SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement [ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Cortech, Inc.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
<PAGE>
Cortech, Inc.
6850 N. Broadway, Suite G
Denver, Colorado 80221
(303) 650-1200
August __, 1998
Dear Stockholder:
You are cordially invited to attend Cortech, Inc.'s Annual Meeting of
Stockholders, which will begin at 9:00 a.m. local time, Friday, September 4,
1998 at The Renaissance Hotel, 3801 Quebec Street, Denver, Colorado.
Stockholders will vote on the proposals detailed in the attached proxy
statement, and we will present a brief status report on the Company's
operations.
Regardless of your plans to join us on September 4th, we hope you will
sign, date and return your WHITE proxy card in the envelope provided at your
earliest convenience. If you have any questions or need assistance in voting
your shares, please call D.F. King & Co., Inc., which is assisting us, toll-free
at 1-800-848-3051. We look forward to your reply.
Sincerely yours,
Bert Fingerhut
Chairman
<PAGE>
CORTECH, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 4, 1998
------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Cortech, Inc., a Delaware corporation ("Cortech" or the "Company"), will be held
on Friday, September 4, 1998 at 9:00 a.m. local time at The Renaissance Hotel,
3801 Quebec Street, Denver, Colorado for the following purposes:
1. To elect two Class I directors to hold office until the 2001
annual meeting of stockholders or until his successor is elected
and has qualified and, if the stockholder proposal set forth
under proposal 5 below is approved, to elect one additional
Class I director and one Class III director to hold office
until, respectively, the 2001 and 2000 annual meetings of
stockholders or until their successors are elected and have
qualified.
2. To adopt and approve an amendment to the Company's Certificate
of Incorporation that provides for a one-for-ten reverse stock
split of outstanding Cortech common stock.
3. To adopt and approve an amendment to the Company's Certificate
of Incorporation that provides that the Board of Directors shall
fix the number of directors.
4. To ratify the selection of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending December 31,
1998.
5. To consider and act upon, if properly presented, a stockholder
proposal concerning an amendment to the Company's Bylaws to
increase the number of directors, which proposal is opposed by
the Board of Directors.
6. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on July 10, 1998
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors,
Bert Fingerhut
Chairman
Denver, Colorado
August __, 1998
<PAGE>
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED WHITE PROXY CARD AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE
YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID
IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
PRELIMINARY COPY
CORTECH, INC.
------------
PROXY STATEMENT
------------
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Cortech, Inc., a Delaware corporation ("Cortech" or the "Company"), for use at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held on
September 4, 1998 at 9:00 a.m. local time, or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at The Renaissance Hotel, 3801
Quebec Street, Denver, Colorado. The Company intends to mail this proxy
statement and accompanying proxy card on or about August 10, 1998, to all
stockholders entitled to vote at the Annual Meeting.
You probably have already received an opposition proxy statement (the
"Opposition Proxy") from Asset Value Fund Limited Partnership ("AVF"), a
dissident stockholder that is attempting a hostile takeover of the Company. In
connection with its hostile takeover attempts, AVF is soliciting proxies to,
among other things, amend the Company's Bylaws to increase the size of the Board
to seven members and, subject to the approval of such amendment, to elect its
four nominees to the Board (to fill the two Class I seats up for election and
the two vacancies created by AVF's proposed Bylaw amendment). If AVF is
successful in passing its proposed Bylaw amendment and in electing its four
nominees, AVF representatives would have a majority of the seats on the
Company's Board of Directors and AVF would control Cortech.
AVF is an investment vehicle led by Paul Koether, who the Company
believes is a notorious greenmailer with a documented history of purchasing
short-term positions in public companies, threatening and waging costly and
divisive proxy contests with the stated purpose of protecting stockholder
interests, and then selling out when offered an attractive price. The Board of
Directors urges you not to support AVF's hostile attempt to take over the
Company, but to carefully review the information contained in this proxy
statement and sign, date and return the WHITE proxy card today in the enclosed,
postage pre-paid envelope.
Ten years ago, Emerald Partners, a partnership formed by Paul and
Natalie Koether, sued to stop a merger of May Petroleum, Inc. and several
companies controlled by Craig Hall, the defendant in the lawsuit. The Vice
Chancellor of the Delaware Chancery Court, Delaware's corporate court,
characterized both the Koethers' partnership and the defendant as having little
concern for other stockholders:
"As will be seen, the Court is placed in the difficult position of
having to choose between two protagonists, both of which seem to have
little concern for the interests of the hapless minority stockholders."
Looking at the record of the Koethers' partnership, the court
commented:
"Emerald obviously deals in many forms of shareholder blackmail, i.e.,
greenmail, in attempts to gain control of corporations or be bought out
at substantial premiums."
The Court eventually enjoined the merger, upholding Emerald's role as a
representative of the May stockholders, and commenting:
"Emerald has assumed the role here as being a fiduciary for the
minority stockholders, a role which is probably entirely new to it. Having
assumed that role it will be expected to fulfill it in the high standards
required by Delaware law. "
The litigation, begun ten years ago, is still ongoing today.
As recently as six months ago, AVF sold shares of FIND/SVP, Inc. back
to FIND/SVP at a substantial premium over market value in connection with the
settlement of litigation brought by the Koethers. Unlike the Emerald Partners
case, the FIND/SVP litigation did not involve derivative claims by AVF on behalf
of all FIND/SVP stockholders; instead AVF claimed it was deceived into buying
additional FIND/SVP shares and canceling plans to sell shares. Twenty months
ago, Pureworld Inc., another Koether-led vehicle, extracted $825,000 from
American Industrial Properties REIT in a settlement as reimbursement for costs
and in consideration for releases and standstill agreement. Like the FIND/SVP
litigation, the claims in the American Industrial litigation did not involve
derivative claims made by Pureworld on behalf of all American Industrial
stockholders; instead Pureworld was sued for violations of federal securities
laws and Pureworld made counterclaims contesting the validity of provisions of
American Industrial's bylaws, seeking to appoint an additional trustee and a
receiver of American Industrial; and seeking to enjoin American Industrial until
appointment of an additional trustee.
In its campaign materials, AVF says it intends to benefit from its
Cortech investment only to the same extent other stockholders benefit. But
nothing obligates Koether to live up to his promise if he takes control of
Cortech. We urge you to look into Koether's record before casting a vote for
him!
Your Board of Directors remains committed to the interests of Cortech
stockholders and maximizing the value of Cortech stock. Cortech's Board members
include scientists and businessmen with years of experience in science and the
pharmaceutical industry who believe that Cortech's technology has value. In
contrast, Koether is proposing a slate which would be controlled by himself and
his associates, none of whom have significant scientific or pharmaceutical
industry experience.
Voting Rights and Outstanding Shares
Only holders of record of Common Stock at the close of business on July
10, 1998 (the "Record Date") will be entitled to notice of and to vote at the
Annual Meeting. At the close of business on the Record Date the Company had
outstanding and entitled to vote 18,523,918 shares of Common Stock. Each holder
of record of Common Stock on the Record Date will be entitled to one vote for
each share held on each matter to be voted upon at the Annual Meeting.
Under the Bylaws of the Company, a quorum for the transaction of
business is constituted by the presence, in person or by proxy, of the holders
of a majority of the stock of the Company issued and outstanding and entitled to
vote at the meeting. A plurality of the votes of the shares present and entitled
to vote at the Annual Meeting is required to approve the election of directors
in Proposal 1. The affirmative vote of holders of a majority of the Company's
issued and outstanding shares entitled to vote at the Annual Meeting is required
to approve each of Proposals 2 and 3 and the affirmative vote of holders of a
majority of the shares present in person or by proxy and entitled to vote on the
matter at the Annual Meeting is required to approve each of Proposals 4 and 5.
All votes will be tabulated by the inspector of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
Revocability of Proxies
Any person giving a proxy in connection with the Annual Meeting has the
power to revoke such proxy at any time before it is voted at the Annual Meeting
(i) by delivering a written notice of revocation of such proxy to the Secretary
of the Company at the Company's principal executive office, 6850 N. Broadway,
Suite G, Denver, Colorado 80221, (ii) by executing and delivering a later dated
proxy to the Company or its solicitation agents, or (iii) by attending the
Annual Meeting and voting in person at the Annual Meeting. Attendance at the
Annual Meeting will not, by itself, revoke a proxy.
There is no limit on the number of times that a stockholder may revoke
his or her proxy prior to the Annual Meeting. Only the latest dated, properly
signed proxy card will be counted.
IF YOU ALREADY SENT A PROXY CARD TO AVF, A DISSIDENT STOCKHOLDER THAT IS
ATTEMPTING A HOSTILE TAKEOVER OF THE COMPANY, YOU MAY REVOKE THAT PROXY AND VOTE
IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS BY SIGNING,
DATING AND MAILING THE ENCLOSED WHITE PROXY CARD IN THE ENVELOPE PROVIDED.
Proposal 1
Election of Directors
THE BOARD RECOMMENDS A VOTE FOR THE NOMINEES OF THE BOARD
The Company's Certificate and Bylaws, each as amended, currently provide
that the Board of Directors shall be divided into three classes, each class
consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term.
The Company currently has a total of five directors, consisting of two
Class I directors, whose terms expire in 1998, two Class II directors, whose
terms expire in 1999 and one Class III director, whose term expires in 2000.
Each of the current directors, with the exception of Bert Fingerhut, was
appointed to fill a vacancy on the Board created by the resignations of Charles
Cohen, Ph.D., Donald Kennedy, Ph.D. and Allen Misher, Ph.D. effective July 21,
1998 and Kenneth R. Lynn, effective May 18, 1998. Such resignations were not the
result of any disagreement with the Company and , in the case of Drs. Cohen,
Kennedy and Misher, had been contemplated earlier this year in connection with
the Company's proposed merger with Biostar, Inc. ("Biostar"), which merger was
subsequently abandoned.
Two Class I directors will be elected at the Annual Meeting . The Board
of Directors has nominated Dr. Lawrence M. Gold and Joachim von Roy as Class I
directors (term expiring 2001) to be elected at the Annual Meeting. However,
AVF, a dissident stockholder, is attempting a hostile takeover of the Company by
proposing Proposal 5 (the "AVF Proposal") which would add two new directors to
the Board (one Class I director, with a term expiring in 2001, and one Class III
director, with a term expiring 2000) and permit AVF to elect a majority of the
members of the Board of Directors. The Board of Directors opposes the AVF
Proposal and recommends Proposal 3, which would protect the Company's classified
Board structure by eliminating the possibility of AVF or future dissident
stockholders from taking control of the Company by proposals such as the AVF
Proposal. However, if Proposal 3 is defeated and the AVF Proposal is properly
presented and approved, then four directors will be elected at the Annual
Meeting. The Board of Directors has conditionally nominated Drs. John P. Papp
and John C. Cheronis (collectively, the "Additional Nominees") to fill the two
vacancies (for Class I director and Class III director, respectively) created in
the event the AVF Proposal is adopted and the Board is increased to seven
members.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented by
executed WHITE proxy card will be voted, if authority to do so is not withheld,
for the election of Dr. Gold and Mr. von Roy as Class I director and, in the
event the AVF Proposal is approved, also for the election of Drs. Papp and
Cheronis as Class I and Class III directors, respectively.
The persons nominated for election have agreed to serve if elected, and
management has no reason to believe that such nominees will be unable to serve.
However, in the event that any of such nominees becomes unable or unwilling to
accept nomination or election as a result of an unexpected occurrence, the
shares represented by the enclosed proxy will be voted for the election of such
substitute nominee as management may propose.
Set forth below is biographical information for the persons (including
the Additional Nominees) nominated for election to the Board of Directors and
each other person whose term of office as a director will continue after the
Annual Meeting, including information furnished by them as to their principle
occupations at present and for the past five years, certain directorships held
by each, their ages as of July 15, 1998 and the year in which each continuing
director became a director of the Company.
The Board of Directors recommends a vote FOR each of the nominees listed
below.
Nominee for Election as Class I Director
Lawrence M. Gold, PhD. Dr. Gold, 56, has been Chairman of the Board of
NeXstar Pharmaceuticals, Inc., an integrated biopharmaceutical company, since
1993 and Chief Scientific Officer of NeXstar since 1995. He was a founder of
NeXstar, has served as a director of NeXstar since its inception in 1991 and
served as Executive Vice President of Research and Development at Nexstar from
1991 to 1995. From 1988 to 1992 Dr. Gold was Chairman of the Department of
Molecular, Cellular and Developmental Biology at the University of Colorado at
Boulder. He has been a professor at the University since 1970 and has received
the University's Distiquished Lectureship Award. Dr. Gold was a founder of
Synergen, Inc.., a biopharmaceutical company, and, from 1981 to 1988, was
Synergen's Co-Director of Research. He is a recipient of the National Institutes
of Health Merit Award and Career Development Award and is a member of the
National Academy of Sciences.
Joachim von Roy Mr. von Roy, 52, has been a director of the Company since
July 1998. Mr. von Roy is a Principal of RvR Associates, an independent health
care consulting firm. From 1993 to 1997, he served as President of Bristol-Myers
Squibb Pharmaceuticals, Europe and, from 1990 to 1993, he was President of
Bristol-Myers Squibb Pharmaceuticals, Central Europe. Mr. von Roy is Chairman of
Health Initiative Europe Institute for Bagonalistics and a member of Kuratorium,
the German Lipid League.
Additional Nominees for Election as Class I and Class III Directors
Class I Director:
John P. Papp, M.D. Dr. Papp, 59, is a gastroenterologist in private
practice who also holds a teaching appointment as a Clinical Professor in the
Department of Medicine, College of Human Medicine, at Michigan State University,
an appointment he has held since May 1987. He is a past president of the
American College of Gastroenterology and has served on and chaired a number of
medical committees.
Class III Director:
John C. Cheronis, M.D., Ph.D. Dr. Cheronis, 47, has been Founding Scientist
of the Company since 1996 and served as Vice President, Research of the Company
from the Company's inception in 1982 to 1995. Dr. Cheronis was a director of the
Company from 1982 to 1995. He is a diplomat of the American Board of Internal
Medicine. Dr. Cheronis received his Ph.D. and M.D. from the Department of
Pharmacology and Physiology at the Pritzker School of Medicine of the University
of Chicago in 1978 and 1980, respectively.
Continuing Class II Directors
Bert Fingerhut. Mr. Fingerhut, 54, has been a director of the Company
since 1988 and Chairman of the Board and Acting Chief Executive Officer since
May 1998. Mr. Fingerhut also served as Chairman of the Board from June 1991 to
April 1997. In addition to his service with the Company, Mr. Fingerhut presently
pursues private business and conservation interests. From 1984 to 1985, he was
Special Limited Partner and Senior Vice President of Odyssey Partners, a private
investment partnership. From 1965 to 1983, he was General Partner, Managing
Director, Executive Vice President and Director of Research of Oppenheimer &
Company, Inc., an investment banking and brokerage firm. Mr. Fingerhut is
Chairman of the Board of Directors of Toxics Targeting, a private company based
in Ithaca, N.Y. that tracks and provides information on toxic waste sites. He is
currently Chairman of the Governing Council of The Wilderness Society, a member
of the Board of Directors of the Southern Utah Wilderness Alliance, a director
of the Grand Canyon Trust and Trustee of the Alaska Conservation Foundation. Mr.
Fingerhut also serves as a director of the Wyss Foundation.
John E. Repine, M.D. Dr. Repine, 53, has been a director of the Company
since July 1998. Dr. Repine has been the President (since 1993) and a Director
(since 1989) of the Webb-Waring Institute for Biomedical Research. He has also
been the James J. Waring Professor in the Department of Medicine and Pediatrics
at the University of Colorado Health Sciences Center since 1996. Dr. Repine was
elected to the American Society of Clinical Investigation and the Association of
American Physicians. He is also the recipient of an Established Investigator
Award from the American Heart Association, Basil O'Connor Research Award from
the March of Dimes and the Bonfils-Stanton Award for his outstanding
contribution to medicine and science. Dr. Repine serves on the scientific
advisory boards of a number of biotechnology companies. He currently holds 6
patents.
Continuing Class III Director
Edward Finkelstein. Mr. Finkelstein, 62, has been a director of the
Company since July 1998. Mr. Finkelstein has been a managing partner of REM, a
real estate holding company, since 1986, and the President and Chief Executive
Officer of Edmark Development LLC, a commercial real estate development and
management company, since 1990. He has also served as the President and Chief
Executive Officer of Central Motors, a holding company of Midwestern car
dealerships, since 1992, and the Chairman and Chief Executive Officer of
Rollabind, Inc., the largest manufacturer of patented disc binding systems
worldwide, since 1996. Between 1972 and 1991, Mr. Finkelstein was President and
Chief Executive Officer of Michigan Sporting Goods Distributors, Inc., the
parent company of MC Sports, one of the largest retail sporting good chains in
the world.
The Board of Directors recommends a vote FOR the Board's nominees.
Proposal 2
Approval of the Reverse Split
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 2
The Board of Directors of the Company has unanimously approved, and
recommends that stockholders approve, an amendment to the Company's Certificate
of Incorporation to effect a reverse split of the Company's Common Stock and
make a corresponding reduction in the authorized number of shares of Common
Stock which the Company may issue (such actions collectively being referred to
as the "Reverse Split"). The Reverse Split, if approved by stockholders, would
cause all issued and outstanding shares of the Company's Common Stock to be
split, on a reverse basis, one-for-ten (stockholders would receive one share of
Common Stock for every ten shares held prior to the Reverse Split). If the
Reverse Split is approved at the Annual Meeting, the Company intends to file
documents to effect the Reverse Split with the Secretary of State of Delaware as
soon as practicable, and the Reverse Split will be effective on the date such
documents are filed (the "Effective Date"). As part of the Reverse Split,
Article V, Section 1 of the Certificate of Incorporation would be amended to
decrease the authorized number of shares of capital stock which the Company may
issue from 52,000,000 shares to 7,000,000 shares, 5,000,000 of which shall be
Common Stock, and 2,000,000 of which shall be Preferred Stock.
As described below, the primary objective of the Reverse Split is to
increase the per share market price of the Common Stock. On July 13, 1998, the
Nasdaq Stock Market, Inc. ("Nasdaq") Listing Qualifications Panel decided that,
as of the close of business on such date, the Company's Common Stock would be
delisted from the Nasdaq National Market. Nasdaq requires that the common stock
of companies listed on the Nasdaq National Market must have a bid price of at
least $1.00 per share, and the basis for the Panel's decision was that the bid
price of the Common Stock was less than $1.00 per share. As a result of the
delisting, the Common Stock currently trades on Nasdaq's OTC Bulletin Board.
Nasdaq's delisting of the Common Stock will have a number of adverse
effects on the Company's stockholders. Availability of current market price
information for the Common Stock and news coverage of the Company will be
limited. Delisting may have the effect of restricting investors' interest in the
Common Stock and may have a material adverse effect on the trading market and
prices for the Common Stock as well as the Company's ability to issue additional
securities or to secure additional financing. Because of the adverse impact on
the trading market of the Common Stock and the potential loss of effective
trading markets, the volatility of the Common Stock may be increased.
In addition, stocks with low per share prices are subject to additional
federal and state regulatory requirements. Because the market price of the
Common Stock is less than $5 per share, the Common Stock cannot be used as
collateral for margin loans. In addition, if the Common Stock were priced and
less than $5 per share and deemed a "penny stock" under federal securities laws,
additional regulatory restrictions would apply. Although the price of the Common
Stock is less than $5 per share, the Company does not believe that its Common
Stock is a penny stock under federal securities laws, because the Company's net
tangible assets exceed the required threshold of $4 million. However, there is
no assurance that the Company will continue to meet the net tangible assets
requirement or other exemptions from the definition of a penny stock in the
future.
On July 23, 1998, the Company appealed Nasdaq's decision to delist the
Common Stock to the Nasdaq Listing and Hearing Review Council (the "Review
Council"). The basis for the Company's appeal is that the Company believes that
the failure of the Common Stock to comply with Nasdaq's minimum $1.00 per share
bid price requirement will be cured by stockholder approval of the Reverse Split
at the Annual Meeting. However, even if the Reverse Split is approved, there can
be no assurance that the Company's appeal to the Review Council will be
successful. In addition, while the Company believes it currently meets the
continued listing criteria for the Nasdaq National Market (other than with
respect to the minimum bid price), even if the decision of the Review Council is
favorable, there can be no assurance that the Company will meet Nasdaq's
continued listing criteria in the future (whether as a result of failure to meet
the minimum bid price requirement or other requirements imposed by Nasdaq).
If the Reverse Split is not approved by stockholders, the Company
believes that the Common Stock will not be eligible to be traded on the Nasdaq
National Market or the Nasdaq Small Cap Market because the Company is not
currently able to meet certain of the Nasdaq's initial listing requirements,
which are more stringent than the continued listing requirements. In particular,
the initial listing requirement of the Nasdaq National Market is a minimum bid
price of $5 per share, and the initial listing requirement of the Nasdaq Small
Cap Market is a minimum bid price of $4 per share.
If the Reverse Split is approved by stockholders but the Company's
appeal to the Review Counsel is unsuccessful, the Company may seek to have the
Common Stock listed on the Nasdaq Small Cap Market. However, there is no
assurance that Nasdaq would act favorably on any request by the Company to be
listed on the Nasdaq Small Cap Market.
On July 29, 1998, Nasdaq informed the Company that the Company would be
permitted to submit information to the Review Council in connection with the
Company's appeal until the close of business on September 23, 1998. Nasdaq
further indicated in its July 29, 1998 letter that the Review Council would
issue a decision after the NASD Board of Governors had an opportunity to
consider the delisting decision pursuant to NASD Rule 4880, an opportunity that
Nasdaq indicated would likely occur at the December NASD Board of Governors
meeting.
The Board of Directors believes that the Reverse Split is beneficial to
the Company's stockholders as the Company will not have reasonable grounds for
appealing the delisting of its Common Stock from the Nasdaq National Market if
the Reverse Split is not effected and if the market price for the Common Stock
does not otherwise meet Nasdaq's $1.00 minimum bid price maintenance standard.
In addition, the Board of Directors believes that the Reverse Split may permit
the Company to have the Common Stock listed on the Nasdaq Small Cap Market,
which the Board of Directors believes would offer advantages to stockholders as
compared with trading on Nasdaq's OTC Bulletin Board.
For the foregoing reasons, the Board of Directors has determined that a
recapitalization through the Reverse Split would be in the best interests of the
Company and its stockholders, and recommends stockholders approve the Reverse
Split.
Effects of the Reverse Split
General Effects. The principal effect of the Reverse Split would be to
decrease the number of outstanding shares of the Company's Common Stock.
Specifically, the 18,523,918 shares of Common Stock issued and outstanding on
the Record Date would, as a result of the Reverse Split, be converted into
approximately 1,852,392 shares of Common Stock (with the precise number
depending upon the extent of fractional shares resulting from the Reverse Split,
which will be converted to cash based upon the market price for a share of
Common Stock on the trading day prior to implementation of the Reverse Split).
The number of shares of Common Stock authorized for issuance by the Company's
Certificate of Incorporation following the Reverse Split would be
proportionately adjusted from 50,000,000 shares to 5,000,000 shares.
Accordingly, after the Reverse Split, there would be approximately 3.1 million
"new" (or post-Reverse Split) shares of Common Stock ("New Shares") available
for issuance by the Company.
Effect on Market for Common Stock. On August 4, 1998, the closing price
of the Company's Common Stock as quoted on the OTC Bulletin Board was $0.52 per
share. By decreasing the number of shares of Common Stock otherwise outstanding
without altering the aggregate economic interest in the Company represented by
such shares, the Board believes that the per share market price for the
Company's Common Stock will be increased in excess of the minimum $1.00 bid
price required for continued listing of shares on the Nasdaq National Market.
Effect on Stock Options and Warrants. The total number of shares of
Common Stock issuable upon the exercise of options and warrants to acquire such
shares, and the exercise price thereof, shall be proportionally adjusted to
reflect the Reverse Split.
Effect under the Company's Rights Plan. Following the implementation of
the Reverse Split, each share of Common Stock will continue to have one
preferred share purchase right (a "Right") associated with it; however, the
number of shares of Preferred Stock issuable upon the exercise of each Right
shall be proportionally adjusted to reflect the Reverse Split (i.e., following
the effectiveness of the Reverse Split, each Right, under certain circumstances,
would be eligible to purchase up to one-tenth of a share of Preferred Stock).
Changes in Stockholders' Equity. The Reverse Split would reduce the
Company's stated capital, which consists of the par value per share of Common
Stock multiplied by the number of such shares outstanding, from the amount which
would otherwise exist (assuming the share amounts set forth above, the Reverse
Split would reduce the Company's stated capital by approximately $70,000).
Although the par value of Common Stock would remain at $0.002 per share
following the Reverse Split, stated capital would be decreased because the
number of shares outstanding would be reduced. Correspondingly, the Company's
additional paid-in capital, which consists of the difference between its stated
capital and the aggregate amount paid to the Company upon its issuance of all
then outstanding shares of Common Stock, would be increased.
Appraisal Rights. Pursuant to the Delaware General Corporate Law, the
Company's stockholders are not entitled to appraisal rights with respect to the
Reverse Split.
Disadvantages. The Company believes that, as a result of the Reverse
Split, certain shareholders may incur increased expenses in selling odd-lot
shares of the Company's Common Stock.
No Fractional Shares; Procedures for Exchange of Certificates
No fractional shares of Common Stock will be issued as a result of the
Reverse Split, no certificates for any fractional shares will be issued, and
fractional share interests will not entitle the holder therof to exercise any
right of a stockholder with respect thereto. In lieu of such fractional shares,
any holder of Common Stock (after aggregating all fractional shares of Common
Stock issuable to such holder) will, upon surrender of such holder's stock
certificate(s) representing Common Stock to American Securities Transfer &
Trust, Inc. (the "Exchange Agent"), be paid in cash the dollar amount (rounded
to the nearest whole cent), without interest, determined by multiplying such
fractional shares by the average of the reported closing prices for the shares
on the OTC Bulletin Board for the ten trading days immediately preceding the
Effective Date.
As soon as practicable after the Effective Date, the Exchange Agent
will mail to the registered holders of Common Stock (i) a Letter of Transmittal,
and (ii) instructions for the use of the Letter of Transmittal in effecting the
surrender of the Common Stock certificates for certificates representing New
Shares. Upon surrender of a certificate to the Exchange Agent, together with a
duly executed Letter of Transmittal and such other documents as may reasonably
be required by the Exchange Agent or Cortech, the holder of such certificate
shall be entitled to receive in exchange therefor a certificate representing the
whole number of New Shares that such holder has the right to receive.
If any stock certificate has been lost, stolen or destroyed, Cortech may require
the owner of such lost, stolen or destroyed certificate to provide an
appropriate affidavit and to deliver a bond as indemnity against any claim that
may be made against the Exchange Agent or Cortech with respect to such
certificate.
STOCKHOLDERS SHOULD NOT SURRENDER THEIR STOCK CERTIFICATES FOR EXCHANGE UNTIL
THEY RECEIVE A LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
Federal Income Tax Consequences
The following summary of the federal income tax consequences of the
Reverse Split is based on current law, including the Internal Revenue Code of
1986, as amended, and is for general information only. The tax treatment for any
stockholder may vary depending upon the particular facts and circumstances of
such stockholder. Certain stockholders, including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, non-resident
aliens, foreign corporations and persons who do not hold Common Stock of the
Company as a capital asset, may be subject to special rules not discussed below.
Accordingly, each stockholder should consult his or her tax advisor to determine
the particular tax consequences to him or her of the Reverse Split, including
the application and effect of federal, state, local or foreign income taxes and
other laws.
The receipt of whole New Shares (excluding fractional New Shares) in
the Reverse Split should be non-taxable for federal income tax purposes.
Consequently, a stockholder receiving New Shares will not recognize either gain
or loss, or any other type of income, with respect to whole New Shares received
as a result of the Reverse Split. In addition, the tax basis of such
stockholder's shares of Common Stock prior to the Reverse Split will carry over
as the tax basis of the stockholder's New Shares. The holding period of the New
Shares should also include the stockholder's holding period of the Common Stock
prior to the Reverse Split, provided that such Common Stock was held by the
stockholder as a capital asset on the Effective Date.
Any stockholder who receives cash in lieu of a fractional New Share
pursuant to the Reverse Split will recognize gain or loss equal to the
difference between the amount of cash received and the portion of the aggregate
tax basis in his or her shares of Common Stock allocable to such fractional New
Share. If the shares of Common Stock were held as a capital asset on the
Effective Date, then the stockholder's gain or loss will be a capital gain or
loss. Such capital gain or loss will be a long-term capital gain or loss if the
stockholder's holding period for the shares of Common Stock is longer than
eighteen months, a short-term capital gain or loss if the stockholder's holding
period is twelve months or less and mid-term gain or loss if the stockholder's
holding period is longer than twelve months and less than eighteen months.
Based on certain exceptions contained in regulations issued by the
Internal Revenue Service, the Company does not believe that it or its
stockholders would be subject to backup withholding or informational reporting
with respect to cash distributed in lieu of fractional New Shares.
Exchange of Shares
On or after the Effective Date, the Company will mail to each
stockholder of record a letter of transmittal. Stockholders will be able to
receive a certificate representing New Shares and, if applicable, cash in lieu
of a fractional New Share only by transmitting to the Exchange Agent such
stockholder's stock certificate(s) for shares of Common Stock outstanding prior
to the Reverse Split, together with the properly executed and completed letter
of transmittal, and such evidence of ownership of such shares as the Company may
require. Stockholders will not receive certificates for New Shares unless and
until the certificates representing their shares of Common Stock outstanding
prior to the Reverse Split are surrendered. Stockholders should not forward
their certificates to the Exchange Agent until the letter of transmittal is
received and should surrender their certificates only with such letter of
transmittal.
Payment in lieu of a fractional New Share will be made to any
stockholder entitled thereto promptly after receipt by the Company or its
Exchange Agent of a properly completed letter of transmittal and stock
certificate(s) for all of his or her shares of Common Stock outstanding prior to
the Reverse Split. There will be no service charge payable by stockholders in
connection with the exchange of certificates or in connection with the payment
of cash in lieu of the issuance of a fractional New Share. These costs will be
borne by the Company.
Required Vote
The affirmative vote of the holders of a majority of the issued and
outstanding shares entitled to vote on the matter at the Annual Meeting will be
required to approve the Reverse Split described in this Proposal 2.
The Board of Directors recommends a vote FOR Proposal 2.
Proposal 3
Approval of Amendment to Certificate of Incorporation Confirming
the Board's Authority to Fix the Number of Directors
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 3
Article IX, Section 1 of the Company's Certificate of Incorporation
currently provides that the number of directors of the Company shall be fixed
from time to time in the manner provided in the Bylaws and may be increased or
decreased from time to time in the manner provided in the Bylaws. Article 3,
Section 3.1 of the Company's Bylaws provides, in pertinent part, that the number
of directors shall be one or more, as fixed from time to time by resolution of
the Board of Directors. The Board of Directors has unanimously approved, and
recommends that stockholders approve, an amendment to the Company's Certificate
of Incorporation to restate Article IX, Section 1 in its entirety as follows:
"The exact number of directors of the Company shall be determined from time to
time by resolution of the Board of Directors."
The proposed amendment is designed to resolve the question of whether
dissident stockholders can amend the Bylaws to increase the number of directors
and then nominate directors to fill the vacancies created by the Bylaw
amendment. This approach allows a dissident to elect a majority of the board
members at a single meeting. This is the strategy currently being followed by
AVF. The Board of Directors believes that it is in the best interests of the
Company and its stockholders to defeat efforts, such as those currently being
employed by AVF through the AVF Proposal (described under Proposal 5), to take
control of the Board.
The Company has had a classified Board structure since 1992. The Board
of Directors believes that a classified Board continues to serve the Company,
its stockholders and those with whom the Company is seeking to do business by
permitting all parties to rely on the consistency and continuity of corporate
policy. This is particularly important to a research-based organization such as
the Company, where product development often requires many years. At the same
time, annual elections in which approximately one-third of the Board is elected
each year offer stockholders a regular opportunity to renew and reinvigorate
corporate decision-making while maintaining the basic integrity of corporate
policy from year-to-year.
In addition, in the event of any unfriendly or unsolicited proposal to
take over or restructure the Company, such as the hostile takeover by proxy
contest currently being undertaken by AVF, a classified board structure permits
the Company to negotiate with the sponsor, to consider alternative proposals and
to assure that stockholder value is maximized.
The Board of Directors believes that the approval of the amendment set
forth in Proposal 3 is important in order to eliminate the possibility of AVF or
future dissident stockholders from mounting a hostile takeover of the Company
through proposals, such as the AVF Proposal, to elect a majority of the
directors at a single meeting.
The affirmative vote of the holders of a majority of the issued and
outstanding shares entitled to vote on the matter at the Annual Meeting will be
required for the adoption of the amendment contained in Proposal 3.
The Board of Directors recommends a vote FOR Proposal 3.
Proposal 4
Ratification of Selection of Independent Auditors
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 4
The Board of Directors has selected Arthur Andersen LLP as the
Company's independent auditors for the fiscal year ending December 31, 1998 and
has further directed that management submit the selection of independent
auditors for ratification by the stockholders at the Annual Meeting. Arthur
Andersen LLP has audited the Company's financial statements since 1989.
Representatives of Arthur Andersen LLP are expected to be present at the Annual
Meeting, will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions.
Stockholder ratification of the selection of Arthur Andersen LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Arthur Andersen LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board in its discretion may direct the appointment of different
independent auditors at any time during the year if they determine that such a
change would be in the best interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the Annual Meeting
will be required to approve Proposal 4 ratifying the selection of Arthur
Andersen LLP.
The Board Of Directors recommends a vote FOR Proposal 4.
Proposal 5
Solicitation in Opposition to AVF Proposal to Increase the
Size of the Board THE BOARD RECOMMENDS A VOTE
AGAINST PROPOSAL 5
Article 3, Section 3.1 of the Company's Bylaws provides, in pertinent
part, that the number of directors shall be one or more, as fixed from time to
time by resolution of the Board of Directors. According to the Opposition Proxy,
AVF proposes to amend Article 3, Section 3.1 of the Bylaws to fix the number of
directors to serve on the Board of Directors at seven. As described earlier, the
Company has had a classified Board of Directors since 1992. With a classified
Board of Directors, only one-third of the board members are elected in any one
year. The Company believes that the AVF Proposal is inconsistent with the
Company's classified Board of Directors because it would allow a majority of the
directors to be elected at one election. As asserted by AVF in the Opposition
Proxy, the AVF Proposal is designed to enable AVF to elect a majority of the
Board at this election, thereby permitting AVF's representatives to constitute a
majority of the Company's directors and AVF to control the Company.
The Board of Directors believes that the AVF Proposal is not in the
best interests of the Company and its stockholders and has unanimously adopted
Proposal 3, which would amend the Company's Certificate of Incorporation to
prevent AVF or other dissident stockholders from attempting to take control of
the Company by proposing such a Bylaw amendment. In addition to helping assure
continuity and stability of the Company's corporate policies and strategies, a
classified board structure permits the Company, in the face of a hostile
takeover attempt or unsolicited proposal, time to negotiate with the sponsor, to
consider alternative proposals and to assure that stockholder value is
maximized--in other words, the classified board is designed to protect the
Company and stockholders precisely against corporate raiders such as Koether.
Given Koether's documented history of greenmail, hostile takeovers and
contentious litigation, the Board of Directors urges you to carefully consider
the Board's reasons for opposing the AVF Proposal.
AVF presently owns approximately 10.8% of the Company's outstanding
Common Stock (approximately 15% when combined with the holdings of Mark and Fred
Jaindl who are participating in the Opposition Proxy solicitation), acquiring
its interest in the fall of 1997 with the announced intention of seeking
representation on the Board through a proxy contest or otherwise. In recent
months the Board of Directors has worked hard to try to negotiate a fair
settlement with Koether, but he appears to want nothing less than control of the
Company for his (and the Jaindls') 15% interest. The Board urges holders of the
remaining 85% of the Company's outstanding Common Stock to look at the Koethers'
twenty year history of greenmail transactions before turning over control of
Cortech to AVF.
The affirmative vote of the holders of a majority of the issued and
outstanding shares present in person or represented by proxy and entitled to
vote at the Annual Meeting will be required to approve the Bylaw amendment
described in Proposal 5.
In order to defeat the hostile takeover attempt by Koether and ensure
that the interests of all the Company's stockholders are taken into account, the
Board of Directors recommends a vote AGAINST Proposal 5.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of July 24, 1998 by: (i) each
director and nominee for director; (ii) each of the executive officers named in
the Summary Compensation Table under the caption "Compensation of Executive
Officers" below; (iii) all executive officers and directors of the Company as a
group; and (iv) all those known by the Company to be beneficial owners of more
than five percent of its Common Stock.
Beneficial Ownership (1)
Name of Beneficial Owner Number of Shares Percent of Total
Asset Value Fund Limited Partnership(2) 2,000,000 10.80%
P.O. Box 74
Bedminister, NJ
BVF Partners, L.P.(3) 1,180,752 6.37%
333 West Wacker Drive, Suite 1600
Chicago, IL
Bert Fingerhut(4) 563,205 3.02%
Edward Finkelstein 444,025 2.40%
Dr. Lawrence M. Gold -- --
Dr. John E. Repine (5) 5,000 --
Joachim von Roy -- --
Dr. John P. Papp 70,123 *
Dr. John C. Cheronis(6) 486,891 2.68%
Kenneth R. Lynn(7) 3,433 *
Joseph L. Turner(8) 140,984 *
All executive officers and directors as a
group (5 persons)(9) 1,263,872 6.68%
- --------------------
* Less than one percent.
(1) This table is based upon information supplied by the Company's officers,
directors and principal stockholders and Schedules 13D and 13G filed with
the Securities and Exchange Commission (the "SEC"). Unless otherwise
indicated in the footnotes to this table and subject to community
property laws where applicable, the Company believes that each of the
stockholders named in this table has sole voting and investment power
with respect to the shares indicated as beneficially owned. Applicable
percentages are based on 18,523,918 shares outstanding on July 24, 1998,
adjusted as required by rules promulgated by the SEC.
(2) According to Amendment No. 12 to the Schedule 13D filed with the SEC on
July 17, 1998 by Asset Value. The sole general partner of Asset Value is
Asset Value Management, Inc., a Delaware corporation and wholly owned
subsidiary of Kent Financial Services, Inc., a Delaware corporation. On
February 10, 1998, Mark W. Jaindl and Frederick J. Jaindl acquired,
respectively, 250,000 shares and 520,000 shares of Company Common Stock
from Asset Value in a privately negotiated transaction. Mark Jaindl is
the son of Fred Jaindl and a director of a company that might be deemed
to be under the common control of Asset Value by virtue of common stock
ownership. Although Asset Value and the Jaindls file jointly, Asset
Value disclaims membership in a group with the Jaindls and disclaims
beneficial ownership of the shares owned by the Jaindls.
(3) According to Schedule 13D filed with the SEC on May 16, 1997 by
Biotechnology Value Fund, L.P. ("BVF"). Includes 638,796 Shares BVF
beneficially owns and has shared dispositive and voting power with BVF
Partners, L.P. ("Partners"). Partners and BVF Inc. share voting and
dispositive power over the 1,180,752 shares they own with, in addition
to BVF, the managed accounts on whose behalf Partners, as investment
manager, purchased such shares.
(4) Includes options to purchase 153,010 shares, which are exercisable
within 60 days of the date of this table. Also includes 3,000 shares
held by Mr. Fingerhut's wife and 17,000 shares by Mr. Fingerhut's minor
daughter.
(5) Includes options to purchase 5,000 shares, which are exercisable within
60 days of this table.
(6) Includes options to purchase 107,000 shares, which are exercisable
within 60 days of the date of this table. Also includes 73,666 shares
held in trust for Mr. Cheronis' children.
(7) Mr. Lynn resigned as an officer of the Company on May 18, 1998.
(8) Mr. Turner resigned as an officer of the Company on December 1, 1997.
Includes options to purchase 128,066 shares, which are exercisable within
60 days of the date of this table.
(9) Includes options to purchase a total of 391,792 shares, which are
exercisable within 60 days of the date of this table by executive
officers and directors.
BOARD COMMITTEES AND MEETINGS
During the year ended December 31, 1997, the Board of Directors held
nine meetings. Each incumbent director then in office attended at least 75% of
the aggregate number of meetings of the Board and of the Committees on which
such director served. The Board has an Audit Committee, a Compensation
Committee, an Equity Committee and a Nominating Committee.
The Audit Committee meets with the Company's independent auditors at
least annually to review the results of the annual audit and discuss the
financial statements; recommends to the Board the independent auditors to be
retained; and receives and considers the accountants' comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. The Audit Committee, which during 1997 was
composed of Mr. Fingerhut and Dr. Cohen, met once during 1997.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to officers, employees and
consultants under the Company's stock option plans and otherwise determines
compensation levels and performs such other functions regarding compensation as
the Board may delegate. The Compensation Committee, which during 1997 was
composed of Mr. Fingerhut and Drs. Kennedy and Misher, met once during 1997.
The Equity Committee administers the Company's stock option plans for
non-officer employees only and makes stock option grants to such employees not
in excess of 20,000 shares. All option grants in excess of this limit and all
option grants to officers must be approved by the Compensation Committee. The
Equity Committee, which during 1997 was composed of Mr. Lynn, did not take any
action during 1997.
The Nominating Committee interviews, evaluates, nominates and recommends
individuals for membership on the Board of Directors and committees of the
Board, and for election as officers of the Company, and, in connection with such
duties, monitors and makes recommendations with respect to compensation of
directors. No procedure has been established for the consideration of nominees
recommended by the stockholders. In addition, the Nominating Committee reviews
certain matters of Board governance, including evaluation of committee structure
and function and Board performance. The Nominating Committee, which during 1997
was composed of Drs.
Kennedy and Misher, did not meet during 1997.
EXECUTIVE COMPENSATION
Compensation of Directors
Under the 1992 Amended and Restated Non-Employee Directors' Stock Option
Plan (the "1992 Directors' Plan"), which expired by its terms on December 31,
1997, each non-employee director received options to purchase Common Stock of
the Company as compensation for his or her services as a director and received
additional options under such Plan for service on certain committees of the
Board. In addition, options were, and continue to be, granted to non-employee
directors outside of such Plan. To date, no plan has replaced the 1992
Directors' Plan. Outside directors receive $1,000 per Board meeting attended and
$1,000 per committee meeting attended if held on a non-Board meeting occasion
and an additional $6,000 annually.
Option grants under the 1992 Directors' Plan were automatic and
non-discretionary. Each person who was a non-employee director of the Company as
of the adoption date of the 1992 Directors' Plan was granted options generally
covering 25,000 shares, with adjustments to equalize the directors' overall
options in light of options previously granted to them. Such options generally
become exercisable ("vest") in year-end installments of 5,000 shares. Each
member of the Compensation and Audit Committees received options covering an
additional 500 shares for each committee on which he served. In addition, (a)
each person subsequently elected for the first time as a non-employee director
is granted an option on the date of his or her initial election as a director to
purchase a pro rata portion of 25,000 shares, depending upon when he or she is
elected, which options generally vest in year-end installments of 5,000 shares;
(b) each person subsequently elected for the first time to the Audit or
Compensation Committee is granted an option to purchase 500 shares if elected
before July 1, or a portion thereof, prorated on a quarterly basis, if elected
after such date, vesting in full on December 31; (c) each non-employee director
receives an annual option to purchase an additional number of shares, determined
by multiplying 5,000 by a fraction, the numerator of which is $20 and the
denominator of which is the fair market value per share of the Common Stock on
the grant date, subject to minimum and maximum limits of 2,500 and 5,000 shares,
respectively, vesting quarterly over five years; and (d) each non-employee
director who is a member of the Company's Audit or Compensation Committee
receives an annual option to purchase 500 shares, vesting in full on December
31. Vesting of all options is subject to continued service as a non-employee
director or employee of the Company during the vesting period and, in the case
of options granted for service on a committee, to continued service on the
applicable committee. As of July 24, 1998, 1,650 options had been exercised
under the 1992 Directors' Plan.
All directors are reimbursed for their expenses incurred in attending
Board of Directors meetings. Directors who are employees of the Company do not
receive separate compensation for their services as directors.
During the fiscal year ended December 31, 1997, Mr. Fingerhut and Drs.
Cohen, Misher and Kennedy received options pursuant to the 1992 Directors' Plan
covering 6,000 shares, 5,000 shares, 5,500 shares and 5,500 shares,
respectively, each at an exercise price of $1.47 per share.
<PAGE>
Compensation of Executive Officers
The following table shows for the fiscal years ended December 31, 1997,
1996 and 1995, compensation awarded or paid to, or earned by, each person who
served as (i) the Company's Chief Executive Officer during 1997 and (ii) the
Company's other most highly compensated executive officers at December 31, 1997
(collectively the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
Awards
Name and Other Annual Securities All Other
Principal Position Year Salary($) Bonus($)Compensation($)Underlying Compensation
Options(#) ($)(1)
Kenneth R. Lynn (2)1997 $265,513 $65,000 -- -- $1,141
President, Chief 1996 265,006 65,000 -- 75,000 1,174
Executive Officer 1995 230,499 75,000 -- 275,000 1,099
and Chairman of the Board
Joseph L. Turner (3)1997 165,537 -- -- -- 2,165
Vice President, 1996 154,533 25,000 -- 40,000 2,399
Finance and 1995 155,349 30,000 -- 64,000 2,009
Administration, Chief Financial Officer
and Secretary
Diarmuid Boran (4) 1997 140,364 30,000 -- -- 1,708
Vice President, 1996 140,046 25,000 -- 40,000 1,707
Corporate 1995 112,493 30,000 -- 64,000 1,386
Development and Planning
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(1) Includes matching payments by the Company under its 401(k) Plan and
premiums paid by the Company for group term life insurance. For 1997,
the amounts were $631 and $510, respectively, for Mr. Lynn; $1,295 and
$870, respectively, for Mr. Turner; and $1,404 and $304, respectively,
for Mr. Boran.
(2) Mr. Lynn left all positions with the Company as of May 18, 1998. In
accordance with the Board's determination that Mr. Lynn's departure
constituted a Termination Event under the Executive Compensation and
Benefits Agreement dated as of October 14, 1997 between the Company and
Mr. Lynn, Mr. Lynn was entitled to receive the benefits provided
thereunder, subject to the modifications set forth in the letter
agreement dated May 18, 1998 between Mr. Lynn and the Board: (i) the
lump salary continuation payment was limited to 20 months salary or
$441,667, (ii) no pro rata bonus was paid and (iii) all outstanding
options held by Mr. Lynn were terminated and extinguished. Pursuant to
the letter agreement, Mr. Lynn agreed to make himself available as a
consultant to the Company through June 30, 1998 at a rate equal to half
of his former rate of compensation; consulting fees totaling $17,100
were paid to Mr. Lynn during such period. In addition, the Company
entered into an indemnity agreement with Mr. Lynn whereby it agreed to
indemnify him against claims arising in connection with acts or
omissions arising out of his service as a director, executive,
employee, consultant and/or agent of the Company.
(3) Mr. Turner resigned as an officer and employee of the Company as of
December 1, 1997. At such time, Mr. Turner and the Company entered into
an agreement pursuant to which Mr. Turner served as a consultant and
continued to receive his former salary through June 30, 1998. Stock
options held by Mr. Turner at the time of his resignation continued to
vest until June 30, 1998.
(4) Mr. Boran became an executive officer in 1995. In May 1998, Mr. Boran
was appointed Chief Operating Officer and Acting Chief Financial
Officer of the Company.
<PAGE>
Stock Option Grants and Exercises
The Company grants options to its executive officers under its 1993
Equity Incentive Plan. No options were granted to the Company's executive
officers in 1997. As of July 15, 1998, options to purchase a total of 632,483
shares were outstanding under the 1993 Equity Incentive Plan and options to
purchase 836,627 shares remained available for grant thereunder.
Aggregated Option Exercises in Fiscal 1997 and Value of Options
At End of Fiscal 1997
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at End of Options at End of
Shares Acquired Value Fiscal 1997 (#) Fiscal 1997($)(1)
Name On Exercise (#) Realized($)Exer/Unexer Exercisable/Unexercisable
Kenneth R. Lynn -- -- 275,009/174,991 $0/$0
Joseph L. Turner -- -- 101,305/62,695 0/0
Diarmuid Boran -- -- 79,940/66,560 0/0
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(1) Based on the closing price of the Company's Common Stock on December
31, 1997 ($0.594) minus the exercise price of the options.
Employment Contracts and Severance Plan
The Company adopted the Executive Officers' Severance Benefit Plan (the
"Severance Plan") on September 18, 1995, which was amended on December 13, 1996,
to encourage senior employees to work in the Company's best interests following
a change in control. In the event of an involuntary termination of employment
within 60 days prior and 30 months following a change in control, all employees
employed at the level of Vice President or above and such other management
employees as may be designated by the Chief Executive Officer will receive
compensation during the Benefit Period (defined below), a proportional bonus
payment if one was received the year preceding the year in which the termination
date occurs, and all outstanding unvested stock options will become fully vested
on the termination date. The "Benefit Period" for employees other than the Chief
Executive Officer is the period commencing on the termination date and (i)
continues for 18 months following such date if the date occurs within 60 days
prior or 12 months after a change in control, or (ii) continues for the period
following the date the employee becomes eligible determined by reducing 30
months by the number of months the eligible employee was employed by the Company
following a change in control. With respect to the Chief Executive Officer, the
"Benefit Period" is the Chief Executive Officer's termination date and (i)
continues for 24 months following such date if the date occurs within 60 days
prior or 12 months after a change in control, or (ii) continues for the period
following such termination date determined by reducing 36 months by the number
of months the Chief Executive Officer was employed by the Company following a
change in control.
The Company amended its Executive Compensation and Benefits
Continuation Agreement with Mr. Lynn (the "Employment Agreement") on October 14,
1997. As amended, the agreement provided, upon the occurrence of a Termination
Event (defined below), for the payment of the equivalent of 24 months base
salary, the payment of health insurance policies for up to 18 months following
the Termination Event, immediate vesting of all stock options not already vested
and the payment of a bonus (equal to the fraction of the current year worked
multiplied by the bonus paid for the prior year). A "Termination Event" was
defined as the involuntary termination of Mr. Lynn by the Company without cause
or the termination of employment by Mr. Lynn on account of a material change in
the business of the Company or the duties of Mr. Lynn prior to or within 30
months after a change in control of Company. The Employment Agreement also
provided that, with respect to any Termination Event that was also covered by
the Severance Plan, Mr. Lynn would receive compensation and benefits pursuant to
the Employment Agreement only and not pursuant to the Severance Plan. In
connection with his departure from the Company on May 18, 1998, Mr. Lynn entered
into a letter agreement with the Company that modified the terms of the
Employment Agreement as described in footnote (2) to the Summary Compensation
Table above.
In connection with arrangements relating to the proposed agreement of
merger between Cortech and BioStar (the "Merger"), which proposal has since been
terminated, Cortech entered into an agreement with Mr. Boran (the "Boran
Agreement") which provides that the cash benefits payable under the Severance
Plan would have been paid to Mr. Boran upon the effectiveness of the Merger. The
Boran Agreement further provides that benefits available under the Severance
Plan would also be paid to Mr. Boran (with cash payments made over the course of
six months) in the event of Mr. Boran's involuntary termination in the absence
of the Merger and that Cortech would have employed Mr. Boran at his current
salary as a full-time consultant for the six months following the effectiveness
of the Merger. The Boran Agreement continues to be in full force and effect.
Compensation Committee Interlocks and Insider Participation
The members of the Company's Compensation Committee during 1997 were
Drs. Kennedy and Misher and Mr. Fingerhut. There were no interlocks or other
relationships among the Company's executive officers and directors that are
required to be disclosed under applicable executive compensation disclosure
regulations.
REPORT TO STOCKHOLDERS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
consisted during 1997 of Drs. Kennedy and Misher, each of whom resigned from the
Board effective July 21, 1998, and Mr. Fingerhut. The Committee is responsible
for recommending and administering the Company's policies governing employee
compensation and for administering the Company's employee benefit plans,
including its stock plans. The Committee evaluates the performance of
management, recommends compensation policies and levels, and makes
recommendations concerning salaries and incentive compensation. The full Board
of Directors reviews the Committee's recommendations regarding the compensation
of the executive officers of the Company.
It is the Company's policy generally to qualify compensation paid to
executive officers for deductibility under Section 162(m) of the Internal
Revenue Code (the "Code"). Section 162(m) limits the Company to a deduction for
federal income tax purposes of no more than $1 million of compensation paid to
certain executive officers in a taxable year. Compensation above $1 million may
be deducted if it is "performance-based" compensation within the meaning of the
Code. The Compensation Committee has determined that stock options granted under
the Company's 1993 Equity Incentive Plan with an exercise price equal to at
least the fair market value of the Company's Common Stock on the date of grant
shall be treated as "performance-based compensation," to the extent the
requirements of Section 162(m) are otherwise satisfied and consistent with the
best interests of the Company. All options granted to executive officers under
such plan after January 1, 1996 are eligible for treatment as "performance-based
compensation."
Key Elements of Executive Compensation
The Company's executive compensation program is designed to attract and
retain executives capable of leading the Company to meet its business objectives
and to motivate them to enhance long-term stockholder value. The key elements of
the program are competitive pay and equity incentives. Annual compensation for
the Company's executive officers consists of three elements: a base salary, an
incentive bonus and stock option grants.
The Committee makes compensation determinations based upon a subjective
assessment of a variety of factors, both personal and corporate, in evaluating
the performance of the Company's executive officers and making compensation
decisions. These factors include, in order of importance, the progress of the
Company toward its long-term objectives, the individual contributions of each
officer to the Company, and the compensation paid by selected biotechnology
companies to individuals in comparable positions. The Committee's weighing of
these factors in determining the compensation of an individual executive officer
may vary. In awarding stock options, the Committee considers the number and
value of an executive officer's outstanding stock options.
In light of the Company's disappointing test results and the loss of
collaborative partner support, the measures presently used by the Committee in
evaluating the Company's progress are management's ability to effectively
implement the Board of Director's restructuring and cost-saving policies, which
include (i) reducing the Company's work force, (ii) decommissioning the
Company's laboratories, and (iii) selling the Company's scientific and technical
equipment, as well as management's ability to efficiently use corporate
resources. Historically, the Committee has considered, and where appropriate
will continue to consider, (a) the achievement and management of appropriate
collaborative arrangements with larger pharmaceutical and biotechnology
companies relating to the discovery and development of commercializable
products, (b) progress of products under development in pre-clinical (animal)
testing, (c) the effectiveness with which management identifies new strategic
alternatives and its responses to new information such as the results of
research programs and clinical trials in the context of the identified strategic
alternatives, and (d) the hiring and retention of subordinate officers and other
key employees best capable of accomplishing the foregoing.
Base Salary. When utilizing comparative data, the Committee attempts to
set compensation levels in the mid-range of management compensation at the
companies examined. In December 1996, the Compensation Committee set annual
salaries for 1997. The Compensation Committee reviews salaries on an annual
basis, with the annual review for 1998 having occurred in December 1997. At an
annual review, the Compensation Committee may increase each executive officer's
salary based on the individual's contributions and responsibilities over the
prior 12 months and expectations for the next 12 months.
Bonus. The Committee may award bonuses at the end of the fiscal year
based on the Company's ability to meet its corporate and strategic goals and the
individual's contributions to those goals, if it deems such an award to be
appropriate. Based on management's ability to effectively implement the Board's
restructuring policies within a relatively short period of time, the Committee
decided to award cash bonuses for 1997 to certain officers and key employees.
Stock Options. Long-term incentives are provided by means of periodic
grants of stock options. The Company's 1993 Equity Incentive Plan is
administered by the Compensation Committee. The Committee believes that by
granting executive officers an opportunity to obtain and increase their personal
ownership of Company stock, the best interests of stockholders and executives
will be more closely integrated. The vesting provisions of the option plan serve
to retain qualified employees, providing continuing benefits to the Company
beyond those achieved in the year of grant.
Chief Executive Officer Compensation
Compensation paid during 1997 to Kenneth R. Lynn, the Company's former
Chief Executive Officer, was determined based on a subjective analysis of the
criteria described above and reflected the Company's strategic challenges for
the coming year, including its need to significantly reduce costs and conserve
cash, while at the same time pursuing new collaborative relationships with
larger biotechnology and pharmaceutical companies, and the desire to compensate
the chief executive officer in the mid-range of comparable biotechnology
companies, based upon an industry survey covering 107 biotechnology and
biopharmaceutical firms with between 51 and 149 employees.
The foregoing report has been furnished by the Compensation Committee
of the Board of Directors and shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent the Company specifically incorporates this report by
reference and shall not otherwise be deemed filed under such Acts.
Respectfully submitted,
Bert Fingerhut
STOCK PRICE PERFORMANCE GRAPH
The following graph illustrates a comparison of the cumulative total
stockholder return (change in stock price plus reinvested dividends) of the
Company's Common Stock with the Nasdaq Stock Market (US) (the "Nasdaq US Index")
and the Hambrecht & Quist "Biotechnology Index" (the "H&Q Biotechnology Index").
The comparisons in the graph are required by the SEC and are not intended to
forecast or be indicative of possible future performance of the Company's Common
Stock.
[Performance Graph]
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
Cortech, Inc. $100.00 127.91 25.29 23.83 13.67 5.53
Nasdaq US Index 100.00 114.80 112.21 158.70 195.19 239.53
H & Q Biotech- 100.00 86.21 81.89 139.30 128.53 130.10
nology Index
Assumes a $100 investment on December 31, 1992 in each of the Company's
Common Stock, the securities comprising the Nasdaq US Index, and the securities
comprising the H&Q Biotechnology Index.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1992, Cortech entered into a series of agreements with
CP-0127 Development Corporation ("CDC") that govern the development of products
utilizing Bradycor. The agreements grant CDC the right to utilize Bradycor in
the United States, Canada and Europe for certain indications, while Cortech
retained rights to such products in other parts of the world. Cortech has the
right to market, sell and license the technology licensed to CDC or to sell
products derived therefrom and is subject to a royalty obligation in favor of
CDC. Cortech is currently seeking a partner to advance the development of
components covered by the license. Mr. Fingerhut, the Company's Chairman and
Acting Chief Executive Officer, is a director of CDC.
The Company believes that the foregoing transactions and relationships
are in its best interests. As a matter of policy these transactions were, and
all future transactions between the Company and its officers, directors or
principal stockholders will be, approved by a majority of the independent and
disinterested members of the Board of Directors, on terms no less favorable to
the Company than could be obtained from unaffiliated third parties and in
connection with bona fide business purposes of the Company.
LEGAL PROCEEDINGS
Biostar Litigation. On February 27, 1998, a complaint was filed in the
New Castle County, Delaware Court of Chancery naming the Company, the Company's
directors and BioStar as defendants. The complaint, filed by a stockholder of
the Company, claims to be on behalf of a class of all the Company's stockholders
and contends that the directors of the Company breached their fiduciary duties
to the Company's stockholders when they unanimously approved the proposed
combination with BioStar. The complaint originally sought to enjoin the proposed
combination with BioStar as well as the operation of the Company's stockholder
rights plan and sought an order rescinding the proposed combination with BioStar
upon its consummation as well as compensatory damages and costs. The complaint
was amended following termination of the Biostar merger to seek to force an
auction of the Company and other relief. The Company believes that the claims
are without merit and intends to vigorously defend against this suit. Although
there can be no assurances in this regard, the Company believes that the suit
will have no material adverse effect on the Company because the Company (i)
believes that the claimant will not prevail on the merits, and (ii) has
insurance which it believes will cover the cost of defending this claim (except
for a $75,000 deductible amount.
AVF Litigation. Because the proposed combination with Biostar was
terminated on May 7, 1998, the annual meeting of the Company scheduled to be
held in conjunction with the stockholder vote on the Biostar transaction was not
held. Under Delaware law, any stockholder can seek a court action to require an
annual meeting if a company has not held an annual meeting for a period of 13
months. This period expired on June 28, 1998, and, on the following day, AVF
filed an action in the Court of Chancery of the State of Delaware to compel the
Company to hold an annual meeting of stockholders immediately. Pursuant to a
stipulation order entered into by the Company and AVF, and approved by the Court
on July 16, 1998, the Company and AVF agreed and stipulated that the Company's
annual meeting would be held on September 4, 1998 with the record date set for
July 10, 1998.
STOCKHOLDER PROPOSALS
To be considered for inclusion in the proxy statement for presentation
at the Annual Meeting of Stockholders to be held in 1999, a stockholder proposal
must be received at the offices of the Company, 6850 N. Broadway, Suite G,
Denver, CO 80221 not later than April 10, 1999.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly, printing and mailing of this proxy statement,
the proxy and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of Common Stock beneficially owned
by others to forward to such beneficial owners. The Company may reimburse
persons representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company or, at the Company's request, D.F. King & Co., Inc., 77 Water Street,
New York, New York 10008-4495 ("D.F. King"). D.F. King has advised the Company
that approximately 25 D.F. King employees will provide assistance in connection
with the solicitation. No additional compensation will be paid to directors,
officers or other regular employees for such services, but D.F. King will be
paid a fee, estimated to be up to approximately $47,500 (of which $17,500 is
contingent upon the result of the proxy contest) plus reasonable expenses, to
assist in the solicitation of proxies. The Company estimates that the total
amount of expenses to be incurred by it in connection with this proxy
solicitation will be $135,000, $10,000 of which has been incurred to date.
INDEMNIFICATION
The Company's Certificate and Bylaws provide, among other things, that
the Company will indemnify each officer or director, under the circumstances and
to the extent provided for therein, for expenses, damages, judgments, fines and
settlements he may be required to pay in actions or proceedings to which he is
or may be made a party by reason of his position as a director, officer or other
agent of the Company, and otherwise to the full extent permitted under Delaware
law.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers, and any persons holding
more than 10% of the Company's Common Stock to file initial reports of ownership
and reports of change in ownership of the Company's Common Stock with the SEC.
Officers, directors and greater than ten percent stockholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
OTHER MATTERS
The Board of Directors knows of no other business that will be
presented at the Annual Meeting. If any other matters are properly brought
before the Annual Meeting, it is intended that proxies in the enclosed form will
be voted in accordance with the judgment of the persons voting the proxies.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her to
participate at the Annual Meeting may request reasonable assistance or
accommodation from the Company by contacting Cortech, Inc., 6850 N. Broadway,
Suite G, Denver, CO 80221, (303) 650-1200. To provide the Company sufficient
time to arrange for reasonable assistance or accommodation, please submit all
requests by August 25, 1998.
If you have any questions concerning this proxy solicitation of the
procedures to execute and deliver a proxy, please contact D.F. King at:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005-4495
(212) 269-5550 collect
(800) 848-3051 toll free
Whether you intend to be present at the Annual Meeting or not, we urge
you to return your signed WHITE proxy card promptly.
By order of the Board of Directors
Bert Fingerhut
Chairman
<PAGE>
CORTECH, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 4, 1998
The undersigned hereby appoints Bert Fingerhut, Diarmuid Boran and John
Cheronis, M.D., and each of them, as attorneys and proxies of the undersigned,
with full power of substitution, to vote all of the shares of Common Stock of
Cortech, Inc. (the "Company") which the undersigned may be entitled to vote at
the Annual Meeting of Stockholders of the Company to be held at the Renaissance
Hotel, 3801 Quebec Street, Denver, Colorado on Friday, September 4, 1998, at
9:00 a.m., local time, and at any and all postponements, continuations and
adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
THE NOMINEES LISTED IN PROPOSAL 1, FOR PROPOSALS 2, 3 AND 4 AND AGAINST PROPOSAL
5, ALL AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC
INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors recommends a vote FOR the Nominee(s) listed
below.
o FOR the nominee(s) listed below o WITHHOLD AUTHORITY to vote for
(except as marked to the contrary below). the nominee(s) listed below.
NOMINEE:
__________________________ (Class I Director)
__________________________ (Class I Director)
__________________________ (Class I Director)*
__________________________ (Class III Director)*
- ----------------
* Nominated for election solely in the event Proposal 5 to increase the size of
the Board, which is opposed by the Board of Directors, is approved.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE WRITE SUCH NOMINEE'S NAME BELOW
- ---------------------------------------------------
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
<PAGE>
PROPOSAL 2: To approve an amendment to the Company's Certificate of
Incorporation that provides for a one-for-ten reverse stock split.
o FOR o AGAINST o ABSTAIN
The Board of Directors recommends a vote FOR Proposal 2.
PROPOSAL 3: To amend Article IX, Section 1 of the Company's Certificate of
Incorporation to provide that the number of directors shall be set by the Board
of Directors.
o?FOR o AGAINST o ABSTAIN
The Board of Directors recommends a vote FOR Proposal 3.
PROPOSAL 4: To ratify the selection of Arthur Andersen LLP as independent
auditors of the Company for its fiscal year ending December 31, 1998.
o FOR o AGAINST o ABSTAIN
The Board of Directors recommends a vote FOR Proposal 4.
PROPOSAL 5: To amend Article 3, Section 3.1 of the Company's Bylaws to set the
number of directors to serve on the Board of Directors at seven.
o FOR o AGAINST o ABSTAIN
The Board of Directors recommends a vote AGAINST Proposal 5.
DATE: _________________________, 1998
------------------------------------
SIGNATURE(S)
------------------------------------
TITLE (IF APPLICABLE)
Please sign exactly as your name appears hereon. If the stock is
registered in the names of two or more persons, each should sign.
Executors, administrators, trustees, guardians and attorneys-in-fact
should add their titles. If signer is a corporation, please give full
corporate name and have a duly authorized officer sign, stating title.
If signer is a partnership, please sign in partnership name by
authorized person.
PLEASE SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
<PAGE>
BARTLIT BECK HERMAN PALENCHAR & SCOTT
The Kittredge Building
511 Sixteenth Street
Denver, CO 80202
August 6, 1998
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Cortech, Inc.
Dear Sir or Madam:
On behalf of Cortech, Inc., a Delaware corporation (the "Company"), we
hereby electronically transmit, pursuant to Regulation S-T promulgated by the
Securities and Exchange Commission, the revised preliminary Proxy Statement of
the Company in respect of its annual meeting to be held on September 4, 1998.
Asset Value Fund Limited Partnership, a stockholder of the Company, has filed a
definitive proxy statement in opposition to the solicitation by the Company.
Please contact the undersigned at (303) 592-3175 or Thomas R. Stephens
of this firm at (303) 592-3144 should you require further information or have
any additional questions.
Very truly yours,
/s/ Polly S. Swartzfager
Polly S. Swartzfager
(Admitted in New York;
application pending in Colorado)
PSS/kmv
