<PAGE>

                                                                     Exhibit 1.1

                                 B Y E - L A W S

                                       of

                                  FLAG Limited

I H E R E B Y C E R T I F Y that the within-written Bye-laws are a true copy of
the Bye-laws of FLAG Limited as subscribed by the subscribers to the Memorandum
of Association and approved at the Statutory Meeting of the above Company on the
19th day of April, 1994, as amended through 17th February 1999.

                                    Director
<PAGE>

                                      INDEX

INTERPRETATION.................................................................3
REGISTERED OFFICE..............................................................7
SHARE RIGHTS...................................................................7
MODIFICATION OF RIGHTS.........................................................7
SHARES.........................................................................7
CERTIFICATES...................................................................8
REGISTER OF SHAREHOLDERS.......................................................9
REGISTER OF DIRECTORS AND OFFICERS.............................................9
DEFAULT.......................................................................10
TRANSFER OF SHARES............................................................12
TRANSMISSION OF SHARES........................................................18
INCREASE OF CAPITAL...........................................................19
ALTERATION OF CAPITAL.........................................................19
REDUCTION OF CAPITAL..........................................................20
MATTERS REQUIRING SPECIAL APPROVAL............................................20
BUSINESS PLAN: MARKETING PLAN.................................................23
GENERAL MEETINGS..............................................................24
NOTICE OF GENERAL MEETINGS....................................................24
PROCEEDINGS AT GENERAL MEETINGS...............................................24
VOTING........................................................................25
PROXIES AND CORPORATE REPRESENTATIVES.........................................27
APPOINTMENT AND REMOVAL OF DIRECTORS..........................................29
RESIGNATION AND DISQUALIFICATION OF DIRECTORS.................................30
ALTERNATE DIRECTORS...........................................................31
DIRECTORS' FEES AND ADDITIONAL REMUNERATION AND EXPENSES......................31
DIRECTORS' INTERESTS..........................................................32
POWERS AND DUTIES OF THE BOARD................................................32
DELEGATION OF THE BOARD'S POWERS..............................................33
PROCEEDINGS OF THE BOARD......................................................34
OFFICERS......................................................................36
MINUTES.......................................................................36
SECRETARY.....................................................................37
THE SEAL......................................................................37
DIVIDENDS AND OTHER PAYMENTS..................................................37
RESERVES......................................................................38
CAPITALISATION OF PROFITS.....................................................38
RECORD DATES..................................................................39
ACCOUNTING RECORDS............................................................39
AUDIT.........................................................................40
SERVICE OF NOTICES AND OTHER DOCUMENTS........................................40
WINDING UP....................................................................41
INDEMNITY.....................................................................41
DIRECTORS AND OFFICERS INSURANCE..............................................42
TRANSFER BY WAY OF CONTINUATION...............................................42
ALTERATION OF BYE-LAWS........................................................42
EXHIBIT A         FAIR VALUE..................................................44
EXHIBIT B         OWNERSHIP OF SHAREHOLDERS...................................45
EXHIBIT C         CONFIDENTIALITY AGREEMENT...................................46
EXHIBIT D         IRREVOCABLE PROXY AND POWER.................................48


                                       2
<PAGE>

                                   BYE - LAWS
                                       of
                                  FLAG Limited

                                 INTERPRETATION

1.           In these Bye-laws unless the context otherwise requires -

             "Affiliate"                with respect to any person means any
                                        other person who is a subsidiary of
                                        such person, of whom such person is a
                                        subsidiary or who is a subsidiary of
                                        a third person of whom such person is
                                        also a subsidiary;

             "Associated Person"        means, in relation to any Shareholder,
                                        (i) any subsidiary or holding company of
                                        such Shareholder or any other subsidiary
                                        of any such holding company, (ii) any
                                        company in which such Shareholder or any
                                        holding company of such Shareholder
                                        holds or controls directly or indirectly
                                        not less than 20% of the issued share
                                        capital and (iii) any other affiliate
                                        of, or other person controlling,
                                        controlled by or under common control
                                        with, such Shareholder (the expressions
                                        "subsidiary company", "holding company",
                                        and "control" having respectively the
                                        meanings given to them in Section 86 of
                                        the Companies Act of 1981 of Bermuda, as
                                        amended);

             "Bell Atlantic"            means Bell Atlantic Network Systems
                                        Company, a Delaware corporation, with
                                        offices at 4 West Red Oak Lane, White
                                        Plains, New York 10604, USA;

             "Bermuda"                  means the islands of Bermuda;

             "Board"                    means the Board of Directors of the
                                        Company or the Directors present at a
                                        meeting of Directors at which there is a
                                        quorum;

             "Business Plan"            means, as of any date, the business plan
                                        in effect as of such date in accordance
                                        with the provisions of Bye-laws 40 and
                                        41;

             "Chairman"                 shall have the meaning ascribed thereto
                                        in Bye-law 95;

             "Collateral Trustee"       means any collateral trustee under any
                                        financing arrangement entered into by
                                        the Company;

             "Company"                  means the company incorporated in
                                        Bermuda under the name of FLAG Limited
                                        on the 4th day of January 1993;


                                       3
<PAGE>

             "the Companies Acts"       means every Bermuda statute from time to
                                        time in force concerning companies
                                        insofar as the same applies to the
                                        Company;

              "Credit Agreement"        means the Credit Agreement dated as of
                                        January 28, 1998 among the Company, as
                                        borrower, Barclays Bank plc, as
                                        administrative agent, International
                                        Trust Company of Bermuda Limited, as
                                        collateral trustee, and the Lenders (as
                                        defined therein) from time to time
                                        parties thereto;

             "Debt Termination Date"    means the date on which all Obligations
                                        (as defined in the Credit Agreement) and
                                        all obligations of the Company arising
                                        out of any other loans or extensions of
                                        credit to the Company shall have been
                                        paid in full and the Commitments (as
                                        defined in the Credit Agreement) and all
                                        commitments of any lenders to make loans
                                        or other extension of credit to the
                                        Company shall have been terminated;

             "Director"                 means any director of the Company (or
                                        his duly appointed alternate);

             "Dollar" and "$"           means the lawful currency for the time
                                        being of the United States of America;

             "Entire Board"             means, at any time, all of the Directors
                                        then in office;

             "Fair Value"               means, in relation to any Shares
                                        transferred, or to be transferred, in
                                        accordance with Bye-law 23(d), the
                                        amount determined by an independent
                                        investment banker retained by the
                                        Company pursuant to the procedures set
                                        forth in these Bye-laws to be the value
                                        attributable to the Relevant Shares (as
                                        defined in Bye-law 23(c)) in accordance
                                        with Exhibit A hereto;

             "family member"            means, with respect to any person, any
                                        of (i) such person's parents, spouse or
                                        children or grandchildren (in each case
                                        who are not infants or of unsound mind)
                                        and (ii) a trust established for such
                                        person or any of the foregoing (whether
                                        or not infants or of unsound mind);

             "Financing Documents"      means, collectively, (a) the Financing
                                        Documents as defined in the Credit
                                        Agreement and (b) any other credit,
                                        loan, financing or security
                                        documentation relating to any loans or
                                        other extensions of credit to the
                                        Company;

             "FLAG Cable System"        means an undersea fiber optic
                                        communication system, constructed and
                                        operated by the Company, linking several
                                        countries in Europe, the Middle East and
                                        Asia;


                                       4
<PAGE>

             "FLAG Project"             means the project for the development,
                                        construction, operation and maintenance
                                        of, and the ownership and sale of
                                        capacity in, the FLAG Cable System;

             "Memorandum of             means the Memorandum of Association of
             Association"               the Company in effect on the date of 
                                        adoption of these Bye-laws, as the same
                                        may be amended from time to time;

             "Ordinary Shares"          shall have the meaning ascribed thereto
                                        in Bye-law 7(a);

             "Ordinary Voting           At any date means the total number of
             Power"                     votes exercisable by all holders
                                        of Ordinary Shares issued and
                                        outstanding as of such date;

             "Paid up"                  means paid up or credited as paid up;

             "person"                   means any individual, corporation,
                                        partnership, firm, joint venture,
                                        association, joint-stock company,
                                        trust, unincorporated organisation,
                                        governmental body or other entity;

             "Pledge Agreement"         means any pledge agreement permitted
                                        under Bye-law 23(p)(iv);

             "Prime Rate"               means the rate of interest
                                        announced from time to time by
                                        Citibank, N.A., New York, New York,
                                        USA, as its prime rate;

             "Register"                 means the Register of Shareholders of
                                        the Company;

             "Relevant Proportions"     means, in relation to a
                                        holder of any class of Shares as of
                                        any date, a fraction the numerator of
                                        which is the total number or
                                        principal amount of Shares of such
                                        class held by such holder as of such
                                        date and the denominator of which is
                                        the total number or principal amount
                                        of Shares of such class outstanding
                                        as of such date;

             "Resolution"               means a resolution of the
                                        Shareholders or, where required, of a
                                        separate class or separate classes of
                                        Shareholders, adopted either in
                                        general meeting or by written
                                        resolution in accordance with these
                                        Bye-laws;

             "Seal"                     means the common seal of the Company;

             "Secretary"                includes a temporary or assistant
                                        Secretary and any person appointed by
                                        the Board to perform any of the duties
                                        of the secretary;


                                       5
<PAGE>

             "Security Interest"        means any lien, option, security,
                                        mortgage, charge (whether fixed or
                                        floating), pledge, assignment, title
                                        retention arrangement, hypothecation,
                                        encumbrance, or other right by way of
                                        security (and any agreement or
                                        arrangement having substantially the
                                        same economic effect as any of the
                                        foregoing);

             "Share"                    means any B share in the share
                                        capital of the Company, such B share
                                        being designated an ordinary share in
                                        the share capital of the Company from
                                        the 26th February, 1999;

             "Shareholder"              means any registered holder of one or
                                        more Shares;

             "Shareholder               shall have the meaning ascribed thereto 
             Supermajority Vote"        in Bye-law 38;

             "subsidiary"               means, with respect to any Shareholder
                                        or the Company, a corporation or other
                                        entity, 50% or more of whose voting
                                        securities are owned by such Shareholder
                                        or the Company, respectively;

             "these Bye-laws"           means these Bye-laws, as amended from
                                        time to time;

             "Total Voting Power"       at any date means the total number of
                                        votes exercisable by all holders of
                                        Shares issued and outstanding as of such
                                        date;

             for the purposes of these Bye-laws a corporation shall be deemed to
             be present in person if its representative duly authorised pursuant
             to the Companies Acts is present;

             words importing the singular number only include the plural number
             and vice versa;

             words importing the masculine gender only include the feminine and
             neuter genders, respectively;

             words importing persons include companies or associations or bodies
             of persons, whether corporate or unincorporate;

             reference to writing shall include typewriting, printing,
             lithography, photography and other modes of representing or
             reproducing words in a legible and nontransitory form; and

             any words or expressions defined in the Companies Acts in force at
             the date when these Bye-laws or any part thereof are adopted or
             amended shall bear the same meaning in these Bye-laws or such part,
             as the case may be.


                                       6
<PAGE>

                                REGISTERED OFFICE

2.           The registered office of the Company (the "Registered Office")
             shall be at such place in Bermuda as the Board shall from time to
             time appoint.

                                  SHARE RIGHTS

3.           Subject to (i) any special rights conferred on the holders of any
             Share or class of Shares and (ii) Bye-laws 5 and 38, any Share in
             the Company may be issued with or have attached thereto such
             preferred, deferred, qualified or other special rights or such
             restrictions, whether in regard to dividend, voting, return of
             capital or otherwise as the Company may by Resolution determine or
             may delegate to the Directors for determination.

4.           Subject to the Companies Acts and Bye-law 38, any preference shares
             may be issued on terms:

             (a)          that they are to be redeemed on the happening of a
                          specified event or on a given date; and/or

             (b)          that they are liable to be redeemed at the option of
                          the Company; and/or

             (c)          if authorised by the Memorandum of Association, that
                          they are liable to be redeemed at the option of the
                          holder.

             The terms and manner of redemption shall be provided for by way of
amendment of these Bye-laws.

                             MODIFICATION OF RIGHTS

5.           Subject to the Companies Acts and Bye-law 38, all or any of the
             special rights for the time being attached to any class of Shares
             may from time to time (whether or not the Company is being wound
             up) be altered or abrogated with the prior approval of Shareholders
             holding at least 75% of the total issued and outstanding Shares of
             such class. Upon the effective date of any such alteration or
             abrogation, the outstanding certificates formerly representing the
             Shares of the class being altered or abrogated, shall thereafter
             evidence the securities as so altered or abrogated.

6.           The special rights conferred upon the holders of any Shares or
             class of Shares shall not, unless otherwise expressly provided in
             the rights attaching to or the terms of issue of such Shares, be
             deemed to be altered by the creation or issue of further Shares
             ranking pari passu therewith.

                                     SHARES

7.           (a)          The Share Capital of the Company shall consist of such
                          Ordinary Shares as the Shareholders shall determine
                          from time to time.


                                       7
<PAGE>

             (b)          Subject to the provisions of these Bye-laws,
                          including, without limitation, Bye-law 38, the
                          unissued Shares of the Company (whether forming part
                          of the original capital or any increased capital)
                          shall be at the disposal of the Board, which may
                          offer, allot, grant options over or otherwise dispose
                          of them to such persons, at such times and for such
                          consideration and upon such terms and conditions as
                          the Board may determine.

8.           The Board may, in connection with the issue of any Shares, exercise
             all powers of paying commission and brokerage conferred or
             permitted by applicable law.

9.           Except as ordered by a court of competent jurisdiction or as
             required by applicable law or as required or permitted by these
             Bye-laws, or as required or permitted by any pledge agreements
             permitted by these Bye-laws, no person shall be recognised by the
             Company as holding any Share upon trust and the Company shall not
             be bound by or required in any way to recognise (even when having
             notice thereof) any equitable contingent, future or partial
             interest in any Share or any interest in any fractional part of a
             Share or (except only as otherwise provided in these Bye-laws or by
             applicable law) any other right in respect of any Share except an
             absolute right to the entirety thereof in the registered holder.

                                  CERTIFICATES

10.          The preparation, issue and delivery of certificates shall be
             governed by the Companies Acts. In the case of a Share held jointly
             by several persons, delivery of a certificate to one of several
             joint holders shall be sufficient delivery to all. For so long as
             there is in existence a Collateral Trustee, until the Company shall
             have received notice from such Collateral Trustee that outstanding
             Pledge Agreements in its favour and the Security Interests granted
             thereunder have been terminated, the Company shall deliver to such
             Collateral Trustee any certificates or other instruments
             representing any Shares that are required to be pledged under any
             Pledge Agreement that the Company issues to any person for such
             Collateral Trustee to hold as collateral pursuant to the applicable
             Pledge Agreement.

11.          If a certificate representing Shares is defaced, lost or destroyed
             it may be replaced without fee but on such terms, if any, as to
             evidence and indemnity and to payment of the costs and out of
             pocket expenses of the Company in investigating such evidence and
             preparing such indemnity as the Board shall determine and, in case
             of defacement, on delivery of the old certificate to the Company.

12.          All certificates for share or loan capital or other securities of
             the Company (other than letters of allotment, scrip certificates
             and other like documents) shall, except to the extent that the
             terms and conditions relating thereto otherwise provide, be issued
             under the Seal. The Board may by resolution determine, either
             generally or in any particular case, that any signatures on any
             such certificates need not be autographic but may be affixed to
             such certificates by some mechanical means or may be printed
             thereon or that such certificates need not be signed by any
             persons.

13.          Each certificate representing Shares, whether issued before or
             after the adoption of these Bye-laws, shall bear a legend as
             follows:


                                       8
<PAGE>

                          "The shares represented by this certificate are
                          issued, accepted and held subject to the terms of the
                          Company's Bye-laws. A copy of such Bye-laws has been
                          filed at the registered office of the Company. This
                          certificate and the shares represented hereby are not
                          subject to sale, assignment, transfer, mortgage,
                          pledge, hypothecation, or other encumbrance or
                          disposition, except as provided in the Company's
                          Bye-laws, to which Bye-laws the holder hereof, by the
                          acceptance hereof, agrees. Under such Bye-laws, the
                          Company is authorised to transfer the shares
                          represented by this certificate on the books of the
                          Company in accordance with the terms of such Bye-laws
                          without regard to the surrender of this certificate."

                            REGISTER OF SHAREHOLDERS

14.          The Secretary shall establish and maintain the Register of
             Shareholders in the manner prescribed by the Companies Acts. Unless
             the Board otherwise determines, the Register of Shareholders shall
             be open to inspection in the manner prescribed by the Companies
             Acts between 10:00 a.m. and 12:00 noon on every working day. Unless
             (i) permitted by these Bye-laws or any Financing Document or (ii)
             the Board otherwise determines, no Shareholder or intending
             Shareholder shall be entitled to have entered in the Register any
             indication of any trust or any equitable, contingent, future or
             partial interest in any Share or any interest in any fractional
             part of a Share, and if any such entry exists or is permitted by
             the Board it shall not be deemed to abrogate any of the provisions
             of Bye-law 9. The preceding provisions of this Bye-law 14
             notwithstanding, the Company may, upon resolution by the Board,
             enter into a Registrar and Transfer Agent Agreement under which a
             registrar and transfer agent will be appointed to maintain the
             Register of Shareholders of the Company at the office of such
             registrar and transfer agent; under such circumstances, if any
             provisions of such Registrar and Transfer Agent Agreement shall be
             in conflict with the provisions of this Bye-law 14, the former
             shall govern.

                       REGISTER OF DIRECTORS AND OFFICERS

15.          The Secretary shall establish and maintain a register of the
             Directors and Officers of the Company as required by the Companies
             Acts. The register of Directors and Officers shall be open to
             inspection in the manner prescribed by the Companies Acts between
             10:00 a.m. and 12:00 noon on every working day.

                         FINANCE AND ISSUANCE OF SHARES

16.          The issuance of any Shares, other than any Shares issued pursuant
             to the exercise of a duly authorised share option, shall require
             the approval of the Board and a Shareholder Supermajority Vote.
             Such Shares may be issued at such prices as are specified in the
             resolution approved by the Board and the Shareholders relating to
             such issuance; PROVIDED, HOWEVER, that (except for the Shares
             referred to in the first sentence of this Bye-law 16) no Shares may
             be issued to any person unless all of the then existing
             Shareholders are given the right to subscribe for their then
             Relevant Proportion of the total number of Shares proposed to be
             issued. No Shareholder shall be obligated to provide any such
             additional capital.

17.          Except as expressly provided in these Bye-laws or otherwise agreed
             between a Shareholder and the Company, no Shareholder shall be
             obligated to provide any loan or share capital to the Company.


                                       9
<PAGE>

                                     DEFAULT

18.          Any Shareholder shall be entitled to serve a notice (a "Notice of
             Alleged Default") on the Company requesting that the Company serve
             a notice (a "Default Notice") on a Shareholder (the "Defaulting
             Shareholder"), with a copy to be served on all other Shareholders,
             upon the occurrence of any of the events set forth in this Bye-law
             18 in respect of such Shareholder. Upon receipt of a Notice of
             Alleged Default, the Company shall call a special meeting of the
             Board to consider such request, and, if the Board determines by the
             affirmative vote of at least two-thirds of the total voting power
             of the Entire Board (excluding the vote of any Director appointed
             solely by the alleged Defaulting Shareholder and/or its Associated
             Persons) that a default has occurred, the Company shall serve a
             Default Notice on the Defaulting Shareholder. A Shareholder shall
             be deemed to be in default for the purposes of this Bye-law 18:

             (a)          if such Shareholder is in breach of any of its
                          material obligations hereunder (in which case the
                          Default Notice shall specify the steps required to be
                          taken to remedy such default);

             (b)          if a petition is presented or a proceeding is
                          commenced or an order is made or an effective
                          resolution is passed for the winding-up, insolvency,
                          administration, reorganisation, reconstruction,
                          dissolution or bankruptcy of such Shareholder or for
                          the appointment of a liquidator, receiver,
                          administrative receiver, administrator, trustee or
                          similar officer of such Shareholder or of all or any
                          substantial part of its business or assets; if such
                          Shareholder stops or suspends payments to its
                          creditors generally or is unable or admits its
                          inability to pay its debts as they fall due or seeks
                          to enter into any composition or other arrangement
                          with its creditors or is declared or becomes bankrupt
                          or insolvent or being an individual commits an act of
                          bankruptcy; or if a creditor takes possession of all
                          or substantially all of the business or assets of such
                          Shareholder or any execution or other legal process is
                          enforced against all or any substantial portion of the
                          business or assets of such Shareholder and is not
                          discharged within 30 days;

             (c)          if (i) such Shareholder ceases or threatens to cease
                          to carry on its business or if such Shareholder
                          disposes of, or threatens to dispose of, all or
                          substantially all of its business or assets; or (ii)
                          any governmental or other authority expropriates or
                          threatens to expropriate, all or substantially all of
                          such Shareholder's business or assets; or

             (d)          if at any time there is a change in ownership of such
                          Shareholder. For the purposes of these Bye-laws, there
                          shall be deemed to be a change in ownership of a
                          Shareholder if any change shall occur in the ownership
                          of the capital stock of such Shareholder, or any
                          holding company of such Shareholder, as specified on
                          Exhibit B (other than a change in the ownership of the
                          capital stock of any company identified in Exhibit B
                          as the ultimate holding company of such Shareholder).
                          Notwithstanding the immediately preceding sentence,
                          persons holding shares in a Shareholder or any such
                          holding company may transfer any or all of such shares
                          to any Affiliate of such person or of the ultimate
                          holding company of such Shareholder, to a family
                          member, to another shareholder in such Shareholder or
                          such holding company or to the estate representative
                          (as defined in Bye-law 29) of the transferor, in each
                          case without a change of 


                                       10
<PAGE>

                          ownership being deemed to have occurred. Upon a change
                          in ownership of a Shareholder permitted by this
                          Bye-law 18(d) or the acquisition of Shares by another
                          person in accordance with the terms of these Bye-laws,
                          Exhibit B shall be amended to reflect such change or
                          the addition of such Shareholder. Notwithstanding
                          anything to the contrary herein, (i) this Bye-law
                          18(d) shall not apply to a change in ownership of a
                          Shareholder which is identified on Exhibit B as having
                          no controlling shareholder and (ii) commencing six
                          months after Final System Acceptance (as defined in
                          the construction contract for the FLAG Cable System,
                          as amended), this Bye-law 18(d)) shall not apply to a
                          change in ownership of a Shareholder if, prior to such
                          change in ownership, such Shareholder gave notice of
                          such change and the identity of the purchaser or
                          transferee of such ownership interest to each of the
                          other Shareholders and Shareholders representing at
                          least two-thirds of the Total Voting Power (excluding
                          for this purpose voting power represented by Shares
                          held by the Shareholder giving the aforesaid notice
                          and its Associated Persons) shall not have objected to
                          such change on grounds reasonably related to the
                          business strategy or operations of the Company.

19.          In addition to any other remedies available against a Defaulting
             Shareholder, if the Defaulting Shareholder has failed to remedy a
             default within the period of 60 days after a Default Notice has
             been served, any Shareholder may, within 15 days following
             expiration of such 60-day period, serve a further notice on the
             Company requiring the Company promptly to serve notice (a "Default
             Transfer Notice") on the Defaulting Shareholder requiring the
             Defaulting Shareholder to offer to sell to the other Shareholders
             all of the Shares held by the Defaulting Shareholder whereupon the
             Defaulting Shareholder shall be deemed to have served a Transfer
             Notice pursuant to Bye-law 23(d).

20.          If a Default Notice is served on a Defaulting Shareholder pursuant
             to Bye-law 18, then from the date being 61 days after such Default
             Notice is served on such Defaulting Shareholder and until the date
             on which the transfer procedures set forth in Bye-law 23 have been
             completed or (if no Default Transfer Notice has been served on the
             Defaulting Shareholder pursuant to Bye-law 19) the relevant default
             is remedied to the reasonable satisfaction of the Board (excluding
             the vote of any Director appointed solely by the Defaulting
             Shareholder and/or its Associated Persons), the Defaulting
             Shareholder shall not, unless all the other Shareholders consent in
             writing, be entitled:

             (a)          to vote at any meeting of Shareholders (and the Shares
                          held by such Defaulting Shareholder and/or its
                          Associated Persons shall not be counted for any
                          purpose in determining the presence or absence of a
                          quorum at any meeting of Shareholders);

             (b)          to receive, participate or share in any distribution
                          or dividend made, declared or proposed to be made by
                          the Company (it being understood that any such payment
                          shall be held in suspense until such transfer
                          procedures have been completed or such default has
                          been remedied, as the case may be); or

             (c)          to transfer its Shares in the Company;


                                       11
<PAGE>

             and any Director designated solely by such Defaulting Shareholder
             and/or its Associated Persons shall cease to be qualified to serve
             on the Board and shall forthwith resign or be removed from the
             Board, provided that such Director shall be reinstated when such
             default is remedied.

21.          Each Shareholder shall give notice to the other Shareholders and to
             the Company of the occurrence of any of the events set forth in
             Bye-law 18 promptly upon becoming aware of such occurrence whether
             such event relates to itself or to any other Shareholder.

                               TRANSFER OF SHARES

22.          The Directors shall not register a transfer of any Shares to a
             person who is known to them to be an infant, bankrupt or person of
             unsound mind; PROVIDED that the Directors shall not be bound to
             enquire into the age or soundness of mind of any transferee or
             whether or not he is a bankrupt. For so long as there is in
             existence a Collateral Trustee, until the Company shall have
             received notice from such Collateral Trustee that the Pledge
             Agreements and the Security Interests granted thereunder have been
             terminated, the Directors shall not register any transfer of any
             Shares subject to any Pledge Agreement unless such transfer is
             permitted by the applicable Pledge Agreement and, prior to the Debt
             Termination Date, any other applicable Financing Document.

23.          (a)          Except in compliance with these Bye-laws, (i) no
                          transfer or disposal of any Shares or any interest in
                          any Shares shall be made by a Shareholder and (ii) no
                          Shareholder shall grant any Security Interest over its
                          Shares or otherwise sell or otherwise dispose of or
                          assign or otherwise purport to transfer the beneficial
                          interest therein or any right in relation thereto
                          separate from the legal interest.

             (b)          Each Shareholder shall be entitled to create or allow
                          a Security Interest to subsist over its Shares in
                          favour of a third party which is not an Associated
                          Person. The enforcement of any such Security Interest
                          shall be subject to the provisions of Bye-law 23(d).

             (c)          Before transferring or disposing of its Shares or any
                          interest in its Shares (other than a Security Interest
                          permitted by Bye-law 23(b)) the Shareholder proposing
                          to transfer or dispose of its Shares ("the
                          Transferor") shall give notice (a "Transfer Notice")
                          to the Company that it desires to transfer or dispose
                          of the Shares. The Transfer Notice shall specify:

                          (i)          the type, class (if applicable) and
                                       number of Shares and/or any interest
                                       therein which the Transferor wishes to
                                       transfer or dispose of which may be all
                                       or part of the Shares then held by the
                                       Transferor (the "Relevant Shares");

                          (ii)         the price per Share at which the
                                       Transferor is willing to sell the
                                       Relevant Shares, which price shall be
                                       (except as otherwise provided herein) the
                                       Prescribed Price for the purposes of
                                       these Bye-laws; and

                          (iii)        whether the Transferor wishes to impose a
                                       condition that, unless all of the
                                       Relevant Shares are sold pursuant to this
                                       Bye-law 23, none shall be sold (a "Total
                                       Transfer Condition").


                                       12
<PAGE>

                          In the event that the Transferor shall have received a
                          bona fide offer to purchase the Relevant Shares and
                          intends to accept such offer subject to the terms and
                          provisions of this Bye-law 23, the Transfer Notice may
                          also contain the name of the person to whom the
                          Transferor proposes to sell the Shares and the price
                          per Share at which such sale would be effected, in
                          which case such price shall be the Prescribed Price.
                          The Transfer Notice shall constitute the Company the
                          agent of the Transferor for the sale of the Relevant
                          Shares at the Prescribed Price during the Prescribed
                          Period (as hereinafter defined) to the Shareholders
                          (other than the Transferor) as provided in this
                          Bye-law 23 and shall be irrevocable except with the
                          consent of such Shareholders.

             (d)          If a Shareholder at any time attempts to transfer or
                          dispose of a Share or Shares or any interest therein
                          or right attaching thereto otherwise than as permitted
                          by this Bye-law 23 or if a Default Transfer Notice is
                          served on it or if any secured party attempts to
                          enforce a Security Interest in the Shares of such
                          Shareholder, such Shareholder shall be deemed,
                          immediately prior to such attempt or service, as the
                          case may be, to have given a Transfer Notice (a
                          "Deemed Transfer Notice") in respect of such Share or
                          Shares, and

                          (i)          the Prescribed Price for such Shares
                                       shall be the Fair Value of the Relevant
                                       Shares;

                          (ii)         the Deemed Transfer Notice shall be
                                       deemed to have been received by the
                                       Company on the date on which all
                                       Directors have actually become aware, or
                                       were given notice by the Company, of the
                                       facts giving rise to the same; and

                          (iii)        a Deemed Transfer Notice shall be deemed
                                       not to contain a Total Transfer Condition
                                       and shall be irrevocable.

             (e)          Within seven days after the receipt of any Transfer
                          Notice the Company shall serve a copy of the Transfer
                          Notice on all the Shareholders (other than the
                          Transferor). In the case of a Deemed Transfer Notice,
                          the Company shall similarly serve notice on all the
                          Shareholders (including the Transferor), notifying
                          them that such notice has been deemed to have been
                          given, within 30 days after the later of (i) the date
                          of the event giving rise to the Deemed Transfer Notice
                          or (ii) the earlier of the date on which all Directors
                          (x) have actually become aware of such event and (y)
                          were given notice of such event.

             (f)          Simultaneously with the service of a Transfer Notice
                          or a Deemed Transfer Notice in accordance with Bye-law
                          23(d), the Company shall by notice offer to sell to
                          each holder (other than the Transferor) of the same
                          type and class (if applicable) of Shares as the
                          Relevant Shares up to its Relevant Proportion
                          (calculated with respect to Shares of the same type
                          and class, if applicable, as the Relevant Shares and
                          on a basis excluding Shares held by the Transferor) of
                          the Relevant Shares at the Prescribed Price. Such
                          offer shall be open for acceptance at any time within
                          the Prescribed Period. As used herein, "Prescribed
                          Period" means the period commencing on the date of the
                          notice given by the Company in accordance with this
                          Bye-law 23(f) and expiring (i) in the case of a
                          Transfer Notice, one month thereafter and (ii) in the
                          case of a Deemed Transfer Notice, one month after a
                          notice containing the results of the 


                                       13
<PAGE>

                          determination of the Fair Value of the Relevant Shares
                          shall have been served on each holder of Shares of
                          such class (other than the Transferor). Every such
                          offer shall specify (a) the total number of Relevant
                          Shares, (b) the number of Relevant Shares offered to
                          such Shareholder ("Pro-Rata Entitlement") and (c)
                          whether or not the Transfer Notice contained a Total
                          Transfer Condition, and shall be accompanied by an
                          application (an "Entitlement Application") for use by
                          such Shareholder in applying for its Pro-Rata
                          Entitlement and for any Shares in excess of such
                          Pro-Rata Entitlement which it wishes to purchase.

             (g)          Subject to Bye-law 23(k), if there is only one
                          Shareholder who applies for all or any of the Relevant
                          Shares, the Company shall give notice thereof to the
                          Transferor and the Transferor shall be bound upon
                          payment therefor to transfer to such Shareholder the
                          number of Relevant Shares which it has applied for.
                          The purchase shall be completed at a place and time to
                          be appointed by the Directors not being less than
                          three days nor more than ten days after the date of
                          such notice, and the Directors shall be bound to
                          register the transfer.

             (h)          Subject to Bye-law 23(k), if more than one Shareholder
                          applies for all or any of the Relevant Shares, each
                          such Shareholder shall be allocated the lesser of (a)
                          its Pro-Rata Entitlement and (b) the number of Shares
                          set forth in its Entitlement Application; PROVIDED
                          that if one or more Shareholders does not accept the
                          offer to purchase its Pro-Rata Entitlement in full and
                          each other Shareholder's Entitlement Application has
                          not been satisfied in full, then each Shareholder
                          shall be allocated the lesser of (a) its Relevant
                          Proportion (calculated with respect to the Shares of
                          the same type and class (if applicable) of the
                          Relevant Shares and on a basis excluding the Shares
                          held by the Transferor and each Shareholder whose
                          Entitlement Application has been satisfied in full or
                          who has elected not to apply for any portion of its
                          Pro-Rata Entitlement) of the Relevant Shares which
                          have been applied for but have not been allocated and
                          (b) the unsatisfied portion of the amount set forth in
                          its Entitlement Application. Any remaining Relevant
                          Shares shall be allocated among those Shareholders
                          whose Entitlement Applications have not been satisfied
                          in full by applying the procedure set forth in this
                          Bye-law 23(h) as many times as is necessary until
                          either all of the Relevant Shares shall have been
                          allocated or all Shareholders' Entitlement
                          Applications shall have been satisfied in full. The
                          Company shall forthwith give notice of such
                          allocations to the Transferor and the Shareholders to
                          whom the Relevant Shares have been allocated and shall
                          specify in the said notice the place and time, being
                          not less than three days nor more than ten days after
                          the date of such notice, at which the sale of the
                          Relevant Shares so allocated shall be completed. The
                          Transferor shall be bound upon payment to transfer the
                          Relevant Shares so allocated to the relevant
                          Shareholders and the Directors shall be bound to
                          register the transfers.

             (i)          In the event that the Company does not receive
                          acceptances for all the Relevant Shares from
                          Shareholders holding Shares of the same type and class
                          (if applicable) as the Relevant Shares, the Company
                          shall offer to sell each Shareholder holding Shares of
                          any other type or class (if applicable) (other than
                          Shareholders who also hold Shares of the same type and
                          class (if applicable)) its Relevant Proportion
                          (calculated on a basis including all Shares of all
                          classes held by it, but excluding all Shares held by
                          the Transferor) of the remaining Relevant Shares and
                          the provisions of Bye-laws 23(f) through (h) 


                                       14
<PAGE>

                          shall apply MUTATIS mutandis to any such offer.

             (j)          If the Transfer Notice does not contain a Total
                          Transfer Condition and if by the foregoing procedures
                          the Company shall have received acceptances from
                          Shareholders in respect of only a portion of the
                          Relevant Shares within the Prescribed Period then the
                          Company shall forthwith give notice of that fact to
                          the Transferor. The Transferor shall then be entitled
                          at any time within 90 days after the date of the said
                          notice, but subject to the rights of the other
                          Shareholders under Bye-law 23(l), to sell and transfer
                          in accordance with Bye-law 23(q) all or part of those
                          Relevant Shares which have not been accepted as
                          aforesaid to any person at any price, being not less
                          than the Prescribed Price, and the Directors shall be
                          bound to register the same; PROVIDED, HOWEVER, that
                          (i) at any time prior to six months after Final System
                          Acceptance (as defined in the construction contract
                          for the FLAG Cable System, as amended), the right of
                          the Transferor to effect such transfer shall be
                          conditioned on its having given notice to all
                          Shareholders other than the Transferor of the name of
                          the purchaser (either in the Transfer Notice or in a
                          subsequent notice) at least 30 days prior to the date
                          of sale and no Shareholder holding Shares representing
                          at least 10% of the Total Voting Power shall have
                          objected in writing to the identity of the purchaser,
                          PROVIDED that any such objection made by any such
                          Shareholder shall only be made on grounds reasonably
                          related to the business strategy or operations of the
                          Company and (ii) commencing six months after Final
                          System Acceptance, the right of the Transferor to
                          effect such transfer to any purchaser if, following
                          such transfer, such purchaser and its Associated
                          Persons would own 5% or more of the issued and
                          outstanding Shares shall be conditioned on the
                          Transferor having given notice as described in clause
                          (i) above and Shareholders representing at least
                          two-thirds of the Total Voting Power (excluding for
                          this purpose voting power represented by Shares held
                          by the Transferor and its Associated Persons) shall
                          not have objected to the identity of the purchaser on
                          grounds reasonably related to the business strategy or
                          operations of the Company.

             (k)          If the Transfer Notice contains a Total Transfer
                          Condition, an offer of sale of the Relevant Shares
                          made by the Company pursuant to this Bye-law 23 shall
                          only be capable of acceptance when all of the Relevant
                          Shares shall have been accepted by the Shareholders.
                          If by the foregoing procedures the Company shall not
                          have received acceptances in respect of all of the
                          Relevant Shares within the Prescribed Period, the
                          Company shall forthwith give notice of that fact to
                          the Transferor. The Transferor shall then be entitled
                          at any time within 90 days after the date of the said
                          notice, but subject to the rights of the other
                          Shareholders under Bye-law 23(l), to sell and transfer
                          in accordance with Bye-law 23(q) all, but not less
                          than all, of those Relevant Shares to any person at
                          any price greater than or equal to the Prescribed
                          Price, and the Directors shall be bound to register
                          the same, PROVIDED, HOWEVER, that the right of the
                          Transferor to effect such transfer shall be subject to
                          the provisions set forth in clauses (i) and (ii) of
                          Bye-law 23(j).


                                       15
<PAGE>

             (l)          Immediately after entering into a bona fide
                          conditional sale of any Relevant Shares to a third
                          party under Bye-law 23(j) or Bye-law 23(k), the
                          Transferor shall (if it had not already done so)
                          notify the Company of the name of such third party and
                          of the terms of sale and the Company shall forthwith
                          send a copy of such notice to the other Shareholders.
                          Within 14 days after receipt of such notice any one or
                          more of such other Shareholders may by notice to the
                          Transferor and the Company require the Transferor to
                          sell all, but not less than all, of such Relevant
                          Shares to it or them on the same terms and, if more
                          than one such other Shareholder gives such notice,
                          Bye-law 23(h) shall apply MUTATIS MUTANDIS. The
                          purchase shall be completed at a place and time to be
                          determined by the Board not being less than three days
                          nor more than ten days after the date of the
                          last-mentioned notice. The Transferor shall be bound
                          upon payment to transfer such Relevant Shares to the
                          relevant Shareholders and the Directors shall be bound
                          to register the transfers. This Bye-law 23(l) shall
                          not apply if the name of the third party and the terms
                          of sale were stated by the Transferor in the relevant
                          Transfer Notice.

             (m)          If a Transferor, having become bound to transfer any
                          Relevant Shares pursuant to this Bye-law 23, defaults
                          in transferring the same, the Company may authorise an
                          officer of the Company (who is (as security for the
                          performance of the Transferor's obligations) hereby
                          irrevocably and unconditionally appointed as the
                          attorney of the Transferor for such purpose) to
                          execute the necessary instrument of transfer of such
                          Relevant Shares and may deliver it on behalf of the
                          Transferor and the Company may receive the purchase
                          money and shall thereupon cause the transferee to be
                          registered as the holder of such Relevant Shares and
                          shall hold such purchase money on behalf of the
                          Transferor. The Company shall not be bound to earn or
                          pay interest on any money so held and shall not pay
                          such money to the Transferor until it shall have
                          delivered the certificates for the Relevant Shares (or
                          an appropriate indemnity in respect of any lost
                          certificates) to the Company. The receipt of the
                          Company for such purchase money shall be a good
                          discharge to the transferee who shall not be bound to
                          see to the application thereof, and after the name of
                          the transferee has been entered in the Register of
                          Shareholders in purported exercise of the aforesaid
                          power the validity of the proceedings shall not be
                          questioned by any person.

             (n)          An obligation to transfer a Share under the provisions
                          of this Bye-law 23 shall be deemed to be an obligation
                          to transfer the entire legal and beneficial interest
                          in such Share free from any Security Interest.

             (o)          The provisions of this Bye-law 23 may be waived in
                          whole or in part in any particular case with the prior
                          written consent of all the Shareholders.

             (p)          Notwithstanding any other provision of this Bye-law
                          23, but subject always to Bye-law 22, the following
                          transfers shall be permitted:

                          (i)          the transfer of any subscriber Shares by
                                       a nominee to the beneficial owner thereof
                                       or by the subscriber to one or more
                                       Shareholders;

                          (ii)         the transfer of Shares to a transferee
                                       who is and remains an Affiliate of the
                                       transferor, provided that:


                                       16
<PAGE>

                                       (aa)         the obligations of the
                                                    transferor Shareholder under
                                                    these Bye-laws will remain
                                                    unaffected by any such
                                                    transfer; and

                                       (bb)         the Shares will be
                                                    re-transferred to the
                                                    transferor Shareholder
                                                    immediately upon the
                                                    transferee ceasing to be an
                                                    Affiliate of such transferor
                                                    Shareholder;

                          (iii)        transfers by Shareholders to the Company;

                          (iv)         (A) the pledge by any Shareholder of
                                       Shares (or any interests or rights
                                       therein) to secure the repayment of any
                                       loans and extensions of credit to be made
                                       to the Company and the payment and
                                       performance of any other obligations
                                       arising out of any such loan or extension
                                       of credit, (B) any transfer of Shares (or
                                       any interests or rights therein) pursuant
                                       to any judicial foreclosure or the
                                       exercise of any other remedies under any
                                       Pledge Agreement or any exercise of
                                       remedies under applicable law by a
                                       Collateral Trustee under any financing
                                       arrangement entered into by the Company
                                       and (C) any transfer of Shares (or any
                                       interest or rights therein) to and at the
                                       request of a Collateral Trustee under any
                                       such arrangement (including any
                                       registration or recognition thereof);

                          PROVIDED, that in no event shall any such holder sell,
                          transfer or assign any of its Shares to any transferee
                          that is a competitor of either the Company or Bell
                          Atlantic. For purposes of the foregoing proviso, (A) a
                          transferee shall include any other person controlling,
                          controlled by, or under common control with such
                          transferee and any employee benefit plans for the
                          benefit of the employees of any such transferee or
                          other person and (B) a competitor shall be any person
                          (1) engaged substantially in the business of running
                          or operating a submarine telecommunications cable
                          (other than a cable used only for private network
                          communications of such person and its affiliates), (2)
                          owning substantial operating assets in the
                          telecommunications industry, or (3) engaged
                          substantially in any business in which Bell Atlantic
                          or the Company is engaged on the date of the proposed
                          transfer. For purposes of clause (A) of the preceding
                          sentence, "controlling," "controlled," and "control"
                          with respect to any person mean the direct or indirect
                          beneficial ownership of more than 20% of the voting
                          interest or economic interest in such person.

             (q)          No transfer of any Share in the Company to any person
                          shall be registered unless

                          (i)          such transfer is made in compliance with
                                       these Bye-laws;

                          (ii)         the proposed transferee is duly qualified
                                       as a Shareholder under Bermuda law; and

                          (iii)        such transfer is made in compliance with
                                       all applicable Pledge Agreements and all
                                       other applicable Financing Documents.

24.          For the purpose of ensuring that a particular transfer of a Share
             or of Shares is permitted under these Bye-laws except for any
             transfer requested by a Collateral Trustee pursuant to Bye-law
             23(p)(iv), the Board may require the transferor or the person named
             as transferee in any transfer lodged for registration to furnish
             the 


                                       17
<PAGE>

             Company with such information and evidence as the Board may, acting
             reasonably, deem necessary or relevant. If such information or
             evidence is not furnished to the satisfaction of the Board within a
             period of 28 days after such request, the Directors shall be
             entitled to refuse to register the transfer in question.

25.          Subject to the Companies Acts and to such of the restrictions
             contained in these Bye-laws as may be applicable, any Shareholder
             may transfer all or any of its Shares by an instrument of transfer
             in the usual common form or in any other form which the Board may
             approve.

26.          The instrument of transfer of a Share shall be signed by or on
             behalf of the transferor and when registered may be retained by the
             Company.

             The Board may decline to register any transfer unless:

             (i)          the instrument of transfer is duly stamped and lodged
                          with the Company, accompanied by the certificate for
                          the Shares to which it relates, and, except for any
                          transfer requested by the Collateral Trustee pursuant
                          to Bye-law 23(p)(iv), such other evidence as the Board
                          may reasonably require to show the right of the
                          transferor to make the transfer;

             (ii)         the instrument of transfer is in respect of only one
                          type and class (if applicable) of Share; and

             (iii)        where applicable, the permission of the Bermuda
                          Monetary Authority with respect thereto has been
                          obtained.

             If so authorised by the Board, the Secretary may exercise the
             powers and discretions of the Board under this Bye-law 26 and
             Bye-laws 25 and 27.

27.          If the Board declines to register a transfer it shall, within three
             months after the date on which the instrument of transfer was
             lodged, send to the transferee notice of such refusal.

28.          No fee shall be charged by the Company for registering any
             transfer, probate, letters of administration, certificate of death
             or marriage, power of attorney, distringas or stop notice, order of
             court or other instrument relating to or affecting the title to any
             Share, or otherwise making an entry in the Register relating to any
             Share.

                             TRANSMISSION OF SHARES

29.          In the case of the death of a Shareholder, the survivor or
             survivors, where the deceased was a joint holder, and the estate
             representative, where he was sole holder, shall be the only person
             recognised by the Company as having any title to his Shares. For
             the purpose of this Bye-law, estate representative means the person
             to whom probate or letters of administration has or have been
             granted in Bermuda or, failing any such person, such other person
             as the Board may in its absolute discretion determine to be the
             person recognised by the Company for the purpose of this Bye-law.


                                       18
<PAGE>

30.          Any person becoming entitled to a Share in consequence of the death
             of a Shareholder or otherwise by operation of applicable law may,
             subject as hereafter provided and upon such evidence being produced
             as may from time to time be required by the Board as to his
             entitlement, either be registered himself as the holder of the
             Share or elect to have some person nominated by him registered as
             the transferee thereof. If the person so becoming entitled elects
             to be registered himself, he shall deliver or send to the Company a
             notice in writing signed by him stating that he so elects. If he
             shall elect to have his nominee registered, he shall signify his
             election by signing an instrument of transfer of such Share in
             favour of his nominee. All the limitations, restrictions and
             provisions of these Bye-laws relating to the right to transfer and
             the registration of transfer of Shares shall be applicable to any
             such notice or instrument of transfer as aforesaid as if the death
             of the Shareholder or other event giving rise to the transmission
             had not occurred and the notice or instrument of transfer was an
             instrument of transfer signed by such Shareholder.

31.          A person becoming entitled to a Share in consequence of the death
             of a Shareholder or otherwise by operation of applicable law shall
             (upon such evidence being produced as may from time to time be
             required by the Board as to his entitlement) be entitled to receive
             and may give a discharge for any dividends or other moneys payable
             in respect of the Share, but he shall not be entitled in respect of
             the Share to receive notices of or to attend or vote at general
             meetings of the Company or, save as aforesaid, to exercise in
             respect of the Share any of the rights or privileges of a
             Shareholder until he shall have become registered as the holder
             thereof. The Board may at any time give notice requiring such
             person to elect either to be registered himself or to transfer the
             Share and if the notice is not complied with within sixty days the
             Board may thereafter withhold payment of all dividends and other
             moneys payable in respect of the Shares until the requirements of
             the notice have been complied with.

32.          If so authorised by the Board, the Secretary may exercise the
             powers and discretions of the Board under Bye-laws 29, 30 and 31.

                               INCREASE OF CAPITAL

33.          Subject to Bye-laws 5 and 38, the Company may from time to time
             increase its authorised capital by such sum to be divided into
             Shares of such par value as the Company by Resolution shall
             prescribe.

                              ALTERATION OF CAPITAL

34.          Subject to Bye-laws 5and 38, the Company may from time to time by
             Resolution:

             (a)          divide its Shares into several classes and attach
                          thereto respectively any preferential, deferred,
                          qualified or special rights, privileges or conditions
                          or alter, abrogate or convert any of its Shares into
                          any other class and/or type of Shares;

             (b)          consolidate and divide all or any of its share capital
                          into Shares of larger par value than its existing
                          Shares;

             (c)          sub-divide its Shares or any of them into Shares of
                          smaller par value than is fixed by its Memorandum of
                          Association;


                                       19
<PAGE>

             (d)          make provision for the issue and allotment of Shares
                          which do not carry any voting rights;

             (e)          cancel Shares which, at the date of the passing of the
                          resolution in that behalf, have not been taken or
                          agreed to be taken by any person, and diminish the
                          amount of its share capital by the amount of the
                          Shares so cancelled; and

             (f)          change the currency denomination of its share capital.

             Where any difficulty arises in regard to any alteration,
             abrogation, division, consolidation, sub-division, exchange or
             conversion under this Bye-law, the Board may settle the same as it
             deems expedient and, in particular, may arrange for the sale of the
             Shares representing fractions and the distribution of the net
             proceeds of sale in due proportion amongst the Shareholders who
             would have been entitled to the fractions, and for this purpose the
             Board may authorise some person to transfer the Shares representing
             fractions to the purchaser thereof, who shall not be bound to see
             to the application of the purchase money nor shall his title to the
             Shares be affected by any irregularity or invalidity in the
             proceedings relating to the sale.

35.          Subject to the Companies Acts and to any confirmation or consent
             required by applicable law or these Bye-laws (including, without
             limitation, Bye-law 38), the Company may by Resolution from time to
             time convert any preference shares into redeemable preference
             shares.

                              REDUCTION OF CAPITAL

36.          Subject to the Companies Acts, its Memorandum of Association and
             any confirmation or consent required by applicable law or these
             Bye-laws (including, without limitation, Bye-law 38), the Company
             may from time to time by Resolution authorise the reduction of its
             issued share capital or any capital redemption reserve fund or any
             share premium or contributed surplus account in any manner.

37.          In relation to any such reduction, the Company may by Resolution
             determine the terms upon which such reduction is to be effected
             including in the case of a reduction of part of a class of Shares,
             those Shares to be affected.

                       MATTERS REQUIRING SPECIAL APPROVAL

38.          The Company shall not take any of the following actions (or permit
             any of its subsidiaries to take any of the following actions)
             unless such action is approved by resolution validly passed by the
             Board and by the affirmative vote of holders of Shares representing
             at least two-thirds of the Total Voting Power (a "Shareholder
             Supermajority Vote"); PROVIDED, that, prior to the Debt Termination
             Date unless the Collateral Trustee shall have otherwise given its
             written consent, the Company shall not take the actions specified
             in clause (iv) of this Bye-law 38 unless such actions are approved
             by an affirmative vote of the holders of shares representing at
             least 75% of the Total Voting Power:

             (i)          adopt or amend fundamental accounting policies;

             (ii)         appoint or replace the auditors of the Company or any
                          of its subsidiaries;


                                       20
<PAGE>

             (iii)        make or permit any material change to the nature or
                          scope of the FLAG Project;

             (iv)         make any composition or arrangement with its
                          creditors, move for insolvency, receivership or
                          administration or do or permit or suffer to be done
                          any act or thing whereby the Company or any of its
                          subsidiaries may be wound up (whether voluntarily or
                          compulsorily);

             (v)          create any Security Interest over the whole or any
                          material part of the business, property or assets
                          (tangible or intangible) of the Company or any of its
                          subsidiaries;

             (vi)         incur indebtedness exceeding $5,000,000 in the
                          aggregate;

             (vii)        subject to Bye-law 39, make any loan or advance or
                          give any credit (other than normal trade credit) to
                          any person other than a subsidiary of the Company in
                          excess of an amount equal to 1% of the total paid up
                          capital (nominal amount plus share premium) of the
                          Company from time to time;

             (viii)       give any guarantee, indemnity or security to secure
                          the liabilities or obligations of any other person,
                          other than a subsidiary of the Company;

             (ix)         sell, transfer, lease, assign, dispose of or part with
                          control of any interest in all or any material part of
                          the business, property or assets (tangible or
                          intangible) of the Company or any of its subsidiaries,
                          other than the sale or lease of cable capacity on
                          arm's length terms (whether by a single transaction or
                          a series of transactions), or contract to do so or
                          acquire or contract to acquire any business, property
                          or assets (tangible or intangible) or any interest
                          therein which would, following such acquisition
                          constitute a material part of the business, property
                          or assets of the Company or any of its subsidiaries
                          (and for the purposes of this Bye-law 38(ix), any such
                          business, property or assets accounting for, or which
                          would following such acquisition by the Company or any
                          of its subsidiaries account for, 5% or more of the net
                          income or net asset value of the Company shall be
                          deemed material);

             (x)          subject in all cases to Bye-law 5 make or agree to
                          make any change to the authorised share capital from
                          time to time of the Company or any of its subsidiaries
                          (including without limitation, the creation of any
                          class of share capital, any increase in the number of
                          authorised shares of any class of share capital or any
                          change in the par value of any class of share capital)
                          or grant any option over, or issue any investment
                          carrying rights of conversion into, any share capital
                          of the Company or any of its subsidiaries;

             (xi)         repurchase, redeem (otherwise than in accordance with
                          the terms of redemption established at the time of
                          issue of the relevant share capital or loan stock),
                          reorganise, consolidate, subdivide, cancel, reduce or
                          convert (otherwise than in accordance with the terms
                          of conversion established at the time of issue of the
                          relevant share capital or loan stock) any of the share
                          capital or loan stock of the Company or any of its
                          subsidiaries or in any way alter the rights attaching
                          thereto;


                                       21
<PAGE>

             (xii)        acquire, purchase or subscribe for any shares, loan
                          stock, debentures, mortgages or securities (or any
                          interest therein) or any other interest in any
                          company, trust or other body or person, other than the
                          Company or a wholly owned subsidiary, PROVIDED that
                          this Bye-law 38(xii) shall not apply to the
                          acquisition of short-term investment grade securities
                          for cash management purposes;

             (xiii)       grant any power of attorney (other than special powers
                          of attorney granted in the ordinary course of
                          business) or make any general delegation of Directors'
                          powers, except in accordance with these Bye-laws;

             (xiv)        subject to Bye-law 39, enter into or make any material
                          amendment to any contract that provides for aggregate
                          payments by the Company or any of its subsidiaries in
                          excess of $5,000,000;

             (xv)         make any amendment of the Memorandum of Association or
                          Bye-laws of the Company or any of its subsidiaries;

             (xvi)        establish the terms and conditions of the issuance of
                          any Shares or any share in the share capital of any of
                          the Company's subsidiaries; or

             (xvii)       declare any dividend on any share capital of the
                          Company or any of its subsidiaries (other than by way
                          of any capitalisation of share premium account).

39.          The Company shall not (and shall not permit any of its subsidiaries
             to) enter into, amend in any material respect or terminate any
             agreement or transaction involving aggregate payments or other
             consideration with an aggregate value in excess of $1 million with
             any person in which a Shareholder or any of its Associated Persons
             has an interest unless such action is approved by at least
             two-thirds of the votes cast at a meeting of the Board, excluding
             for all purposes of such calculation all votes exercisable by the
             Director(s) designated by such interested Shareholder, and any such
             action with respect to any agreement or transaction involving
             payments or other consideration with an aggregate value of $1
             million or less shall require approval by the affirmative vote of
             the Directors representing a majority of the total voting power of
             the Entire Board, excluding for all purposes of such calculation
             all votes exercisable by any Director appointed by the interested
             Shareholder. The Company shall not (and shall not permit any of its
             subsidiaries to) make any loan or advance or give any credit (other
             than normal trade credit) to any Shareholder or Director or any
             relative or Associated Person of a Shareholder or Director unless
             such loan, advance or credit is approved by the affirmative vote of
             at least two-thirds of the votes cast at a meeting of the Board,
             excluding for all purposes of such calculation all votes
             exercisable by any Director appointed by an interested Shareholder.
             In case of doubt, the Board shall determine by majority vote,
             excluding for all purposes of such calculation all votes
             exercisable by the Director appointed by the potentially interested
             shareholder whether a Shareholder is an interested Shareholder by
             virtue of it or any of its Associated Persons having an interest in
             any agreement or transaction of a nature requiring approval as
             provided in this Bye-law 39.


                                       22
<PAGE>

                                  BUSINESS PLAN

40.          The Board shall meet at least three months before the end of each
             financial year to approve a Business Plan for the following three
             financial years. Each such Business Plan shall deal with the
             following matters:

             (a)          the activities to be undertaken by the Company and its
                          subsidiaries;

             (b)          a budget setting out the expected revenues, expenses
                          and capital requirements of the Company;

             (c)          the manner in which the anticipated capital
                          requirements of the Company and its subsidiaries will
                          be funded including the proportions to be funded by
                          way of external borrowings, Shareholders' loans or
                          guarantees and/or equity contributions; and

             (d)          such other matters as the Shareholders may determine
                          should be dealt with in the Business Plan from time to
                          time.

41.          Business Plans shall be approved, and any Business Plan may be
             amended by the affirmative vote of at least a majority of the total
             voting power of the Entire Board. If the Board is unable to approve
             any Business Plan, the Business Plan then in effect shall continue
             to be operative until the earlier to occur of (i) the expiration of
             the period covered by such Business Plan and (ii) adoption by the
             Board of a subsequent Business Plan.

42.          A marketing plan in respect of the sale of capacity in the FLAG
             Cable System ("Marketing Plan") shall be adopted concurrently with
             the adoption of each Business Plan. Marketing Plans shall be
             approved, and any Marketing Plan may be amended, by the affirmative
             vote of at least a majority of the total voting power of the Entire
             Board. If the Board is unable to approve a new Marketing Plan, the
             Marketing Plan then in effect shall continue to be operative until
             the earlier to occur of (i) the expiration of the period covered by
             such Marketing Plan and (ii) adoption by the Board of a subsequent
             Marketing Plan.

43.          The Company acknowledges that Bell Atlantic is, and, by virtue of
             Bell Atlantic's interest in the Company, the Company may be,
             subject to the U.S. Telecommunications Act of 1996 (the "Telecoms
             Act"). The Telecoms Act prohibits Bell Atlantic as a participant
             and may prohibit the Company from engaging in certain activities
             with respect to services sold for use or consumption in the United
             States including, without limitation, the provision of
             inter-exchange services. So long as Bell Atlantic or any of its
             Associated Persons has any interest in the Company, the Company may
             not knowingly engage in any activity which in Bell Atlantic's
             opinion could contravene the Telecoms Act. If the Company desires
             to engage in any such activity, the Company shall, so far as
             reasonably possible, work diligently towards constructing the
             activity, or the ownership of the activity, so as to avoid
             contravention of the Telecoms Act; PROVIDED that the Company shall
             not engage in such activity if, in Bell Atlantic's opinion, such
             activity, or the ownership of such activity, cannot be constructed
             so as to avoid contravention of the Telecoms Act.


                                       23
<PAGE>

                                GENERAL MEETINGS

44.          The Board shall convene and the Company shall hold general meetings
             as annual general meetings in accordance with the requirements of
             the Companies Acts and in any event not less than once in every
             year.

45.          Unless otherwise agreed to by all Shareholders, the annual general
             meeting will be held, subject to the notice provisions of Bye-law
             46, at the time and place designated by the Board. Special general
             meetings and class meetings of the Shareholders may be called by
             the Chairman of the Board and shall be called by the Chairman of
             the Board upon written request of at least one Director or when
             required by the Companies Acts. A special general meeting or class
             meeting shall also be called by the Chairman of the Board and shall
             be held at a time and place designated by the Board or the Chairman
             of the Board and in any event as soon as practicable after any
             regular or special meeting of the directors at which action is to
             be, or has been, taken by the Directors which, if favourable, will
             also require a Shareholder vote or a class vote, as the case may
             be. Unless otherwise agreed to by all Shareholders or as specified
             above, special general meetings and class meetings shall be held at
             the place designated for the next annual general meeting and,
             subject to the notice provisions set forth in Bye-law 46, at a date
             and time determined by the Chairman of the Board (which date shall
             be, in the case of a special general meeting or class meeting
             called at the request of at least one Director as provided above,
             within ten days of the date specified in such request).

                           NOTICE OF GENERAL MEETINGS

46.          Unless waived by all the Shareholders entitled to vote at such
             meeting, not less than seven full days' notice of each meeting of
             the Shareholders shall be given to each Shareholder entitled to
             vote at such meeting and to each Director, and to any Resident
             Representative who or which has delivered a written notice to the
             Registered Office requiring that such notice be sent to him or it,
             together with an agenda of the business to be transacted at such
             meeting and all papers to be circulated or presented to the same.
             Notice of each meeting shall be given in any manner permitted by
             Bye-law 117 to all Shareholders entitled to attend and vote at such
             meeting. As soon as practicable after each such meeting, a copy of
             the minutes of that meeting shall be sent to each Shareholder.

                         PROCEEDINGS AT GENERAL MEETINGS

47.          No special general meeting or annual general meeting of the
             Shareholders or any class of Shareholders of the Company may
             proceed to business unless a quorum is present at such meeting. For
             these purposes, a quorum of the Shareholders at such meeting shall
             be Shareholders holding Shares representing at least 50% of the
             Total Voting Power and a quorum of Shareholders at a class meeting
             shall be Shareholders holding at least 50% of the total issued and
             outstanding Shares of the relevant class, in any such case being
             present in person or by their respective proxies or duly authorised
             representatives. Without limiting the generality of the foregoing,
             a quorum shall in all cases consist of at least two Shareholders
             (in the case of a meeting of the Shareholders) or two Shareholders
             of the relevant class (in the case of a class meeting), unless
             there is only one holder of Shares or of Shares of the relevant
             class.


                                       24
<PAGE>

48.          Shareholders' meetings may be held by means of such telephone,
             electronic or other communication facilities as permit all persons
             participating in the meeting to communicate with each other
             simultaneously and instantaneously, and participation in a meeting
             of Shareholders through such means shall constitute presence in
             person, by proxy or by representative, as the case may be.

49.          If within five minutes (or such longer time as the chairman of the
             meeting may determine to wait) after the time appointed for the
             meeting, a quorum of the Shareholders is not present at a duly
             convened annual general meeting, special general meeting or at a
             class meeting, as the case may be, the meeting, if convened on the
             requisition of Shareholders, shall be dissolved, and in any other
             case, shall be adjourned for two days to the same time and place.

50.          Each Director shall be entitled to attend and speak at any general
             meeting of the Company and the Resident Representative, if any,
             upon giving the notice referred to in Bye-law 46, shall be entitled
             to attend any general meeting of the Company.

51.          The Chairman of the Board or, in his absence, the Deputy Chairman,
             shall preside as chairman at every Shareholders' meeting. If there
             is no such Chairman or Deputy Chairman, or if at any meeting
             neither the Chairman nor the Deputy Chairman is present within five
             minutes after the time appointed for holding the meeting, or if
             neither of them is willing to act as chairman, the Directors
             present shall choose one of their number to act, or if one Director
             only is present, he shall preside as chairman, if willing to act.
             If no Director is present, or if each of the Directors present
             declines to take the chair, the persons present and entitled to
             vote on a poll shall elect one of their number to be chairman. The
             chairman of any meeting of Shareholders shall not be entitled, by
             virtue of such capacity, to exercise a vote (casting or otherwise)
             at such meeting.

52.          The chairman of the meeting may, with the consent of any meeting at
             which a quorum is present (and shall, if so directed by the
             meeting), adjourn the meeting from time to time and from place to
             place, but no business shall be transacted at any adjourned meeting
             except business which might lawfully have been transacted at the
             meeting from which the adjournment took place. When a meeting is
             adjourned for three months or more, notice of the adjourned meeting
             shall be given as if the adjourned meeting were the original
             meeting.

53.          Except as expressly provided by these Bye-laws, it shall not be
             necessary to give any notice of an adjournment or of the business
             to be transacted at an adjourned meeting.

                                     VOTING

54.          Notwithstanding the other provisions of these Bye-laws, upon any
             voting on a resolution proposed for consideration by the
             Shareholders in general meeting, no Shareholder may cast a vote in
             person or by proxy or corporate representative in circumstances
             where they have executed and delivered a valid and subsisting
             Irrevocable Proxy pursuant to Bye-law 67(b) and the holder of such
             proxy has delivered such proxy to the Company in accordance with
             the terms and conditions specified in such proxy. Except where a
             greater majority is required by the Companies Acts or these
             Bye-laws, any question proposed for consideration at any general
             meeting or class meeting shall be decided on by a simple majority
             of votes cast.


                                       25
<PAGE>

55.          Except in the case of removal of auditors and Directors, a
             Shareholders' resolution shall be validly passed without a meeting
             if the text of the resolution has been approved in writing by or on
             behalf of all of the Shareholders who at the date of the resolution
             would be entitled to attend the meeting and vote on the resolution.
             Such resolution shall be sent by post or facsimile to each
             Shareholder entitled to vote on such resolution at its registered
             address or such other address for service specified by such
             Shareholder in accordance with Bye-law 117. Such resolution shall
             take effect at the time when the last of the written approvals
             required to approve such resolution is actually received by the
             Company.

56.          At any meeting of Shareholders, a resolution put to the vote of the
             meeting shall be decided on a show of hands unless (before or on
             the declaration of the result of the show of hands or on the
             withdrawal of any other demand for a poll) a poll is demanded by:

             (a)          the chairman of the meeting;

             (b)          at least two Shareholders present in person or by
                          proxy or duly authorised representative; or

             (c)          any Shareholder or Shareholders present in person or
                          by proxy or duly authorised representative, and
                          holding between them not less than ten percent of the
                          total voting power of all the Shareholders having the
                          right to attend and vote at such meeting.

             Unless a poll is so demanded and the demand is not withdrawn, a
             declaration by the chairman that a resolution has, on a show of
             hands, been carried or carried unanimously or by a particular
             majority or not carried by a particular majority or lost shall be
             final and conclusive, and an entry to that effect in the minute
             book of the Company shall be conclusive evidence of the fact
             without proof of the number of votes recorded for or against such
             resolution.

57.          If a poll is duly demanded, the result of the poll shall be deemed
             to be the resolution of the meeting at which the poll is demanded.

58.          A poll demanded on the election of a chairman, or on a question of
             adjournment, shall be taken forthwith. A poll demanded on any other
             question shall be taken in such manner and either forthwith or at
             such time (being not later than the close of the meeting at which
             such poll was demanded) and place as the chairman shall direct.

59.          The demand for a poll shall not prevent the continuance of a
             meeting for the transaction of any business other than the question
             on which the poll has been demanded and it may be withdrawn at any
             time before the close of the meeting or the taking of the poll,
             whichever is the earlier.

60.          On a poll, votes may be cast personally, by proxy or by duly
             authorised representative, PROVIDED, that if an Irrevocable Proxy
             has been executed and delivered in accordance with the provisions
             of Bye-law 67(b) such votes may only be cast by the holder of that
             Irrevocable Proxy during the subsistence of that proxy once such
             holder has delivered such proxy to the Company in accordance with
             the terms and conditions specified in such proxy.


                                       26
<PAGE>

61.          A person entitled to more than one vote on a poll need not use all
             his votes or cast all the votes he uses in the same way.

62.          In the case of an equality of votes at a general meeting, whether
             on a show of hands or on a poll, the chairman of such meeting shall
             not be entitled to a second or casting vote.

63.          In the case of joint holders of a Share, the vote of the senior who
             tenders a vote, whether in person or by proxy, shall be accepted to
             the exclusion of the votes of the other joint holders, and for this
             purpose seniority shall be determined by the order in which the
             names stand in the Register in respect of the joint holding.

64.          A Shareholder who is a patient for any purpose of any statute or
             applicable law relating to mental health or in respect of whom an
             order has been made by any court having jurisdiction for the
             protection or management of the affairs of persons incapable of
             managing their own affairs may vote, whether on a show of hands or
             on a poll, by his receiver, committee, curator bonis or other
             person in the nature of a receiver, committee or curator bonis
             appointed by such court and such receiver, committee, curator bonis
             or other person may vote on a poll by proxy, and may otherwise act
             and be treated as such Shareholder for the purpose of Shareholders'
             meetings.

65.          If (i) any objection shall be raised to the qualification of any
             voter or (ii) any votes have been counted which ought not to have
             been counted or which might have been rejected or (iii) any votes
             are not counted which ought to have been counted, the objection or
             error shall not vitiate the decision of the meeting or adjourned
             meeting on any resolution unless the same is raised or pointed out
             at the meeting or the adjourned meeting, as the case may be, at
             which the vote objected to is given or tendered or at which the
             error occurs. Any objection or error shall be referred to the
             chairman of the meeting and shall only vitiate the decision of the
             meeting on any resolution if the chairman decides that the same may
             have affected the decision of the meeting. The decision of the
             chairman on such matters shall be final and conclusive.

                      PROXIES AND CORPORATE REPRESENTATIVES

66.          The instrument appointing a proxy shall be in writing under the
             hand of the appointor or of his attorney authorised by him in
             writing or, if the appointor is a corporation, either under its
             seal or under the hand of an officer, attorney or other person
             authorised to sign the same.

67.          (a)          Without prejudice to Bye-law 63, any Shareholder may
                          appoint a standing proxy or, if a corporation,
                          representative by depositing at the Registered Office
                          a proxy or, if a corporation, an authorisation and
                          such proxy or authorisation shall be valid for all
                          general meetings and adjournments thereof until notice
                          of revocation is received at the Registered Office.
                          Where a standing proxy or authorisation exists, its
                          operation shall be deemed to have been suspended at
                          any Shareholders' meeting or adjournment thereof at
                          which the Shareholder is present or in respect to
                          which the Shareholder has specially appointed a proxy
                          or representative. The Board may from time to time
                          require such evidence as it shall deem necessary as to
                          the due execution and continuing validity of any such
                          standing proxy or authorisation and the operation of
                          any such standing 


                                       27
<PAGE>

                          proxy or authorisation shall be deemed to be suspended
                          until such time as the Board determines that it has
                          received the requested evidence or other evidence
                          satisfactory to it.

             (b)          Notwithstanding the provisions of Bye-laws 67(a), 68
                          or 69 or any other provision of these Bye-laws, in the
                          event that an Irrevocable Proxy and Power (the
                          "Irrevocable Proxy") in the form set out as Exhibit D
                          hereto is delivered to the Company by a Collateral
                          Trustee, its operation shall be treated by the Company
                          for all purposes as effective in accordance with its
                          terms and effective to preclude the exercise by the
                          Shareholder which has granted the Irrevocable Proxy
                          either to vote directly, to appoint a specific proxy
                          or to exercise any other rights it may have as a
                          Shareholder. The exercise by a Collateral Trustee of
                          any rights under any Irrevocable Proxy shall not be
                          subject to the payment by any person of any funding or
                          other obligations of any Shareholder or any other
                          restrictions imposed by Bye-laws 18, 19, 20 or 21.

68.          Subject to Bye-laws 63 and 67, the instrument appointing a proxy,
             together with such other evidence as to its due execution as the
             Board may from time to time require, shall be delivered at the
             Registered Office (or at such place as may be specified in the
             notice convening the meeting or in any notice of any adjournment
             or, in either case, in any document sent therewith) prior to the
             holding of the meeting or adjourned meeting at which the person
             named in the instrument proposes to vote and in default the
             instrument of proxy shall not be treated as valid.

69.          Instruments of proxy shall be in any common form or in such other
             form as the Board may approve and the Board may, if it deems
             appropriate, send out with the notice of any meeting forms of
             instruments of proxy for use at that meeting. The instrument of
             proxy shall be deemed to confer authority to demand or join in
             demanding a poll and to vote on any amendment of a resolution put
             to the meeting for which it is given as the proxy deems
             appropriate. The instrument of proxy shall, unless the contrary is
             stated therein, be valid as well for any adjournment of the meeting
             as for the meeting to which it relates.

70.          A vote given in accordance with the terms of an instrument of proxy
             shall be valid notwithstanding the previous death or insanity of
             the principal, or revocation of the instrument of proxy or of the
             authority under which it was executed, provided that no intimation
             in writing of such death, insanity or revocation shall have been
             received by the Company at the Registered Office (or such other
             place as may be specified for the delivery of instruments of proxy
             in the notice convening the meeting or other documents sent
             therewith) one hour at least before the commencement of the meeting
             or adjourned meeting, at which the instrument of proxy is used,
             PROVIDED further that an Irrevocable Proxy may not be revoked
             except as may be set out therein.

71.          Subject to the Companies Acts and Bye-law 67(b), the Board may at
             its discretion waive any of the provisions of these Bye-laws
             related to proxies or authorisations (other than Bye-law 67(b))
             and, in particular, may accept such verbal or other assurances as
             it deems appropriate as to the right of any person to attend and
             vote on behalf of any Shareholder at any meeting.


                                       28
<PAGE>

                      APPOINTMENT AND REMOVAL OF DIRECTORS

72.          The number of Directors shall be such number not less than three or
             more than fifteen as the Company by Resolution may, subject to
             Bye-law 73, from time to time determine and, subject to the
             Companies Acts and these Bye-laws, shall serve until re-elected or
             their successors are appointed at the next annual general meeting.

73.          Subject as is set out below, the Directors of the Company shall be
             appointed as set out in this Bye-law 73:

             (a)          Each Shareholder holding at least 30% of the issued
                          and outstanding Shares shall have the right from time
                          to time for each 30% of the issued and outstanding
                          Shares held by such Shareholder to designate one
                          Director by notice to the Company (PROVIDED, HOWEVER,
                          that if two or more Associated Persons each hold
                          Shares, their respective holdings shall be aggregated
                          for purposes of this Bye-law 73 and Bye-law 74).

             (b)          If the procedures set forth above in Bye-law 73(a) do
                          not result in the appointment of at least two
                          Directors resident in Bermuda, or if there are not two
                          individuals ordinarily resident in Bermuda serving as
                          secretary and as a resident Director or as Secretary
                          and as a Resident Representative, respectively, of the
                          Company, the Shareholders shall have the right from
                          time to time collectively to designate, as necessary
                          to ensure that there are at all times either (i) a
                          resident Secretary and a Resident Representative, (ii)
                          a resident Secretary and a resident Director or (iii)
                          two resident Directors, one or two additional
                          Directors (or a Resident Representative) each of whom
                          is resident in Bermuda. Such designation shall be made
                          by the affirmative vote of Shareholders holding at
                          least two-thirds of the Total Voting Power. "Resident
                          Director," as used in these Bye-laws, means a Director
                          appointed pursuant to this Bye-law 73(b).

             (c)          If not otherwise designated as Directors, either (i)
                          the Chairman and the Deputy Chairman or (ii) the
                          President and the Vice President, if any, shall be
                          designated as Directors by the person or persons
                          holding a majority of the total Shares at the time
                          outstanding.

             (d)          Notwithstanding anything to the contrary herein, no
                          Director shall be permitted to take office until he
                          has executed and delivered to the Company a
                          confidentiality agreement in the form set forth in
                          Exhibit C hereto.

74.          (a)          Any Shareholder or class of Shareholders designating a
                          Director may by notice in writing to the Company and
                          to the other Shareholders request the removal of such
                          Director and designate another person to be elected in
                          his place in accordance with Bye-law 73(a). Upon the
                          sale or transfer of Shares held by a Shareholder with
                          the result that such Shareholder ceases to hold such
                          percentage of the issued and outstanding Shares that
                          entitled it to designate such total number of
                          Directors calculated pursuant to Bye-law 73(a), there
                          shall be delivered to the Company, upon the closing of
                          such sale or transfer, written resignations of such
                          number of Directors as such Shareholder is no longer
                          entitled to designate pursuant to Bye-law 73(a). Any
                          Shareholder may, by notice to the Company, (i) at any
                          time request the removal of any Resident Director who
                          ceases to be a resident of Bermuda or (ii) request the
                          removal of 


                                       29
<PAGE>

                          any Director or Directors designated pursuant to
                          Bye-law 73(a) by a Shareholder that, at the time of
                          such request, does not hold such percentage of the
                          issued and outstanding Shares that entitled it to
                          designate such Director or Directors pursuant to
                          Bye-law 73(a).

             (b)          The Company shall in a special general meeting or
                          class meeting called for that purpose remove a
                          Director whose removal is requested pursuant to
                          Bye-law 74(a); PROVIDED that notice of any such
                          meeting shall be served upon the Director concerned
                          not less than fourteen days before the meeting. Any
                          vacancy created by the removal of a Director at a
                          special general meeting or class meeting may be filled
                          at the meeting by the election of another Director in
                          his place.

             (c)          Each Shareholder shall vote or execute a written
                          consent with respect to all Shares as to which it is
                          entitled to vote so as to secure the due appointment
                          as Directors and/or continuation in office of all
                          persons designated in accordance with Bye-laws 73 and
                          74.

75.          If any Director is removed in accordance with the provisions of
             Bye-law 74, the Shareholder (or Shareholders, jointly and
             severally, if more than one) who designated such Director shall be
             responsible for and shall hold harmless the other Shareholders and
             the Company from and against any claim for compensation arising out
             of such removal and any reasonable costs and expenses incurred in
             defending such proceedings, including, without limitation, the
             fees, disbursements and related charges of counsel.

                  RESIGNATION AND DISQUALIFICATION OF DIRECTORS

76.          The office of a Director shall be vacated upon the happening of any
             of the following events:

             (i)          if he resigns his office by notice in writing
                          delivered to the Registered Office or tendered at a
                          meeting of the Board;

             (ii)         if he becomes of unsound mind or a patient for any
                          purpose of any statute or applicable law relating to
                          mental health and the Board resolves that his office
                          is vacated;

             (iii)        if he becomes bankrupt or compounds with his
                          creditors;

             (iv)         if he is prohibited by law from being a Director;

             (v)          if he ceases to be a Director by virtue of the
                          Companies Acts;

             (vi)         if he is removed from office pursuant to these
                          Bye-laws; or

             (vii)        if he is no longer qualified to serve as a Director
                          pursuant to any provision of these Bye-laws.


                                       30
<PAGE>

                               ALTERNATE DIRECTORS

77.          Each Director may appoint an alternate (an "Alternate Director") to
             represent him at meetings of the Board which he is unable to
             attend; PROVIDED, HOWEVER, that a Director appointed pursuant to
             Bye-law 73(c) may not appoint an Alternate Director. An Alternate
             Director may also be a Director in his own right and may act as
             alternate to more than one Director.

78.          An Alternate Director shall be entitled to receive notices of all
             meetings of Directors, to attend, be counted in the quorum and vote
             at any such meeting at which any Director to whom he is alternate
             is not personally present, and generally to perform all the
             functions of any Director to whom he is alternate in such
             Director's absence.

79.          Every person acting as an Alternate Director shall (except as
             regards powers to appoint an alternate and remuneration) be subject
             in all respects to the provisions of these Bye-laws relating to
             Directors and shall alone be responsible to the Company for his
             acts and defaults and shall not be deemed to be the agent of or for
             any Director for whom he is alternate. An Alternate Director may be
             paid expenses and shall be entitled to be indemnified by the
             Company to the same extent MUTATIS MUTANDIS as if he were a
             Director. Every person acting as an Alternate Director shall have
             the vote(s) of each Director for whom he acts as alternate (in
             addition to his own vote(s) if he is also a Director). The
             signature of an Alternate Director to any resolution in writing of
             the Board or a committee of the Board shall, unless the terms of
             his appointment provide to the contrary, be as effective as the
             signature of the Director or Directors to whom he is alternate.

            DIRECTORS' FEES AND ADDITIONAL REMUNERATION AND EXPENSES

80.          The remuneration, if any, of the Directors for their services as
             Directors shall be determined from time to time by, and be subject
             to the approval of, Shareholders holding a majority of the Total
             Voting Power. Each Director shall be paid his reasonable
             travelling, hotel and incidental expenses in attending and
             returning from meetings of the Board or committees constituted
             pursuant to these Bye-laws or general meetings and shall be paid
             all expenses properly and reasonably incurred by him in the conduct
             of the Company's business or in the discharge of his duties as a
             Director. Any such remuneration shall be the same for all Directors
             except where a Director has entered into an agreement with the
             Company for the provision of executive services, in which event
             such Director shall be entitled to remuneration for such executive
             services as provided in such agreement (and may, to the extent
             provided in such agreement, receive no remuneration, or a lesser
             amount of remuneration than that received by other Directors, for
             his services as a Director).

81.          The Shareholders may from time to time by resolution appoint one of
             the Directors to be a managing director and may similarly appoint
             one or more of the Directors to hold any other employment or
             executive office with the Company (except that of auditor) for such
             period and upon such terms as the Shareholders may determine and
             may revoke or terminate any such appointments. Any such revocation
             or termination as aforesaid shall be without prejudice to any claim
             for damages that such Director may have against the Company or the
             Company may have against such Director for any breach of any
             contract of service between him and the Company which may be
             involved in such revocation or termination.


                                       31
<PAGE>

                              DIRECTORS' INTERESTS

82.          (a)          A Director may hold any other office or place of
                          profit with the Company (except that of auditor) in
                          conjunction with his office of Director for such
                          period and upon such terms as the Shareholders may
                          determine in accordance with Bye-law 81, and may be
                          paid such remuneration therefor (whether by way of
                          salary, commission, participation in profits or
                          otherwise) as the Shareholders may determine in
                          accordance with Bye-law 80.

             (b)          A Director may act by himself or his firm in a
                          professional capacity for the Company (otherwise than
                          as auditor) and he or his firm shall be entitled to
                          remuneration for professional services as if he were
                          not a Director.

             (c)          Subject to the provisions of the Companies Acts and
                          Bye-law 39, a Director may notwithstanding his office
                          be a party to, or otherwise interested in, any
                          transaction or arrangement with the Company or in
                          which the Company is otherwise interested, and be a
                          Director or other officer of, or employed by, or a
                          party to any transaction or arrangement with, or
                          otherwise interested in, any body corporate promoted
                          by the Company or in which the Company is interested
                          or with which the Company proposes to contract. The
                          Board may also cause the voting power conferred by the
                          shares in any other company held or owned by the
                          Company to be exercised in such manner in all respects
                          as it deems appropriate, including the exercise
                          thereof in favour of any resolution appointing the
                          Directors or any of them to be directors or officers
                          of such other company, or voting or providing for the
                          payment of remuneration to the directors or officers
                          of such other company.

             (d)          So long as, where it is necessary, he declares the
                          nature of his interest at the first opportunity at a
                          meeting of the Board or by writing to the Directors as
                          required by the Companies Acts, a Director shall not
                          by reason of his office be accountable to the Company
                          for any benefit which he derives from any office or
                          employment to which these Bye-laws allow him to be
                          appointed or from any transaction or arrangement in
                          which these Bye-laws allow him to be interested, and,
                          subject to Bye-law 39, no such transaction or
                          arrangement shall be liable to be avoided on the
                          ground of any interest or benefit.

             (e)          Subject to the Companies Acts and any further
                          disclosure required thereby, a general notice to the
                          Directors by a Director or officer declaring that he
                          is a director or officer or has an interest in a
                          person and is to be regarded as interested in any
                          transaction or arrangement made with that person,
                          shall be a sufficient declaration of interest in
                          relation to any transaction or arrangement so made.

                         POWERS AND DUTIES OF THE BOARD

83.          Subject to the provisions of the Companies Acts and these Bye-laws,
             including, without limitation, Bye-law 38, and to any directions
             given by the Company in general meeting, the Board shall manage the
             business of the Company and may pay all expenses incurred in
             promoting and incorporating the Company and may exercise all the
             powers of the Company. No alteration of these Bye-laws and no such
             direction shall invalidate any prior act of the Board which would
             have been valid if that alteration had not been made or that
             direction had not been given. The powers 


                                       32
<PAGE>

             given by this Bye-law shall not be limited by any special power
             given to the Board by these Bye-laws and, except as otherwise
             specifically provided in these Bye-laws, a meeting of the Board at
             which a quorum is present shall be competent to exercise all the
             powers, authorities and discretions for the time being vested in or
             exercisable by the Board.

84.          The Board may, subject to Bye-law 38, exercise all the powers of
             the Company to borrow money and to mortgage or charge all or any
             part of the undertaking, property and assets (present and future)
             of the Company and to issue debentures and other securities,
             whether outright or as collateral security for any debt, liability
             or obligation of the Company or of any other persons.

85.          All cheques, promissory notes, drafts, bills of exchange and other
             instruments, whether negotiable or transferable or not, and all
             receipts for money paid to the Company shall be signed, drawn,
             accepted, endorsed or otherwise executed, as the case may be, in
             such manner as the Board shall from time to time by resolution
             determine.

86.          The Board on behalf of the Company may provide benefits, whether by
             the payment of gratuities or pensions or otherwise, for any person,
             including any Director or former Director, who has held any
             executive office or employment with the Company or with any body
             corporate which is or has been a subsidiary or affiliate of the
             Company or a predecessor in the business of the Company or of any
             such subsidiary or affiliate, and to any Shareholder or his family
             or any person who is or was dependent on him, and may contribute to
             any fund and pay premiums for the purchase or provision of any such
             gratuity, pension or other benefit, or for the insurance of any
             such person.

                        DELEGATION OF THE BOARD'S POWERS

87.          The Board may, subject to Bye-law 38, by power of attorney appoint
             any company, firm or person or any fluctuating body of persons,
             whether nominated directly or indirectly by the Board, to be the
             attorney or attorneys of the Company for such purposes and with
             such powers, authorities and discretions (not exceeding those
             vested in or exercisable by the Board under these Bye-laws) and for
             such period and subject to such conditions as it may deem
             appropriate, and any such power of attorney may contain such
             provisions for the protection and convenience of persons dealing
             with any such attorney and of such attorney as the Board may deem
             appropriate, and may also authorise any such attorney to
             sub-delegate all or any of the powers, authorities and discretions
             vested in him.

88.          The Board may entrust to and confer upon any Director or, subject
             to Bye-law 38, any officer any of the powers exercisable by it upon
             such terms and conditions with such restrictions as it deems
             appropriate, and either collaterally with, or to the exclusion of,
             its own powers, and may from time to time revoke or vary all or any
             of such powers but no person dealing in good faith and without
             notice of such revocation or variation shall be affected thereby.


                                       33
<PAGE>

89.          The Board may delegate, subject to Bye-law 38, to the extent
             consistent with applicable law, any of its powers, to the officers
             of the Company or to a committee or committees consisting of such
             Directors or other persons as the Board shall determine. Any
             officer or any committee so formed shall, in the exercise of the
             powers so delegated, conform to any regulations that may be imposed
             on him or it by the Board. If the Board so authorises or requests,
             auditors, consultants, advisers and employees shall be permitted to
             attend and speak at meetings of the Board, but not to vote.

                            PROCEEDINGS OF THE BOARD

90.          (a)          The Board may meet for the dispatch of business,
                          adjourn and otherwise regulate its meetings as it
                          deems appropriate. Meetings of the Board may be called
                          by the Chairman of the Board and shall be called by
                          such Chairman upon written request of at least one
                          Director.

             (b)          At each meeting of the Board and in respect of each
                          resolution proposed to the Board, each Director shall
                          be entitled to exercise one vote. All resolutions
                          proposed at any meeting of the Board shall be passed
                          by simple majority of votes cast at such meeting
                          except where a greater majority is required by these
                          Bye-laws or the Companies Acts. In the case of an
                          equality of votes the resolution shall be deemed to
                          have failed.

91.          Unless waived by all the Directors entitled to receive notice of
             such meeting, not less than seven full days' notice of all meetings
             (or three full days' notice for telephonic meetings) of the Board
             or of a committee of the Board shall be given to each Director or
             member of such committee, together with an agenda of the business
             to be transacted at such meeting and all papers to be circulated or
             presented to the same. Matters not included on such agenda may not
             be considered at such meeting without the consent of (a) two-thirds
             of the Directors then in office or members of such committee, as
             the case may be, or (b) Directors holding at least two-thirds of
             the total number of votes entitled to be exercised by all Directors
             then in office or all members of such committee, as the case may
             be. Notice of a Board meeting shall be deemed to be duly given to a
             Director if it is given to him personally or sent to him by post,
             cable, telex, facsimile or other mode of representing or
             reproducing words in a legible and non-transitory form at the
             address for notice specified by such Director (or, if none, to the
             Shareholder or Shareholders who appointed him). Any notice or
             resolution so given or transmitted by commercial courier shall be
             deemed to have been delivered on the date of actual delivery
             thereof and any notice or resolution given by facsimile or telex
             shall be deemed to have been delivered on the date that the
             facsimile or telex is dispatched and confirmation of receipt
             (electronic or otherwise) is made. A Director may waive notice of
             any meeting either prospectively or retrospectively. As soon as
             practicable after each such meeting, a copy of the minutes of that
             meeting shall be sent to each Director. The Resident
             Representative, if any, shall, upon delivering written notice to
             the Registered Office, be entitled to receive notice of, attend and
             be heard at, and receive minutes of all meetings of the Board.


                                       34
<PAGE>

92.          No meeting of the Board may proceed to business or transact any
             business unless a quorum is present at such meeting. For these
             purposes, a quorum of the Board shall be two Directors present in
             person or represented by an Alternate Director at the relevant
             meeting; PROVIDED that if any Director other than a Resident
             Director is present at a meeting, a quorum shall be Directors
             present in person or represented by an Alternate Director at such
             meeting representing at least 51 percent of the total voting power
             of the Entire Board. Meetings of Directors may be held by means of
             such telephone, electronic or other communication facilities as
             permit all persons participating in the meeting to communicate with
             each other simultaneously and instantaneously, and participation in
             a meeting by a Director or Alternate Director through such means
             shall constitute presence in person at such meeting. In the event
             that a quorum of the Directors is not so present at a duly convened
             Board meeting, that meeting shall be adjourned for two days to the
             same time and place.

93.          (a)          Any Director who ceases to be a Director at a Board
                          meeting may continue to be present and to act as a
                          Director and be counted in the quorum until the
                          termination of the Board meeting if no other Director
                          objects and if otherwise a quorum of Directors would
                          not be present.

             (b)          Except as provided in Bye-law 39, a Director who to
                          his knowledge is in any way, whether directly or
                          indirectly, interested in a contract or proposed
                          contract, transaction or arrangement with the Company
                          and has complied with the provisions of the Companies
                          Acts and these Bye-laws with regard to disclosure of
                          his interest shall be entitled to vote in respect of
                          any contract, transaction or arrangement in which he
                          is so interested and if he shall do so his vote shall
                          be counted, and he shall be taken into account in
                          ascertaining whether a quorum is present.

94.          So long as a quorum of Directors remains in office, the continuing
             Directors may act notwithstanding any vacancy in the Board but, if
             no such quorum remains, the continuing Directors or a sole
             continuing Director may act only for the purpose of calling a
             general meeting.

95.          The Directors shall elect one of their number to be the Chairman of
             the Board (the "Chairman"). The Chairman shall hold office until
             his successor is elected by the Board. The Chairman, and in his
             absence the Deputy Chairman, shall preside as chairman at every
             meeting of the Board. If there is no such Chairman and Deputy
             Chairman, or if at any meeting the Chairman and the Deputy Chairman
             are not present within five minutes after the time appointed for
             holding the meeting, the Directors present may choose one of their
             number to be chairman of the meeting. The Chairman and Deputy
             Chairman shall not be entitled, by virtue of such capacity, to
             exercise a vote (casting or otherwise) at any meeting of the Board.

96.          The meetings and proceedings of any committee consisting of two or
             more members shall be governed by the provisions contained in these
             Bye-laws for regulating the meetings and proceedings of the Board
             so far as the same are applicable and are not superseded by any
             regulations imposed by the Board.

97.          Subject to Bye-law 38, a resolution of the Board or of a committee
             of the Board shall be validly passed without a meeting if the text
             of the resolution has been unanimously approved in writing by all
             the Directors or by all members of such committee, as the case may
             be. Such resolution shall be sent by post or facsimile to each
             Director 


                                       35
<PAGE>

             entitled to receive notice of such meeting in accordance with the
             notice provisions of Bye-law 117. Such resolution shall take effect
             at the time when the last of the written approvals is actually
             received by the Company. Such resolution may be contained in one
             document or in several documents in the like form, each signed by
             one or more of the Directors or members of the committee concerned.

98.          All acts done by the Board or by any committee or by any person
             acting as a Director or member of a committee or any person duly
             authorised by the Board or any committee, shall, notwithstanding
             that it is afterwards discovered that there was some defect in the
             appointment of any Director or member of such committee or person
             acting as aforesaid or that they or any of them were disqualified
             or had vacated their office, be as valid as if every such person
             had been duly appointed and was qualified and had continued to be a
             Director, member of such committee or person so authorised.

                                    OFFICERS

99.          The officers of the Company shall include, at the discretion of the
             Board, (i) a Chairman and a Deputy Chairman or (ii) a President and
             a Vice President who shall be elected by the Board and who shall be
             Directors. In addition, the Board may appoint any person to hold
             such other office (including any additional Vice-Presidencies) as
             the Board may from time to time determine. Any person elected or
             appointed pursuant to this Bye-law shall hold office for such
             period and upon such terms as the Board may determine and the Board
             may revoke or terminate any such election or appointment. Any such
             revocation or termination shall be without prejudice to any claim
             for damages that such officer may have against the Company or the
             Company may have against such officer for any breach of any
             contract of service between him and the Company which may be
             involved in such revocation or termination. Except as provided in
             the Companies Acts or these Bye-laws, the powers and duties of the
             officers of the Company shall be such, if any, as are determined
             from time to time by the Board.

                                     MINUTES

100.         The Directors shall cause minutes to be made and books kept for the
             purpose of recording:

             (i)          all appointments of officers made by the Directors;

             (ii)         the names of the Directors and other persons, if any,
                          present at each meeting of the Board and of any
                          committee;

             (iii)        all proceedings at meetings of the Company, of the
                          Board, of the holders of any class of Shares in the
                          Company, and of committees; and

             (iv)         all proceedings of managers, if any.


                                       36
<PAGE>

                      SECRETARY AND RESIDENT REPRESENTATIVE

101.         The Secretary, and, if required, the Resident Representative, shall
             be appointed by the Board at such remuneration, if any, and upon
             such terms as it may deem appropriate and any Secretary so
             appointed may be removed by the Board.

             The duties of the Secretary and Resident Representative shall be
             those prescribed by the Companies Acts, together with such other
             duties as shall from time to time be prescribed by the Board.

102.         A provision of the Companies Acts or these Bye-laws requiring or
             authorising a thing to be done by or to a Director and the
             Secretary shall not be satisfied by its being done by or to the
             same person acting both as Director and as, or in the place of, the
             Secretary.

                                    THE SEAL

103.         (a)          The Seal shall consist of a circular metal device with
                          the name of the Company around the outer margin
                          thereof and the country and year of incorporation
                          across the centre thereof. Should the Seal not have
                          been received at the Registered Office in such form at
                          the date of adoption of this Bye-law then, pending
                          such receipt, any document requiring to be sealed with
                          the Seal shall be sealed by affixing a red wafer seal
                          to the document with the name of the Company, and the
                          country and year of incorporation type-written across
                          the centre thereof.

             (b)          The Board shall provide for the custody of every Seal.
                          A Seal shall only be used by authority of the Board or
                          of a committee of the Board authorised by the Board in
                          that behalf. Subject to these Bye-laws, any instrument
                          to which a Seal is affixed shall be signed by a
                          Director and by the Secretary or by two Directors or
                          by any two persons authorised either generally or
                          specifically by the Board to attest to the use of the
                          Seal; PROVIDED that the Secretary or a Director or any
                          such authorised person may affix a Seal over his
                          signature only to authenticate copies of these
                          Bye-laws, the minutes of any meeting or any other
                          documents requiring authentication.

                          DIVIDENDS AND OTHER PAYMENTS

104.         Subject to Bye-law 38, the Board may from time to time declare cash
             dividends or distributions out of contributed surplus to be paid to
             the Shareholders according to their rights and interests including
             such interim dividends as appear to the Board to be justified by
             the position of the Company. The Board may also pay any fixed cash
             dividend which is payable on any Shares of the Company half yearly
             or on such other dates, whenever the position of the Company, in
             the opinion of the Board, justifies such payment.

105.         No dividend, distribution or other moneys payable by the Company on
             or in respect of any Share shall bear interest against the Company.

106.         Any dividend, distribution, interest or other sum payable in cash
             to the holder of Shares may be paid by cheque or warrant sent
             through the post addressed to the holder at his address as
             appearing in the Register or, in the case of joint holders,


                                       37
<PAGE>

             addressed to the holder whose name stands first in the Register in
             respect of the Shares at his registered address as appearing in the
             Register or addressed to such person at such address as the holder
             or joint holders may in writing direct. Every such cheque or
             warrant shall, unless the holder or joint holders otherwise direct,
             be made payable to the order of the holder or, in the case of joint
             holders, to the order of the holder whose name stands first in the
             Register in respect of such Shares, and shall be sent at his or
             their risk and payment of the cheque or warrant by the bank on
             which it is drawn shall constitute a good discharge to the Company.
             Any one of two or more joint holders may give effectual receipts
             for any dividends, distributions or other moneys payable or
             property distributable in respect of the Shares held by such joint
             holders.

107.         Any dividend or distribution out of contributed surplus unclaimed
             for a period of six years from the date of declaration of such
             dividend or distribution shall be forfeited and shall revert to the
             Company and the payment by the Board of any unclaimed dividend,
             distribution, interest or other sum payable on or in respect of the
             Share into a separate account shall not constitute the Company a
             trustee in respect thereof.

108.         Subject to Bye-law 38 and upon the Resolution of the Company, the
             Board may direct payment or satisfaction of any dividend or
             distribution out of contributed surplus wholly or in part by the
             distribution of specific assets, and in particular of paid-up
             shares or debentures of any other company, and where any difficulty
             arises in regard to such distribution or dividend the Board may
             settle it as it deems expedient, and in particular, may authorise
             any person to sell and transfer any fractions or may ignore
             fractions altogether, and may fix the value for distribution or
             dividend purposes of any such specific assets and may determine
             that cash payments shall be made to any Shareholders upon the
             footing of the values so fixed in order to secure equality of
             distribution and may vest any such specific assets in trustees as
             may seem expedient to the Board.

                                    RESERVES

109.         Subject to Bye-law 38, the Board may, before recommending or
             declaring any dividend or distribution out of contributed surplus,
             set aside such sums as it deems proper as reserves which shall, at
             the discretion of the Board, be applicable for any purpose of the
             Company and pending such application may, also at such discretion,
             either be employed in the business of the Company or be invested in
             such investments as the Board may from time to time deem
             appropriate. The Board may also without placing the same to reserve
             carry forward any sums which it may think it prudent not to
             distribute.

                            CAPITALISATION OF PROFITS

110.         Subject to Bye-law 38, the Company may, upon the recommendation of
             the Board, at any time and from time to time resolve by Resolution
             to the effect that it is desirable to capitalise all or any part of
             any amount for the time being standing to the credit of any reserve
             or fund which is available for distribution or to the credit of any
             share premium account or any capital redemption reserve fund and,
             accordingly, that such amount be set free for distribution amongst
             the Shareholders or any class of Shareholders who would be entitled
             thereto if distributed by way of dividend and in the same
             proportions, on the footing that the same be not paid in cash but
             be applied in payment in full of unissued Shares, debentures or
             other obligations of the 


                                       38
<PAGE>

             Company, to be allotted and distributed or credited as fully paid
             amongst such Shareholders, and the Board shall give effect to such
             Resolution; PROVIDED that for the purposes of this Bye-law, any sum
             standing to the credit of a share premium account may only be
             applied in crediting as fully-paid Shares of the same class as that
             from which the relevant share premium was derived and PROVIDED
             FURTHER that, in respect of any capitalisation of any sum standing
             to the credit of the share premium account which is required in
             order to give effect to the terms on which Shares of any class are
             required or entitled to be converted into Shares of any other
             class, the Board shall have authority to resolve upon such
             capitalisation without the need for a resolution of the Company and
             this Bye-law shall not require any shares to be allotted to the
             Shareholders or any class of Shareholders proportionately to the
             number of Shares, or Shares of the relevant class, held by them
             respectively if the terms of conversion otherwise require.

111.         Where any difficulty arises in regard to any distribution under the
             last preceding Bye-law, the Board may settle the same as it deems
             expedient and, in particular, may authorise any person to sell and
             transfer any fractions or may resolve that the distribution should
             be as nearly as may be practicable in the correct proportion but
             not exactly so or may ignore fractions altogether, and may
             determine that cash payments should be made to any Shareholders in
             order to adjust the rights of all parties, as may seem expedient to
             the Board. The Board may appoint any person to sign on behalf of
             the persons entitled to participate in the distribution any
             contract necessary or desirable for giving effect thereto and such
             appointment shall be effective and binding upon the Shareholders.

                                  RECORD DATES

112.         Notwithstanding any other provisions of these Bye-laws, the Company
             by Resolution or the Board may fix any date as the record date for
             any dividend, distribution, allotment or issue and for the purpose
             of identifying the persons entitled to receive notices of general
             meetings. Any such record date may be on or at any time before or
             after any date on which such dividend, distribution, allotment or
             issue is declared, paid or made or such notice is dispatched.

                               ACCOUNTING RECORDS

113.         The Board shall cause to be kept accounting records sufficient to
             give a true and fair view of the state of the Company's affairs and
             to show and explain its transactions in accordance with the
             Companies Acts.

114.         The records of account shall be kept at the Registered Office or at
             such other place or places as the Board deems appropriate, and
             shall at all times be open to inspection by the Directors; PROVIDED
             that if the records of account are kept at some place outside
             Bermuda, there shall be kept at an office of the Company in Bermuda
             such records as will enable the Directors to ascertain with
             reasonable accuracy the financial position of the Company at the
             end of each three month period. No Shareholder (other than an
             officer of the Company) shall have any right to inspect any
             accounting record or book or document of the Company except as
             conferred by law or authorised by the Board or the Company by
             Resolution.


                                       39
<PAGE>

115.         A copy of every balance sheet and statement of income and
             expenditure, including every document required by law to be annexed
             thereto, which is to be laid before the Company in general meeting,
             together with a copy of the auditor's report, shall be sent to each
             person entitled thereto in accordance with the requirements of the
             Companies Acts.

                                      AUDIT

116.         Except and to the extent that an audit is waived in the manner
             permitted by the Companies Acts, auditors shall be appointed and
             their duties regulated in accordance with the Companies Acts, any
             other applicable law and such requirements not inconsistent with
             the Companies Acts as the Board may from time to time determine.

                     SERVICE OF NOTICES AND OTHER DOCUMENTS

117.         Any notice, communication or other document (including a share
             certificate) shall be in writing duly signed by or on behalf of the
             person giving it and may be delivered to any Shareholder or the
             Company by sending it by commercial courier or by facsimile or
             telex to such Shareholder at his address as appearing in the
             Register or in any case at such other address as the Shareholder in
             question may notify the other Shareholders in accordance with this
             Bye-law 117 or to the Company at its Registered Office. In the case
             of joint holders of a Share, service or delivery of any notice or
             other document on or to one of the joint holders shall for all
             purposes be deemed as sufficient service on or delivery to all the
             joint holders. A copy of any notice or other communication to a
             Shareholder shall also be sent to such specified person at such
             address as may be notified by such Shareholder to the other
             Shareholders in the manner aforesaid; PROVIDED that a failure to
             send such copy shall not invalidate any notice or other
             communication to the Shareholder concerned. Any notice given by
             commercial courier shall be deemed to have been delivered on the
             date of actual delivery thereof and any notice by facsimile or
             telex shall be deemed to have been delivered on the date that the
             facsimile or telex is dispatched and confirmation of receipt
             (electronic or otherwise) is made.

118.         Any notice or other document delivered, sent or given to a
             Shareholder in any manner permitted by these Bye-laws shall,
             notwithstanding that such Shareholder is then dead or bankrupt or
             that any other event has occurred, and whether or not the Company
             has notice of the death or bankruptcy or other event, be deemed to
             have been duly served or delivered in respect of any Share
             registered in the name of such Shareholder as sole or joint holder
             unless his name shall, at the time of the service or delivery of
             the notice or document, have been removed from the Register as the
             holder of the Share, and such service or delivery shall for all
             purposes be deemed as sufficient service or delivery of such notice
             or document on all persons interested (whether jointly with or as
             claiming through or under him) in the Share.


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<PAGE>

                                   WINDING UP

119.         In the event of the Company being wound up by way of a voluntary
             winding-up, the Shareholders will select a liquidator who is (i) an
             attorney qualified to practice in Bermuda and (ii) acceptable to
             all the Shareholders. If the Shareholders are unable in the first
             instance to agree on the selection of a liquidator, the
             Shareholders agree to discuss such selection in good faith for a
             period of 30 days. If the Shareholders are unable to reach
             agreement at the conclusion of such 30 day period, the Company
             shall require the nomination of a liquidator by the Institute of
             Chartered Public Accountants of Bermuda.

120.         The Shareholders shall prove in the winding-up of the Company to
             the maximum extent permitted by law for all sums due or to fall due
             to them respectively from the Company and shall exercise all rights
             of set-off and generally do all such other acts and things as may
             be available to them in order to obtain the maximum receipts and
             recoveries.

121.         Subject to these Bye-laws, to the extent that any Shareholder does
             not receive satisfaction in full in the winding-up of the Company
             of all sums due or to fall due to it as a creditor of the Company
             then the aggregate shortfall between the sums due or to fall due to
             the Shareholders and the aggregate of all amounts actually
             recovered by the Shareholders from the Company or its liquidator
             (whether by direct payment or the exercise of any right of set-off
             or otherwise) shall be calculated and apportioned between the
             Shareholders in proportion to the respective sums due or to fall
             due to each Shareholder as a creditor of the Company, and, if
             necessary, the Shareholders shall make payments to each other to
             ensure that each Shareholder receives its respective share of the
             aggregate of all amounts recovered and bears its respective share
             of the aggregate amount of such shortfall.

                                    INDEMNITY

122.         Subject to the proviso below, every Director, officer of the
             Company and member of a committee constituted under Bye-law 89 and
             any Resident Representative shall be indemnified out of the funds
             of the Company against all civil liabilities, loss, damage or
             expense (including but not limited to liabilities under contract,
             tort and statute or any applicable foreign law or regulation and
             all reasonable legal and other costs and expenses properly payable)
             incurred or suffered by him as such Director, officer, committee
             member or Resident Representative (whether acting in such capacity
             before or after the date of these Bye-laws) and the indemnity
             contained in this Bye-law shall extend to any person acting as a
             Director, officer, committee member or Resident Representative in
             the reasonable belief that he has been so appointed or elected
             notwithstanding any defect in such appointment or election,
             PROVIDED ALWAYS that the indemnity contained in this Bye-law shall
             not extend to any matter which would render it void pursuant to the
             Companies Acts or which by virtue of any rule of law would
             otherwise attach to the person seeking indemnification pursuant
             hereto in respect of any willful negligence, willful default, fraud
             or dishonesty of which he may be guilty in relation to his
             activities on behalf of the Company.


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<PAGE>

123.         Every Director, officer and member of a committee duly constituted
             under Bye-law 89 and any Resident Representative shall be
             indemnified out of the funds of the Company against all liabilities
             incurred by him as such Director, officer, committee member or
             Resident Representative in defending any proceedings, whether civil
             or criminal, in which judgment is given in his favour, or in which
             he is acquitted, or in connection with any application under the
             Companies Acts in which relief from liability is granted to him by
             the court.

124.         To the extent that any Director, officer or member of a committee
             duly constituted under Bye-law 89 or any Resident Representative is
             entitled to claim an indemnity pursuant to these Bye-laws in
             respect of amounts paid or discharged by him, the relative
             indemnity shall take effect as an obligation of the Company to
             reimburse the person making such payment or affecting such
             discharge. In addition, the Company will advance to any person who
             may be entitled to indemnification hereunder in respect of civil
             liabilities, loss, damage or expense, amounts necessary to pay the
             reasonable fees and expenses of counsel to such indemnified person
             upon presentation of invoices therefor, provided that the Company
             need not so advance such amounts unless and until the person
             requesting the same shall have delivered to the Company a binding
             contract to refund such amounts to the Company if such person
             ultimately should be found not to be entitled to indemnification
             hereunder.

                        DIRECTORS AND OFFICERS INSURANCE

125.         Notwithstanding section 98 of the Companies Act 1981, the Company
             may purchase and maintain insurance for the benefit of any officer
             of the Company and any Resident Representative against any
             liability incurred by him under section 97(1)(b) of that Act in his
             capacity as an officer of the Company or indemnifying such officer
             in respect of any loss arising or liability attaching to him by
             virtue of any rule of law in respect of any negligence, default,
             breach of duty or breach of trust of which the officer or such
             Resident Representative may be guilty in relation to the Company or
             any subsidiary thereof.

                         TRANSFER BY WAY OF CONTINUATION

126.         If the Company is permitted in accordance with the provisions of
             the Companies Acts, it shall, subject to the provisions thereof,
             have the power to negotiate by way of continuation as a body
             corporate under the laws of any jurisdiction outside Bermuda and to
             be discontinued in Bermuda.

                             ALTERATION OF BYE-LAWS

127.         Subject to Bye-laws 5 and 38, these Bye-laws may be amended from
             time to time in the manner provided for in the Companies Acts.

128.         The Company and each Shareholder acknowledges the various rights
             and remedies under the terms of the Financing Documents (as defined
             in the Credit Agreement) that have been granted to the lenders
             providing financing to the Company thereunder, and the Company and
             each Shareholder further acknowledges that such lenders shall have
             all rights and remedies set forth therein.

129.         (a)          Notwithstanding any other provision of these Bye-laws,
                          none of the restrictions on the transfer of any Shares
                          or any interests or rights therein (or 


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<PAGE>

                          the registration or recognition thereof) contained in
                          these Bye-laws shall be applicable with respect to any
                          transfer permitted by Bye-law 23(p)(iv), and any
                          transferee (including any Collateral Trustee) of any
                          such permitted transfer of Shares or any interests or
                          rights therein shall hold such Shares free and clear
                          of any transfer restrictions imposed by these
                          Bye-laws.

             (b)          No action which is taken or is to be taken by any
                          Collateral Trustee (or any secured party under any
                          Financing Document) pursuant to or in accordance with
                          the terms of any Pledge Agreement (including any such
                          permitted transfer or the registration or recognition
                          thereof and any exercise of any voting right) shall be
                          subject to the payment by any person of any funding or
                          other obligations of any Shareholder or to any
                          restrictions imposed by Bye-laws 18, 19, 20 or 21.

130.         If one or more of the provisions contained in these Bye-laws, or
             any part thereof, hereafter are construed to be invalid or
             unenforceable, the same shall not affect the remainder of these
             Bye-laws, which shall be given full effect, without regard to the
             invalid or unenforceable portions.


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