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1. Notification was made by AIB Investment Managers Ltd (AIBIM) on 30 September 1992 with a request for a certificate under Section 4(4) of the Competition Act, 1991 or, in the event of a refusal by the Competition Authority to grant a certificate, a licence under Section 4(2) in respect of a share subscription agreement relating to the acquisition of shares in Seletar Ltd.

2. The notification concerns a share subscription agreement dated 26 July 1990 between Aidan McGill, Kieran McGill and Phelim McCloskey (the covenantors), Seletar Ltd and AIBIM in relation to a subscription by a designated investment fund managed by AIBIM (the Fund) for shares in Seletar Ltd.

3. The parties to the agreement are as follows:

(i) Seletar Ltd was a private limited company incorporated on 6 November 1989 and at the date of the agreement it had an issued share capital of £235,000 represented by 235,000 ordinary shares of £1 each. Seletar Ltd is a holding company whose sole asset is the ownership of Drummoyne Developments Ltd which acquired, and commenced trading in February 1990, in the Westbourne Hotel, a small one star 20 bedroom hotel located in Bray. The business of Drummoyne Developments Ltd ceased in February 1995 on the sale of the hotel.

(ii) The holders of ordinary shares of £1 each in Seletar Ltd before and after the subscription by the Fund were as follows:

Before After

Aidan Mc Gill 45,000 45,000

Kieran McGill 45,000 45,000

Phelim Mc Closkey 45,000 45,000

Laprov Investments Ltd 100,000 100,000

Erin Executor & Trustee Co. - 500,000

(as trustee for the Fund) ------- ------- 235,000 735,000

Kieran and Aidan Mc Gill and Phelim Mc Closkey were directors and holders of the majority of shares in Seletar prior to the date of the agreement. They were also directors of its wholly owned subsidiary, Drummoyne Developments Ltd. Laprov Investments Ltd is an investment holding company holding shares in Seletar on behalf of 10 named individual investors.

(iii) AIB Investment Managers Ltd, a subsidiary of the AIB Group, is engaged in the business of corporate finance. It is the manager of a designated investment fund (the Fund). Under the notified agreement, AIBIM, as manager, agreed to procure the subscription by the fund for 500,000 ordinary shares in Seletar.

(iv) Aidan McGill, Kieran McGill and Phelim McCloskey (the covenantors) were directors of Drummoyne Developments Ltd and at the time they were executing the agreement they were the beneficial owners of 57.4% of the issued share capital of Seletar Ltd. After the agreement was executed this holding was reduced to 18.4%.

4. According to the 1992 Review of the Irish Hotel Industry there were 668 hotels in the State in 1991 with 21,967 bedrooms. There are 6 hotels in Bray containing 160 bedrooms of which 5 hotels, with 86 bedrooms, are graded one star or less. There are 2 hotels in Greystones with a total of 44 bedrooms. Bray is readily accessible to Dublin City which has 70 hotels with over 4,000 bedrooms. The 1992 Review shows that, in 1991, on average, sales of food made up 38% of hotel revenues with revenue from rooms accounting for 33% and bar receipts 25%. For Grade B hotels (the lowest grade analysed) revenue from rooms represented 19% of revenue, with food and beverages each contributing 38%. On average Irish guests take up around 45% of hotel bed nights but the average for Grade B hotels was 57.2%. Irish guests include a large proportion of the business guests who took up on average 36% of bed nights. The ratio for Irish guests is higher than average in Leinster (excluding Dublin) where it was 66% in 1991. According to the Statistical Bulletin issued by the Central Statistics Office, the number of overseas visits to the State increased from 2.345m in 1988 to 3.68m in 1994 with overseas visitor spending (excluding international fares) increasing from £566m to £1,072m. While therefore the growth in tourism numbers has an important impact on the overall hotel business, the Westbourne Hotel, as a small one star hotel, is heavily reliant on more locally based business in respect of which it competes with the other hotels in the locality of Bray. The geographical market is therefore primarily the Bray area, although in the case of tourists, the hotel is to an extent competing with others located in the greater Dublin area.

Subscription Agreement

5.(i) The notified agreement was made on 26 July 1990

to provide for the subscription, on behalf of the Fund, for 500,000 ordinary shares in Seletar to be used inter alia for the purposes of financing the development of the Westbourne Hotel. Immediately on completion the company was to subscribe for 735,000 shares of £1 each in Drummoyne Ltd and a Put and Call option agreement with another company, exercisable after 5 years, for the purchase of Seletar's entire shareholding in Drummoyne was to be entered into. On completion Mr. Aidan Mc Gill was to enter into an employment contract with Drummoyne. The termination date of the agreement is the date the Fund and Labrov cease to hold shares in Seletar or, if earlier, the date Seletar ceases to hold shares in Drummoyne. The agreement also contains standard provisions and restrictions on the company's internal operations to protect the non-active shareholding position of the new investors.

(ii) Section 5.1 of the agreement contains the following competition covenants:

"Each of the covenantors undertakes with the Manager (AIBIM) that:

(a) from the date hereof until the Termination date he will not.....either on his own behalf or in conjunction with or on behalf of any person firm or company carry on or be engaged, concerned or interested in carrying on a business situated within a 3 mile radius of the Property or in the town of Greystones, Co Wicklow in competition with the Business

(b) from the date hereof until the Termination date he will not either on his own account or in conjunction with or on behalf of any other person firm or company solicit or entice away from any member of the Group for the time being thereof any officer, manager or

servant whether or not such person would commit a breach of his contract of employment by reason of leaving service."

6. Under Section 3.4(e) of the Subscription agreement, an employment contract was to be entered into by Aidan Mc Gill with Drummoyne Developments Ltd. This contract was executed on 26 July 1990 and provides for the terms and conditions of Mr. Mc Gill's employment with Drummoyne. The agreement contains no post termination restrictions. The agreement effectively terminated in November 1994.

7. AIBIM in its submission stated that the restrictive covenants in the agreement were the standard clauses which were found in most loan, share subscription and BES agreements for corporate institutions. The covenants seek to ensure that:

- the investment made in the Company is not undermined by parties to the agreement;

- the goodwill of the Company is maintained; and

- the expert knowledge built up by the Company is available for the duration of the

agreement.

8. Section 4(1) of the Competition Act 1991 prohibits and renders void all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State, or in any part of the State.

9. Section 3(1) of the Competition Act defines an undertaking as a "person being an individual, a body corporate or an unincorporated body of person engaged for gain in the production, supply or distribution of goods or the provision of a service".

10. Seletar Ltd was a holding company whose sole asset was the ownership of Drummoyne Developments Ltd which owned and operated the Westbourne Hotel in Bray. It was therefore an undertaking. At the date of the agreement, Aidan McGill, Kieran McGill and Phelim McCloskey, collectively, were majority shareholders and directors of Seletar and directors of Drummoyne Developments Ltd which owned and operated the Westbourne Hotel in Bray. They were therefore undertakings. AIB Investment Managers Ltd is engaged in corporate finance and in the management of designated investment funds for which it receives fees and commission. It is therefore an undertaking. The notified agreement is an agreement between undertakings. The agreement has effect within the State.

11. The Share Subscription Agreement constitutes an agreement whereby a designated investment fund makes a venture capital type investment to obtain a majority shareholding in Seletar. This, in effect, involves an investment by a large number of small personal investors for a combined majority stake in the company. Such an agreement is not, per se , anti-competitive and does not offend against Section 4(1) of the Competition Act. The agreement also provides for a number of standard provisions and restrictions on the company's internal operations, designed to protect the non-active shareholding position of the new investors, which the Authority has decided in a number of decisions do not offend against Section 4(1).

12. Section 5(1) of the agreement imposes non-compete and non-solicit restrictions on the original promoters i.e. Aidan McGill, Kieran McGill and Phelim McCloskey which prevents any of them from the date of the agreement until the termination date from

- being in any way involved in a business within a 3 mile radius of Bray or in Greystones

which would compete with the Westbourne Hotel.

- soliciting to entice away any officer, manager or servant of the Company.

The covenant is in favour of AIBIM, as manager of the Fund. The termination date is the date that Erin, as trustee to the Fund, and the other investors who invested through Labrov, cease to hold shares in Seletar or if earlier, the date Seletar ceases to hold shares in the operating subsidiary, Drummoyne Developments Ltd.

13. The investment involved in this case was a BES investment which was intended to apply for a limited time with provisions in the agreement to enable the Fund to dispose of its shares after 5 years. Taking into account the particular nature of the BES investment involved the Authority considers that non-compete and non-solicit clauses on the original owners and promoters of the investee company, which apply for a period which equates with the estimated duration of the Fund's subscription in the company do not, for the reasons given in its decision on Killarney Park Hotel Ltd/Hamptoncove Holdings LtdDecision No. 398, 26 April 1995, offend against Section 4(1) of the Competition Act. In any event the restrictions in this case are of such limited scope as to have no appreciable effect on competition .

14. In the Authority's opinion, Aidan McGill, Kieran McGill, Phelim McCloskey, Seletar Ltd and AIB Investment Managers Ltd are undertakings within the meaning of Section 3(1) of the Competition Act, 1991 and the notified share subscription agreement is an agreement between undertakings. In the Authority's opinion the notified agreement does not offend against Section 4(1) of the Competition Act, 1991.

15. The Competition Authority has issued the following certificate:

The Competition Authority certifies that, in its opinion, on the basis of the facts in its possession, the Share Subscription Agreement of 26 July 1990 between Aidan McGill, Kieran McGill and Phelim McCloskey, Seletar Ltd and AIB Investment Managers Ltd, notified under Section 7(2) on 30 September 1992 (notification no. CA/432/92E) does not offend against Section 4(1) of the Competition Act, 1991.

For the Competition Authority.

Des Wall

Member.

23 November 1995