The Ottawa Citizen from Ottawa, Ontario, Canada • 17

Inside: TSE 100 disconnects Rogers. B3 BUSINESS Internet Section Editor: Hugh Paterson, 596-3799 Businessthecitizen.southam.ca mce Ottawa's Internet Company 228-3565 www.magma.ca COMMUNICATK THE OTTAWA CITIZEN, TUESDAY, MARCH 3, 1998 Executive's legal woes surprise RES Alphacell president faces 91 charges in Quebec courts shareholders' vote later this month. The proposed financing wasn't unveiled publicly by RES until CDN officials halted RES stock and sought clarifications about the financing. When trading resumed on Feb. 9, RES's shares more than tripled, rising from six cents to as high as 20 cents in heavy trading.

Volume in RES shares topped 1.2 million on Feb. 17, trading records show. The share value has since settled to a dime and volume has dropped just as fast. Since the deal was announced, the Citizen has learned that: In exchange, RES said Alphacell agreed to give RES a portfolio of what RES called "long-term U.S. treasury bills and strip bonds" worth $28.75 lion.

RES said it would use $15 million of the new cash for "business expansion," $12 million to undertake "new ventures" and use the balance to settle outstanding debts and finance its current operations. An Internet discussion group buzzed as RES investors and observers talked up the Ottawa company's expansion and future prospects even before the financing deal is put to a Alphacell Technologies president, Robert Roy, is before Quebec courts on 91 charges of breaching the Quebec Securities Act. The QSC alleges that Mr. Roy and his father, Constantin Roy, illegally helped sell Quebec investors research and development tax shelter investments without the proper licences or prospectuses. Mr.

Roy pleaded not guilty. A trial has been held and a judge is expected to hand down a ruling on March 11. If he is found guilty on all counts, Mr-Roy faces a minimum fine of $455,000. See RES on page B2 company. On paper, its headquarters are in Upper Jay, New York, though its executives offices are in Montreal.

The shares of RES trade on the Canadian Dealers' Network (CDN), the Toronto Stock Exchange's over the counter dealer market. On February 9, RES said it agreed to issue 57.5 million RES shares to i A Cornfield, painted by Homer Watson in 1883, shows an idyll of agriculture. But scientific evolution in the cornfield means this spring, farmers can buy, from the same company, an herbicide and the corn-plant seeds resistant to that herbicide. Watching the corn grow By Andrew Mcintosh Ottawa software company RES International Inc. has signed a tentative $28.75 million financing deal with a company called Alphacell Technologies whose president is before Quebec courts for alleged securities violations.

Alphacell is a Nevada-registered AIT lands two key deals Profits within reach, but technology pioneer needs more contracts by James agnall AIT Corp. looks like it has finally caught a break, although it is still a long way from reaching safe ground. The Ottawa-based technology pioneer yesterday announced it has landed a pair of major contracts that could help it produce its first quarterly profit in more than two years. One deal, worth is to sup ply British Airways with its latest-generation system for issuing and reading travel documents. The second contract, reached with a U.S.

government agency, involves similar technology and is worth $760,000. AIT chief executive Peter Bennett said these contracts have pushed company revenues above $4.5 million, with another month remaining in its second fiscal quarter ending Mar. 31. "We're already above our breakeven point," Mr. Bennett said in an interview with the Citizen.

"This gives us a lot of confidence going forward." Still, AIT will not necessarily produce a second-quarter profit. Mr. Bennett said that, from now on, AIT will at least break even each quarter his company generates at least $4.5 million worth of sales. AIT sacked about 20 per cent of its staff in January, which will result in a one-time restructuring charge for the second quarter. To make up for the hit and still make it into the black, AIT's sales this quarter need to top $6.1 million.

"That's at the top end of our range" of possible outcomes, said Mr. Bennett. Consistently landing fresh contracts of the size and calibre announced yesterday will be critical to AIT's ability to remain as a healthy, standalone firm. See ATT on page B2 STRANGE BREW MARKETS Second high-tech leak in region Police arrest Mitel designer for allegedly stealing research By Don Campbell and James Bagnall A Vietnamese native who has worked since 1982 as an employee at Kanata-based Mitel Corp. has been charged with sending confidential research to a company headquartered in his homeland.

To Van Tran, 41, of Shetland Way in Kanata, was arrested Friday afternoon in Mitel's engineering department and appeared in court Saturday. He was released on several conditions and has suspended Mr. Van Tran, pending the results of an investigation police say is only in the most preliminary stages. More charges could follow. A search warrant was also obtained and carried out at his residence.

Police would not comment on what evidence they found there. It's the second instance involving the release of confidential information at one of this region's major high-tech concerns. In December 1996, an employee at Newbridge Networks Corp. of Kanata was charged with releasing confidential strategies "and information vital to the financial interests of the corporate body." Mitel's director of security Darrell Booth said the company launched an internal investigation about twp weeks ago following a tip from another employee. From there, it was discovered that information involving PBX technology was being transferred to a foreign country.

PBX is short for private branch exchange, the term for telephone systems sold by Mitel to small and medium-size businesses. Mr. Van Tran is a "platform designer," which means he would have had access to a considerable body of technology related to one of Mitel's core product lines. Fortunately for Mitel, the potential damage will likely be mitigated. Mr.

Van Tran was allegedly transferring information to a company, likely a fairly small one, based in Vietnam and not to one of Mitel's main competitors. And Mitel itself is in the midst of shifting its focus away from PBX technology towards semiconductors. Following a recent acquisition of the Plessey semiconductor unit of GEC pic of Britain, more than half of Mitel's annual sales are now being generated by its semiconductor unit. See MITEL on page B3 Ontario cornfields might look the same this spring, but a new breed of corn plant is already grabbing the ear of this multi-million dollar business. Tom Spears reports.

NATIONAL GALLERY OF CANADA. OTTA corn cells grown in the lab. It was literally hit-or-miss technology, but it worked: In the blast, some of the genetic material got inside individual cells. Later the technique became more sophisticated. The "bullet" is now a tiny fleck of gold, just one micron (one millionth of a metre) in diameter, and blown by a blast of air at the mass of cells.

As with the bullet, the gold flecks have a coating of DNA. "It will enter the cells, since gold is heavy, and is taken inside the cells," says Ken Kasha, a professor of crop science at the University of Guelph. "Once it's in the cells we don't know exactly how it works. Most likely it gets into the nucleus of the cell where the corn chromosomes are." "It is a big field and it's just exploding," said Mr. Kasha.

Genetic resistance to Roundup and to Bt, a natural insecticide that kills the corn borer are just the start, he believes. More genetic manipulation will soon bring us crops that are resistant to cold and disease, that have improved content of protein and fatty acids, or that simply yield more. And it's not just corn. Monsanto has a parallel brand of soybeans that's also "Roundup Ready." There are U.S.-grown tomatoes designed to stay firm longer, and cotton designed to poison insects that eat the plant. "It's just starting, and they're doing the testing (of genetic engineering methods) with the herbicide gene.

The whole field is mushrooming extremely rapidly," Mr. Kasha says. He is involved in research to develop varieties of corn that resist cold. See CORN on page B2 'At the use of the least-damaging herbicide on the market. Meanwhile the corn that's causing all the excitement is just an ordinary-looking plant, producing ordinary cattle feed, with one difference: a gene fired into its many-times-great grandparents on a bullet.

Corn is big business in Ontario. The province's farms produced more than 2.8 million tonnes of corn last year, worth $438 million. Most of that is feed corn, the kind Monsanto and its partner, the seed company DeKalb Canada are now selling. The design of Roundup Ready began about eight years ago, when DeKalb scientists took an existing, natural corn gene and used chemicals to make it mutate. They then had to insert the gene into the long string of DNA that makes up the chromosomes that map out how corn or any living thing will grow and behave.

To do that, DeKalb started with a culture of cells that had not yet grown into a corn plant. The idea in this approach is that by inserting a new gene into the immature blob of cells before they differentiate into leaves, stalks, roots and so on, the gene will eventually spread through the whole plant. The company used two kinds of "gene gun." The first was just exactly that, a gun, using a small-calibre bullet coated with DNA and fired into a clump of Kmart stores line department stores. The decision to preserve four local stores was good news for about 400 Kmart workers, particularly the 100 employees of a store at 1651 Merivale Rd. It appeared a prime candidate for closing because it is close to a Zellers outlet.

The Merivale Road employees were elated, though some were concerned that not all the employees in the store will have jobs when it is converted to a new specialty store. Hudson's Bay spokesman Rob Moore said the staffing levels at the converted stores have yet to be determined. Some are expected to carry the Bed, Bath and More name. Others could feature clothing or furniture lines. While capital region store employees were relieved, 70 employees at a A.22-calibre bullet fired eight years ago will hit Ontario's farm fields this spring, blowing a big hole in people's idea of what a corn plant is.

The original bullet, coated with a tiny cargo of DNA, carried enough genetic information to make corn resistant to Roundup, a common herbicide. Ordinarily, Roundup kills all vegetation. City people spray it on driveways and patios to kill plants that sprout up through cracks. Farmers spray it to give them bare soil before planting. The catch was that you couldn't use it after planting because it kills the corn along with the weeds.

Until now. Resistant to Roundup, one patented brand of seeds will be commercially available to farmers this spring for the first time in Canada. Monsanto and its partners own patents both on Roundup and on the seeds designed to match it. Planted on 100 farms this spring, Roundup Ready corn will look, grow and mature the way normal feed corn grows. But it will encourage farmers who plant it to buy weed killer from the same company that sold them the seeds.

For the first time in Canada, a farm crop has been designed to make che-ical weed killer sales possible. Environment groups decry it, saying it encourages a greater use of pesticides. Farmers praise it. They say Roundup Ready corn will encourage Ottawa-area survive the Bay takeover Citizen High-Tech Not available TSE 300 7,113.10 20.61 TSE 100 432.39 0.62 TSE 35 382.76 Dow Jones 8,550.45 4.73 1,047.70 Nasdaq 1,758.54 MSE 3,636.54 VSE 633.05 3.58 Tokyo 17,264.34 432.67 London 5,820.6 53.3 Hong Kong 11,318.84 Dollar (U.S. t) 70.49 0.25 Gold (U.S.$) $299.50 $0.40 Silver (U.S.

$6.510 8.0$ Kmart store at the Seaway Centre in Cornwall weren't so lucky. That store will close April 30. "I was optimistic (we would survive) until this morning," said Molly Roy, a salesperson, "but now we are disappointed." She said only full-time employees and part-timers with five years experience will get severance packages. Mr. Moore declined to discuss specific severance packages, saying only that they exceed provincial government standards.

In addition to the Merivale Road store, the Kmart store at Les Promenades de l'Outaouais in Gatineau will also become a new specialty store. The Kmart stores at 59 Robertson Road in Bells Corners and at 1055 St. Laurent Blvd. in Ottawa will be con- By Bert hill The four Kmart stores in the capital region will survive the $240-million takeover of 112 Kmart stores by the Hudson's Bay Company, although as many as 6,000 people at stores across the country will be losing their jobs. The giant retail chain first announced in early February it would acquire Kmart Canada Co.

and merge it with its other discount chain, Zellers. Yesterday, Hudson's Bay released further details of that acquisition, including that it will close 54 former Kmart or Zellers stores, putting 4,000 to 6,000 people out of work. The closings and conversions will leave the retail chain with 341 Zellers stores, 12 new specialty stores and 103 Bay full- verted into Zellers outlets. Elsewhere in Eastern Ontario, a Kmart store at Pembroke's West End Mall will become a Zellers outlet. The announcement does not affect the Kmart store on Bank Street South in Blossom Park, which was already slated to close before the Hudson's Bay takeover.

Across the country, Hudson's Bay is trying to create a new discount chain from existing Zellers stores and newly-acquired Kmart outlets that is better equipped to match the challenge from the surging Wal-Mart invasion. Since entering the Canadian market with the acquisition of the old Woolco chain, Wal-Mart has seized 45 per cent of the discount department store market. 1 TSE: Stocks gained for a seventh day to close above the 7,100 level. MarketsStocks: Listings, B7 B12 ir.