SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant |_|
Filed by a Party other than the Registrant |X|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Cortech, Inc.
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(Name of Registrant as Specified In Its Charter)
Asset Value Fund Limited Partnership
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|_| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).
|_| $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
|X| No fee required
1) Title of each class of securities to which transaction applies:
Common Stock
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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4) Proposed maximum aggregate value of transaction:
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|_| 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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2) Form, Schedule or Registration No.
---------------------------------------
3) Filing party:
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4) Date filed:
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___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
(032796DTI)
<PAGE>
REVISED PRELIMINARY OPPOSITION PROXY STATEMENT June __, 1998
ANNUAL MEETING OF STOCKHOLDERS
OF CORTECH, INC. ("Cortech" or "the Company")
ASSET VALUE FUND LIMITED PARTNERSHIP ("Asset Value 1")
(a Delaware limited partnership)
This Proxy Statement and the enclosed white proxy card are being sent by
Asset Value on or about __________, 1998 in connection with its solicitation of
proxies at the Annual Meeting of Stockholders being held by Cortech at [time and
place] ( the "Meeting"). Asset Value and two other investors own approximately
15% of the outstanding common stock of Cortech ("Cortech Stock"), making them by
far the largest stockholders. At the Meeting, Cortech management proposes to
elect its two nominees to the Board of Directors and to ratify the selection of
Arthur Andersen LLP as Cortech's independent auditors. Asset Value favors the
selection of Arthur Andersen LLP but opposes the election of management's
nominees to the Board.
Under the Certificate of Incorporation and Bylaws currently in effect, the
Cortech board has five members whose terms are staggered so that no more than
two terms expire in any one year. A staggered board, sometimes referred to as a
classified board, is an obstacle to gaining control of the Board in any one
year. Asset Value seeks to gain control of Cortech at the Meeting by proposing
to amend the Bylaws to increase the number of directors from five to seven (the
"Board Amendment") and subject to the approval of the Board Amendment, to elect
its four nominees as directors (the two vacancies available under the current
Bylaws plus the two vacancies created by the Board Amendment). If the Board
Amendment is approved and all of Asset Value's nominees are elected, Asset
Value's nominees will constitute a majority of the Board and therefore control
of Cortech will transfer to Asset Value.
If the Board Amendment is not approved, Asset Value will seek to have two
of its nominees elected as directors in opposition to Management's nominees for
the two vacancies available under the Bylaws currently in effect. Asset Value
will vote for the ratification of Arthur Andersen LLP as the Company's
independent auditors, for the Board Amendment and for its nominees.
The close of business on ___________, 1998 has been fixed by the Company as
the record date in determining the number of shares eligible to vote at the
Meeting. A copy of this Proxy Statement and white Proxy Card will be mailed to
all stockholders entitled to vote at the Annual Meeting.
In reliance upon Rule 14a-5(c) of the Securities and Exchange Act of
1934 2, reference is made to management's proxy statement which is being sent
to you by the Company for a full
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1 Asset Value is a Delaware limited partnership which is wholly-owned by
Kent Financial Services, Inc., a Delaware corporation ("Kent") the shares of
which are publicly traded on NASDAQ under the symbol KENT. Asset Value was
organized in September, 1990 for the purpose of investing in securities,
principally marketable securities. Additional information about Asset Value and
its management and about Kent and the names of its officers, directors and
controlling stockholders and their ownership interests is presented on Schedule
1 of this Proxy Statement.
2 Rule 14a-5(c) provides that "any information contained in any other
proxy soliciting material which as been furnished to each person solicited in
connection with the same meeting or subject matter may be omitted from the proxy
statement, if a clear reference is made to the particular document containing
such information."
<PAGE>
description of management's proposals, as well as information with respect to
the number of shares eligible to vote at the Meeting, the quorum, the record
date, the securities ownership of the Company, information about the Company's
officers and directors, including compensation, information about the
ratification of the appointment of Arthur Andersen LLP as independent auditors
and the date by which stockholders must submit proposals for inclusion in the
next annual meeting.
PLEASE READ THE FOLLOWING MATERIAL WITH CARE BECAUSE WE BELIEVE THAT CORTECH'S
FUTURE DEPENDS ON YOUR VOTE.
WE URGE YOU TO VOTE:
FOR THE BOARD AMENDMENT (which will add two vacancies on the Board.)
FOR ALL OF ASSET VALUE'S NOMINEES (which in combination with the Board Amendment
would effect a change of control to Asset Value)
We are seeking your vote because we believe that the incumbent Board has
exercised poor judgment in governing Cortech.
At the end of fiscal 1997, Cortech had net assets of only $15.4 million
after losing over $70 million since 1993 in a failed attempt to exploit
Cortech's technology. The Board then proceeded to expend $673,000 of Cortech's
limited resources promoting a merger with Biostar, Inc. (the "Merger"), a
company with a $5.6 million negative net worth even though Asset Value warned
the Board from the start that the Merger was not in the interests of
stockholders3 who, Asset Value said, would never approve such a transaction. The
Merger was canceled on May 7,1998. Within two weeks, Kenneth Lynn, the former
CEO, left Cortech, taking with him, what we would call, a "departure bonus" of
almost $500,000, another 3.5% of Cortech's remaining cash of $14.3 million.
We ask you. What will this Board do next? Don't take a chance.
Vote for a change.
Vote for Asset Value's nominees!
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3 Asset Value has not retained an independent financial adviser and its
conclusions are solely based on the opinion of its manager, Asset Value
Management, Inc. which was reached after reviewing management's proxy material
for the Merger, including the opinion of management's financial adviser.
<PAGE>
MORE RED INK!
After the termination of the Merger, Cortech's Form 10-Q for the first
quarter of 1998 revealed that Cortech's losses not only continued but increased
compared to last year. In a quarter with No research and development activities
and No revenues, Cortech still had approximately 15 full-time4 employees and
general and administrative expenses of $1,522,000, of which, according to
Cortech, merger expense only accounted for approximately $673,000.
TIME AND MONEY ARE RUNNING OUT!
On May 18, 1998, CEO Kenneth Lynn left Cortech. We believe that Mr Lynn was
made a scapegoat for what we think is Cortech's prior mismanagement. But in our
opinion, Mr. Lynn was a symptom of what is wrong with Cortech not the source, at
least, in our view, not the only source. In the past five years (including the
first quarter of 1998), Cortech has lost over $70 million, and as of March 31,
1998, had cash of only $14.3 million. We ask, does Lynn's departure absolve the
Board of their responsibility for these losses? We think the answer is a
resounding No!
PICTURE OF HOUR GLASS WITH CONTENTS READING
CASH REMAINING AT
MARCH 31, 1998
$14.3 million
LOSSES INCEPTION
TO DATE
$86 million!!!
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4 Cortech does not disclose whether there are additional part-time
employees and consultants still hanging on.
<PAGE>
The question we believe you should ask yourself, is
ARE YOU BETTER OFF NOW THAN YOU WERE FIVE YEARS
AGO?
In what we think is the biggest bull market in history, Cortech Stock
prices have declined from $18.25 per share in 1993 to $.50 per share in 1998,
making Cortech, by any comparison, in our view, one of the poorest stock market
performers during this period. --AND THAT'S NO BULL!
COMPARISON OF CORTECH'S STOCK PERFORMANCE (NASDAQ
SYMBOL-CRTQ) TO THE DOW JONES INDUSTRIAL AVERAGE (DJII) AND
THE STANDARD AND POOR'S 500 COMPOSITE INDEX (S&P)
[GRAPH THE ABOVE]
<TABLE>
<CAPTION>
DJII S&P Cortech
------ ----- ---------
<S> <C> <C> <C>
1993 3820.77 469.90 $18.25
1994 3867.41 460.68 14.25
1995 5181.43 616.71 3.65625
1996 6544.09 748.03 3.8125
1997 7908.25 970.43 2.03125
1998 9037.71 1113.86 .50
</TABLE>
NOT A PRETTY PICTURE!
<PAGE>
Shortly before the Merger was canceled, Cortech announced that Cortech
Stock would be delisted from NASDAQ.5 Management concedes that "the absence of
the NASDAQ National Market listing for the Company's Common Stock [will] have an
adverse effect on the market for, and potentially the market price of, the
Company's Common Stock."
NOW YOU TELL US!
After speaking to a representative of NASDAQ and after reviewing NASDAQ's
rules for listing, Asset Value concluded that the Board should have known prior
to the date of the Merger Agreement in December of 1997, that Cortech Common
Stock would be delisted irrespective of the Merger. This fact alone, in Asset
Value's view, should have caused the Board to reject the Merger with BioStar.
Once Cortech is delisted, to be reinstated it must comply with requirements for
new listings which have much higher standards than the standards for the
maintenance of a listing. Asset Value has no magic bullet to rectify the limited
marketability of Cortech shares anticipated as a result of the delisting except
to give priority to suitors with financial attributes that would satisfy the
listing requirements upon a combination with Cortech. Of course there can be no
assurance that such a combination can be achieved.
THIS BOARD ACTS LIKE THEIR VOICE IS THE ONLY CHOICE.
"WHO CARES WHAT OWNERS THINK? Who owns American companies? The
management, of course. Shareholders are tolerated, but managers rule.6"
TOO LITTLE, TOO LATE
Seven months after Asset Value first asked for representation on the Board;
long after the Board was sued for misfeasance; after Cortech had spent $673,000
on the failed Merger; after Cortech had lost another approximately $3.4 million
from operations (from September 30, 1997 through March 31, 1998), finally on May
11, 1998 the Cortech Board expressed an interest in meeting with Asset Value's
manager, Paul Koether7. By this time, Asset Value had already spent significant
amounts of its own funds in opposing the Merger and in securing control of the
Board
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5 Cortech is currently appealing the NASDAQ ruling.
6 Market Watch, New York Times, 3/8/98, Floyd Norris. This quote has
been made without the permission of the New York Times or Mr. Norris.
7 Prior to the announcement of the Merger, Asset Value sought to have
its principal officer, Paul O. Koether, elected as a Cortech director to assist
in the redirection of Cortech's assets. Although the Cortech Board did not
reject our request, it did not acquiesce either. In our view, it dithered,
deferred and delayed and finally, without any further personal contact with its
largest stockholder, Cortech announced the BioStar transaction. Only after the
Merger failed did Cortech's president, Kenneth Lynn finally telephone Paul O.
Koether. Mr. Lynn was told that Asset Value, among other things, wished the
Board to cancel the poison pill and to declassify the Board which, in Asset
Value's opinion, would restore corporate democracy and potentially entice
prospective acquirers.
<PAGE>
because it believed that a change in course for Cortech was absolutely essential
and because it believed that a Board controlled by the incumbents would not
embrace the necessary changes. Asset Value thought that the Board's offer to
meet, in and of itself, was too little too late.
Asset Value was willing to meet only if the Board would first take the
following steps which, in the view of Asset Value, would enhance stockholder
value and stockholder democracy : 1) lift the Poison Pill; 2) amend the By-laws
to allow stockholders owning 10% or more to call a special meeting; 3) eliminate
the current classification of the Board so that all directors would stand for
election at the upcoming meeting and 4) elect three Asset Value nominees which
would constitute a majority of the current five person Board.
Supporters of classified boards and poison pills claim that they are tools
for directors to resist takeovers that they deem unfair to stockholders.
Whatever the justification for classified boards and poison pills in general, in
the case of Cortech, Asset Value believes that they have served only to prevent
competition for control. Moreover, in Asset Value's view, this Board's approval
of the Biostar transaction exemplifies how these "tools" can be misused in the
hands of directors who have bad judgment.
The Board's response to Asset Value was a three page letter, the essence of
which, in the opinion of Asset Value, was
SAME OLD; SAME OLD
The Board was willing to discuss the declassification of the Board
(permitting all directors to be elected in one year) but wanted to defer
consideration of the other issues until after a new Board was elected. The Board
wished to submit to the stockholders a slate of nominees which consisted of
current Board members as well as members representing certain unnamed
"significant stockholder constituencies". Under the Board's proposal, Asset
Value believes that the new Board, once fortified with nominees of "significant
stockholders" would get together after the election to decide issues that could
have been decided at the Meeting by all stockholders.
The Board said that it "...embraced [Asset Value's] call for stockholder
democracy and [had] a genuine interest in avoiding a costly proxy fight" and was
prepared to let stockholder democracy determine the course of future events.
Asset Value took the Board at its word and responded that Asset Value wanted to
join the Board in presenting all disputed issues for consideration in one joint
proxy statement. This course would, in the view of Asset Value, permit all
stockholders, large and small, to have a voice in determining the future of
Cortech without incurring the cost of a proxy contest. Asset Value told the
Board that it believed that the addition of two or three new voices would [not]
necessarily add up to new leadership for the company. Instead conflicting
opinions among Board members could leave the Company directionless at a crucial
crossroad in its history. In its view, stockholders would now be better off if
the Board consisted of a majority of the Board's nominees or a majority of Asset
Value's nominees rather than an amalgamation of the two. In any event Asset
Value said that the slates of each side ought to be presented in one proxy
statement so that stockholders could make that choice themselves. Asset Value
also offered to pay its share of the cost of the proxy solicitation.
<PAGE>
To date the Board has not answered whether it is prepared to join Asset
Value and let stockholders determine their destiny.
STOP THE RED INK!
Asset Value considers a shutdown of Cortech an alternative which must be
considered, particularly in view of the continued losses reported in the first
quarter of 1998. Such a course however, has risks, including the possible
further diminishment of Cortech's technology and the cessation of Cortech as a
going concern. The matter would be further evaluated with current employees once
Asset Value gained control, therefore, there is no assurance that Cortech would
be shut down.
Asset Value can only give stockholders the assurance that its nominees will
try to further reduce Cortech's expenses and will move as quickly as possible to
secure a merger partner. Expenses that will be particularly scrutinized for cuts
are any part-time employees or consultants and employees engaged in any activity
other than caretaking. The new Board would seek to reduce, if possible, any
professional fees unrelated to seeking a strategic partner. Asset Value's
nominees have pledged to take no fees for serving as directors.
Asset Value has promised not to seek to merge Cortech with any affiliate or
entity in which Asset Value is an investor. Asset Value intends to benefit from
its Cortech investment only to the same extent other stockholders benefit.
THE SHAPE OF THINGS TO COME 8
So, what will Asset Value do if it obtains control of the Cortech Board? We
believe that once the Cortech Board determined to change control of Cortech, it
should have sought competitive transactions more aggressively, by advertising in
the financial media, by engaging an investment banker from the outset to solicit
merger partners and by publicly stating that the Board was conducting an open
bidding process for control of Cortech. If elected Asset Value's nominees will
take these steps. Asset Value has no specific merger partner in mind and has
considered possible alternatives for the future of Cortech only in a preliminary
way. In the course of its own business, however, Asset Value constantly reviews
investment opportunities and in connection with this process has seen companies
which might be attractive strategic partners for Cortech although additional
analysis would be required to determine whether any of these companies are a fit
with Cortech.
The principal standards for seeking a candidate would be balance sheet
quality and positive earnings. Asset Value also believes that a private company
which seeks a public market or a public company which needs Cortech's assets to
qualify for NASDAQ, would consider these attributes as well as cash in
calculating Cortech's value. Asset Value is not sure, however, that there are
potential acquisitions or mergers that would be attractive for Cortech. One
thing is certain however, Asset
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8 H.G. Wells
<PAGE>
Value will not seek to merge Cortech with any affiliate or entity in which Asset
Value is an investor. Asset Value intends to benefit from its Cortech investment
only to the same extent other stockholders benefit.
WARNING: "Those who cannot remember the past are condemned to repeat it."9
In our opinion, several individuals and entities, other then Cortech
stockholders would have reaped the benefits of the Merger with BioStar. We
believe that Mr. Lynn stood to benefit from the Merger because it would have
triggered his golden parachute ($1,300,000 for him and others with severance
agreements) and enabled him (and other Board members and executive officers) to
exercise 623,535 options. BioStar's management would have received additional
compensation and options in connection with the Merger. In fact, it seems to
Asset Value, that every participant was to profit from the Merger except the
public stockholders of Cortech, who would have suffered a dilution in book value
per Cortech share of 64% (from an historical $.83 to a pro forma $.30) while
BioStar stockholders would have enjoyed an improvement in book value from an
historical negative ($2.86) to a positive $.17 per share.
PLEASE ASK YOURSELF:
DO YOU WANT THE BOARD MEMBERS WHO APPROVED THE
BIOSTAR MERGER TO SELECT THE NEXT MERGER CANDIDATE
FOR CORTECH?
WE THINK YOUR ANSWER WILL BE: CERTAINLY NOT!
PLEASE SEND THE WHITE PROXY CARD TO ASSET VALUE AND VOTE TO INCREASE THE BOARD
AND TO ELECT ALL OF ASSET VALUE'S NOMINEES.
Remember, Asset Value will not merge Cortech with an Asset Value affiliate
or a company in which Asset Value is a stockholder. Asset Value believes it
should gain from any future acquisition or Merger involving Cortech only to the
extent all stockholders benefit. Asset Value's nominees have pledged not to
accept any fees for serving as directors.
IT'S TIME FOR A CHANGE.
VOTE FOR CHANGE.
VOTE FOR ASSET VALUE.
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9 The Life of Reason, (1905) George Santayana
<PAGE>
PROPOSAL 1
INCREASE IN BOARD
Asset Value is asking for your support to approve a proposal to amend
Article 3 Section 3.1 of the Bylaws of Cortech to set the number of directors to
serve on the Board of Directors at seven. The affirmative vote of a plurality of
the votes present in person or represented by proxy and entitled to vote at the
meeting are required to approve this proposal.
Asset Value urges you to vote FOR the approval of the proposal to amend
Article 3 Section 3.1 of the Bylaws of Cortech to set the number of directors to
serve on the Board of Directors at seven.
PROPOSAL 2
ELECTION OF DIRECTORS
Asset Value is asking for your support to elect its nominees. Under Article
II, Section 2.2 of the Company's Bylaws, to bring business before the annual
meeting, a stockholder must provide timely, written notice to the secretary
describing the business and providing information about the stockholder,
including name and address and beneficial ownership. The affirmative vote of a
plurality of the votes present in person or represented by proxy and entitled to
vote at the meeting are required to elect each of the Asset Value nominees.
Information about management's nominees, including beneficial ownership of
Cortech Shares and compensation can be found in management's proxy statement.
The biographical data, including age, principal occupation or employment, and
other affiliations and business experience of each Asset Value nominee during
the last five years follows:
Paul O. Koether, age 61, is principally engaged in the following
businesses: (i) as Chairman and director of Kent Financial Services, Inc.
("Kent") since July 1987 and President since October 1990 and the general
partner since 1990 of Shamrock Associates, an investment partnership which is
the principal stockholder of Kent and (ii) various positions with affiliates of
Kent, including Chairman since 1990 and a registered representative since 1989
of T. R. Winston & Company, Inc. ("Winston") and since July 1992, a director of
American Metals Service, Inc., ("AMS") which was an indirect, majority-owned
subsidiary of Kent before its shares were distributed to Kent's stockholders.
Mr. Koether also has been Chairman since April 1988, President from April 1989
to February 1997 and director since March 1988 of Pure World, Inc., formerly
American Holdings, Inc., ("Pure World") and since December 1994 has been a
director and since January 1995 has been Chairman of Pure World's majority-owned
subsidiary, Madis Botanicals, Inc., ("Madis") a manufacturer and distributor of
natural products. He is also Chairman and a director of Pure World's principal
stockholder, Sun Equities Corporation, ("Sun") a private company. Mr. Koether
served as Chairman and a director of NorthCorp Realty Advisors, Inc., an asset
management company, ("NorthCorp") from June 1992 when it was acquired by Pure
World until August, 1994 when it was merged and renamed Crown NorthCorp, Inc.
<PAGE>
Mark W. Jaindl, age 37, is the President and Chief Executive Officer of the
American Bank of the Lehigh Valley, a commercial bank. He has served as Senior
Vice President of Pure World from June 1992 until May 1995 and as a director
since October 1994. He was Senior Vice President of Madis from December 1994
until May 1995 and a director of Madis since December 1994 and he has served as
a director of AMS since July 1992. Mr. Jaindl was a director of NorthCorp from
June 1992 until September 1994 and was Interim President of NorthCorp from
February 1994 until August 1994. From May 1982 to October 1991 and again since
May 1995 he has served as Chief Financial Officer of Jaindl Farms, which is
engaged in diversified businesses, including the operation of a 12,000-acre
turkey farm, a mobile home park, a John Deere dealership and a grain operation.
Mr. Jaindl also served as the Chief Financial Officer of Jaindl Land Company, a
developer of residential, commercial and industrial properties in eastern
Pennsylvania.
John W. Galuchie, Jr., age 45, a certified public accountant, is
principally engaged in the following businesses: (i) Winston, as President since
January 1990 and director since September 1989; (ii) Kent, in various executive
positions since 1986 and a director from June 1989 until August 1993; (iii) Pure
World, as Executive Vice President since April 1988, director from January 1990
until October 1994 and for more than five years as Vice President and director
of Sun; (iv) AMS as Vice President, Treasurer and a director since July 1992.
Mr. Galuchie served as a director of Crown NorthCorp, Inc., the successor
corporation to NorthCorp from June 1992 to August 1996.
James L. Bicksler, age 60, is a Professor of Economics and Finance,
Graduate School of Management, Rutgers University, a position he has held since
1969.
Asset Value urges you to vote FOR the nominees described above. They will
seek to maximize stockholder values and pledge to cooperate with and consider
the proposals of other stockholders.
If more than a majority of Cortech Shares present by proxy or in person
vote in favor of amending the Bylaws to increase the number of directors, there
will be four vacancies on the Board and the four nominees receiving the highest
vote (whether Asset Value's nominees or management's nominees) will be elected
to the Board. If all of Asset Value's nominees are elected, Asset Value's
nominees will constitute a majority of the Board and control of Cortech will
transfer to Asset Value.
If the Board Amendment is not approved, the two nominees (whether Asset
Value's nominees or Management's nominees) receiving the highest number of votes
cast at the meeting will be elected. Asset Value makes no provision for voting
for management's nominees, therefore if you vote for only one of Asset Value's
nominees, you will not have an opportunity to vote for a candidate to fill the
other vacancy to the Board.
Even if you have voted against increasing the Board please vote for Asset
Value's nominees. The nominees receiving the highest number of votes will be
elected. If the Board Amendment is not approved two of Asset Value's nominees
can still be elected if their votes exceed the votes for Management's nominees.
If the Bylaw Amendment is approved, management's nominees can still be elected
to two vacancies if their votes exceed the votes of any of the four Asset Value
nominees.
<PAGE>
Therefore if you agree that it is time for a change, VOTE
YES to the Board Amendment
and
FOR Asset Value's nominees
PROPOSAL 3
RATIFICATION OF INDEPENDENT AUDITOR
Information about the ratification of Arthur Andersen LLP can be found in
management's proxy statement. Asset Value favors the ratification of Arthur
Andersen LLP as Cortech's independent auditor.
REQUIRED VOTE AND MANNER OF VOTING
If more than a majority of Cortech Shares present by proxy or in person
vote in favor of the Board Amendment, there will be four vacancies on the Board
and the four nominees receiving the highest vote (whether Asset Value's nominees
or management's nominees) will be elected to the Board. If the increase in Board
members is not approved the two nominees (whether Asset Value's nominees or
Management's nominees) receiving the highest number of votes cast at the meeting
will be elected. If more than a majority of shares of Cortech Shares voting at
the Meeting vote for the ratification of Arthur Andersen LLP as Cortech's
independent auditor, this proposal will be approved. Information about the
quorum and voting for management's proposals can be found in management's proxy
statement.
Valid proxies will be voted as instructed therein, but absent instructions
on the white proxy card, will be voted FOR the Bylaw amendment to enlarge the
Board, FOR Asset Value's nominees, and FOR the ratification of Arthur Anderson
LLP and in the discretion of the proxies on any other matter that comes before
the Meeting except that proxies will not be voted on another matter which
becomes known a reasonable time before the Meeting. Abstentions and broker
non-votes (where a nominee holding shares for a beneficial owner has not
received voting instructions from the beneficial owner on a particular matter
and the nominee does not vote the shares) will be counted in the determination
of a quorum but will not be counted for or against any proposal. We urge you to
sign, date and return the white proxy card in the enclosed envelope. No postage
is required if mailed in the United States.
<PAGE>
SHARES IN STREET NAME
If you hold your Cortech Shares in the name of a brokerage firm or bank,
your broker or banker cannot vote the Shares until the broker or banker receives
specific instructions from you. Please contact the party at the brokerage firm
or bank responsible for your account to make sure that a proxy is executed for
your Cortech Shares on the white proxy card.
REVOCATION OF PROXIES
If you have executed management's **** proxy card before receiving this
Proxy Statement, you have every right to change your vote by signing, dating and
returning the enclosed white proxy card in the postage-paid envelope provided.
Only your latest dated proxy will count at the Meeting. Any proxy, including the
proxy solicited hereby, may be revoked at any time before it is voted by (i)
submitting a duly executed proxy bearing a later date to the Secretary of the
Company or to Asset Value, (ii) filing with the Secretary of the Company a
written revocation or (iii) attending and voting at the Meeting in person.
SOLICITATION EXPENSE
Asset Value, Mark W. Jaindl and Frederick J. Jaindl (see Schedule 1) will
bear the cost of preparing, assembling and mailing the enclosed form of proxy,
this proxy statement and other material which may be sent to stockholders in
connection with this solicitation. Officers and regular employees of Asset Value
or its affiliates may solicit proxies by mail, telephone, telegraph, facsimile
and personal interview, for which no additional compensation will be paid. In
addition, Asset Value has retained Beacon Hill Partners, Inc. ("Beacon Hill") to
solicit proxies on its behalf. In connection with the solicitation in opposition
to Cortech, Asset Value has agreed to pay Beacon Hill up to $15,000 plus
expenses, part of which is a success fee. Asset Value advanced Beacon Hill
$3,000 to cover expenses. It is anticipated that the cost to Asset Value in
connection with this solicitation will be approximately $50,000.
Very truly yours,
Paul O. Koether
Asset Value Fund Limited Partnership
<PAGE>
IMPORTANT
If your shares are held in "Street Name" only your bank or broker can vote
your shares, and only upon receipt of your specific instructions. Please contact
the person responsible for your account and instruct them to execute a white
proxy card as soon as possible.
If you have any questions or need further assistance in voting, please call
John W. Galuchie, Jr., of Asset Value Fund Limited Partnership collect at (908)
234-1881, or our proxy solicitor:
BEACON HILL PARTNERS, INC.
90 BROAD STREET
NEW YORK, NEW YORK 10004
(800) 253-3814
<PAGE>
SCHEDULE 1
ADDITIONAL INFORMATION ABOUT ASSET VALUE FUND LIMITED
PARTNERSHIP, MARK W. JAINDL AND FREDERICK J. JAINDL
Asset Value Fund Limited Partnership ("Asset Value") is engaged in
investing in securities. The sole general partner of Asset Value is Asset Value
Management, Inc. ("Asset Value Management"). Asset Value Management is a
wholly-owned subsidiary of Kent Financial Services, Inc. ("Kent"), whose
principal business is the operation of T. R. Winston & Company, Inc. ("TRW"),
its wholly-owned subsidiary. TRW is a securities broker-dealer registered with
the National Association of Securities Dealers, Inc. Asset Value, Asset Value
Management, Kent and TRW maintain offices at 376 Main Street, Bedminster, New
Jersey 07921.
Mark W. Jaindl ("Mark Jaindl") is the President and Chief Executive Officer
of the American Bank of the Lehigh Valley, a commercial bank whose principal
business address is 4029 West Tilghman Street, Allentown, PA 18104 ("American
Bank"). (For additional information on Mark Jaindl, see PROPOSAL 1, ELECTION OF
DIRECTORS.) Frederick J. Jaindl ("Fred Jaindl") is the sole proprietor of Jaindl
Farms (turkey farming), whose principal business address is 3150 Coffeetown
Road, Orefield, PA 18069. Fred Jaindl is Chairman of American Bank. Mark and
Fred Jaindl are the principal stockholders of American Bank. Mark Jaindl is the
son of Fred Jaindl.
As of March 23, 1998, Asset Value holds 2,000,000 Cortech Shares or
approximately 10.80% of the total Cortech Shares outstanding. Mark Jaindl holds
250,000 Cortech Shares, or approximately 1.35% and Fred Jaindl holds 520,000
Cortech Shares or approximately 2.80%. Asset Value, Mark Jaindl and Fred Jaindl
disclaim the beneficial ownership of each other's Cortech Shares. Purchases and
sales of Cortech Shares by Asset Value, Mark Jaindl and Fred Jaindl are listed
on Schedule 2.
During the past ten years, none of Asset Value, Mark Jaindl, Fred Jaindl,
Asset Value Management, Kent, TRW, or the Directors and Executive Officers of
Kent has been convicted in a criminal proceeding.
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS
OF KENT FINANCIAL SERVICES, INC.
Percent of Direct or
Indirect Ownership
Name and Address Position and Office of Voting Securities of
of Beneficial Owner Currently Held Kent Financial Services, Inc.
- ------------------- ------------------- -----------------------------
<S> <C> <C>
Paul O. Koether Chairman, Director 44.90%
211 Pennbrook Road and President
Far Hills, NJ 07931
John W. Galuchie, Jr. Vice President and
376 Main Street Treasurer 2.32%
Bedminster, NJ 07921
Mark Koscinski Vice President *
376 Main Street
Bedminster, NJ 07921
M. Michael Witte Director 1.15%
1120 Granville Avenue
Suite 102
Los Angeles, CA 90049
Casey K. Tjang Director *
56 Hall Drive
Clark, NJ 07066
Mathew E. Hoffman Director *
62 Rosehill Avenue
New Rochelle, NY 10804
_________________________________________
*Less than 1 percent
</TABLE>
<PAGE>
SCHEDULE 2
<TABLE>
PURCHASES AND SALES OF CORTECH SHARES
ASSET VALUE<F1>
Dates purchased Number of shares purchased Price per share<F2> Total
- --------------- -------------------------- --------------- -------------
<S> <C> <C> <C>
07/25/97 20,000 $.61375 $ 12,275.00
07/31/97 6,700 .625 4,321.50
08/06/97 9,100 .6875 6,256.25
08/07/97 2,600 .6875 1,787.50
08/08/97 3,100 .6875 2,131.25
08/12/97 458,500 .6875 315,218.75
08/15/97 5,100 .6875 3,506.25
08/18/97 5,200 .6689 3,478.28
08/19/97 3,200 .65625 2,100.00
08/20/97 9,000 .65625 5,906.25
08/21/97 8,500 .6875 5,843.75
08/27/97 146,800 .6875 103,861.00
09/08/97 22,000 .6875 15,125.00
09/11/97 20,000 .703125 14,062.50
09/15/97 26,000 .703125 18,281.25
09/16/97 7,700 .703125 5,414.06
09/17/97 4,000 .703125 2,812.50
09/24/97 31,425 .703125 22,095.70
09/30/97 89,600 .703125 63,000.00
10/01/97 56,000 .703125 39,375.00
10/02/97 1,475 .703125 1,037.11
10/06/97 25,000 .6875 17,187.50
10/07/97 2,000 .6875 1,375.00
10/07/97 6,500 .71875 4,671.88
10/07/97 336,000 .703125 236,250.00
10/08/97 1,556,757 .65 1,011,892.05
10/08/97 5,000 .75 3,750.00
10/08/97 20,000 .71875 14,375.00
10/09/97 2,000 .71875 1,437.50
10/09/97 5,000 .765625 3,828.13
10/09/97 18,500 .75 13,875.00
10/10/97 4,500 .78125 3,515.63
10/14/97 1,000 .78125 781.25
10/14/97 6,000 .8125 4,875.00
10/28/97 15,000 .6875 10,312.50
10/30/97 13,000 .6875 8,937.50
10/30/97 12,000 .65625 7,875.00
11/03/97 3,700 .6875 2,543.75
11/04/97 4,900 .65625 3,215.63
11/05/97 12,000 .6875 8,250.00
11/05/97 2,500 .65625 1,640.63
11/07/97 11,300 .65625 7,415.63
11/10/97 58,343 .65625 38,287.59
11/11/97 10,500 .65625 6,890.63
(table continued on next page)
<PAGE>
(table continued from previous page)
Dates purchased Number of shares purchased Price per share<F2> Total
- --------------- -------------------------- --------------- -------------
11/14/97 4,000 .65625 2,625.00
11/14/97 8,500 .6875 5,843.75
11/17/97 9,700 .65625 6,365.63
11/18/97 11,300 .65625 7,415.63
11/24/97 5,000 .640625 3,203.13
--------- -------------
3,106,000 $2,086,524.84
--------- -------------
Dates sold Number of shares sold Price per share<F2> Total
- ---------- ------------------------- --------------- -------------
08/13/97 3,000 $.6875 $ 2,062.43
08/29/97 3,000 .71875 2,156.17
09/17/97 2,000 .71875 1,437.45
09/30/97 3,000 .71875 2,156.17
10/07/97 325,000 .65 211,242.95
02/10/98 770,000 .6705 516,285.00
--------- -------------
1,106,000 735,340.17<F3>
--------- -------------
2,000,000 $1,319,425.00
========= =============
MARK W. JAINDL
Dates purchased Number of shares purchased Price per share<F2> Total
- --------------- -------------------------- --------------- -------------
02/10/98 250,000 .6705 $ 167,625.00
========== =============
FREDERICK J. JAINDL
Dates purchased Number of shares purchased Price per share<F2> Total
- --------------- -------------------------- --------------- -------------
02/10/98 520,000 .6705 $ 348,660.00
========== =============
<FN>
<F1> Excludes the purchase for an aggregate amount of $11,251.52 on October
8, 1997 of warrants to purchase 562,576 shares of Cortech stock, which
were contributed back to the capital of Cortech on October 18, 1997.
No shares were purchased with or are being held with borrowed funds.
<F2> Price excludes brokerage commissions, if any.
<F3> Reflects loss on sale of $31,759.67.
</FN>
</TABLE>
<PAGE>
PRELIMINARY PROXY CARD
Cortech, Inc.
Annual Meeting To Be Held On [date], 1998
This Proxy Is Being Solicited On Behalf Of Asset Value Fund Limited
Partnership ("Asset Value")
The undersigned hereby appoints Paul O. Koether, Mark W. Jaindl and John W.
Galuchie, Jr. or any of them, the undersigned's proxies, each with full power of
substitution, to vote all Shares of Common Stock of Cortech, Inc. (the
"Company") which the undersigned would be entitled to vote if personally present
at the Annual Meeting of Stockholders of the Company to be held on [date], 1998
at **A.M. at ************************************** (the "Meeting") and at any
adjournments or postponements thereof and, without limiting the generality of
the power hereby conferred, the proxy nominees named above and each of them are
specifically directed to vote as indicated below.
WHERE A CHOICE IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED AS SPECIFIED. IF NO CHOICE IS INDICATED, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR THE AMENDMENT TO THE BYLAWS TO INCREASE THE NUMBER OF
DIRECTORS TO SEVEN, FOR THE ELECTION OF ASSET VALUE'S NOMINEES AS DIRECTORS, and
FOR THE RATIFICATION OF ARTHUR ANDERSEN LLP.
If there are amendments or variations to the matters proposed at the
Meeting or at any adjournments or postponements thereof, or if any other
business properly comes before the Meeting, this proxy confers discretionary
authority on the proxy nominees named herein and each of them to vote on such
amendments, variations or other business.
ASSET VALUE RECOMMENDS A VOTE FOR INCREASING THE NUMBER OF DIRECTORS FROM FIVE
TO SEVEN.
1. 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.
FOR__________ AGAINST__________ ABSTAIN__________
ASSET VALUE RECOMMENDS A VOTE FOR THE ASSET VALUE NOMINEES.
2. To elect Asset Value's nominees as Directors:
Paul O. Koether _____FOR _____AGAINST _____ABSTAIN
Mark W. Jaindl _____FOR _____AGAINST _____ABSTAIN
John W. Galuchie, Jr. _____FOR _____AGAINST _____ABSTAIN
James L. Bicksler _____FOR _____AGAINST _____ABSTAIN
<PAGE>
ASSET VALUE RECOMMENDS A VOTE FOR THE RATIFICATION OF ARTHUR ANDERSEN
LLP.
3. To ratify the appointment of Arthur Andersen LLP as independent auditors for
the year ended December 31, 1998.
FOR__________ AGAINST__________ ABSTAIN__________
4. In their discretion, on such other matters as may properly come before the
annual meeting or any postponements or adjournments thereof, except that proxies
will not be voted on another matter which becomes known a reasonable time before
the meeting.
The undersigned acknowledges receipt of the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement for the _________________, 1998
meeting.
Dated:______________________________, 1998
------------------------------------------
Signature of Stockholder
------------------------------------------
Signature of Stockholder if Shares held in
more than one name (Please sign exactly as
name or names appear hereon. Full title of
one signing in representative capacity
should be clearly designated after
signature. If a corporation, please sign
in full corporate name by President or
other authorized officer(s). If a
partnership, please sign in partnership
name by authorized person. If stock is in
the name of two or more persons, each
should sign. Joint owners should each
sign. Names of all joint holders should
be written even if signed by only one.)
ASSET VALUE RECOMMENDS A VOTE FOR PROPOSALS 1, 2, AND 3.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
PRELIMINARY OPPOSITION PROXY MATERIAL
ASSET VALUE FUND LIMITED PARTNERSHIP
376 MAIN STREET, P.O. BOX 74
BEDMINSTER, NJ 07921
(908) 234-1881
June__, 1998
Dear Fellow Cortech Stockholder:
We and two other investors ("Asset Value") own approximately 15% of the
outstanding shares ("Cortech Shares") of Cortech, Inc. ("Cortech"), which makes
us by far Cortech's largest stockholders. We believe that the incumbent Board
has exercised poor judgment in governing Cortech. That is why we are seeking
your vote at the upcoming Annual Meeting to elect all of our nominees who would
then constitute a majority of the Board.1
At the end of fiscal 1997, Cortech had net assets of only $15.4 million
after losing over $70 million since 1993 in a failed attempt to exploit
Cortech's technology. The Board then proceeded to expend $673,000 of Cortech's
limited resources promoting a merger with BioStar, Inc. (the "Merger"), a
company with a $5.6 million negative net worth even though Asset Value warned
the Board from the start that the Merger was not in the interests of
stockholders2 who, Asset Value said, would never approve such a transaction. The
Merger was canceled on May 7,1998. Within two weeks, Kenneth Lynn, the former
CEO, left Cortech, taking with him, what we would call, a "departure bonus" of
almost $500,000, another 3.5% of Cortech's remaining cash of $14.3 million.
We ask you. What will this Board do next?
Don't take a chance.
Vote for a change.
Vote for Asset Value's nominees!
MORE RED INK!
After the termination of the Merger, Cortech's Form 10-Q for the first
quarter of 1998 revealed that Cortech's losses not only continued but increased
compared to last year. In a quarter with No research and development activities
and No revenues, Cortech still had approximately 15
- --------
1 Asset Value is also asking stockholders to approve an amendment to the
By-laws which would increase the number of directors from five to seven creating
a total of four vacancies. If these four vacancies are filled with Asset Value's
nominees control of Cortech would transfer to Asset Value.
2 Asset Value has not retained an independent financial adviser and its
conclusions are solely based on the opinion of its manager, Asset Value
Management, Inc. which was reached after reviewing management's proxy material
for the Merger, including the opinion of management's financial adviser.
<PAGE>
full-time3 employees and general and administrative expenses of $1,522,000, of
which, according to Cortech, merger expense only accounted for approximately
$673,000
TIME AND MONEY ARE RUNNING OUT!
On May 18, 1998, CEO Kenneth Lynn left Cortech . We believe that Mr Lynn
was made a scapegoat for what we think is Cortech's prior mismanagement. But in
our opinion, Mr. Lynn was a symptom of what is wrong with Cortech not the
source, at least, in our view, not the only source. In the past five years
(including the first quarter of 1998), Cortech has lost over $70 million, and as
of March 31, 1998 had cash of only $14.3million. We ask, does Lynn's departure
absolve the Board of their responsibility for these losses? We think the answer
is a resounding No!
PICTURE OF HOUR GLASS WITH CONTENTS READING
CASH REMAINING AT
MARCH 31, 1998
$14.3 million
LOSSES INCEPTION
TO DATE
$86 million!!!
- --------
3 Cortech does not disclose whether there are additional part-time
employees and consultants still hanging on.
<PAGE>
The question we believe you should ask yourself, is
ARE YOU BETTER OFF NOW THAN YOU WERE FIVE YEARS
AGO?
In what we think is the biggest bull market in history, Cortech Stock
prices have declined from $18.25 per share in 1993 to $.50 per share in 1998,
making Cortech, by any comparison, in our view, one of the poorest stock market
performers during this period. --AND THAT'S NO BULL!
COMPARISON OF CORTECH'S STOCK PERFORMANCE (NASDAQ
SYMBOL-CRTQ) TO THE DOW JONES INDUSTRIAL AVERAGE (DJII) AND
THE STANDARD AND POOR'S 500 COMPOSITE INDEX (S&P)
[GRAPH THE ABOVE]
<TABLE>
<CAPTION>
DJII S&P Cortech
------ ----- ---------
<S> <C> <C> <C>
1993 3820.77 469.90 $18.25
1994 3867.41 460.68 14.25
1995 5181.43 616.71 3.65625
1996 6544.09 748.03 3.8125
1997 7908.25 970.43 2.03125
1998 9037.71 1113.86 .50
</TABLE>
NOT A PRETTY PICTURE!
<PAGE>
STOP THE RED INK!
Asset Value considers a shutdown of Cortech an alternative which must be
considered, particularly in view of the continued losses reported in the first
quarter of 1998. Such a course however, has risks, including the possible
further diminishment of Cortech's technology and the possible cessation of
Cortech as a going concern. The matter would be further evaluated with current
employees once Asset Value gained control, therefore, no assurance can be given
that Cortech would be shut down.
Asset Value can only give stockholders the assurance that its nominees will
try to further reduce Cortech's expenses and will move as quickly as possible to
secure a merger partner. Expenses that will be particularly scrutinized for cuts
are any part-time employees or consultants and employees engaged in any activity
other than caretaking. The new Board would seek to reduce, if possible, any
professional fees unrelated to seeking a strategic partner. Asset Value's
nominees have pledged to take no fees for serving as directors.
THE SHAPE OF THINGS TO COME 4
So, what will Asset Value do if it obtains control of the Cortech Board? We
believe that once the Cortech Board determined to change control of Cortech, it
should have sought competitive transactions more aggressively, by advertising in
the financial media, by engaging an investment banker from the outset to solicit
merger partners and by publicly stating that the Board was conducting an open
bidding process for control of Cortech. If elected Asset Value's nominees will
take these steps. Asset Value has no specific merger partner in mind and has
considered possible alternatives for the future of Cortech only in a preliminary
way. In the course of its own business, however, Asset Value constantly reviews
investment opportunities and in connection with this process has seen companies
which might be attractive strategic partners for Cortech although additional
analysis would be required to determine whether any of these companies are a fit
with Cortech.
The principal standards for seeking a candidate would be balance sheet
quality and positive earnings. Asset Value also believes that a private company
which seeks a public market or a public company which needs Cortech's assets to
qualify for NASDAQ, would consider these attributes as well as cash in
calculating Cortech's value. Asset Value is not sure, however, that there are
potential acquisitions or mergers that would be attractive for Cortech. One
thing is certain however, Asset Value will not seek to merge Cortech with any
affiliate or entity in which Asset Value is an investor. Asset Value intends to
benefit from its Cortech investment only to the same extent other stockholders
benefit.
- --------
4 H.G. Wells
<PAGE>
"WHO CARES WHAT OWNERS THINK? Who owns American
companies? The management, of course. Shareholders are tolerated, but managers
rule.5"
Seven months after Asset Value first asked for representation on the Board;
long after the Board was sued for misfeasance; after Cortech had spent $673,000
on the failed Merger; after Cortech had lost another approximately $3.4 million
from operations (from September 30, 1997 through March 31, 1998), finally on May
11, 1998 the Cortech Board expressed an interest in meeting with Asset Value's
manager, Paul Koether. By this time, Asset Value had already spent significant
amounts of its own funds opposing the Merger and attempting to secure control of
the Board because it believed that a change in course for Cortech was absolutely
essential and because it believed that a Board controlled by the incumbents
would not embrace the necessary changes. Still Asset Value was willing to
present the issues in dispute to stockholders in one proxy statement filed
jointly by the Board and by Asset Value to avoid the cost of this proxy contest.
Asset Value even offered to pay its share of the costs. The Board has yet to
respond to this proposal. Asset Value's position and Asset Value's view of
management's position is more fully set forth in the enclosed Proxy Statement
which we urge you to read carefully.
Now it is time for the Annual Meeting; time for the stockholders to
re-evaluate the past leadership of Cortech and time to consider a change. We
believe that Asset Value has the same interests as all other stockholders which
it believes will be a change from this management - a substantial change.
PLEASE ASK YOURSELF:
DO YOU WANT THE BOARD MEMBERS WHO APPROVED THE
BIOSTAR MERGER TO SELECT THE NEXT MERGER CANDIDATE
FOR CORTECH?
WE THINK YOUR ANSWER WILL BE : CERTAINLY NOT!
PLEASE SEND THE WHITE PROXY CARD TO ASSET VALUE AND VOTE TO INCREASE THE
BOARD AND TO ELECT ALL OF ASSET VALUE'S NOMINEES.
Sincerely,
Paul O. Koether
Asset Value Fund Limited Partnership
- --------
5 Market Watch, New York Times, 3/8/98, Floyd Norris. This quote has
been made without the permission of the New York Times or Mr. Norris.
<PAGE>
IT'S TIME FOR A CHANGE; VOTE FOR CHANGE;
VOTE FOR ASSET VALUE.
SEND IN THE WHITE PROXY CARD
VOTE YES TO INCREASE THE BOARD
VOTE FOR ALL OF ASSET VALUE'S NOMINEES
IMPORTANT
If your shares are held in "Street Name" only your bank or broker can vote
your shares, and only upon receipt of your specific instructions. Please contact
the person responsible for your account and instruct them to execute a white
proxy card as soon as possible.
If you have any questions or need further assistance in voting, please call
John W. Galuchie, Jr., of Asset Value Fund Limited Partnership collect at (908)
234-1881, or our proxy solicitor:
BEACON HILL PARTNERS, INC.
90 BROAD STREET
NEW YORK, NEW YORK 10004
(800) 253-3814
