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.
- --------------------------------------------------------------------------------
(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 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 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 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.
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. As of this date, no one other than Asset Value, including
management, has mailed a proxy statement in connection with the Meeting and
therefore Asset Value does not know what other proposals will be submitted to
stockholders. In correspondence with Asset Value, the Chairman of Cortech
indicated that Cortech may offer a proposal to amend the Certificate of
Incorporation to declassify the Board ("the Declassification Amendment"). 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. If
management proposes the Declassification Amendment and it is approved by
stockholders, Asset Value will seek to elect five nominees to the Board, who, if
elected, would comprise the entire Board, transferring control of Cortech to
Asset Value.
If management does not propose the Declassification Amendment or if it is
proposed and not approved by stockholders, 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 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 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 Declassification Amendment is not offered or not approved and the
Board Amendment is not approved, Asset Value will seek to have two of its
nominees elected as directors in opposition to any other nominees for the two
vacancies available under the Bylaws currently in effect.
In the past, Cortech has also sought the ratification of Arthur Andersen
LLP as the Company's independent auditors. Asset Value will vote: FOR the
ratification of Arthur Andersen LLP as the Company's independent auditors if it
is proposed; FOR the Declassification Amendment if it is proposed; and FOR the
Board Amendment and Asset Value nominees. Since no other proxy
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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>
statement has been filed or mailed, Asset Value does not know what other
proposals will be submitted to stockholders and 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.
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 white Proxy Card will be mailed to all
stockholders entitled to vote at the Annual Meeting. According to the Company's
Form 10-Q filed for the quarter ended March 31, 1998, the number of shares
entitled to vote at the Meeting are 18,523,918 ("Shares"). The quorum for the
Meeting is 9,261,960 Shares. The favorable vote of a majority of Shares entitled
to vote at the Meeting (9,261,960 Shares) are required to approve the
Declassification Amendment if it is proposed. The approval of the Board
Amendment and the election of Directors also require the favorable vote of a
majority of Shares present and voting at the 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 or information statement
for a full description of management's proposals (if any), as well as
information with respect to the number of Shares 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 (if proposed) 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 DECLASSIFICATION AMENDMENT, if it is proposed or if the
Board is not declassified then
FOR THE BOARD AMENDMENT (which will add
two vacancies on the Board for a
total of four.)
FOR ALL OF ASSET VALUE'S NOMINEES (which in combination
with the Declassification Amendment or the Board Amendment
would effect a change
of control to Asset Value)
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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>
FOR GRANTING ASSET VALUE AUTHORITY TO VOTE ON ANY
OTHER MATTERS WHICH COME BEFORE THE MEETING
We are seeking your vote because we believe that the incumbent Board has
exercised poor judgment in governing Cortech and that Asset Value's nominees
would provide better leadership because they are not tied to what we think are
the failures of the past.
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 incumbent 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.
Only Asset Value was willing to use 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.
We ask you. Do you want Cortech led into the future by an 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
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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>
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!
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!
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4 Cortech does not disclose whether there are additional part-time
employees and consultants still hanging on.
<PAGE>
TOO LITTLE, TOO LATE
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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 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 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 put in place by the
incumbent 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 current five person Board. To date the Board
has resisted all of these proposals although it did indicate in correspondence
with Asset Value that it may propose to declassify the Board at this Meeting.
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. If elected, Asset Value's nominees
will remove the poison pill and if the Declassification Amendment is not
proposed at the this Meeting, Asset Value will seek to have stockholders approve
a declassification at the next Annual Meeting.
THE BOARD'S VERSION OF STOCKHOLDER DEMOCRACY
This Board called this Meeting only after Asset Value filed to have the
Delaware courts compel Cortech to hold the Meeting. We ask you: Why would the
Board fail to call a meeting within the time required by law? Why is the Board
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 committed 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. Moreover Asset Value's nominees do not
intend to take any fees for managing Cortech.
<PAGE>
SAME OLD; SAME OLD
Bert Fingerhut, an incumbent Cortech director, replaced Kenneth Lynn as
CEO. Mr. Fingerhut responded to Asset Value's request for majority control of
the Board by offering to declassify the Board and to designate one Asset Value
nominee on a five member slate. In addition to himself and incumbent Charles
Cohen, Mr. Fingerhut's proposed slate would include Edward Finkelstein and John
Papp. Mr. Fingerhut described Messrs Finkelstein and Papp as newcomers but we
believe they are two cronies of management. As Mr. Fingerhut himself disclosed,
"As you know, Mr. Finkelstein and his associates have a significant ownership
stake in Cortech" (although Mr. Finkelstein and his unnamed associates
presumably own less than 5% since no Schedule 13D has been filed) and "Dr. Papp
is familiar with Cortech's intellectual property from his service as a Director
of CDC, a research and development affiliate of Cortech." (emphasis added).
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
incumbent Board members 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
CASH LOSSES FROM
INCEPTION (1982) TO
DATE $86 million!!!
<PAGE>
And we ask where were Mr. Fingerhut's recommended nominees, Mr. Finkelstein
and Dr. Papp while Cortech was losing all this money? Right behind the Board, we
think!
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 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. 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. Asset Value intends to benefit from its Cortech investment only to
the same extent other stockholders benefit.
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5 H.G. Wells
<PAGE>
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
SERVED 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 WHITE PROXY CARD TO ASSET VALUE
AND VOTE TO DECLASSIFY THE BOARD (if it is proposed by
management); TO INCREASE THE BOARD (if the Board is
not declassified) AND TO
ELECT ALL OF ASSET VALUE'S NOMINEES.
IF THE BOARD IS DECLASSIFIED OR 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. Asset Value's nominees have pledged not to
accept any fees for serving as directors.
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6 The Life of Reason, (1905) George Santayana
<PAGE>
IT'S TIME FOR A CHANGE.
VOTE FOR CHANGE.
VOTE FOR ASSET VALUE.
PROPOSAL 1
DECLASSIFICATION OF THE BOARD
If management proposes the Declassification Amendment, Asset Value will
support it. To effect a declassification, Article IX, Section 1 of the
Certificate of Incorporation of Cortech must be amended to require all directors
to stand for election each year. The affirmative vote of a majority outstanding
Shares are required to approve this proposal (9,261,960 Shares).
If management proposes the Declassification Amendment, Asset Value urges
you to vote FOR the approval of the proposal to amend Article IX, Section 1, of
the Certificate of Incorporation which will require all directors to stand for
election each year, commencing with this Meeting.
PROPOSAL 2
INCREASE IN BOARD
If management does not propose the Declassification Amendment or if it is
proposed but not approved by stockholders, 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 serving on the Board 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.
THIS PROPOSAL WILL NOT BE SUBMITTED IF THE DECLASSIFICATION AMENDMENT IS
PROPOSED AND APPROVED.
If the Board Amendment is submitted, 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 at seven.
PROPOSAL 3
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 are required to elect each of the
Asset Value nominees. If any other proponent, including management, proposes any
nominees, information about them, including
<PAGE>
beneficial ownership of Cortech Shares and compensation can be found in the
proponent's proxy statement. If the Declassification Amendment is approved, all
five Asset Value nominees will stand for election. If the Board is not
declassified, but the Board Amendment is approved, Asset Value nominee Mathew E.
Hoffman will withdraw as a candidate for election. If there are only two
vacancies, only Paul O. Koether and Mark W. Jaindl will stand for election. 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.
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.
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.
<PAGE>
Mathew E. Hoffman, age 44, is the head of the litigation department of
Todtman, Nachamie, Hendler & Spizz P.C., a position he has held since January,
1997. From May 1994 until January, 1997 Mr. Hoffman was a partner of the law
firm of Rosen & Reade. From February 1989 to May 1994, he was a partner of Keck,
Mahin & Cate. Since September 1994, Mr. Hoffman has served as a director of
Kent.
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 outstanding Cortech Shares vote for the
Declassification Amendment (if it is proposed by management) and all of Asset
Value's nominees are elected, Asset Value's nominees will comprise the entire
Board and control will transfer to Asset Value. If the Declassification
Amendment is not proposed by management or if it is proposed but not approved
but a majority of 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 any other
proponent's nominees) will be elected to the Board. 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.
If the Board Amendment is not approved, the two nominees (whether Asset
Value's nominees or any other proponent'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 other vacancies to the Board.
Even if you have voted against declassifying the Board or increasing the
Board please vote for Asset Value's nominees. The nominees receiving the highest
number of votes will be elected. If the Declassification Amendment is not
proposed or is proposed but not approved and the Board Amendment is not
approved, two of Asset Value's nominees can still be elected if their votes
exceed the votes for any other nominees. Therefore if you agree that it is time
for a change, a real change, VOTE
YES to the Declassification Amendment if it is proposed and if it is not
proposed or if it is proposed and not approved then
YES to the Board Amendment
and
FOR Asset Value's nominees
<PAGE>
PROPOSAL 4
RATIFICATION OF INDEPENDENT AUDITOR
In the past management has proposed the ratification of Arthur Andersen LLP
as Cortech's independent auditor. If management again submits this proposal,
information about the matter can be found in management's proxy statement. Asset
Value favors the ratification of Arthur Andersen LLP as Cortech's independent
auditor.
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. Other proponents may submit to stockholders proposals
yet unknown. Therefore Asset Value seeks authority to vote on any proposals
which become known subsequent to the mailing of this proxy statement. 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".
REQUIRED VOTE AND MANNER OF VOTING
If management submits the Declassification Amendment and more than a
majority of outstanding Shares vote in favor of it, there will be five vacancies
on the Board and the nominees receiving the highest vote (whether Asset Value's
nominees or any other proponent's nominees) will be elected to the Board. If the
Declassification Amendment is not proposed or is proposed but is not approved
and more than a majority of 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 any other
proponent's nominees) will be elected to the Board. If the Board Amendment is
not approved the two nominees (whether Asset Value's nominees or any other
proponent's nominees) receiving the highest number of votes cast at the meeting
will be elected.
If more than a majority of Shares 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.
<PAGE>
Valid proxies will be voted as instructed therein, but absent instructions
on the white proxy card, will be voted FOR the Declassification Amendment if it
is proposed. If the Declassification Amendment is not proposed or if it is
proposed and not approved, the white proxy card will be voted FOR the Board
Amendment. In all cases, the white proxy card will be voted FOR Asset Value's
nominees, FOR the ratification of Arthur Anderson LLP (if it is proposed)and FOR
authority to vote on any other matter which comes before the meeting. Absent
that express authority 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 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.
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 any 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.
<PAGE>
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
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>
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 on September 4, 1998 (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
1. FOR THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION DECLASSIFYING
THE BOARD (IF IT IS PROPOSED BY MANAGEMENT);
2. FOR THE AMENDMENT TO THE BYLAWS TO INCREASE THE NUMBER OF DIRECTORS
TO SEVEN IF DECLASSIFICATION IS NOT PROPOSED OR IS NOT APPROVED;
3. FOR THE ELECTION OF ASSET VALUE'S NOMINEES AS DIRECTORS;
4. FOR THE RATIFICATION OF ARTHUR ANDERSEN LLP (IF IT IS PROPOSED BY
MANAGEMENT);
5. FOR THE AUTHORIZATION TO VOTE ON ANY OTHER MATTERS WHICH COME BEFORE
THE MEETING.
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.
IF MANAGEMENT PROPOSES IT, ASSET VALUE RECOMMENDS A VOTE FOR DECLASSIFYING THE
BOARD OF DIRECTORS.
1. To amend Article IX Section 1 of the Certificate of Incorporation of the
Company to eliminate the current classification of the Board and require all
directors to stand for election each year.
______FOR ______AGAINST ______ABSTAIN
IF MANAGEMENT DOES NOT PROPOSE DECLASSIFICATION OR IF DECLASSIFICATION IS
NOT APPROVED, ASSET VALUE RECOMMENDS A VOTE FOR INCREASING THE NUMBER OF
DIRECTORS FROM FIVE TO SEVEN.
2. 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
<PAGE>
ASSET VALUE RECOMMENDS A VOTE FOR THE ASSET VALUE NOMINEES.
3. To elect Asset Value's nominees, Paul O. Koether, Mark W. Jaindl, John W.
Galuchie, Jr., James L. Bicksler, and Mathew E. Hoffman to serve as Directors.
______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 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
5. ASSET VALUE RECOMMENDS A VOTE GIVING 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.
______GRANTED ______WITHHELD ______ABSTAIN
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, 3, 4 AND 5.
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 that the incumbent Board
has exercised poor judgment in governing Cortech and that Asset Value's nominees
would provide better leadership because they are not tied to what we think are
the failures of the past. That is why we are seeking control of the Board by
electing our nominees to 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. 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 an incumbent
Director or any other nominee connected to this past?
- --------
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 will transfer to Asset Value. Management has
indicated that it may propose to declassify the Board which, if approved, would
mean all five seats on the Board would be open. In this case, Asset Value would
seek to elect five nominees who, if elected, would comprise the entire Board. If
the Board is not declassified or increased, Asset Value will seek to elect two
of its nominees to fill the two vacancies which would then be available.
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>
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-time3 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 would this Board do next?
Well one thing it would 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.
Ask yourself why the Cortech Board would spend Cortech's limited resources
to defend against a demand to hold an annual meeting as required by law?
- ----------
3 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>
We think one reason is because the Board and its nominees did 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 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 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.
THE BOARD'S VERSION OF STOCKHOLDER DEMOCRACY
This Board called this Meeting only after Asset Value filed to have the
Delaware courts compel the Board to hold the Meeting. We ask you: Why would the
Board fail to call a meeting within the time required by law? Why is the Board
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 committed 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. Moreover Asset Value's nominees do not
intend to take any fees for managing Cortech.
SAME OLD; SAME OLD
Bert Fingerhut, an incumbent Cortech director, replaced Kenneth Lynn as
CEO. Mr. Fingerhut responded to Asset Value's request for majority control of
the Board by offering to declassify the Board and to designate one Asset Value
nominee on a five member slate. In addition to himself and incumbent Charles
Cohen, Mr. Fingerhut's proposed slate would include stockholders Edward
Finkelstein and John Papp. Mr. Fingerhut described Messrs Finkelstein and Papp
as newcomers but we believe they are two cronies of management. As Mr.
Fingerhut, himself disclosed, "As you know, Mr. Finkelstein and his associates
have a significant ownership stake in Cortech" (although Mr. Finkelstein and his
unnamed associates presumably own less than 5% since no Schedule 13D has been
filed) and "Dr. Papp is familiar with Cortech's intellectual property from his
service as a Director of CDC, a research and development affiliate of Cortech."
(emphasis added).
<PAGE>
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
incumbent Board members 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
CASH LOSSES FROM
INCEPTION (1982) TO
DATE $86 million!!!
And we ask where were Mr. Fingerhut's recommended nominees, Mr. Finkelstein
and Dr. Papp while Cortech was losing all this money? Right behind the Board, we
think!
<PAGE>
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. 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. 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 SERVED 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 WHITE PROXY CARD TO ASSET VALUE AND
- --------
4H.G. Wells
<PAGE>
VOTE TO DECLASSIFY THE BOARD(if it is proposed by
management); TO INCREASE THE BOARD (if the Board is
not declassified) AND TO
ELECT ASSET VALUE'S NOMINEES.
IT'S TIME FOR A CHANGE; VOTE FOR CHANGE;
VOTE FOR ASSET VALUE.
SEND IN THE WHITE PROXY CARD
VOTE YES TO DECLASSIFY THE BOARD (If it is proposed by
management) OR TO INCREASE THE BOARD (if declassification is
not proposed) BUT IN ANY EVENT:
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
