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.
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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 July __, 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 green proxy ballot (the "Green Proxy
Ballot") 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 9:00 a.m. local time at the Renaissance
Hotel, 3801 Quebec Street, Denver, Colorado on September 4, 1998 (the
"Meeting").
THIS MEETING WAS ORDERED BY THE CHANCERY COURT OF DELAWARE ONLY AFTER A
LAWSUIT WAS FILED BY ASSET VALUE TO COMPEL THE MEETING.
Effective July 21, 1998, three members of the old Board (the "Old Board")
resigned after appointing their replacements (the "Appointed Board"). Cortech
has stated that the departures did not result from disagreements with the
Company. There has been no explanation of why the incumbents did not wait until
their successors were chosen by the stockholders at the Meeting on September 4
which would have permitted stockholders an opportunity to elect the new
Directors.
At the Meeting, management proposes to elect one director, unless Asset
Value succeeds in expanding the Board, in which event, management proposes to
elect three additional directors. Management opposes the expansion of the Board.
Management also proposes to eliminate a stockholder's right to increase the
number of directors ("Elimination of Stockholders Right"); to reverse split the
outstanding shares of Cortech Stock, one for four (the "Reverse Stock Split");
and to ratify Arthur Andersen LLP as independent auditors for the fiscal year
ending December 31, 1998. Asset Value favors the expansion of the Board; favors
the Reverse Stock Split; favors the ratification of Arthur Andersen, LLP and
opposes management's slate and the Elimination of Stockholders Right.
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. Under the Certificate of Incorporation and Bylaws
currently in effect, the Cortech board has four 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 will seek to gain control of Cortech at the Meeting by
proposing to amend the Bylaws to increase the number of directors from four to
seven (the "Board Amendment") and subject to the approval of the Board
Amendment, to elect its four nominees as directors (the one vacancy available
under the current Bylaws plus the three vacancies created by the Board
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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.
<PAGE>
Amendment). If the Board Amendment is approved and four Asset Value 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 one
of its nominees elected as a director in opposition to management's nominee for
the one vacancy available under the Bylaws currently in effect.
Asset Value will vote: FOR the Board Amendment; FOR Asset Value's four
nominees; FOR the Reverse Stock Split; FOR the ratification of Arthur Andersen
LLP as the Company's independent auditors; and AGAINST the Elimination of
Stockholders Right.
Asset Value is likely to mail this proxy statement before management mails
its proxy statement, therefore, Asset Value does not know with certainty what
other proposals may be submitted to stockholders. Therefore, Asset Value also is
seeking express authorization from stockholders to vote proxies on any other
matter whether or not it becomes known prior to the Meeting without further
consultation with, solicitation of or disclosure to the grantor.
The close of business on July 10, 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 Green Proxy Ballot will be mailed to all
stockholders entitled to vote at the Annual Meeting.
The approval of the Board Amendment, the election of Directors and the
ratification of Arthur Andersen LLP require the favorable vote of a plurality of
votes present and entitled to vote at the Meeting. The Reverse Stock Split and
the Elimination of Stockholders Right can be effected only by amending the
Company's Certificate of Incorporation which requires an affirmative vote of a
majority of outstanding shares of Cortech Stock.
In reliance upon Rule 14a-5(c) of the Securities and Exchange Act of 19342,
reference is made to management's proxy statement for a full description of
management's proposals, as well as information with respect to the record date,
the number of shares of Cortech Stock eligible to vote at the Meeting, the
quorum, 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.
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2 Rule 14a-5(c) provides that "any information contained in any other
proxy soliciting material which has 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>
WE URGE YOU TO VOTE:
FOR THE BOARD AMENDMENT (which will add three
vacancies on the Board for a total of
four vacancies).
FOR ALL OF ASSET VALUE'S NOMINEES (which in combination
with the Board Amendment would effect a change of
control to Asset Value).
FOR THE REVERSE STOCK SPLIT.
FOR GRANTING ASSET VALUE AUTHORITY TO VOTE ON ANY
OTHER MATTERS WHICH COME BEFORE THE MEETING.
AGAINST THE ELIMINATION OF STOCKHOLDERS RIGHT.
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 Old 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 Old 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.
Only Asset Value was willing to spend its time
and money to publicly oppose the Merger!
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. The calculation of the $500,000
departure bonus was derived by adding 20 months of salary ($442,000), future
consulting fees of an undisclosed amount and health insurance coverage for 18
months estimated at $600 per month as reported in Cortech's Form 8-K filed on
May 18, 1998.
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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>
We ask you. Do you want Cortech led into the future
by any incumbent Director or any other nominee
connected to the past?
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 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.
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!
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4 Cortech does not disclose whether there are additional part-time
employees and consultants still hanging on.
<PAGE>
COMPARISON OF
CORTECH'S STOCK PERFORMANCE (NASDAQ SYMBOL-CRTQ)
TO
THE NASDAQ BIOTECHNOLOGY INDEX (IXBT) AND THE
AMERICAN STOCK EXCHANGE BIOTECHNOLOGY INDEX (BTK)
[GRAPH THE ABOVE]
<TABLE>
<CAPTION>
Cortech IXBT BTK
------ ----- ------
<S> <C> <C> <C>
1993 $18.25 197.88 115.78
1994 14.25 161.40 82.06
1995 3.65625 304.30 133.77
1996 3.8125 314.48 144.56
1997 2.03125 304.89 163.28
7/17/1998 .50 335.15 144.16
</TABLE>
NOT A PRETTY PICTURE!
TOO LITTLE, TOO LATE
Seven months after Asset Value first asked for representation on the Board;
long after the Old 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 Old Board expressed an interest in meeting with
Asset Value's manager, Paul Koether. By this time, Asset Value had already spent
or committed significant amounts of its own funds (estimated to exceed $125,000
including counsel fees and management time) in opposing the Merger and in
securing 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 management would not embrace the necessary changes. Asset Value thought that
the Old Board's offer to meet, in and of itself, was too little too late.
<PAGE>
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 put in place by the Old
Board without stockholder approval ; 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 then five person Board. To date the Old Board and
the Appointed Board have resisted all of these proposals.
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, the Old Board's
approval of the BioStar transaction exemplifies how these "tools" can be misused
in the hands of directors who have bad judgment. If elected, Asset Value's
nominees will remove the poison pill and propose to declassify the Board at the
next Meeting.
MANAGEMENT'S VERSION OF STOCKHOLDER DEMOCRACY
Management called this Meeting only after Asset Value filed to have the
Delaware courts compel Cortech to hold the Meeting. We ask you: Why would
management fail to call a meeting within the time required by law? Why is
management spending your money and our money to delay what we believe will be
the day of reckoning when the stockholders will finally be given a choice
between what, in our view, is the failed past and what we think will be a better
future. In making this choice, we ask you to consider that Asset Value has
promised not to seek to merge Cortech with any affiliate or entity in which
Asset Value is an investor. Nor will Asset Value consider selling its Cortech
Stock before a transaction is consummated which Asset Value believes is in the
interests of all stockholders. Asset Value intends to benefit from its Cortech
investment only to the same extent other stockholders benefit. Moreover Asset
Value's nominees do not intend to take any fees for managing Cortech.
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
Old Board members of their responsibility for these losses? We think the answer
is a resounding No!
<PAGE>
Will you vote for the nominees appointed by the Old Board members who led us to
where we are today? We hope the answer is a resounding No!
PICTURE OF HOUR GLASS WITH CONTENTS READING
CASH REMAINING AT
MARCH 31, 1998
$14.3 million
ACCUMULATED
DEFICIT
$86 million!!!
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, 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 care taking. 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 5
So, what else will Asset Value do if it obtains control of the Cortech
Board? We believe that once the Old 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
- --------
5 H.G. Wells
<PAGE>
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, positive earnings and good growth potential. 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. As of March 31, 1998, Cortech's
total assets were $14.9 million of which cash and cash equivalents were $14.3
million. 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. Nor will Asset Value consider selling its Cortech
Stock before a transaction is consummated which Asset Value believes is in the
interests of all stockholders. 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."6
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. Remember. Only Asset
Value was willing to spend its time and money to publicly oppose the Merger!
PLEASE ASK YOURSELF:
DO YOU WANT A BOARD COMPRISED OF ANY DIRECTORS WHO
WERE PART OF MANAGEMENT WHILE CORTECH WAS LOSING
ALL THIS MONEY?
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6 The Life of Reason, (1905) George Santayana
<PAGE>
DO YOU WANT FUTURE TRANSACTIONS SELECTED BY ANYONE
WHO EITHER APPROVED THE MERGER OR STOOD SILENT WHILE
THE MERGER MOVED FORWARD?
WE HOPE YOUR ANSWER WILL BE : CERTAINLY NOT!
PLEASE SEND THE GREEN PROXY BALLOT TO ASSET VALUE AND
VOTE TO INCREASE THE BOARD AND TO ELECT ALL OF ASSET
VALUE'S NOMINEES.
IF THE BOARD IS INCREASED AND ASSET VALUE'S NOMINEES
RECEIVE THE HIGHEST NUMBER OF VOTES CONTROL OF
CORTECH WILL TRANSFER TO ASSET VALUE.
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. Nor will Asset Value sell its Cortech Stock
before a transaction is consummated which Asset Value believes is in the
interests of all stockholders. 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.
PROPOSAL 1
THE BOARD AMENDMENT (INCREASE THE BOARD)
Asset Value is asking for your support to approve the Board Amendment which
will amend Article 3 Section 3.1 of the Bylaws of Cortech to set the number of
directors serving on the Board at seven. The Board currently has four members.
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 Board Amendment which
will set the number of directors to serve on the Board at seven.
<PAGE>
PROPOSAL 2
ELECTION OF DIRECTORS
Asset Value is asking for your support to elect its nominees. Article II,
Section 2.2 of the Company's Bylaws, purports to require that 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 is required to elect each of the Asset
Value nominees. Information about management's nominees, including beneficial
ownership of Cortech Stock and compensation can be found in management's proxy
statement.
If the Board Amendment is approved four Asset Value nominees will stand for
election. If there is only one vacancy, only Paul O. Koether will stand for
election. If a majority of shares of Cortech Stock 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 fewer than four Asset
Value nominees are elected, then Asset Value's nominees will withdraw in
ascending order starting with nominee John W. Galuchie, Jr. If Asset Value's
four nominees are elected, Asset Value's nominees will constitute a majority of
the Board and control of Cortech will transfer to Asset Value.
Except as provided above, the persons nominated by Asset Value have agreed
to serve if elected, and Asset Value has no reason to believe that such nominees
will be unable to serve. In the event any nominee subsequently becomes unable or
unwilling to serve, Asset Value will vote its Cortech Stock and its proxies for
a substituted nominee. 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 38, 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.
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.
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.
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.
The nominees (whether Asset Value's 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 or any other nominees,
therefore if you vote for fewer than all of Asset Value's nominees, you will not
have an opportunity to vote for candidates to fill vacancies on 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, Paul Koether can still be
elected if his votes exceed the votes for any other nominee. Therefore if you
agree that it is time for a change, a real change, VOTE
YES to the Board Amendment
and
FOR Asset Value's nominees
<PAGE>
PROPOSAL 3
THE REVERSE STOCK SPLIT
Management has proposed to reverse stock split Cortech stock one for four
(for every four shares you presently hold, you will hold one share). Relying on
management's position that the Reverse Stock Split is necessary to support the
Company's appeal from NASDAQ's delisting of Cortech Stock, Asset Value is
supporting the proposal. Management's proxy statement contains more information
about the Reverse Stock Split and why management proposes it.
The affirmative vote of a majority of outstanding shares of Cortech Stock
is required to approve the Reverse Stock Split.
PROPOSAL 4
RATIFICATION OF INDEPENDENT AUDITOR
Management has proposed and Asset Value favors the ratification of Arthur
Andersen LLP as Cortech's independent auditor. More information about this
proposal is provided in management's proxy statement. A plurality of shares of
Cortech stock voting at the Meeting is required to approve this proposal.
PROPOSAL 5
AUTHORIZATION TO VOTE ON OTHER MATTERS
Asset Value is seeking express authority to vote on any other matters which
come before the Meeting. Asset Value is likely to mail this proxy statement
before management mails its proxy statement, therefore, Asset Value does not
know with certainty what other proposals may be submitted to stockholders.
Therefore, Asset Value also is seeking express authorization from stockholders
to vote proxies on any other matter whether or not it becomes known prior to the
Meeting.
If this authority is granted, it means that the proxy can be voted on any
other matter that comes before the meeting without further consultation with,
solicitation of or disclosure to the grantor of the proxy. However, even if you
grant this authority, remember you can always revoke any proxy at anytime even
at the meeting by following the procedures outlined below under "REVOCATION OF
PROXIES".
<PAGE>
PROPOSAL 6
OPPOSITION TO MANAGEMENT'S PROPOSED ELIMINATION OF
STOCKHOLDERS RIGHT TO INCREASE THE BOARD
Currently stockholders can amend any By-law by the favorable vote of a
plurality of shares of Cortech Stock voting at any stockholders meeting,
including setting the number of directors. Asset Value has proposed to increase
the number of directors and to elect its nominees to the additional vacancies,
the intention and effect of which, is to override declassification as an
obstacle to obtaining control of the Company at the Meeting. Management proposes
to eliminate the right of stockholders to increase the Board by amending the
Certificate of Incorporation and giving the Directors the sole right to set the
number of directors. Asset Value opposes the Elimination of Stockholders Right
for all the reasons set forth in this Proxy Statement in support of transferring
control of Cortech to Asset Value. Management's basis for submitting this
proposal is described in management's proxy statement. If fewer than a majority
of outstanding shares of Cortech Stock vote for management's proposal, it will
be defeated.
REQUIRED VOTE AND MANNER OF VOTING
If more than a majority of shares of Cortech Stock 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 fewer than
four Asset Value nominees are elected, then Asset Value's nominees will withdraw
in ascending order starting with nominee John W. Galuchie, Jr. If the Board
Amendment is not approved the nominee (whether Asset Value's nominee or
management's nominee) receiving the highest number of votes cast at the meeting
will be elected.
If a plurality of shares of Cortech Stock voting at the Meeting vote for
the ratification of Arthur Andersen LLP as Cortech's independent auditor, this
proposal will be approved. If a proxy grants express authority to vote the proxy
on any other matter that comes before the Meeting, the proxies will be entitled
to vote on any matter without further consultation with, solicitation of or
disclosure to the grantor of the proxy. If a proxy does not grant such
authority, then the proxy can be voted on other matters but not on any matter
which becomes known a reasonable time before the Meeting. If the proposal to
effect the Reverse Stock Split by amending the Certificate of Incorporation is
approved by the favorable vote of a majority of outstanding shares of Cortech
Stock it will be approved. If the proposal to eliminate a stockholder's right to
increase the Board is not approved by the favorable vote of a majority of
outstanding shares of Cortech Stock, it will be defeated.
Valid proxies will be voted as instructed therein, but absent instructions
on the Green Proxy Ballot, it will be voted FOR the Board Amendment; FOR Asset
Value's nominees; FOR the Reverse Stock Split; FOR the ratification of Arthur
Anderson LLP; FOR granting the express authority to vote on any other matter
which comes before the meeting; and AGAINST the Elimination of Stockholders
Right. Absent the grant of express authority to vote the proxy on any matter
that comes before the Meeting which is presently unknown, the proxy can still be
voted on any other matter except a matter that is known a reasonable time before
the Meeting. Abstentions and broker non-votes (where a nominee holding
<PAGE>
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 Green
Proxy Ballot in the enclosed envelope. No postage is required if mailed in the
United States.
SHARES IN STREET NAME
If you hold your Cortech Stock in the name of a brokerage firm or bank,
your broker or banker cannot vote the Stock 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 Stock on the Green Proxy Ballot.
REVOCATION OF PROXIES
If you have executed any proxy ballot before receiving this Proxy
Statement, you have every right to change your vote by signing, dating and
returning the enclosed Green Proxy Ballot 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 (including filings in opposition to the
Merger) will be approximately $125,000.
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 Green
Proxy Ballot 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>
REVISED PRELIMINARY OPPOSITION PROXY CARD
Cortech, Inc.
Annual Meeting To Be Held On September 4, 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 September 4,
1998 at 9:00 a.m. local time at the Renaissance Hotel, 3801 Quebec Street,
Denver, Colorado (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 PROPOSALS 1, 2, 3, 4 AND 5 (GRANTING EXPRESS AUTHORITY
TO VOTE ON ANY MATTER) AND AGAINST PROPOSAL 6.
Even if express authority to vote on any other matters is withheld, this
proxy confers discretionary authority on the proxy nominees named herein and
each of them to vote on such amendments, variations or other business except
those matters which become known a reasonable time before the Meeting.
ASSET VALUE RECOMMENDS A VOTE FOR INCREASING THE NUMBER OF DIRECTORS FROM FOUR
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, Paul O. Koether, Mark W. Jaindl, James L.
Bicksler and John W. Galuchie, Jr.
______FOR all nominees (except as marked to the contrary).
______WITHHELD authority to vote for all nominees.
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------------------------------
ASSET VALUE RECOMMENDS A VOTE FOR THE REVERSE STOCK SPLIT.
3. To approve an amendment to the Company's Certificate of Incorporation to
provide for a one for four reverse stock split.
______FOR ______AGAINST ______ABSTAIN
<PAGE>
ASSET VALUE RECOMMENDS A VOTE FOR THE RATIFICATION OF ARTHUR ANDERSEN LLP.
4. To ratify the appointment of Arthur Andersen LLP as independent auditors for
the year ended December 31, 1998.
______FOR ______AGAINST ______ABSTAIN
ASSET VALUE RECOMMENDS A VOTE FOR GRANTING EXPRESS AUTHORIZATION TO VOTE ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENTS
OR ADJOURNMENTS OF THE MEETING WITHOUT FURTHER DISCLOSURE, CONSULTATION OR
SOLICITATION.
5. To grant express authority to vote on any matter subsequently proposed before
or at the Meeting.
______GRANTED ______WITHHELD ______ABSTAIN
ASSET VALUE RECOMMENDS A VOTE AGAINST THE PROPOSAL TO ELIMINATE STOCKHOLDERS
RIGHT TO INCREASE THE NUMBER OF DIRECTORS.
6. 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.
______FOR ______AGAINST ______ABSTAIN
The undersigned acknowledges receipt of the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement for the September 4, 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.)
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
REVISED PRELIMINARY OPPOSITION PROXY MATERIAL
ASSET VALUE FUND LIMITED PARTNERSHIP
376 MAIN STREET, P.O. BOX 74
BEDMINSTER, NJ 07921
(908) 234-1881
July__, 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 Asset Value's nominees
would provide better leadership for Cortech and that is why we are seeking
control of the Board by electing our nominees to the Board.1
Effective July 21, 1998, three members of the old Board (the "Old Board")
resigned after appointing their replacements (the "Appointed Board"). Cortech
has stated that the departures did not result from disagreements with the
Company. There has been no explanation of why the incumbents did not wait until
their successors were chosen by the stockholders on September 4 which would have
permitted stockholders an opportunity to elect the new Directors.
WARNING: "Those who cannot remember the past are condemned to repeat it."2
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 Old 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 Old Board from the start that the Merger was not in the
interests of stockholders3 who, Asset
- --------
1 Asset Value is also asking stockholders to approve an amendment to the
By-laws which would increase the number of directors from four to seven creating
a total of four vacancies (the "Board Amendment"). If these four vacancies are
filled with Asset Value's nominees, control of Cortech will transfer to Asset
Value. If the Board is not increased, Asset Value will seek to elect nominee
Paul Koether, to fill the vacancy which would then be available. Management
opposes the Board Amendment and instead proposes to amend the Certificate of
Incorporation so that only directors have a right to set the number of directors
(the "Elimination of Stockholders Right"). Asset value opposes the Elimination
of Stockholders Right.
2 The Life of Reason, (1905) George Santayana
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>
Value said, would never approve such a transaction. The Merger was canceled on
May 7, 1998.
ONLY ASSET VALUE WAS WILLING TO SPEND ITS TIME AND MONEY TO
PUBLICLY OPPOSE THE MERGER!
We ask you. Do you want Cortech led into the future by any incumbent Director or
any other nominee connected to this past?
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 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. After the
Form10-Q was filed 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. The calculation of the $500,000
departure bonus was derived by adding 20 months of salary ($442,000), future
consulting fees of an undisclosed amount and health insurance coverage for 18
months estimated at $600 per month as reported in Cortech's Form 8-K filed on
May 18, 1998.
What did the Old Board do next?
Well one thing it did not do -at least not voluntarily- is call this Annual
Meeting within the 13 months required by Delaware law. Instead Asset Value had
to file a lawsuit to compel the Board to let stockholders decide who will
determine Cortech's future. THIS MEETING WAS ORDERED BY THE CHANCERY COURT OF
DELAWARE ONLY AFTER A LAWSUIT WAS FILED BY ASSET VALUE TO COMPEL A MEETING.
- --------
4 Cortech does not disclose whether there are additional part-time
employees and consultants still hanging on. 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, there is no assurance that Cortech would be shut down.
<PAGE>
Ask yourself why would the Old Board spend Cortech's limited resources to
defend against a demand to hold an annual meeting as required by law? And why
would the Appointed Board spend Cortech's limited resources on this proxy
contest?
We think one reason is because management does not want you to ask this
question:
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 NASDAQ BIOTECHNOLOGY INDEX (IXBT)
AND THE
AMERICAN STOCK EXCHANGE BIOTECHNOLOGY INDEX (BTK)
[GRAPH THE ABOVE]
<TABLE>
<CAPTION>
Cortech IXBT BTK
------ ----- ------
<S> <C> <C> <C>
1993 $18.25 197.88 115.78
1994 14.25 161.40 82.06
1995 3.65625 304.30 133.77
1996 3.8125 314.48 144.56
1997 2.03125 304.89 163.28
7/17/1998 .50 335.15 144.16
</TABLE>
NOT A PRETTY PICTURE!
<PAGE>
TOO LITTLE, TOO LATE
Seven months after Asset Value first asked for representation on the Old
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
or committed significant amounts of its own funds (estimated to exceed $125,000
including counsel fees and management time) in opposing the Merger and in
securing 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 management would not embrace the necessary changes. Asset Value thought that
the Old Board's offer to meet, in and of itself, was too little too late.
MANAGEMENT'S VERSION OF STOCKHOLDER DEMOCRACY
Management called this Meeting only after Asset Value filed to have the
Delaware courts compel Cortech to hold the Meeting. We ask you: Why would
management fail to call a meeting within the time required by law? Why is
management spending your money and our money to delay what we believe will be
the day of reckoning when the stockholders will finally be given a choice
between what in our view, is the failed past and what we think will be a better
future. In making this choice, we ask you to consider that Asset Value has
promised not to seek to merge Cortech with any affiliate or entity in which
Asset Value is an investor. Nor will Asset Value consider selling its Cortech
Stock before a transaction is consummated which Asset Value believes is in the
interests of all stockholders. Asset Value intends to benefit from its Cortech
investment only to the same extent other stockholders benefit. Moreover Asset
Value's nominees do not intend to take any fees for managing Cortech.
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
Old Board members of their responsibility for these losses? We think the answer
is a resounding No!
<PAGE>
Will you vote for the nominees appointed by the Old Board members who led us to
where we are today? We hope the answer is a resounding No!
PICTURE OF HOUR GLASS WITH CONTENTS READING
CASH REMAINING AT
MARCH 31, 1998
$14.3 million
ACCUMULATED
DEFICIT
$86 million!!!
THE SHAPE OF THINGS TO COME 5
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.
- --------
5 H.G. Wells
<PAGE>
The principal standards for seeking a candidate would be balance sheet
quality, positive earnings and good growth potential. 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. As of March 31, 1998, Cortech's
total assets were $14.9 million of which cash and cash equivalents were $14.3
million. 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. Nor will Asset Value consider selling its Cortech
Stock before a transaction is consummated which Asset Value believes is in the
interests of all stockholders. Asset Value intends to benefit from its Cortech
investment only to the same extent other stockholders benefit.
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 A BOARD COMPRISED OF ANY DIRECTORS WHO
WERE PART OF MANAGEMENT WHILE CORTECH WAS LOSING
ALL THIS MONEY?
DO YOU WANT FUTURE TRANSACTIONS SELECTED BY ANYONE
WHO EITHER APPROVED THE MERGER OR STOOD SILENT WHILE
THE MERGER MOVED FORWARD?
WE HOPE YOUR ANSWER WILL BE : CERTAINLY NOT!
PLEASE SEND THE GREEN PROXY BALLOT TO ASSET VALUE AND
VOTE TO INCREASE THE BOARD AND TO ELECT ASSET VALUE'S
NOMINEES.
IT'S TIME FOR A CHANGE; VOTE FOR CHANGE;
VOTE FOR ASSET VALUE.
SEND IN THE GREEN PROXY BALLOT VOTE
YES TO INCREASE THE BOARD BUT IN ANY EVENT:
<PAGE>
VOTE FOR ALL OF ASSET VALUE'S NOMINEES!
VOTE AGAINST THE ELIMINATION OF A STOCKHOLDERS RIGHT!
Very truly yours,
Paul O. Koether
Asset Value Fund Limited Partnership
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 Green
Proxy Ballot 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
