Ex-Antares chief sues Mentor, CEO

Electronic News, Jan 27, 1997 by Judy Erkanat

Portland, Ore.--The former head of Mentor Graphics' Antares spin-off, Amaury (Pepe) Piedra, filed a $5 million civil suit against Mentor and Walden C. Rhines, the company's president and CEO, Electronic News has learned.

The complaint, claiming $4,637,898 in lost equity and $396,000 in lost salary and bonuses to Mr. Piedra, was filed in the U.S. District Court here. It alleges securities fraud, breach of contract and misrepresentation, demanding a jury trial. Mentor last week filed a counterclaim.

An attempt to settle the matter out-of-court last week ended with Mentor purportedly offering Mr. Piedra a large financial settlement, which he did not accept.

In its counterclaim, Mentor accused Mr. Piedra of misrepresenting Mentor's stock plans to Antares personnel and not disclosing to Antares key employees Mentor's position on transfer and distribution of Antares technology and distribution channel conflicts.

Mr. Piedra's allegations stemmed from Mentor's convincing him to move from Colorado to Oregon in April, 1995, to form a new start-up company. The inducement was a promise by Mentor and Mr. Rhines that Mr. Piedra and other key employees of the new company would receive significant stock holdings in the new company, which would be operated as a separate entity with its own independent sales force, all of which Mentor admitted to in its counterclaim.

After Antares was launched, Mentor allegedly reneged on its promises of stock equity and failed to operate Antares as a separate entity with its own sales force.

After Antares was launched, Mr. Piedra reached agreement with Mr. Rhines and others at Mentor that a pool of stock representing 10.5 percent of Antares' fully diluted equity would be made available to Antares employees, of which slightly less than 5 percent would be counted as founders' shares. Mr. Piedra communicated this to other key employees as they were recruited.

Mr. Piedra expected himself and these so-called founders to start earning vesting rights in their shares when Antares officially began operations Jan. 1, 1996. Mentor delayed putting the stock plan in writing, prompting Mr. Piedra to meet with Dean Freed, Mentor's general counsel and CFO, and Yvonne Lawson of Mentor's legal department in February, 1996, when Mr. Freed told Mr. Piedra and Jim Boies, Antares' CFO, the equity plan was in place. This resulted in a memo promising the founders a total of 4,266,000 in Antares stock, with Mr. Piedra set to receive 1.4 million of these shares.

Based on this, Mr. Piedra remained as president and CEO of Antares. In his complaint, he said, "In the first three quarters of 1996, Antares generated over 60 percent of Mentor's profits even though its sales represented only 6 percent of Mentor's total sales," a statement Mentor denied. "Antares (the combination of MTI and Exemplar) is likely to have over $30 million in sales in its first year of operations, which would have resulted in Mr. Piedra's earning some $800,000 in salary and incentive compensation," continued the complaint. MTI is Model Technology, Inc., a Mentor subsidiary that was folded under Antares with another Mentor company, Exemplar Logic.

Mentor admitted to never implementing the stock equity plan, in spite of the fact it transferred to Antares all Model Technology and Exemplar stock. It said, however, that it attempted to reach an agreement with Antares employees about common product distribution and technology exchange. Mentor also acknowledged changing its mind about selling its product through a separate Antares sales channel.

Last May, Ms. Lawson proposed to Mr. Boies that Mentor's direct sales force sell Antares products on a stand-alone basis, rather than only bundled with other Mentor products, according to Mr. Piedra's complaint. In May, Mentor executives Callan Carpenter, Ken Bado and Glenn House met with Antares representatives. Mr. Carpenter allegedly said Mentor would have the only direct sales force and Antares would be limited to telephone sales.

Although Mentor denied Mr. Rhines had told Mr. Piedra in August that Antares would not be operated as a company with a separate sales force and that key personnel would not receive equity in the company, Mr. Piedra did resign his position with the company later that month (EN, Sept. 9, 1996).

Mentor has since allegedly taken steps to split off Exemplar and Model Technology from Antares (EN, Oct. 21, 1996), which no one at any of the three companies will confirm or deny. Most of the problems seem to stem from the strong influence Mentor's sales force exerts on corporate policy.

Mentor entered what it called the "shrink-wrapped" electronic design automation (EDA) software market with Antares (EN, Nov. 13, 1995), which it called a new broad-line supplier of Windows-based design software. Initially, the company was to have been privately held, funded by Mentor capital. Profitable before it was born because of the MTI and Exemplar products, Antares never seemed to live up to its initial promise.

Mr. Piedra became VP and GM of Mentor's new business ventures division (EN, People in the News, May 22, 1995), after his term as president/CEO at NeoCAD, a programmable logic design software house acquired by Xilinx. He was put in charge of Antares at its inception (EN, Nov. 6, 1995).