SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: (Date of earliest event reported) February 15, 2000
Cortech, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of Incorporation)
0-22018 84-0894091
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(Commission File Number) (IRS Employer Identification Number)
376 Main Street, P.O. Box 74, Bedminster, New Jersey 07921
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(Address of Principal Executive Offices, Zip Code)
908-234-1881
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(Registrant's Telephone Number, including area code)
Not Applicable
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(Former name or former addresses, if changed since last report)
<PAGE>
Item 5. Other Events
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On February 15, 2000, the Vice Chancellor of the Court of Chancery of the
State of Delaware in and for New Castle County, signed a Scheduling Order For
Approval of Settlement of a previously filed and amended complaint. The
complaint was brought by a stockholder of the Company as (i) a proposed class
action on behalf of all the Company's stockholders and (ii) derivative in the
right of the Company, against the members of Cortech's former board of
directors.
As more fully explained in Exhibit 99.1 attached and incorporated hereto
and incorporated herein its entirety by this reference, is the Notice of
Pendency of Derivative Action, Proposed Settlement of Derivative Action,
Settlement Hearing and Right to Appear.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(c) Exhibits
Item Exhibit
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99.1 Notice of Pendency of Derivative Action, Proposed Settlement of
Derivative Action, Settlement Hearing and Right to Appear.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CORTECH, INC.
By: /s/ John W. Galuchie, Jr.
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Name: John W. Galuchie, Jr.
Title: President
Dated: February 23, 2000
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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)
TIM POOLER, )
Plaintiff, )
vs. )
) No. C.A. No. 16214NC
DONALD KENNEDY, KENNETH R. LYNN, ALLEN MISHER, BERT )
FINGERHUT and CHARLES COHEN, )
)
Defendant, )
And )
)
CORTECH, INC., )
Nominal Defendant. )
)
)
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NOTICE OF PENDENCY OF DERIVATIVE ACTION,
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PROPOSED SETTLEMENT OF DERIVATIVE ACTION,
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SETTLEMENT HEARING AND RIGHT TO APPEAR
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TO: ALL RECORD HOLDERS AND BENEFICIAL OWNERS OF STOCK OF CORTECH, INC.
("CORTECH") OR THEIR LEGAL REPRESENTATIVES, HEIRS, SUCCESSORS IN INTEREST,
ASSIGNS OR TRANSFEREES, IMMEDIATE OR REMOTE AT ANY TIME BETWEEN DECEMBER
22, 1997 AND THE DATE HEREOF.
PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR RIGHTS WILL BE
AFFECTED BY THE LEGAL PROCEEDINGS IN THIS LITIGATION. IF THE COURT APPROVES
THE PROPOSED SETTLEMENT, YOU WILL BE FOREVER BARRED FROM CONTESTING THE
FAIRNESS, REASONABLENESS AND ADEQUACY OF THE PROPOSED SETTLEMENT, OR FROM
PURSUING THE SETTLED CLAIMS (DEFINED HEREIN).
IF YOU HELD CORTECH STOCK FOR THE BENEFIT OF ANOTHER, PLEASE PROMPTLY
TRANSMIT THIS DOCUMENT TO SUCH BENEFICIAL OWNER.
I. PURPOSE OF NOTICE
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The purpose of this Notice is to inform you, pursuant to Rule 23.1 of
the Court of Chancery of the State of Delaware in and for New Castle County (the
"Court"), and Order of the Vice Chancellor of the Court dated February 15, 2000,
in the above-captioned lawsuit (the "Lawsuit"), of the proposed settlement of
the Lawsuit (the "Settlement") as provided for in the Stipulation and Agreement
of Compromise, Settlement and Release of Derivative Claim and Dismissal of Class
Claim as Moot (the "Stipulation") dated February 14, 2000 entered into by the
parties to the Lawsuit, and to notify you of your right to participate in a
hearing to be held on April 6, 2000, at 12:00 p.m., before the Court in the Kent
County Courthouse, Dover, Delaware (the "Settlement Hearing") to determine
whether the Court should approve the Settlement as fair, reasonable, adequate
and in the best interests of Cortech and its shareholders and end the Lawsuit,
to determine whether Plaintiff and his counsel have adequately represented the
interests of Cortech and its shareholders in the Lawsuit, to approve dismissal
with prejudice of the claim brought derivatively in the name of Cortech and the
dismissal as moot of the claim on behalf of all Cortech stockholders, and to
consider such other matters, including a request by Plaintiff's counsel for
attorneys' fees and reimbursement of expenses.
This Notice describes the rights you may have under the Settlement and what
steps you may, but are not required to, take in relation to the Settlement.
If the Court approves the Settlement, the parties will ask the Court at the
Settlement Hearing to enter an Order and Final Judgment dismissing the
Derivative Claim and the Lawsuit, brought on behalf of Cortech, with prejudice
on the merits.
THE FOLLOWING RECITATION DOES NOT CONSTITUTE FINDINGS OF THE COURT OF
CHANCERY. IT IS BASED ON STATEMENTS OF THE PARTIES AND SHOULD NOT BE
UNDERSTOOD AS AN EXPRESSION OF ANY OPINION OF THE COURT AS TO THE MERITS OF
ANY OF THE CLAIMS OR DEFENSES RAISED BY ANY OF THE PARTIES.
<PAGE>
II. BACKGROUND OF THE LAWSUIT
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The Lawsuit was brought by one stockholder ("Plaintiff") of Cortech, Inc.
("Cortech" or the "Company") as (i) a proposed class action on behalf of all
Cortech stockholders and (ii) derivatively in the right of Cortech, against the
members of Cortech's board of directors ("Defendants" or "defendant directors").
The complaint initiating the Lawsuit was filed on February 27, 1998. The
complaint relates to the announcement on or about December 22, 1997, that
Cortech had signed a definitive merger agreement with BioStar, Inc. ("BioStar"),
by which BioStar would become a wholly owned subsidiary of Cortech but whose
stockholders would control as much as 60% of the combined equity. Plaintiff has
not sought, and the Court has not entered, any order with respect to the request
in the complaint that the case be certified by the Court as properly brought on
behalf of all Cortech stockholders.
The original complaint, which was filed as a class action claiming to be on
behalf of all Cortech stockholders, alleged that entering into the BioStar
transaction was a breach of the fiduciary duty of the Cortech directors and
alleged that the Cortech directors failed to exercise their independent business
judgment, failed to undertake measures designed to maximize stockholder value
and requested a court order enjoining the directors from proceeding with a
transaction which allegedly benefited the directors to the detriment of the
Company and its stockholders. On or about May 7, 1998, Cortech announced that it
and BioStar had mutually agreed to terminate the merger agreement.
On May 19, 1998, Plaintiff filed an amended complaint. Count I of the
amended complaint was brought derivatively in the name of Cortech seeking, inter
alia, recovery of funds the individual defendants caused Cortech to expend in
pursuing the failed BioStar transaction (the "Derivative Claim"). Count II of
the amended complaint asserted class claims alleging, inter alia, that in the
wake of the failed BioStar transaction, the individual defendants failed to
undertake continuing efforts to maximize shareholder value (the "Class Claim").
Thereafter, on or about July 21, 1998, four of the defendant directors
voluntarily resigned from the board of directors. Earlier one of the Defendants
resigned as CEO of Cortech. A contested election for the board of directors'
positions occurred in the fall of 1998, pursuant to which new directors were
elected and new management was appointed.
In view of these developments, Plaintiff has determined that the principal
claims in his complaint are moot--that is, that the principal relief sought, an
injunction against the BioStar transaction and an injunction ordering the
Cortech board of directors to pursue other transactions to maximize stockholder
value--was achieved in light of the abandonment of the BioStar transaction and
in light of the replacement of four of the defendant directors and the change of
control. Thus, the relief sought by Plaintiff in this regard has been achieved
without a court order. In light of the termination of the BioStar transaction
and the change in the composition of the management and board of Cortech,
Defendants do not contest the presumption afforded Plaintiff that matters
alleged in the Lawsuit were a contributing factor to the changes at Cortech.
In addition, Plaintiff's counsel and counsel for Defendants have conducted
arm's length negotiations concerning a possible settlement of the derivative
claim asserted by Plaintiff in the Lawsuit, which involves such matters as a
claim for damages resulting from the cost of the advisors hired by Cortech to
pursue the BioStar transaction and a request for appointment of a receiver to
take charge of Cortech's assets. The parties have now agreed to a settlement of
the derivative claim asserted by Plaintiff in the Lawsuit.
III. THE SETTLEMENT
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On February 14, 2000, the parties to the Lawsuit executed the Stipulation
providing for the Settlement of the Lawsuit. Pursuant to the terms of the
Settlement a payment in the amount of two hundred thirty-five thousand dollars
($235,000) shall be made to Cortech on behalf of Defendants by Cortech's
directors and officers insurance carrier.
IV. REASONS FOR THE SETTLEMENT
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In evaluating the Settlement of the derivative claim (Count I) and
dismissal of the class claim (Count II) as moot as provided for in the
Stipulation, Plaintiff and his counsel have considered: (i) the substantial
benefits to Cortech and its stockholders from the Settlement and the other
events described herein; (ii) the facts developed during the discovery process;
(iii) the attendant risks of continued litigation and the uncertainty of the
outcome of the Lawsuit; (iv) the probability of success on the merits in the
Lawsuit; (v) the desirability of permitting the Settlement to be consummated
<PAGE>
according to its terms; and (vi) the conclusion of Plaintiff and his counsel
that the terms and conditions of the Settlement are fair, reasonable and
adequate and that it is in the best interests of Cortech and its stockholders to
settle the Lawsuit as set forth herein.
Defendants have vigorously denied, and continue to deny, any wrongdoing or
liability with respect to all claims, events and transactions complained of in
the Lawsuit, deny that they engaged in any wrongdoing, deny that they committed
any violation of law, deny that they breached any fiduciary duties, deny that
they acted improperly in any way and deny liability of any kind to Plaintiff,
Cortech or the shareholders of Cortech, but consider it desirable that the
Lawsuit be settled and dismissed on the merits and with prejudice in order to
(i) avoid the substantial expense, inconvenience and distraction of continued
litigation; (ii) dispose of potentially burdensome and protracted litigation;
and (iii) finally put to rest and terminate the claims asserted in the Lawsuit.
V. SETTLEMENT HEARING
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The Court has scheduled a Settlement Hearing which will be held in the
Kent County Courthouse, on April 6, 2000, at 12:00 p.m., to determine whether:
(i) to approve the Settlement as fair, reasonable and adequate and in the best
interests of Cortech and its shareholders; (ii) to dismiss the Lawsuit with
prejudice, such that no plaintiff or shareholder of Cortech could sue on the
Derivative Claim again; (iii) to approve the dismissal of the Class Claim as
moot; (iv) Plaintiff and his counsel have adequately represented the interests
of Cortech and its shareholders; and (v) if the Court approves the Settlement,
the Court should grant the request of Plaintiff's counsel for attorneys' fees
and the reimbursement of expenses in connection with the Lawsuit (see Section IX
below).
The Court has reserved the right to adjourn the Settlement Hearing from
time to time by oral announcement at such hearing or at any adjournment thereof,
without further notice of any kind. The Court has also reserved the right to
approve the Settlement with or without modification, to enter an Order and Final
Judgment, and to order the payment of attorneys' fees and expenses without
further notice of any kind.
VI. RIGHT TO APPEAR AND OBJECT
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Any shareholder of Cortech who objects to the: (i) Settlement, (ii) the
adequacy of representation by Plaintiff and his counsel; (iii) dismissal, (iv)
judgments to be entered with respect thereto, and/or (v) Plaintiff's counsel's
request for fees and reimbursement of costs and expenses in the Lawsuit, or (vi)
who otherwise wishes to be heard, may appear in person or by their attorney at
the Settlement Hearing and present evidence or argument that may be proper and
relevant; provided, however, that no person other than counsel for the named
plaintiffs and defendants in the Lawsuit shall be heard and no papers, briefs,
pleadings or other documents submitted by any such person shall be received and
considered by the Court (unless the Court in its discretion shall thereafter
otherwise direct, upon application of such person and for good cause shown),
unless not later than ten (10) calendar days prior to the Settlement Hearing, a
person wishing to appear and be heard files with the Register in Chancery: (i) a
written notice of intention to appear, (ii) a statement of such person's
objections to any matters before the Court, (iii) the grounds thereof or the
reasons for such person's desiring to appear and be heard, as well as documents
or writings such person desires the court to consider. Also, on or before the
date of filing such papers, such person must serve them upon the following
counsel of record:
ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. MORRIS NICHOLS, ARSHT & TUNNELL
Joseph Rosenthal, Esq. Martin P. Tully, Esq.
Suite 1401 1201 North Market Street
Mellon Bank Center Wilmington, DE 19899
Post Office Box 1070 Attorneys for Individual Defendants
Wilmington, DE 19899
Attorneys for Plaintiff
RICHARDS, LAYTON & FINGER, P.A.
Gregory V. Varallo, Esq.
One Rodney Square
Post Office Box 551
Wilmington, DE 19899
Attorneys for Cortech
<PAGE>
Any shareholder who does not object to the settlement or the request by
Plaintiff's counsel for an award of attorneys' fees or expenses need not do
anything.
Unless the Court otherwise directs, no person will be entitled to object to
the approval of the Settlement, the judgments to be entered in the Lawsuit, or
the award of attorneys' fees and expenses to Plaintiff's counsel, or otherwise
to be heard, except by serving and filing written objections as described above.
Any person who fails to object in the manner prescribed above will be
deemed to have waived the right to object (including the right to appeal) and
will be forever barred from raising such objection in this or any other action
or proceeding.
VII. ORDER AND FINAL JUDGMENT OF THE COURT
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If the Court determines that the Settlement, as provided for in the
Stipulation, is fair, reasonable, adequate and in the best interests of Cortech
and its shareholders, the parties will ask the Court to enter an Order and Final
judgment, which will, among other things:
1. approve the Settlement and adjudge the terms thereof to be fair,
reasonable, adequate and in the best interests of Cortech and its shareholders,
pursuant to Court of Chancery Rule 23.1;
2. authorize and direct the performance of the Settlement in accordance
with its terms and conditions;
3. as to the Derivative Claim, dismiss the Lawsuit with prejudice on the
merits and release Defendants, and each of them, and Defendants' Affiliates
(defined below), from the Settled Claims (defined below); and
4. dismiss the Class Claim as moot.
VIII. RELEASE
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The Stipulation provides that, if the Settlement is approved by the Court,
and in consideration of the benefits provided by the Settlement, the Lawsuit
will be dismissed on the merits with prejudice as to each defendant and as
against the named plaintiff, Cortech, and all other shareholders of Cortech with
respect to the Derivative Claim and all Settled Claims (as defined below). Under
the terms of the Settlement, any and all claims, rights, demands, suits,
matters, issues or causes of action, whether known or unknown, liquidated or
unliquidated, contingent or absolute, in law or equity, that have been, could
have been, or in the future could be asserted by or against Cortech, by any
shareholder of Cortech on its behalf, or by Plaintiff, either directly,
representatively, derivatively, or in any other capacity, or by any of the
Plaintiff's heirs, executors, administrators, successors and assignees against
Donald Kennedy, Kenneth R. Lynn, Allen Misher, Bert Fingerhut and/or Charles
Cohen, or their respective present or former agents, attorneys, advisors,
accountants, trustees, financial advisors, commercial bank lenders, persons who
provided fairness opinions, investment bankers, associates, representatives,
affiliates, parents, subsidiaries (including the directors and officers of such
affiliates, parents and subsidiaries), general partners, limited partners,
partnerships, heirs, executors, personal representatives, estates,
administrators, successors and assigns (collectively "Defendants' Affiliates"),
whether under state or federal law, in connection with, or that arise out of,
any claim that was or could have been brought in the Lawsuit, or that arise now
or hereafter out of, or that relate in any way to, the Lawsuit, including
without limitation, the definitive merger agreement with BioStar, the
negotiation and consideration of the definitive merger agreement with BioStar,
and any agreements and disclosures relating thereto, and any acts, facts,
matters, transactions, occurrences, conduct or representations relating to or
arising out of the subject matter referred to in the Lawsuit, and the fiduciary
or disclosure obligations of any of the Defendants or Defendants' Affiliates
with respect to any of the foregoing (whether or not such claim could have been
asserted in the Lawsuit), shall be compromised, settled, released and dismissed
with prejudice (the "Settled Claims").
IX. APPLICATION FOR ATTORNEYS, FEES AND EXPENSES
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If the Court approves the Settlement, Plaintiff's counsel intend to ask the
Court for an award of attorneys' fees and expenses in an amount not to exceed
one hundred sixty thousand dollars ($160,000). Defendants have agreed that they
will not oppose such an application up to one hundred sixty thousand dollars
($160,000) and Cortech has agreed to pay, from the settlement proceeds, the fees
and expenses actually awarded by the Court up to one hundred sixty thousand
dollars ($160,000). Except as stated above, neither Cortech's directors and
officers insurance carrier nor the Defendants, and each of them, have agreed to
be liable for any fees or expenses of Plaintiff or the shareholders of Cortech
in connection with the Lawsuit.
<PAGE>
X. NOTICE TO PERSONS OR ENTITIES HOLDING
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OWNERSHIP ON BEHALF OF OTHERS
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Brokerage firms, banks and/or other persons or entities who held shares of
Cortech stock for the benefit of others are directed promptly to send this
Notice to all of their respective beneficial owners. Cortech will reimburse the
record holders for the cost of forwarding this Notice to the beneficial owners.
If additional copies of the Notice are needed for forwarding to such beneficial
owners, any requests for such additional copies may be made to Cortech at the
following address:
Cortech, Inc
Attn: Mr. John W. Galuchie, Jr.
376 Main Street
P.O. Box 74
Bedminster, N.J. 07921
In the alternative, record holders may forward the names and addresses of
the shareholders to Cortech's transfer agent at the foregoing address who will
cause the Notice to be sent.
XI. SCOPE OF THIS NOTICE
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This Notice is not all_inclusive. The references in this Notice to the
pleadings in the Lawsuit, the Stipulation and other papers and proceeding are
only summaries and do not purport to be comprehensive. For the full details of
the Lawsuit, the claims which have been asserted by the parties and the terms
and conditions of the settlement, including a complete copy of the Stipulation,
shareholders are referred to the Court files in the Lawsuit. You or your
attorney may examine the Court files during regular business hours of each
business day at the office of the Register in Chancery, Daniel L. Herrmann
Courthouse, 1020 North King Street, Wilmington, Delaware 19801. Do not call the
Court.
Dated: February 16, 2000
/s/ Dianne M. Kempsky
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Register in Chancery
