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
- --------------------------------------------------------------------------------
(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:
-----------------------------------------------------------------------------
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:
-----------------------------------------------------------------------------
|_| 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:
-------------------------------------------------
2) Form, Schedule or Registration No.
---------------------------------------
3) Filing party:
------------------------------------------------------------
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 May __, 1998
ANNUAL MEETING OF STOCKHOLDERS
OF CORTECH, INC. ("Cortech" or "the Company")
ASSET VALUE FUND LIMITED PARTNERSHIP ("Asset Value 1")
(a Delaware limited partnership)
This Proxy Statement and the enclosed white proxy card are being sent by
Asset Value on or about __________, 1998 in connection with its solicitation of
proxies at the Annual Meeting of Stockholders being held by Cortech at [time and
place] ( the "Meeting"). At the Meeting, Cortech management proposes to elect
its two nominees to the Board of Directors and to ratify the selection of Arthur
Andersen LLP as Cortech's independent auditors. Asset Value favors the selection
of Arthur Andersen LLP but opposes the election of management's nominees to the
Board.
Under the Certificate of Incorporation and Bylaws currently in effect, the
Cortech board has five members whose terms are staggered so that no more than
two terms expire in any one year. A staggered board is an obstacle to gaining
control of the Board in any one year. Asset Value Fund seeks to gain control of
Cortech at the Meeting by proposing to amend the Bylaws to increase the number
of directors from five to seven (the "Board Amendment") and subject to the
approval of the Board Amendment, to elect its four nominees as directors (the
two vacancies available under the current Bylaws plus the two vacancies created
by the Board Amendment). If the Board Amendment is approved and all of Asset
Value's nominees are elected, Asset Value's nominees will constitute a majority
of the Board and therefore control of Cortech will transfer to Asset Value.
If the Board Amendment is not approved, Asset Value will seek to have two
of its nominees elected as directors in opposition to Management's nominees for
the two vacancies available under the Bylaws currently in effect. Asset Value
will vote for the ratification of Arthur Andersen LLP as the Company's
independent auditors, for the Board Amendment and for its nominees.
The close of business on _______, 1998 has been fixed by the Company as the
record date in determining the number of shares eligible to vote at the Meeting.
A copy of this Proxy Statement and white Proxy Card will be mailed to all
stockholders entitled to vote at the Annual Meeting.
In reliance upon Rule 14a-5(c) of the Securities and Exchange Act of 1934
2, reference is made to management's proxy statement which is being sent to you
by the Company for a full description of management's proposals, as well as
information with respect to the number of shares
- --------
1 Asset Value is a Delaware limited partnership which is wholly-owned by
Kent Financial Services, Inc., a Delaware corporation ("Kent") the shares of
which are publicly traded on NASDAQ under the symbol KENT. Asset Value was
organized in September, 1990 for the purpose of investing in securities,
principally marketable securities. Additional information about Asset Value and
its management and about Kent and the names of its officers, directors and
controlling stockholders and their ownership interests is presented on Schedule
1 of this Proxy Statement.
2 Rule 14a-5(c) provides that "any information contained in any other
proxy soliciting material which 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>
eligible to vote at the Meeting, the quorum, the record date, the securities
ownership of the Company, information about the Company's officers and
directors, including compensation, information about the ratification of the
appointment of Arthur Andersen LLP as independent auditors and the date by which
stockholders must submit proposals for inclusion in the next annual meeting.
PLEASE READ THE FOLLOWING MATERIAL WITH CARE BECAUSE WE BELIEVE THAT CORTECH'S
FUTURE DEPENDS ON YOUR VOTE.
WE URGE YOU TO VOTE:
FOR THE BOARD AMENDMENT (which will add two vacancies on the
Board.)
FOR ALL OF ASSET VALUE'S NOMINEES (which in
combination with the Board Amendment would effect a
change of control to Asset Value)
Asset Value seeks to gain control of Cortech because it believes that
Cortech's Board has repeatedly exercised poor judgment.
* The Board failed, in our view, to sharply and quickly downsize in
fiscal 1996, when, in our view, it was reasonable to foresee that
Cortech's technology was a losing cause.
* The Board rewarded management with ever increasing compensation even
while stockholder values plummeted.
* The Board refused Asset Value's request to cancel the poison pill.
* Even after the Board announced that it would seek to redeploy Cortech's
assets, it did not, in Asset Value's opinion, conduct an open bidding
process.
* Instead it expended over $673,000 pursuing a merger (the "Merger")
with BioStar, Inc. ("BioStar"), a company which was losing money
(almost $2 million in 1997), had an accumulated deficit (over $25
million at December 31, 1997), had a negative net worth (more than $5.6
million), had long and short term debt of $9.4 million and in our view
had no immediate prospects for earnings. BioStar's revenues had
increased from $1,272,000 in 1993 to $15,858,000 in 1997 and losses did
improve from ($18.13) per share in 1993 to ($1.00) per share in 1997.
* The Board proceeded to expend Cortech's limited resources promoting
this Merger even though Asset Value warned the Board from the start
that the Merger was not in the interests of stockholders who, Asset
Value said, would never approve such a transaction.
We ask you. What will this Board do next? Don't take a chance. Vote for a
change. Vote for Asset Value's nominees!
<PAGE>
Shortly before the Merger termination, Cortech announced that Cortech's
Common Stock ("Shares") would be delisted from NASDAQ.3 Management concedes
that "the absence of the NASDAQ National Market listing for the Company's Common
Stock [will] have an adverse effect on the market for, and potentially the
market price of, the Company's Common Stock."
NOW YOU TELL US!
Asset Value believes that the Board should have known that Cortech Common
Stock would be delisted irrespective of the Merger and this fact alone, in Asset
Value's view, should have caused the Board to reject the Merger with BioStar. We
believe that Cortech has wasted almost seven months and over $673,000 pursuing a
transaction which, Asset Value asserted was doomed from the start. Instead we
think that once the Cortech Board determined to change control of Cortech, it
should have sought competitive transactions more aggressively, by (i)
advertising in the financial media, (ii) engaging an investment banker from the
outset to solicit merger partners in the investment community and (iii) publicly
stating that the Board was conducting an open bidding process for control of
Cortech.4 Above all, the Board should have sought the support of its major
stockholders.
THIS BOARD ACTS LIKE THEIR VOICE IS THE ONLY CHOICE.
"WHO CARES WHAT OWNERS THINK? Who owns American companies?
The management, of course. Shareholders are tolerated, but managers rule.5"
Not once before the Merger was terminated did a director or officer of
Cortech seek the advice or opinion of Asset Value, Cortech's largest
stockholder. Not once did a Cortech director or officer seek the cooperation of
Asset Value to avoid, what in our view, was the senseless costs of the ill-fated
merger proposal even after Asset Value expressed its opposition in a letter to
Mr. Lynn.
We believe that Asset Value's executives have had considerable success in
restructuring failed businesses, either by direct oversight or by influencing
the course of management. Prior to the announcement of the Merger, Asset Value
sought to have its principal officer, Paul O. Koether, elected as a Cortech
director to assist in the redirection of Cortech's assets. Although the Cortech
Board did not reject our request, it did not acquiesce either. In our view, it
dithered, deferred and delayed and finally, without any further personal contact
with its largest stockholder, Cortech announced the BioStar transaction. Only
after the Merger failed did Cortech's president, Kenneth Lynn finally telephone
Paul O. Koether in an attempt, Asset Value thinks, to deflect Asset Value from
seeking control of the Board. Mr. Lynn was told that Asset Value wished the
Board to cancel the poison pill and to declassify the Board which, in Asset
Value's opinion, would restore corporate
- --------
3 Cortech is currently appealing the NASDAQ ruling.
4 The Cortech Board's own independent financial adviser in the Merger
stated that it was not asked by the Board to solicit competitive offers for
Cortech.
5 Market Watch, New York Times, 3/8/98, Floyd Norris. This quote has
been made without the permission of the New York Times or Mr. Norris.
<PAGE>
democracy and potentially entice prospective acquirers. As yet, the Cortech
Board has not responded but even if the Board took these steps we now believe
they would be too little, too late.
MORE RED INK!
After the telephone conversation between Messrs. Lynn and Koether,
Cortech's Form 10-Q reported 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-time6
employees and general and administrative expenses of $1,522,000, of which,
according to Cortech, merger expense only accounted for approximately $673,000.
In the face of these unabated losses, Asset Value believes that the Board still
appears bent on maintaining the status quo. In our view, it was this same
vacillating decision making that failed to staunch the hemorrhaging of Cortech's
stockholders equity in the past and we believe that we should not allow this
past to become the future.
WARNING: "Those who cannot remember the past are condemned to repeat
it."7
In our opinion, several individuals and entities, other then Cortech
stockholders would have reaped the benefits of the Merger with BioStar. We
believe that Mr. Lynn stood to benefit from the Merger because it would have
triggered his golden parachute ($1,300,000 for him and others with severance
agreements) and enabled him (and other Board members and executive officers) to
exercise 623,535 options. BioStar's management would have received additional
compensation and options in connection with the Merger. In fact, it seems to
Asset Value, that every participant was to profit from the Merger except the
public stockholders of Cortech, who would have suffered a dilution in book value
per Cortech share of 64% (from an historical $.83 to a pro forma $.30) while
BioStar stockholders would have enjoyed an improvement in book value from an
historical negative ($2.86) to a positive $.17 per share.
PLEASE ASK YOURSELF:
DO YOU WANT THE BOARD MEMBERS WHO APPROVED THE BIOSTAR MERGER TO SELECT THE
NEXT MERGER CANDIDATE FOR CORTECH?
IF THE ANSWER IS NO THEN PLEASE SEND THE WHITE PROXY CARD TO ASSET VALUE
AND VOTE TO INCREASE THE BOARD AND TO ELECT ALL OF ASSET VALUE'S NOMINEES.
- --------
6 Cortech does not disclose whether there are additional part-time
employees and consultants still hanging on.
7 The Life of Reason, (1905) George Santayana
<PAGE>
WOULD THE GODS GIVE US THE GIFT TO SEE OURSELVES AS
OTHERS SEE US 8
In connection with his support of the BioStar transaction, Lynn described
himself as a "fiduciary". Far from it in our view. Prior to the Merger proposal,
Lynn owned Cortech Shares worth less than $2,000 in the marketplace. As a result
of the Merger, Lynn and others with severance agreements would have received:
(1) payments of $1,300,000; (2) payment of premiums for health benefits for
eighteen months; and (3) the immediate vesting of 623,535 options. Mr. Lynn was
also to continue as a director of the successor corporation after the Merger.
Even before approving the ill-fated Merger with BioStar, we believe that
the Cortech Board and Mr. Lynn ignored the growing disparity over the past
several years between the interests of Cortech's management and the public
stockholders' interests. The chart below reflects the difference between Mr.
Lynn's increasing compensation between 1993 and 1997 and the concomitant decline
of the market value of Cortech Shares.
<TABLE>
GRAPH OF CORTECH'S HIGH STOCK PRICE AND LYNN'S
COMPENSATION.
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Cortech's High Stock Price $18.25 $14.25 $3.65625 $3.8125 $2.03125
Lynn's Compensation $140,000 $181,744 $305,499 $330,006 $330,513
NOT A PRETTY PICTURE!
</TABLE>
Asset Value has stated and restates here that it 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.
- --------
8 An anglicized version of a quotation from the poem "To a Louse" by
Scottish poet Robert Burns.
<PAGE>
THE SHAPE OF THINGS TO COME 9
Asset Value has only considered possible alternatives for the future of
Cortech in a preliminary way and therefore it does not know with certainty that
there are potential acquisitions or Mergers that would be attractive for
Cortech.
Asset Value has stated and restates here that it has no specific Merger
partner in mind. So, what will Asset Value do if it obtains control of the
Cortech Board? As we stated, 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 in the investment
community 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. But as stated above, there can be no assurance that taking these
steps will produce a transaction that will be favorable for Cortech and its
stockholders.
STOP THE RED INK!
Paul Koether of Asset Value has suggested publicly that a shutdown of
Cortech is an appropriate alternative which would leave Cortech with cash and
future tax benefits from past losses plus the enticement of publicly traded
shares that could be a vehicle for a private company to become public. He
recognizes that there would be risks associated with such an action,
particularly that Cortech would no longer be an "ongoing" business and the
possible reduction in the value of the technology because of the loss of
experienced personnel. In any event, Asset Value would evaluate the matter
further with current employees if it 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, which they believe maximizes stockholder values.
Remember Asset Value has promised not to seek to merge Cortech with any
affiliate or entity in which Asset Value is an investor. Asset Value intends to
benefit from its Cortech investment only to the same extent other stockholders
benefit.
IT'S TIME FOR A CHANGE.
VOTE FOR CHANGE.
VOTE FOR ASSET VALUE.
- --------
9 H.G. Wells
<PAGE>
PROPOSAL 1
INCREASE IN BOARD
Asset Value is asking for your support to approve a proposal to amend
Article 3 Section 3.1 of the Bylaws of Cortech to set the number of directors to
serve on the Board of Directors at seven. The affirmative vote of a plurality of
the votes present in person or represented by proxy and entitled to vote at the
meeting are required to approve this proposal.
Asset Value urges you to vote FOR the approval of the proposal to amend
Article 3 Section 3.1 of the Bylaws of Cortech to set the number of directors to
serve on the Board of Directors at seven.
PROPOSAL 2
ELECTION OF DIRECTORS
Asset Value is asking for your support to elect its nominees. Under Article
II, Section 2.2 of the Company's Bylaws, to bring business before the annual
meeting, a stockholder must provide timely, written notice to the secretary
describing the business and providing information about the stockholder,
including name and address and beneficial ownership. The affirmative vote of a
plurality of the votes present in person or represented by proxy and entitled to
vote at the meeting are required to elect each of the Asset Value nominees.
Information about management's nominees, including beneficial ownership of
Cortech Shares and compensation can be found in management's proxy statement.
The biographical data, including age, principal occupation or employment, and
other affiliations and business experience of each Asset Value nominee during
the last five years follows:
Paul O. Koether, age 61, is principally engaged in the following
businesses: (i) as Chairman and director of Kent Financial Services, Inc.
("Kent") since July 1987 and President since October 1990 and the general
partner since 1990 of Shamrock Associates, an investment partnership which is
the principal stockholder of Kent and (ii) various positions with affiliates of
Kent, including Chairman since 1990 and a registered representative since 1989
of T. R. Winston & Company, Inc. ("Winston") and since July 1992, a director of
American Metals Service, Inc., ("AMS") which was an indirect, majority-owned
subsidiary of Kent before its shares were distributed to Kent's stockholders.
Mr. Koether also has been Chairman since April 1988, President from April 1989
to February 1997 and director since March 1988 of Pure World, Inc., formerly
American Holdings, Inc., ("Pure World") and since December 1994 has been a
director and since January 1995 has been Chairman of Pure World's majority-owned
subsidiary, Madis Botanicals, Inc., ("Madis") a manufacturer and distributor of
natural products. He is also Chairman and a director of Pure World's principal
stockholder, Sun Equities Corporation, ("Sun") a private company. Mr. Koether
served as Chairman and a director of NorthCorp Realty Advisors, Inc., an asset
management company, ("NorthCorp") from June 1992 when it was acquired by Pure
World until August, 1994 when it was merged and renamed Crown NorthCorp, Inc.
<PAGE>
Mark W. Jaindl, age 37, is the President and Chief Executive Officer of the
American Bank of the Lehigh Valley, a commercial bank. He has served as Senior
Vice President of Pure World from June 1992 until May 1995 and as a director
since October 1994. He was Senior Vice President of Madis from December 1994
until May 1995 and a director of Madis since December 1994 and he has served as
a director of AMS since July 1992. Mr. Jaindl was a director of NorthCorp from
June 1992 until September 1994 and was Interim President of NorthCorp from
February 1994 until August 1994. From May 1982 to October 1991 and again since
May 1995 he has served as Chief Financial Officer of Jaindl Farms, which is
engaged in diversified businesses, including the operation of a 12,000-acre
turkey farm, a mobile home park, a John Deere dealership and a grain operation.
Mr. Jaindl also served as the Chief Financial Officer of Jaindl Land Company, a
developer of residential, commercial and industrial properties in eastern
Pennsylvania.
John W. Galuchie, Jr., age 45, a certified public accountant, is
principally engaged in the following businesses: (i) Winston, as President since
January 1990 and director since September 1989; (ii) Kent, in various executive
positions since 1986 and a director from June 1989 until August 1993; (iii) Pure
World, as Executive Vice President since April 1988, director from January 1990
until October 1994 and for more than five years as Vice President and director
of Sun; (iv) AMS as Vice President, Treasurer and a director since July 1992.
Mr. Galuchie served as a director of Crown NorthCorp, Inc., the successor
corporation to NorthCorp from June 1992 to August 1996.
James L. Bicksler, age 60, is a Professor of Economics and Finance,
Graduate School of Management, Rutgers University, a position he has held since
1969.
Asset Value urges you to vote FOR the nominees described above. They will
seek to maximize stockholder values and pledge to cooperate with and consider
the proposals of other stockholders.
If more than a majority of Cortech Shares present by proxy or in person
vote in favor of amending the Bylaws to increase the number of directors, there
will be four vacancies on the Board and the four nominees receiving the highest
vote (whether Asset Value's nominees or management's nominees) will be elected
to the Board. If all of Asset Value's nominees are elected, Asset Value's
nominees will constitute a majority of the Board and control of Cortech will
transfer to Asset Value.
If the Board Amendment is not approved, the two nominees (whether Asset
Value's nominees or Management's nominees) receiving the highest number of votes
cast at the meeting will be elected. Asset Value makes no provision for voting
for management's nominees, therefore if you vote for only one of Asset Value's
nominees, you will not have an opportunity to vote for a candidate to fill the
other vacancy to the Board.
Even if you have voted against increasing the Board please vote for Asset
Value's nominees. The nominees receiving the highest number of votes will be
elected. If the Board Amendment is not approved two of Asset Value's nominees
can still be elected if their votes exceed the votes for Management's nominees.
If the Bylaw Amendment is approved, management's nominees can still be elected
to two vacancies if their votes exceed the votes of any of the four Asset Value
nominees.
Therefore if you agree that it is time for a change, VOTE
<PAGE>
YES to the Board Amendment
and
FOR Asset Value's nominees
PROPOSAL 3
RATIFICATION OF INDEPENDENT AUDITOR
Information about the ratification of Arthur Andersen LLP can be found in
management's proxy statement. Asset Value favors the ratification of Arthur
Andersen LLP as Cortech's independent auditor.
REQUIRED VOTE AND MANNER OF VOTING
If more than a majority of Cortech Shares present by proxy or in person
vote in favor of the Board Amendment, there will be four vacancies on the Board
and the four nominees receiving the highest vote (whether Asset Value's nominees
or management's nominees) will be elected to the Board. If the increase in Board
members is not approved the two nominees (whether Asset Value's nominees or
Management's nominees) receiving the highest number of votes cast at the meeting
will be elected. If more than a majority of shares of Cortech Shares voting at
the Meeting vote for the ratification of Arthur Andersen LLP as Cortech's
independent auditor, this proposal will be approved. Information about the
quorum and voting for management's proposals can be found in management's proxy
statement.
Valid proxies will be voted as instructed therein, but absent instructions
on the white proxy card, will be voted FOR the Bylaw amendment to enlarge the
Board, FOR Asset Value's nominees, and FOR the ratification of Arthur Anderson
LLP and in the discretion of the proxies on any other matter that comes before
the Meeting except that proxies will not be voted on another matter which
becomes known a reasonable time before the Meeting. Abstentions and broker
non-votes (where a nominee holding shares for a beneficial owner has not
received voting instructions from the beneficial owner on a particular matter
and the nominee does not vote the shares) will be counted in the determination
of a quorum but will not be counted for or against any proposal. We urge you to
sign, date and return the white proxy card in the enclosed envelope. No postage
is required if mailed in the United States.
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.
<PAGE>
REVOCATION OF PROXIES
If you have executed management's **** proxy card before receiving this
Proxy Statement, you have every right to change your vote by signing, dating and
returning the enclosed white proxy card in the postage-paid envelope provided.
Only your latest dated proxy will count at the Meeting. Any proxy, including the
proxy solicited hereby, may be revoked at any time before it is voted by (i)
submitting a duly executed proxy bearing a later date to the Secretary of the
Company or to Asset Value, (ii) filing with the Secretary of the Company a
written revocation or (iii) attending and voting at the Meeting in person.
SOLICITATION EXPENSE
Asset Value, Mark W. Jaindl and Frederick J. Jaindl (see Schedule 1) will
bear the cost of preparing, assembling and mailing the enclosed form of proxy,
this proxy statement and other material which may be sent to stockholders in
connection with this solicitation. Officers and regular employees of Asset Value
or its affiliates may solicit proxies by mail, telephone, telegraph, facsimile
and personal interview, for which no additional compensation will be paid. In
addition, Asset Value has retained Beacon Hill Partners, Inc. ("Beacon Hill") to
solicit proxies on its behalf. In connection with the solicitation in opposition
to Cortech, Asset Value has agreed to pay Beacon Hill up to $15,000 plus
expenses, part of which is a success fee. Asset Value advanced Beacon Hill
$3,000 to cover expenses. It is anticipated that the cost to Asset Value in
connection with this solicitation will be approximately $50,000.
Very truly yours,
Paul O. Koether
Asset Value Fund Limited Partnership
IMPORTANT
If your shares are held in "Street Name" only your bank or broker can vote
your shares, and only upon receipt of your specific instructions. Please contact
the person responsible for your account and instruct them to execute a white
proxy card as soon as possible.
If you have any questions or need further assistance in voting, please call
John W. Galuchie, Jr., of Asset Value Fund Limited Partnership collect at (908)
234-1881, or our proxy solicitor:
BEACON HILL PARTNERS, INC.
90 BROAD STREET
NEW YORK, NEW YORK 10004
(800) 253-3814
<PAGE>
SCHEDULE 1
ADDITIONAL INFORMATION ABOUT ASSET VALUE FUND LIMITED
PARTNERSHIP, MARK W. JAINDL AND FREDERICK J. JAINDL
Asset Value Fund Limited Partnership ("Asset Value") is engaged in
investing in securities. The sole general partner of Asset Value is Asset Value
Management, Inc. ("Asset Value Management"). Asset Value Management is a
wholly-owned subsidiary of Kent Financial Services, Inc. ("Kent"), whose
principal business is the operation of T. R. Winston & Company, Inc. ("TRW"),
its wholly-owned subsidiary. TRW is a securities broker-dealer registered with
the National Association of Securities Dealers, Inc. Asset Value, Asset Value
Management, Kent and TRW maintain offices at 376 Main Street, Bedminster, New
Jersey 07921.
Mark W. Jaindl ("Mark Jaindl") is the President and Chief Executive Officer
of the American Bank of the Lehigh Valley, a commercial bank whose principal
business address is 4029 West Tilghman Street, Allentown, PA 18104 ("American
Bank"). (For additional information on Mark Jaindl, see PROPOSAL 1, ELECTION OF
DIRECTORS.) Frederick J. Jaindl ("Fred Jaindl") is the sole proprietor of Jaindl
Farms (turkey farming), whose principal business address is 3150 Coffeetown
Road, Orefield, PA 18069. Fred Jaindl is Chairman of American Bank. Mark and
Fred Jaindl are the principal stockholders of American Bank. Mark Jaindl is the
son of Fred Jaindl.
As of March 23, 1998, Asset Value holds 2,000,000 Cortech Shares or
approximately 10.80% of the total Cortech Shares outstanding. Mark Jaindl holds
250,000 Cortech Shares, or approximately 1.35% and Fred Jaindl holds 520,000
Cortech Shares or approximately 2.80%. Asset Value, Mark Jaindl and Fred Jaindl
disclaim the beneficial ownership of each other's Cortech Shares. Purchases and
sales of Cortech Shares by Asset Value, Mark Jaindl and Fred Jaindl are listed
on Schedule 2.
During the past ten years, none of Asset Value, Mark Jaindl, Fred Jaindl,
Asset Value Management, Kent, TRW, or the Directors and Executive Officers of
Kent has been convicted in a criminal proceeding.
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS
OF KENT FINANCIAL SERVICES, INC.
Percent of Direct or
Indirect Ownership
Name and Address Position and Office of Voting Securities of
of Beneficial Owner Currently Held Kent Financial Services, Inc.
- ------------------- ------------------- -----------------------------
<S> <C> <C>
Paul O. Koether Chairman, Director 44.90%
211 Pennbrook Road and President
Far Hills, NJ 07931
John W. Galuchie, Jr. Vice President and
376 Main Street Treasurer 2.32%
Bedminster, NJ 07921
Mark Koscinski Vice President *
376 Main Street
Bedminster, NJ 07921
M. Michael Witte Director 1.15%
1120 Granville Avenue
Suite 102
Los Angeles, CA 90049
Casey K. Tjang Director *
56 Hall Drive
Clark, NJ 07066
Mathew E. Hoffman Director *
62 Rosehill Avenue
New Rochelle, NY 10804
_________________________________________
*Less than 1 percent
</TABLE>
<PAGE>
SCHEDULE 2
<TABLE>
PURCHASES AND SALES OF CORTECH SHARES
ASSET VALUE<F1>
Dates purchased Number of shares purchased Price per share<F2> Total
- --------------- -------------------------- --------------- -------------
<S> <C> <C> <C>
07/25/97 20,000 $.61375 $ 12,275.00
07/31/97 6,700 .625 4,321.50
08/06/97 9,100 .6875 6,256.25
08/07/97 2,600 .6875 1,787.50
08/08/97 3,100 .6875 2,131.25
08/12/97 458,500 .6875 315,218.75
08/15/97 5,100 .6875 3,506.25
08/18/97 5,200 .6689 3,478.28
08/19/97 3,200 .65625 2,100.00
08/20/97 9,000 .65625 5,906.25
08/21/97 8,500 .6875 5,843.75
08/27/97 146,800 .6875 103,861.00
09/08/97 22,000 .6875 15,125.00
09/11/97 20,000 .703125 14,062.50
09/15/97 26,000 .703125 18,281.25
09/16/97 7,700 .703125 5,414.06
09/17/97 4,000 .703125 2,812.50
09/24/97 31,425 .703125 22,095.70
09/30/97 89,600 .703125 63,000.00
10/01/97 56,000 .703125 39,375.00
10/02/97 1,475 .703125 1,037.11
10/06/97 25,000 .6875 17,187.50
10/07/97 2,000 .6875 1,375.00
10/07/97 6,500 .71875 4,671.88
10/07/97 336,000 .703125 236,250.00
10/08/97 1,556,757 .65 1,011,892.05
10/08/97 5,000 .75 3,750.00
10/08/97 20,000 .71875 14,375.00
10/09/97 2,000 .71875 1,437.50
10/09/97 5,000 .765625 3,828.13
10/09/97 18,500 .75 13,875.00
10/10/97 4,500 .78125 3,515.63
10/14/97 1,000 .78125 781.25
10/14/97 6,000 .8125 4,875.00
10/28/97 15,000 .6875 10,312.50
10/30/97 13,000 .6875 8,937.50
10/30/97 12,000 .65625 7,875.00
11/03/97 3,700 .6875 2,543.75
11/04/97 4,900 .65625 3,215.63
11/05/97 12,000 .6875 8,250.00
11/05/97 2,500 .65625 1,640.63
11/07/97 11,300 .65625 7,415.63
11/10/97 58,343 .65625 38,287.59
11/11/97 10,500 .65625 6,890.63
(table continued on next page)
<PAGE>
(table continued from previous page)
Dates purchased Number of shares purchased Price per share<F2> Total
- --------------- -------------------------- --------------- -------------
11/14/97 4,000 .65625 2,625.00
11/14/97 8,500 .6875 5,843.75
11/17/97 9,700 .65625 6,365.63
11/18/97 11,300 .65625 7,415.63
11/24/97 5,000 .640625 3,203.13
--------- -------------
3,106,000 $2,086,524.84
--------- -------------
Dates sold Number of shares sold Price per share<F2> Total
- ---------- ------------------------- --------------- -------------
08/13/97 3,000 $.6875 $ 2,062.43
08/29/97 3,000 .71875 2,156.17
09/17/97 2,000 .71875 1,437.45
09/30/97 3,000 .71875 2,156.17
10/07/97 325,000 .65 211,242.95
02/10/98 770,000 .6705 516,285.00
--------- -------------
1,106,000 735,340.17<F3>
--------- -------------
2,000,000 $1,319,425.00
========= =============
MARK W. JAINDL
Dates purchased Number of shares purchased Price per share<F2> Total
- --------------- -------------------------- --------------- -------------
02/10/98 250,000 .6705 $ 167,625.00
========== =============
FREDERICK J. JAINDL
Dates purchased Number of shares purchased Price per share<F2> Total
- --------------- -------------------------- --------------- -------------
02/10/98 520,000 .6705 $ 348,660.00
========== =============
<FN>
<F1> Excludes the purchase for an aggregate amount of $11,251.52 on October
8, 1997 of warrants to purchase 562,576 shares of Cortech stock, which
were contributed back to the capital of Cortech on October 18, 1997.
No shares were purchased with or are being held with borrowed funds.
<F2> Price excludes brokerage commissions, if any.
<F3> Reflects loss on sale of $31,759.67.
</FN>
</TABLE>
<PAGE>
PRELIMINARY PROXY CARD
Cortech, Inc.
Annual Meeting To Be Held On [date], 1998
This Proxy Is Being Solicited On Behalf Of Asset Value Fund Limited
Partnership ("Asset Value")
The undersigned hereby appoints Paul O. Koether, Mark W. Jaindl and John W.
Galuchie, Jr. or any of them, the undersigned's proxies, each with full power of
substitution, to vote all Shares of Common Stock of Cortech, Inc. (the
"Company") which the undersigned would be entitled to vote if personally present
at the Annual Meeting of Stockholders of the Company to be held on [date], 1998
at **A.M. at ************************************** (the "Meeting") and at any
adjournments or postponements thereof and, without limiting the generality of
the power hereby conferred, the proxy nominees named above and each of them are
specifically directed to vote as indicated below.
WHERE A CHOICE IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED AS SPECIFIED. IF NO CHOICE IS INDICATED, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR THE AMENDMENT TO THE BYLAWS TO INCREASE THE NUMBER OF
DIRECTORS TO SEVEN, FOR THE ELECTION OF ASSET VALUE'S NOMINEES AS DIRECTORS, and
FOR THE RATIFICATION OF ARTHUR ANDERSEN LLP.
If there are amendments or variations to the matters proposed at the
Meeting or at any adjournments or postponements thereof, or if any other
business properly comes before the Meeting, this proxy confers discretionary
authority on the proxy nominees named herein and each of them to vote on such
amendments, variations or other business.
ASSET VALUE RECOMMENDS A VOTE FOR INCREASING THE NUMBER OF DIRECTORS FROM FIVE
TO SEVEN.
1. To amend Article 3 Section 3.1 of the Company's Bylaws to set the number of
directors to serve on the Board of Directors at seven.
FOR__________ AGAINST__________ ABSTAIN__________
ASSET VALUE RECOMMENDS A VOTE FOR THE ASSET VALUE NOMINEES.
2. To elect Asset Value's nominees as Directors:
Paul O. Koether _____FOR _____AGAINST _____ABSTAIN
Mark W. Jaindl _____FOR _____AGAINST _____ABSTAIN
John W. Galuchie, Jr. _____FOR _____AGAINST _____ABSTAIN
James L. Bicksler _____FOR _____AGAINST _____ABSTAIN
<PAGE>
ASSET VALUE RECOMMENDS A VOTE FOR THE RATIFICATION OF ARTHUR ANDERSEN LLP.
3. To ratify the appointment of Arthur Andersen LLP as independent auditors for
the year ended December 31, 1998.
FOR__________ AGAINST__________ ABSTAIN__________
4. In their discretion, on such other matters as may properly come before the
annual meeting or any postponements or adjournments thereof, except that proxies
will not be voted on another matter which becomes known a reasonable time before
the meeting.
The undersigned acknowledges receipt of the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement for the _________________, 1998
meeting.
Dated: _____________________________, 1998
------------------------------------------
Signature of Stockholder
------------------------------------------
Signature of Stockholder if Shares held in
more than one name (Please sign exactly as
name or names appear hereon. Full title of
one signing in representative capacity
should be clearly designated after
signature. If a corporation, please sign
in full corporate name by President or
other authorized officer(s). If a
partnership, please sign in partnership
name by authorized person. If stock is in
the name of two or more persons, each
should sign. Joint owners should each
sign. Names of all joint holders should
be written even if signed by only one.)
ASSET VALUE RECOMMENDS A VOTE FOR PROPOSALS 1, 2, AND 3.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
PRELIMINARY OPPOSITION PROXY MATERIAL
ASSET VALUE FUND LIMITED PARTNERSHIP
376 MAIN STREET, P.O. BOX 74
BEDMINSTER, NJ 07921
(908) 234-1881
May__, 1998
Dear Fellow Cortech Stockholder:
We and two other investors ("Asset Value") own approximately 15% of the
ourstanding shares of Cortech, Inc. ("Cortech"), which makes us by far Cortech's
largest stockholders. In connection with the upcoming Annual Meeting, Asset
Value is seeking your vote to elect its four nominees, who would then constitute
a majority of the Cortech Board.1 Asset Value seeks to gain control of Cortech
because it believes that Cortech's Board has repeatedly exercised poor judgment.
As you know, Cortech lost over $77 million through the end of fiscal 1996
attempting to exploit its technology. Finally in April of 1997, the Board
announced that Cortech would cease operations and pursue strategic alternatives
to use its remaining cash which as of December 31, 1997 was $15.4 million.
Mirror, Mirror on the Wall, Who's the Fairest of Them All?
Kenneth Lynn, CEO of Cortech, and the Board would have us believe that once
they determined that Cortech could not succeed as a stand-alone entity, they
scoured the land for a merger partner and the only prospective suitor was
BioStar. BioStar, a company which lost almost ($2,000,000) in fiscal 1997 and by
the end of 1997 had a negative net worth of ($5,600,000). After the Board
announced in December of 1997 that Cortech would merge with BioStar, Asset Value
warned the Board that Asset Value believed the Merger was not in the interests
of stockholders who, Asset Value said, would never approve such a transaction.
Notwithstanding this warning, the Board proceeded, in Asset Value's opinion, to
waste a substantial portion of Cortech's remaining resources on the Merger,
which just as Asset Value predicted, failed, in our opinion, for lack of
stockholder support.
We ask you. What will this Board do next?
Don't take a chance. Vote for a change. Vote for Asset Value's nominees!
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.
- --------
1 Cortech has a staggered board which means under the current by-laws
that only two of the five directors must seek election this year. Asset Value
seeks to amend the by-laws to increase the size of the board from five to seven
and to elect its four nominees as directors to the four vacancies (the two
available under the current by-laws and the two vacancies created by the
proposed amendment). If successful, Asset Value's nominees would constitute a
majority of the board.
<PAGE>
MORE RED INK!
Cortech's Form 10-Q filed for the first quarter of 1998 reported that
Cortech's losses not only continued but increased compared to last year
($1,399,000 in 1998; $897,000 in 1997). In a quarter with No research and
development activities and No revenues, Cortech still had approximately 15
full-time2 employees and general and administrative expenses of $1,522,000, of
which, according to Cortech, merger expense only accounted for approximately
$673,000. In the aggregate, Cortech has lost over $86 million as of March 31,
1998. In the face of these unabated losses, Asset Value believes that the Board
still appears bent on maintaining the status quo. In our view, it was this same
vacillating decision making that failed to staunch the hemorrhaging of Cortech's
stockholders equity in the past and we believe that we should not allow this
past to become the future. Vote for Change: Send in the White Proxy Card and
Vote for Asset Value's Nominees.
WARNING: "Those who cannot remember the past are condemned to repeat
it."3
In our opinion, several individuals and entities, other then Cortech
stockholders would have reaped the benefits of the Merger with BioStar. We
believe that Mr. Lynn stood to benefit from the Merger because it would have
triggered his golden parachute ($1,300,000 for him and others with severance
agreements) and enabled him (and other Board members and executive officers) to
exercise 623,535 options. BioStar's management would have received additional
compensation and options in connection with the Merger. In fact, it seems to
Asset Value, that every participant was to profit from the Merger except the
public stockholders of Cortech, who would have suffered a dilution in book value
per Cortech share of 64% (from an historical $.83 to a pro forma $.30) while
BioStar stockholders would have enjoyed an improvement in book value from an
historical negative ($2.86) to a positive $.17 per share.
PLEASE ASK YOURSELF:
DO YOU WANT THE BOARD MEMBERS WHO APPROVED THE BIOSTAR MERGER TO SELECT THE
NEXT MERGER CANDIDATE FOR CORTECH?
IF THE ANSWER IS NO THEN PLEASE SEND THE WHITE PROXY CARD TO ASSET VALUE
AND VOTE TO INCREASE THE BOARD AND TO ELECT ALL OF ASSET VALUE'S NOMINEES.
- --------
2 Cortech does not disclose whether there are additional part-time
employees and consultants still hanging on.
3 The Life of Reason, (1905) George Santayana
<PAGE>
WOULD THE GODS GIVE US THE GIFT TO SEE OURSELVES AS
OTHERS SEE US 4
In connection with his support of the BioStar transaction, Lynn described
himself as a "fiduciary". Far from it in our view. Prior to the Merger proposal,
Lynn owned Cortech Shares worth less than $2,000 in the marketplace. As a result
of the Merger, Lynn and others with severance agreements would have received:
(1) payments of $1,300,000; (2) payment of premiums for health benefits for
eighteen months; and (3) the immediate vesting of 623,535 options. Mr. Lynn was
also to continue as a director of the successor corporation after the Merger.
Even before approving the ill-fated Merger with BioStar, we believe that
the Cortech Board and Mr. Lynn ignored the growing disparity over the past
several years between the interests of Cortech's management and the public
stockholders' interests. The chart below reflects the difference between Mr.
Lynn's increasing compensation between 1993 and 1997 and the concomitant decline
of the market value of Cortech Shares.
<TABLE>
GRAPH OF CORTECH'S HIGH STOCK PRICE AND LYNN'S
COMPENSATION.
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Cortech's High Stock Price $18.25 $14.25 $3.65625 $3.8125 $2.03125
Lynn's Compensation $140,000 $181,744 $305,499 $330,006 $330,513
NOT A PRETTY PICTURE!
</TABLE>
After Asset Value acquired its interest in Cortech in the fall of September
1997, we asked the Cortech Board to elect a nominee of Asset Value to the Board
(only one on a five member Board). The Cortech Board, in effect, refused, then
the Cortech Directors approved a transaction which, in our view, would have
negatively affected all stockholders. They did this without bothering to ask
for, or permit, the participation of Cortech's largest stockholder, Asset Value,
whose interests, clearly, in our opinion, are more matched with public
stockholders than a Board which collectively owns less than 2 1/2 % of Cortech
Common Stock.
- --------
4 An anglicized version of a quotation from the poem "To a Louse" by
Scottish poet Robert Burns.
<PAGE>
THE SHAPE OF THINGS TO COME5
Asset Value has only considered possible alternatives for the future of
Cortech in a preliminary way and therefore it does not know with certainty that
there are potential acquisitions or Mergers that would be attractive for
Cortech.
Asset Value has stated and restates here that it has no specific Merger
partner in mind. So, what will Asset Value do if it obtains control of the
Cortech Board? As we stated, 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 in the investment
community 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. But as stated above, there can be no assurance that taking these
steps will produce a transaction that will be favorable for Cortech and its
stockholders.
STOP THE RED INK !
Paul Koether of Asset Value has suggested publicly that a shutdown of
Cortech is an appropriate alternative which would leave Cortech with cash and
future tax benefits from past losses plus the enticement of publicly traded
shares that could be a vehicle for a private company to become public. He
recognizes that there would be risks associated with such an action,
particularly that Cortech would no longer be an "ongoing" business and the
possible reduction in the value of the technology because of the loss of
experienced personnel. In any event, Asset Value would evaluate the matter
further with current employees if it 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, which they believe maximizes stockholder values.
Remember Asset Value has promised not to seek to merge Cortech with any
affiliate or entity in which Asset Value is an investor. Asset Value intends to
benefit from its Cortech investment only to the same extent other stockholders
benefit. 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.
"WHO CARES WHAT OWNERS THINK? Who owns American companies?
The management, of course. Shareholders are tolerated, but managers rule.6"
THE CORTECH BOARD ACTS LIKE ITS VOICE IS THE ONLY
CHOICE.
- --------
5 H.G. Wells
6 Market Watch, New York Times 3/8/98, Floyd Norris. This quote has been
made without the permission of the New York Times or Mr. Norris.
<PAGE>
But we stockholders can demonstrate that they are wrong. We urge you to
read our enclosed Proxy Statement and vote YES to increasing the Board and FOR
Asset Value's nominees.
Sincerely,
Paul O. Koether
Asset Value Fund Limited Partnership
SEND IN THE WHITE PROXY CARD
VOTE YES TO INCREASE THE BOARD
VOTE FOR ALL OF ASSET VALUE'S NOMINEES
IMPORTANT
If your shares are held in "Street Name" only your bank or broker can vote
your shares, and only upon receipt of your specific instructions. Please contact
the person responsible for your account and instruct them to execute a white
proxy card as soon as possible.
If you have any questions or need further assistance in voting, please call
John W. Galuchie, Jr., of Asset Value Fund Limited Partnership collect at (908)
234-1881, or our proxy solicitor:
BEACON HILL PARTNERS, INC.
90 BROAD STREET
NEW YORK, NEW YORK 10004
(800) 253-3814
