Document:

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                                                                     EXHIBIT 4.2

                               RESTATED BYE-LAWS

                                       OF

                               IPC HOLDINGS, LTD.

 (As amended and restated by resolution of the Members adopted on June 13, 2003)

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Bye-Law                                                                   Page
-------                                                                   ----
<S>                                                                       <C>
1.    Interpretation                                                        1
2.    Board of Directors                                                    6
3.    Management of the Company                                             6
4.    Power to appoint chief executive officer                              6
5.    Power to appoint manager                                              7
6.    Power to authorise specific actions                                   7
7.    Power to appoint attorney                                             7
8.    Power to appoint and dismiss employees                                7
9.    Power to borrow and charge property                                   8
10.   Power to purchase shares of the Company                               8
11.   Election of Directors                                                10
12.   Defects in appointment of Directors                                  11
13.   Alternate Directors                                                  11
14.   Removal of Directors                                                 11
15.   Vacancies on the Board                                               12
16.   Notice of meetings of the Board                                      13
17.   Quorum at meetings of the Board                                      14
18.   Meetings of the Board                                                14
19.   Unanimous written resolutions                                        14
20.   Contracts and disclosure of Directors' interests                     15
21.   Remuneration of Directors                                            15
22.   Other interests of Directors                                         16
</TABLE>

                                        i

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<TABLE>
<S>                                                                        <C>
23.   Power to delegate to a committee                                     16
24.   Officers of the Company                                              17
25.   Appointment of Officers                                              17
26.   Remuneration of Officers                                             18
27.   Duties of Officers                                                   18
28.   Chairman of meetings                                                 18
29.   Register of Directors and Officers                                   18
30.   Obligations of Board to keep minutes                                 19
31.   Indemnification of Directors and Officers of the Company             20
32.   Waiver of claim by Member                                            21
33.   Notice of annual general meeting                                     21
34.   Notice of special general meeting                                    21
35.   Accidental omission of notice of general meeting                     22
36.   Meeting called on requisition of Members                             22
37.   Short notice                                                         22
38.   Postponement of Meetings                                             22
39.   Quorum For General Meeting                                           23
40.   Adjournment of meetings                                              23
41.   Attendance at meetings                                               24
42.   Written resolutions                                                  24
43.   Attendance of Directors                                              25
44.   Voting at meetings                                                   25
45.   Voting on show of hands                                              25
46.   Decision of chairman                                                 26
47.   Demand for a poll                                                    26
48.   Seniority of joint holders voting                                    28
49.   Instrument of proxy                                                  28
50.   Representation of corporations at meetings                           28
51.   Rights of shares                                                     29
52.   Limitation on voting rights of Controlled Shares                     31
</TABLE>

                                       ii

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<TABLE>
<S>                                                                        <C>
53.   Power to issue shares                                                34
54.   Variation of rights and alteration of share capital                  35
55.   Registered holder of shares                                          36
56.   Death of a joint holder                                              36
57.   Share certificates                                                   36
58.   Calls on shares                                                      37
59.   Contents of Register of Members                                      37
60.   Inspection of Register of Members                                    38
61.   Determination of record dates                                        38
62.   Instrument of transfer                                               38
63.   Restriction on transfer                                              39
64.   Transfers by joint holders                                           41
65.   Lien on Shares                                                       41
66.   Registration on bankruptcy                                           42
67.   Declaration of dividends by the Board                                42
68.   Other distributions                                                  43
69.   Reserve fund                                                         43
70.   Deduction of amounts due to the Company                              43
71.   Unclaimed dividends                                                  43
72.   Interest on dividend                                                 44
73.   Issue of bonus shares                                                44
74.   Records of account                                                   44
75.   Financial year end                                                   45
76.   Financial statements                                                 45
77.   Appointment of Auditor                                               45
78.   Remuneration of Auditor                                              45
79.   Vacation of office of Auditor                                        45
80.   Access to books of the Company                                       46
81.   Report of the Auditor                                                46
82.   Notices to Members of the Company                                    47
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<TABLE>
<S>                                                                         <C>
83.   Notices to joint Members                                              47
84.   Service and delivery of notice                                        47
85.   The Seal                                                              48
86.   Manner in which seal is to be affixed                                 48
87.   Determination to wind up Company                                      48
88.   Winding-up/distribution by liquidator                                 48
89.   Alteration of Bye-laws                                                49
</TABLE>

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                                 B Y - L A W S

                                       OF

                               IPC HOLDINGS, LTD.

                                 INTERPRETATION

1.       Interpretation

         (1)      In these Bye-laws the following words and expressions shall,
where not inconsistent with the context, have the following meanings
respectively:-

                  (a)      "Act" means the Companies Act 1981 as amended from
                           time to time;

                  (b)      "Affiliate" has the meaning ascribed thereto in Rule
                           144 promulgated under the Securities Act;

                  (c)      "Alternate Director" means an alternate Director;

                  (d)      "AIG Option" means the option to purchase Common
                           Shares granted to American International Group, Inc.,
                           a Delaware Corporation, by the Company pursuant to
                           the Amended and Restated Option Agreement, dated the
                           effective date hereof, between the Company and
                           American International Group, Inc.;

                  (e)      "AIG Person" means any of American International
                           Group, Inc., a Delaware corporation ( and its
                           successors) and its Affiliates;

                  (f)      "Auditor" includes any individual or partnership;

                  (g)      "Board" means the Board of Directors appointed or
                           elected pursuant to these Bye-laws and acting by
                           resolution in accordance with the Act and these
                           Bye-laws or the Directors present at a meeting of
                           Directors at which there is a quorum;

                  (h)      "Business Day" means any day, other than a Saturday,
                           a Sunday or any day on which banks in Hamilton,
                           Bermuda or The City of New York, United States are
                           authorized or obligated by law or executive order to
                           close;

                  (i)      "Code" means the United States Internal Revenue Code
                           of 1986, as amended from time to time, or any federal
                           statute from time to time in effect that has replaced
                           such statute, and any reference in these Bye-laws to
                           a provision of the Code or a rule or regulation
                           promulgated thereunder means such provision, rule or
                           regulation as amended from time to time or any
                           provision

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                           of a federal law, or any federal rule or regulation,
                           from time to time in effect that has replaced such
                           provision, rule or regulation;

                  (j)      "Common Shares" means the common shares, par value
                           U.S.$0.01 per share, of the Company and includes a
                           fraction of a Common Share;

                  (k)      "Company" means the company for which these Bye-laws
                           are approved and confirmed;

                  (l)      "Controlled Shares" of any Person means all Common
                           Shares owned by such Person, whether:

                           (i)      directly;

                           (ii)     with respect to Persons who are U.S.
                                    Persons, by application of the attribution
                                    and constructive ownership rules of Sections
                                    958(a) and 958(b) of the Code; or,

                           (iii)    beneficially owned directly or indirectly
                                    within the meaning of Section 13(d)(3) of
                                    the Exchange Act and the rules and
                                    regulations thereunder other than Excluded
                                    Controlled Shares;

                  (m)      "debenture" means debenture stock, mortgages, bonds
                           and any other such debt securities of the Company
                           whether constituting a charge on the assets of the
                           Company or not;

                  (n)      "Director" means a director of the Company and shall
                           include an Alternate Director;

                  (o)      "dividend" includes a bonus or capitalization issue
                           of shares;

                  (p)      "Exchange Act" means the United States Securities
                           Exchange Act of 1934 as amended from time to time or
                           any federal statute from time to time in effect that
                           has replaced such statute, and any reference in these
                           Bye-laws to a provision of the Exchange Act or a rule
                           or regulation promulgated thereunder means such
                           provision, rule or regulation as amended from time to
                           time or any provision of a federal law, or any
                           federal rule or regulation, from time to time in
                           effect that has replaced such provision, rule or
                           regulation;

                  (q)      "Excluded Controlled Shares" in reference to any
                           Person means Controlled Shares of such Person that
                           would not be Controlled Shares of such Person but for
                           clause (iii) of the definition of Controlled Shares,
                           provided that (i) such Person is registered under the
                           United States federal securities laws as a broker,
                           dealer or investment adviser or is a bank as defined
                           in Section 3(a)(6) of the Exchange Act, (ii) such
                           Person is the beneficial owner of such shares

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                           solely because it has discretionary authority to vote
                           or dispose of such shares in a fiduciary capacity on
                           behalf of its client who is also a beneficial owner
                           of such shares, (iii) the voting rights carried by
                           such shares are not being exercised (and the client
                           is informed that they are not being exercised) by
                           such broker, dealer, investment adviser or bank and
                           are being exercised (if they are exercised at all) by
                           such client, and (iv) the Person would meet the
                           eligibility test for the filing of Schedule 13-G
                           contained in Rule 13d-1(b)(1) under the Exchange Act
                           with respect to the entirety of its common share
                           ownership (without regard to whether such Person
                           actually has any filing obligations under Section
                           13(d) of the Exchange Act), and provided, further,
                           that the Company shall have received such assurances
                           as it may request confirming that such shares are
                           Excluded Controlled Shares. The Company may assume
                           that the Controlled Shares of each Member who is a
                           Person do not include any Excluded Controlled Shares
                           unless such Member otherwise notifies the Company and
                           provides such assurance.

                  (r)      "Fair Market Value" means, with respect to a
                           repurchase of any shares of the Company in accordance
                           with these Bye-laws, (i) if such shares are listed on
                           a securities exchange (or quoted in a securities
                           quotation system), the average

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                           closing sale price of such shares on such exchange
                           (or in such quotation system), or, if such shares are
                           listed on (or quoted in) more than one exchange (or
                           quotation system), the average closing sale price of
                           the shares on the principal securities exchange (or
                           quotation system) on which such shares are then
                           traded, or, if such shares are not then listed on a
                           securities exchange (or quotation system) but are
                           traded in the over-the-counter market, the average of
                           the latest bid and asked quotations for such shares
                           in such market, in each case for the last five
                           trading days immediately preceding the day on which
                           notice of the repurchase of such shares is sent
                           pursuant to these Bye-laws or (ii) if no such closing
                           sales prices or quotations are available because such
                           shares are not publicly traded or otherwise, the fair
                           value of such shares as determined by one independent
                           nationally recognized investment banking firm chosen
                           by the Company and reasonably satisfactory to the
                           Member whose shares are to be so repurchased by the
                           Company, provided that the calculation of the Fair
                           Market Value of the shares made by such appointed
                           investment banking firm (i) shall not include any
                           discount relating to the absence of a public trading
                           market for, or any transfer restrictions on, such
                           shares, and (ii) such calculation shall be final and
                           the fees and expenses stemming from such calculation
                           shall be borne by the Company or its assignee, as the
                           case may be;

                  (s)      "Formula" has the meaning ascribed thereto in Bye-law
                           52";

                  (t)      "Member" means the person registered in the Register
                           of Members as the holder of shares in the Company
                           and, when two or more persons are so registered as
                           joint holders of shares, means the person whose name
                           stands first in the Register of Members as one of
                           such joint holders or all of such persons as the
                           context so requires;

                  (u)      "notice" means written notice as further defined in
                           these Bye-laws unless otherwise specifically stated;

                  (v)      "Officer" means any person appointed by the Board to
                           hold an office in the Company;

                  (w)      "Person" means any individual, company, corporation,
                           firm, partnership, trust or any other business,
                           entity or person, whether or not recognized as
                           constituting a separate legal entity;

                  (x)      "Preferred Shares" means the preferred shares, par
                           value U.S.$0.01 per share, of the Company and
                           includes a fraction of a Preferred Share;

                  (y)      "Register of Directors and Officers" means the
                           Register of Directors and Officers referred to in
                           Bye-law 29;

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                  (z)      "Register of Members" means the Register of Members
                           referred to in Bye-law 59;

                  (aa)     "Secretary" means the person appointed to perform any
                           or all the duties of secretary of the Company and
                           includes any deputy or assistant secretary;

                  (bb)     "Securities Act" means the United States Securities
                           Act of 1933 as amended from time to time or any
                           federal statute from time to time in effect which has
                           replaced such statute, and any reference in these
                           Bye-laws to a provision of the Securities Act or a
                           rule or regulation promulgated thereunder means such
                           provision, rule or regulation as amended from time to
                           time or any provision of a federal law, or any
                           federal rule or regulation, from time to time in
                           effect that has replaced such provision, rule or
                           regulation;

                  (cc)     "share" means a share of any class of shares in the
                           capital of the Company (including, where the context
                           so admits, Common Shares) and includes a fraction of
                           a share;

                  (dd)     "subsidiary", with respect to any Person, means a
                           company more than fifty percent (50%) (or, in the
                           case of a wholly owned subsidiary, one hundred
                           percent (100%)) of the outstanding Voting Shares of
                           which is owned, directly or indirectly, by such
                           Person or by one or more other subsidiaries, or any
                           such Person and one or more other subsidiaries;

                  (ee)     "10% Shareholder" means a Person who owns, in the
                           aggregate, (i) directly, (ii) with respect to Persons
                           who are U.S. Persons, by application of the
                           attribution and constructive ownership rules of
                           Sections 958(a) and 958(b) of the Code or (iii)
                           beneficially, directly or indirectly within the
                           meaning of Section 13(d)(3) of the Exchange Act,
                           issued shares of the Company representing ten percent
                           (10%) or more of the total combined voting rights
                           attaching to the issued Common Shares and the issued
                           shares of any other class or classes of shares of the
                           Company other than, with respect to clause (iii),
                           Excluded Controlled Shares;

                  (ff)     "Unadjusted Basis", when used with respect to the
                           aggregate voting rights held by any Member, refers to
                           the determination of such rights without reference to
                           the provisions relating to the adjustment of voting
                           rights contained in Bye-law 52;

                  (gg)     "United States" means the United States of America
                           and dependent territories or any part thereof;

                  (hh)     "United States 25% Shareholder" means a U.S. Person
                           who owns, directly or by application of the
                           constructive ownership rules of Sections 958(a) and
                           958(b) of the Code, issued shares representing either
                           (i) more than

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                           twenty-five percent (25%) of the total combined
                           voting rights attaching to the issued Common Shares
                           and the issued shares of any other class or classes
                           of shares of the Company or (ii) more than
                           twenty-five percent (25%) of the total combined value
                           of the Common Shares and any other shares of the
                           Company, in each case determined pursuant to Section
                           957 of the Code;

                  (ii)     "U.S. Person" means (i) an individual who is a
                           citizen or resident of the United States, (ii) a
                           corporation or partnership that is, as to the United
                           States, a domestic corporation or partnership and
                           (iii) an estate or trust that is subject to United
                           States Federal income tax on its income regardless of
                           its source; and

                  (jj)     "Voting Share" of any Person means any share in such
                           Person conferring voting rights on the holder thereof
                           (other than such voting rights as would exist solely
                           in relation to a proposal to alter or vary the rights
                           attaching to such shares solely upon the future
                           occurrence of a contingency or voting rights
                           attaching solely by virtue of the provisions of the
                           Act).

         (2)      In these Bye-laws, where not inconsistent with the context:

                  (a)      words denoting the plural number include the singular
                           number and vice versa;

                  (b)      words denoting the masculine gender include the
                           feminine gender;

                  (c)      words importing persons include companies,
                           associations or bodies of persons whether corporate
                           or not;

                  (d)      the word:

                           (i)      "may" shall be construed as permissive;

                           (ii)     "shall" shall be construed as imperative;
                                    and

                  (e)      unless otherwise provided herein words or expressions
                           defined in the Act shall bear the same meaning in
                           these Bye-laws.

         (3)      Expressions referring to writing or written shall, unless the
                  contrary intention appears, include facsimile, printing,
                  lithography, photography and other modes of representing words
                  in a visible form.

         (4)      Headings used in these Bye-laws are for convenience only and
                  are not to be used or relied upon in the construction hereof.

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                               BOARD OF DIRECTORS

2.       Board of Directors

         The business of the Company shall be managed and conducted by the
         Board.

3.       Management of the Company

         (1)      In managing the business of the Company, the Board may
exercise all such powers of the Company as are not, by statute or by these
Bye-laws, required to be exercised by the Company in general meeting subject,
nevertheless, to these Bye-laws, the provisions of any statute, and to such
regulations as may be prescribed by the Company in general meeting.

         (2)      No regulation or alteration to these Bye-laws made by the
Company in general meeting shall invalidate any prior act of the Board which
would have been valid if that regulation or alteration had not been made.

         (3)      The Board may procure that the Company pays to Members or
third parties all expenses incurred in promoting and incorporating the Company.

4.       Power to appoint chief executive officer

         The Board may from time to time appoint one or more Persons to the
office of chief executive officer of the Company who shall, subject to the
control of the Board, supervise and administer all of the general business and
affairs of the Company.

5.       Power to appoint manager

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         The Board may appoint a Person to act as manager of the Company's day
to day business and may entrust to and confer upon such manager such powers and
duties as it deems appropriate for the transaction or conduct of such business.

6.       Power to authorise specific actions

         The Board may from time to time and at any time authorise any Director,
Officer or other Person or body of Persons to act on behalf of the Company for
any specific purpose and in connection therewith to execute any agreement,
document or instrument on behalf of the Company.

7.       Power to appoint attorney

         The Board may from time to time and at any time by power of attorney
appoint any company, firm, Person or body of Persons, whether nominated directly
or indirectly by the Board, to be an attorney of the Company for such purposes
and with such powers, authorities and discretions (not exceeding those vested in
or exercisable by the Board) and for such period and subject to such conditions
as they may think fit and any such power of attorney may contain such provisions
for the protection and convenience of persons dealing with any such attorney as
the Board may think fit and may also authorise any such attorney to sub-delegate
all or any of the powers, authorities and discretions so vested in the attorney.
Such attorney may, if so authorised under the seal of the Company, execute any
deed or instrument under their personal seal with the same effect as the
affixation of the seal of the Company.

8.       Power to appoint and dismiss employees

         The Board may appoint, suspend or remove any manager, secretary, clerk,
agent or employee of the Company and may fix their remuneration and determine
their duties.

                                        8

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9.       Power to borrow and charge property

         The Board may exercise all the powers of the Company to borrow money
and to mortgage or charge its undertaking, property and uncalled capital, or any
part thereof, and may issue debentures, debenture stock and other securities
whether outright or as security for any debt, liability or obligation of the
Company or any third party.

10.      Power to purchase shares of the Company

         (1)      Exercise of Power to Repurchase Shares of the Company

                  The Board may exercise all the powers of the Company to
purchase all or any part of its own shares pursuant to Sections 42 and 42A of
the Act or to discontinue the Company to a named country or jurisdiction outside
Bermuda pursuant to Section 132G of the Act.

         (2)      Unilateral Repurchase Right

         Subject to Section 42A of the Act, if the Board in its absolute and
unfettered discretion, on behalf of the Company, determines that share ownership
by any Member may result in adverse tax, regulatory or legal consequences to the
Company, any of its subsidiaries or any of the Members, the Company will have
the option, but not the obligation, to repurchase all or part of the shares held
by such Member (to the extent the Board, in the reasonable exercise of its
discretion, determines it is necessary to avoid or cure such adverse
consequences) for immediately available funds in an amount equal to the Fair
Market Value of such shares on the date the Company sends the Repurchase Notice
referred to below (the "Repurchase Price"); provided, that the Board will use
its best efforts to exercise this option equally among similarly situated
Members (to the extent possible under the circumstances). In that event, the
Company will also be entitled to assign its repurchase right to a third party or
parties including the other Members, with the consent of such assignee. Each
Member shall be bound by the determination by the Company to repurchase or
assign its right to repurchase

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such Member's shares and, if so required by the Company, shall sell the number
of shares that the Company requires it to sell.

         In the event that the Company or its assignee(s) determines to
repurchase any such shares, the Company shall provide each Member concerned with
written notice of such determination (a "Repurchase Notice") at least seven (7)
calendar days prior to such repurchase or such shorter period as each such
Member may authorize, specifying the date on which any such shares are to be
repurchased and the Repurchase Price. The Company may revoke the Repurchase
Notice at any time before it (or its assignee(s)) pays for the shares. Neither
the Company nor its assignee(s) shall be obliged to give general notice to the
Members of any intention to purchase or the conclusion of any purchase of
shares. Payment of the Repurchase Price by the Company or its assignee(s) shall
be by wire transfer and made at a closing to be held no less than seven (7)
calendar days after receipt of the Repurchase Notice by the Member.

         (3)      Restrictions on repurchases

                  If the Company redeems or purchases shares pursuant to this
Bye-law 10, it shall do only in a manner it believes would not result, upon
consummation of such redemption or purchase, in (i) the number of total
Controlled Shares of any Person other than an AIG Person, as a percentage of the
shares of the Company, increasing to ten percent (10%) or any higher percentage
or (ii) an AIG Person becoming or continuing to be a United States 25%
Shareholder, in each case (i) and (ii) on an Unadjusted Basis.

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11.      Election of Directors

         (1)      Number and term of office

                  The Board shall consist of not less than two (2) Directors or
such number in excess thereof as the Board may from time to time determine up to
a maximum of seven (7) Directors, each having one vote, who shall be elected,
except in the case of casual vacancy, by the Members in the manner set forth in
paragraph (2) of this Bye-law 11 at the annual general meeting or any special
general meeting called for the purpose and who shall hold office until the next
succeeding annual general meeting or until their successors are elected or
appointed or their office is otherwise vacated, and any general meeting may
authorize the Board to fill any vacancy in their number left unfilled at a
general meeting. Candidates for election at each annual general meeting or
special general meeting called for the purpose shall be nominated by the Board.

         (2)      Election by cumulative voting

                  Notwithstanding any other provisions of these Bye-laws, the
principle of cumulative voting shall apply in any election of Directors pursuant
to paragraph (1) of this Bye-law 11. Each Member entitled to vote in such
election (including any Member owning Controlled Shares) shall have a number of
votes equal to the product of (x) the number of votes conferred by such Member's
Common Shares (as adjusted pursuant to Bye-law 52, if applicable) and (y) the
number of persons standing for election as Directors at the general meeting.
Each Member may divide and distribute such Member's votes, as so calculated,
among any one or more candidates for the directorships to be filled, or such
Member may cast such Member's votes for a single candidate. At such election,
the candidates receiving the highest number of votes, up to the number of
directors to be chosen, shall stand elected, and an absolute majority of the
votes cast is not a prerequisite to the election of any candidate to the Board.

                                       11

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12.      Defects in appointment of Directors

         All acts done bona fide by any meeting of the Board or by a committee
of the Board or by any person acting as a Director shall, notwithstanding that
it be afterwards discovered that there was some defect in the appointment of any
Director or person acting as aforesaid, or that they or any of them were
disqualified, be as valid as if every person had been duly appointed and was
qualified to be a Director.

13.      Alternate Directors

         (1)      Each Director may appoint an Alternate Director and such
appointment shall become effective upon the Secretary receiving written notice
of such appointment. Any person so appointed shall have all the rights and
powers of the Director or Directors for whom such person is appointed in the
alternate, provided that such person shall not be counted more than once in
determining whether or not a quorum is present.

         (2)      An Alternate Director shall be entitled to receive notice of
all meetings of the Board and to attend and vote at any such meeting at which a
Director for whom such Alternate Director was appointed in the alternative is
not personally present and generally to perform at such meeting all the
functions of such Director for whom such Alternate Director was appointed.

         (3)      An Alternate Director shall cease to be such if the Director
for whom such Alternate Director was appointed ceases for any reason to be a
Director but may be re-appointed by the Board as alternate to the person
appointed to fill the vacancy in accordance with these Bye-laws.

14.      Removal of Directors

         (1)      Subject to any provision to the contrary in these Bye-laws,
the Members may, at any special general meeting convened for that purpose and
held in accordance with these Bye-laws, remove any Director provided that the
notice of any such meeting convened for the purpose of

                                       12

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removing a Director shall contain a statement of the intention so to do and be
served on such Director not less than 14 days before the meeting and at such
meeting such Director shall be entitled to be heard on the motion for such
Director's removal.

         (2)      A vacancy on the Board created by the removal of a Director
under the provisions of subparagraph (1) of this Bye-law may be filled by the
Members at the meeting at which such Director is removed. A Director so
appointed shall hold office until the next annual general meeting or until such
Director's successor is elected or appointed or such Director's office is
otherwise vacated and, in the absence of such election or appointment, the Board
may fill any such vacancy in accordance with Bye-law 15.

15.      Vacancies on the Board

         (1)      The Board shall have the power from time to time and at any
                  time to appoint any person as a Director to fill a vacancy on
                  the Board occurring as the result of the death, disability,
                  disqualification or resignation of any Director or if such
                  Director's office is otherwise vacated. A Director so
                  appointed by the Board shall hold office until the next
                  succeeding annual general meeting or until such Director's
                  successor is elected or appointed or such Director's office is
                  otherwise vacated.

         (2)      The Board may act notwithstanding any vacancy in its number
                  but, if and so long as its number is reduced below the number
                  fixed by these Bye-laws, or such greater number as may have
                  been determined by the Members, as the quorum necessary for
                  the transaction of business at meetings of the Board, the
                  continuing Directors or Director may act only for the purpose
                  of (i) summoning a general meeting of the Company or (ii)
                  preserving the assets of the Company.

         (3)      The office of Director shall be vacated if the Director:

                                       13

<PAGE>

                  (a)      is removed from office pursuant to these Bye-laws or
                           is prohibited from being a Director by law;

                  (b)      is or becomes bankrupt or makes any arrangement or
                           composition with his creditors generally;

                  (c)      is or becomes of unsound mind or dies;

                  (d)      resigns his or her office by notice in writing to the
                           Company.

16.      Notice of meetings of the Board

         (1)      The Chairman or Deputy Chairman, or any two (2) Directors may,
and the Secretary on the requisition of the Chairman or Deputy Chairman, or any
two (2) Directors shall, at any time summon a meeting of the Board by at least
three (3) Business Days' notice to each Director and Alternate Director, unless
such Director or Alternate Director consents to shorter notice.

         (2)      Notice of a meeting of the Board shall specify the general
nature of the business to be considered at such meeting and shall be deemed to
be duly given to a Director if it is given to such Director in person or
otherwise communicated or sent to such Director by registered mail, courier
service, cable, telex, telecopier, facsimile or other mode of representing words
in a legible and non-transitory form at such Director's last known address or
any other address given by such Director to the Company for this purpose. If
such notice is sent by next-day courier, cable, telex, telecopier or facsimile,
it shall be deemed to have been given the Business Day following the sending
thereof and, if by registered mail, five (5) Business Days following the sending
thereof.

         (3)      Meetings of the Directors may be held within or outside of
Bermuda.

                                       14

<PAGE>

17.      Quorum at meetings of the Board

         The quorum necessary for the transaction of business at a meeting of
the Board shall be a majority of the Directors then in office, present in person
or represented or such greater number as the Members shall determine.

18.      Meetings of the Board

         (1)      The Board may meet for the transaction of business, adjourn
and otherwise regulate its meetings as it sees fit.

         (2)      Directors may participate in any meeting of the Board 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 such a meeting shall
constitute presence in person at such meeting.

         (3)      A resolution put to the vote at a duly constituted meeting of
the Board at which a quorum is present and acting throughout shall be carried by
the affirmative votes of a majority of the votes cast and in the case of an
equality of votes, the resolution shall fail.

19.      Unanimous written resolutions

         A resolution in writing signed by all the Directors which may be in
counterparts, shall be as valid as if it had been passed at a meeting of the
Board duly called and constituted, such resolution to be effective on the date
on which the last Director signs the resolution. For the purposes of this
Bye-law only, "Director" shall not include an Alternate Director.

                                       15

<PAGE>

20.      Contracts and disclosure of Directors' interests

         (1)      Any Director, or any Director's firm, partner or any company
with whom any Director is associated, may act in a professional capacity for the
Company and such Director or such Director's firm, partner or such company shall
be entitled to remuneration for professional services as if such Director were
not a Director, provided that nothing herein contained shall authorise a
Director or Director's firm, partner or such company to act as Auditor of the
Company.

         (2)      A Director who is directly or indirectly interested in a
contract or proposed contract or arrangement with the Company shall declare the
nature of such interest as required by the Act.

         (3)      Following a declaration being made pursuant to this Bye-law,
and unless disqualified by the chairman of the relevant Board meeting, a
Director may vote in respect of any contract or proposed contract or arrangement
in which such Director is interested and may be counted in the quorum at such
meeting.

21.      Remuneration of Directors

         (1)      The remuneration, (if any) of the Directors shall be
determined by the Company in general meeting and shall be deemed to accrue from
day to day. The Directors may also be paid all travel, hotel and other expenses
properly incurred by them in attending and returning from meetings of the Board,
any committee appointed by the Board, general meetings of the Company, or in
connection with the business of the Company or their duties as Directors
generally.

         (2)      A Director may hold any other office or place of profit under
the Company (other than the office of Auditor) in conjunction with his office of
Director for such period and on such terms as to remuneration and otherwise as
the Directors may determine.

                                       16

<PAGE>

22.      Other interests of Directors

         A Director may be or become a director or other officer of or otherwise
interested in any company promoted by the Company or in which the Company may be
interested as member or otherwise, and no such Director shall be accountable to
the Company for any remuneration or other benefits received by him as a director
or officer of, or from his interest in, such other company. 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 the Board
thinks fit, 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.

                                   COMMITTEES

23.      Power to delegate to a committee

         The Board may appoint one or more Board committees and may delegate any
of its powers to any such committee. Without limiting the generality of the
foregoing, such committees may include:

                  (a)      an Executive Committee, which shall have the power of
                           the Board between meetings of the Board;

                  (b)      an Audit Committee, which shall, among other things,
                           advise the Board with respect to the Company's
                           financial reporting responsibilities and related
                           matters;

                  (c)      a Stock Option and Stock Purchase Committee, which
                           shall, among other things, advise the Board with
                           respect to the Company's employee stock option and
                           stock purchase plans, and approve and administer such
                           plans in accordance with Rule 16b-3 under the
                           Exchange Act; and

                                       17

<PAGE>

                  (d)      a Compensation Committee, which shall, among other
                           things, advise the Board with respect to compensation
                           of Officers.

         All Board committees shall conform to such directions as the Board
shall impose on them, provided that each member shall have one (1) vote, and
each committee shall have the right as it deems appropriate to retain outside
experts. Each committee may adopt rules for the conduct of its affairs,
including rules governing the adoption of resolutions by unanimous written
consent, and the place, time, and notice of meetings, as such committee shall
consider advisable and as shall not be inconsistent with these Bye-laws or with
any applicable resolution adopted by the Board. Each committee shall cause
minutes to be made of all meetings of such committee and of the attendance
thereat and shall cause such minutes and copies of resolutions adopted by
unanimous consent to be promptly inscribed or incorporated by the Secretary in
the Company's minute book.

                                    OFFICERS

24.      Officers of the Company

         The Officers of the Company shall consist of a Chief Executive Officer,
a Chairman, a Deputy Chairman, a Secretary and such additional Officers as the
Board may from time to time determine all of whom shall be deemed to be Officers
for the purposes of these Bye-laws.

25.      Appointment of Officers

         (1)      The Board shall, as soon as possible after each annual general
meeting elect one of its number to be Chairman of the Company and another of its
number to be Deputy Chairman.

         (2)      The Secretary, the Chief Executive Officer and any additional
Officers shall be appointed by the Board from time to time.

                                       18

<PAGE>

26.      Remuneration of Officers

         The Officers shall receive such remuneration as the Board may from time
to time determine.

27.      Duties of Officers

         The Officers shall have such powers and perform such duties in the
management, business and affairs of the Company as may be delegated to them by
the Board from time to time.

28.      Chairman of meetings

         The Chairman shall act as chairman at all meetings of the Members and
of the Board at which such person is present. In his absence the Deputy
Chairman, if present, shall act as chairman and in the absence of both of them a
chairman shall be appointed or elected by those present at the meeting and
entitled to vote.

29.      Register of Directors and Officers

         (1)      The Board shall cause to be kept in one or more books at its
registered office a Register of Directors and Officers and shall enter therein
the following particulars with respect to each Director and the Chairman, Deputy
Chairman, provided each such person is a Director, and the Chief Executive
Officer and Secretary, that is to say:

                  (a)      first name and surname; and

                  (b)      address.

         (2)      The Board shall, within the period of fourteen days from the
occurrence of -

                  (a)      any change among its Directors and in the Chairman,
                           Deputy Chairman, Chief Executive Officer or
                           Secretary; or

                                       19

<PAGE>

                  (b)      any change in the particulars contained in the
                           Register of Directors and Officers,

cause to be entered on the Register of Directors and Officers the particulars of
such change and the date on which such change occurred.

         (3)     The Register of Directors and Officers shall be open to
inspection at the office of the Company on every Business Day, subject to such
reasonable restrictions as the Board may impose, so that not less than two
hours in each Business Day be allowed for such inspection.

                                     MINUTES

30.      Obligations of Board to keep minutes

         The Board shall cause minutes to be duly entered in books provided for
the purpose:-

                  (a)      of all elections and appointments of Officers;

                  (b)      of the names of the Directors present at each meeting
                           of the Board and of any committee appointed by the
                           Board; and

                  (c)      of all resolutions and proceedings of general
                           meetings of the Members, meetings of the Board,
                           meetings of managers and meetings of committees
                           appointed by the Board.

                                    INDEMNITY

31.      Indemnification of Directors and Officers of the Company

                                       20

<PAGE>

         (a)      The Directors, Secretary and other Officers for the time being
of the Company and the liquidator or trustees (if any) for the time being acting
in relation to any of the affairs of the Company and every one of them, and
their heirs, executors and administrators, shall be indemnified and secured
harmless out of the assets of the Company from and against all actions, costs,
charges, losses, damages and expenses which they or any of them, their heirs,
executors or administrators, shall or may incur or sustain by or by reason of
any act done, concurred in or omitted in or about the execution of their duty,
or supposed duty, or in their respective offices or trusts, and none of them
shall be answerable for the acts, receipts, neglects or defaults of the others
of them or for joining in any receipts for the sake of conformity, or for the
acts of or the solvency or honesty of any bankers or other persons with whom any
monies or effects belonging to the Company shall or may be lodged or deposited
for safe custody, or for insufficiency or deficiency of any security upon which
any monies of or belonging to the Company shall be placed out on or invested, or
for any other loss, misfortune or damage which may happen in the execution of
their respective offices or trusts, or in relation thereto, PROVIDED THAT this
indemnity shall not extend to any matter in respect of any wilful negligence,
wilful default, fraud or dishonesty which may attach to any of said persons.

         (b)      Every Director and Officer of the company shall be indemnified
out of the funds of the Company against all liabilities incurred by him as such
Director or Officer of the Company in defending any proceedings, whether civil
or criminal, in which judgement 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. Such funds shall be
advanced to such Director or Officer on his incurring liability prior to
judgement provided that should he be found guilty of a criminal or other offence
for which he cannot by law be indemnified he shall reimburse the Company the
funds advanced.

32.      Waiver of claim by Member

         Each Member agrees to waive any claim or right of action such Member
might have, whether individually or by or in the right of the Company, against
any Director or Officer on account of any action taken by such Director or
Officer, or the failure of such Director or Officer to take any action

                                       21

<PAGE>

in the performance of his duties with or for the Company, PROVIDED THAT such
waiver shall not extend to any matter in respect of any wilful negligence,
wilful default, fraud or dishonesty which may attach to such Director or
Officer.

                                    MEETINGS

33.      Notice of annual general meeting

         The annual general meeting of the Company shall be held in each year at
such time and place as the Chairman or any two Directors or any Director and the
Secretary or the Board shall appoint. At least ten days' written notice of such
meeting shall be given to each Member stating the date, place and time at which
the meeting is to be held, that the election of Directors will take place
thereat, and as far as practicable, the other business to be conducted at the
meeting.

34.      Notice of special general meeting

         The Chairman or any two Directors or any Director and the Secretary or
the Board may convene a special general meeting of the Company whenever in their
judgement such a meeting is necessary, upon not less than ten days' written
notice which shall state the time, place and the general nature of the business
to be considered at the meeting.

                                       22

<PAGE>

35.      Accidental omission of notice of general meeting

         The accidental omission to give notice of a general meeting to, or the
non-receipt of notice of a general meeting by, any person entitled to receive
notice shall not invalidate the proceedings at that meeting.

36.      Meeting called on requisition of Members

         Notwithstanding anything herein, the Board shall, on the requisition of
Members holding at the date of the deposit of the requisition not less than
one-tenth of such of the paid-up share capital of the Company as at the date of
the deposit carries the right to vote at general meetings of the Company,
forthwith proceed to convene a special general meeting of the Company and the
provisions of section 74 of the Act shall apply.

37.      Short notice

         A general meeting of the Company shall, notwithstanding that it is
called by shorter notice than that specified in these Bye-laws, be deemed to
have been properly called if it is so agreed by (i) all the Members entitled to
attend and vote thereat in the case of an annual general meeting; and (ii) by a
majority in number of the Members having the right to attend and vote at the
meeting, being a majority together holding not less than 95% in nominal value of
the shares giving a right to attend and vote thereat in the case of a special
general meeting.

38.      Postponement of Meetings

         The Board may postpone any general meeting called in accordance with
the provisions of these Bye-laws (other than a meeting requisitioned under
Bye-law 36) provided that notice of postponement is given to each Member before
the time for such meeting. Fresh notice of the date,

                                       23

<PAGE>

time and place for the postponed meeting shall be given to each Member in
accordance with the provisions of these Bye-laws.

39.      Quorum For General Meeting

         At any general meeting of the Company two or more persons present in
person and representing in person or by proxy in excess of 50% (on an Unadjusted
Basis) of the total issued and outstanding Common Shares throughout the meeting
shall form a quorum for the transaction of business; provided, that if the
Company shall at any time have only one Member, one Member present in person or
by proxy shall constitute a quorum. If within half an hour from the time
appointed for the meeting a quorum is not present, the meeting shall stand
adjourned to the same day two (2) weeks later, at the same time and place or to
such other day, time or place as the Chairman (if there be one) or failing him
the Deputy Chairman or any Director in attendance may determine. Unless the
meeting is adjourned to a specific date and time, fresh notice of the date, time
and place for the adjourned meeting shall be given to each Member in accordance
with the provisions of these Bye-laws.

40.      Adjournment of meetings

         The chairman of a general meeting may, with the consent of the Members
at any general meeting at which a quorum is present (and shall if so directed),
adjourn the meeting. Unless the meeting is adjourned to a specific date and
time, fresh notice of the date, time and place for the resumption of the
adjourned meeting shall be given to each Member in accordance with the
provisions of these Bye-laws.

                                       24

<PAGE>

41.      Attendance at meetings

         Members may participate in any general meeting 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 such a meeting shall constitute presence
in person at such meeting.

42.      Written resolutions

         (1)      Subject to subparagraph (6), anything which may be done by
resolution of the Company in general meeting or by resolution of a meeting of
any class of the Members of the Company, may, without a meeting and without any
previous notice being required, be done by resolution in writing signed by, or,
in the case of a Member that is a corporation whether or not a company within
the meaning of the Act, on behalf of, all the Members who at the date of the
resolution would be entitled to attend the meeting and vote on the resolution.

         (2)      A resolution in writing may be signed by, or, in the case of a
Member that is a corporation whether or not a company within the meaning of the
Act, on behalf of, all the Members, or any class thereof, in as many
counterparts as may be necessary.

         (3)      For the purposes of this Bye-law, the date of the resolution
is the date when the resolution is signed by, or, in the case of a Member that
is a corporation whether or not a company within the meaning of the Act, on
behalf of, the last Member to sign and any reference in any Bye-law to the date
of passing of a resolution is, in relation to a resolution made in accordance
with this Bye-law, a reference to such date.

         (4)      A resolution in writing made in accordance with this Bye-law
is as valid as if it had been passed by the Company in general meeting or by a
meeting of the relevant class of Members, as the case may be, and any reference
in any Bye-law to a meeting at which a resolution is passed or to Members voting
in favour of a resolution shall be construed accordingly.

                                       25

<PAGE>

         (5)      A resolution in writing made in accordance with this Bye-law
shall constitute minutes for the purposes of sections 81 and 82 of the Act.

         (6)      This Bye-law shall not apply to:-

                  (a)      a resolution passed pursuant to section 89(5) of the
                           Act; or

                  (b)      a resolution passed for the purpose of removing a
                           Director before the expiration of his term of office
                           under these Bye-laws.

43.      Attendance of Directors

         The Directors of the Company shall be entitled to receive notice of and
to attend and be heard at any general meeting.

44.      Voting at meetings

         Subject to the provisions of the Act and these Bye-laws, any question
proposed for the consideration of the Members at any general meeting shall be
decided by the affirmative votes of a majority of the votes cast in accordance
with the provisions of these Bye-laws and in the case of an equality of votes
the resolution shall fail.

45.      Voting on show of hands

         At any general meeting a resolution put to the vote of the meeting
shall, in the first instance, be voted upon by a show of hands and, subject to
any rights or restrictions for the time being lawfully attached to any class of
shares and subject to the provisions of these Bye-laws, every Member present in
person and every person holding a valid proxy at such meeting shall be entitled
to one vote and shall cast such vote by raising his or her hand.

                                       26

<PAGE>

46.      Decision of chairman

         At any general meeting a declaration by the chairman of the meeting
that a question proposed for consideration has, on a show of hands, been
carried, or carried unanimously, or by a particular majority, or lost, or an
entry to that effect in a book containing the minutes of the proceedings of the
Company shall, subject to the provisions of these Bye-laws, be conclusive
evidence of that fact.

47.      Demand for a poll

         (1)      Notwithstanding the provisions of the immediately preceding
two Bye-laws, at any general meeting of the Company, in respect of any question
proposed for the consideration of the Members (whether before or on the
declaration of the result of a show of hands as provided for in these Bye-laws),
a poll may be demanded by any of the following persons: -

                  (a)      the chairman of such meeting; or

                  (b)      at least two Members present in person or represented
                           by proxy; or

                  (c)      any Member or Members present in person or
                           represented by proxy and holding between them not
                           less than one-tenth of the total voting rights of all
                           the Members having the right to vote at such meeting;
                           or

                  (d)      any Member or Members present in person or
                           represented by proxy holding Common Shares on which
                           an aggregate sum has been paid up equal to not less
                           than one-tenth of the total sum paid up on all Common
                           Shares.

         (2)      Where, in accordance with the provisions of paragraph (1) of
                  this Bye-law, a poll is demanded, subject to any rights or
                  restrictions for the time being lawfully attached to any class
                  of shares, including any limitation on the voting power of any
                  Controlled

                                       27

<PAGE>

                  Shares pursuant to Bye-law 52, every Person present at such
                  meeting shall have one vote for each share of which such
                  Person is the holder or for which such person holds a proxy
                  and such vote shall be counted in the manner set out in
                  paragraph (4) of this Bye-law or in the case of a general
                  meeting at which one or more Members are present by telephone
                  in such manner as the chairman of the meeting may direct and
                  the result of such poll shall be deemed to be the resolution
                  of the meeting at which the poll was demanded and shall
                  replace any previous resolution upon the same matter which has
                  been the subject of a show of hands.

         (3)      A poll demanded in accordance with the provisions of paragraph
(1) of this Bye-law, for the purpose of electing a chairman or on a question of
adjournment, shall be taken forthwith and a poll demanded on any other question
shall be taken in such manner and at such time and place as the chairman may
direct and any business other than that upon which a poll has been demanded may
be proceeded with pending the taking of the poll.

         (4)      Where a vote is taken by poll each person present and entitled
to vote shall be furnished with a ballot paper on which such person shall record
his or her vote in such manner as shall be determined at the meeting having
regard to the nature of the question on which the vote is taken, and each ballot
paper shall be signed or initialled or otherwise marked so as to identify the
voter and the registered holder in the case of a proxy. At the conclusion of the
poll the ballot papers shall be examined and counted by a committee of not less
than two Members or proxy holders appointed by the chairman for the purpose and
the result of the poll shall be declared by the chairman.

                                       28

<PAGE>

48.      Seniority of joint holders voting

         In the case of joint holders 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 of Members.

49.      Instrument of proxy

         The instrument appointing a proxy shall be in writing in the form, or
as near thereto as circumstances admit, a Form "A" in the Schedule hereto, under
the hand of the appointor or of his attorney duly authorised in writing, or if
the appointor is a corporation, either under its seal, or under the hand of a
duly authorised officer or attorney. The decision of the chairman of any general
meeting as to the validity of any instrument of proxy shall be final.

50.      Representation of corporations at meetings

         A corporation which is a Member may by written instrument authorise
such person as it thinks fit to act as its representative at any meeting of the
Members and the person so authorised shall be entitled to exercise the same
powers on behalf of the corporation which such person represents as that
corporation could exercise if it were an individual Member. Notwithstanding the
foregoing, the chairman of the meeting may accept such assurances as he or she
thinks fit as to the right of any person to attend and vote at general meetings
on behalf of a corporation which is a Member.

                                       29

<PAGE>

                            SHARE CAPITAL AND SHARES

51.      Rights of shares

         (1)      The share capital of the Company shall initially be divided
into two classes of shares consisting of (i) 75,000,000 Common Shares and (ii)
25,000,000 Preferred Shares.

         (2)      The holders of Common Shares shall, subject to the provisions
of these Bye-laws:

                  (a)      be entitled to one vote per Common Share or, in the
                           case of Controlled Shares, if applicable, a fraction
                           of a vote per Controlled Share as determined pursuant
                           to Bye-law 52;

                  (b)      be entitled to such dividends as the Board may from
                           time to time declare;

                  (c)      in the event of a liquidation, winding-up or
                           dissolution of the Company, whether voluntary or
                           involuntary or for the purpose of a reorganisation or
                           otherwise or upon any distribution of capital, be
                           entitled to share equally and ratably in the assets
                           of the Company, if any, remaining after the payment
                           of all debts and liabilities of the Company and the
                           liquidation preference of any outstanding Preferred
                           Shares; and

                  (d)      generally be entitled to enjoy all of the rights
                           attaching to shares.

         (3)      The Board is authorised, subject to limitations prescribed by
law, to issue the Preferred Shares in series, to establish from time to time the
number of Preferred Shares to be included in each such series, and to fix the
designation, powers, preferences and rights to the Preferred Shares of each such
series and the qualifications, limitations or restrictions thereof. The terms of
any series of Preferred Shares shall be set forth in a Certificate of
Designation in the minutes of the Board.

                                       30

<PAGE>

         The authority of the Board with respect to each series of Preferred
Shares shall include, but not be limited to, determination of the following:

                  (a)      the number of Preferred Shares constituting that
                           series and the distinctive designation of that
                           series;

                  (b)      the rate of dividend, and whether (and if so, on what
                           terms and conditions) dividends shall be cumulative
                           (and if so, whether unpaid dividends shall compound
                           or accrue interest) or shall be payable in preference
                           or in any other relation to the dividends payable on
                           any other class or classes of shares or any other
                           series of the Preferred Shares;

                  (c)      whether that series shall have voting rights in
                           addition to the voting rights provided by law and, if
                           so, the terms and extent of such voting rights;

                  (d)      whether the Preferred Shares may be redeemed and, if
                           so, the terms and conditions on which they may be
                           redeemed (including, without limitation, the dates
                           upon or after which they may be redeemed and the
                           price or prices at which they may be redeemed, which
                           price or prices may be different in different
                           circumstances or at different redemption dates);

                  (e)      whether the Preferred Shares shall be issued with the
                           privilege of conversion or exchange and, if so, the
                           terms and conditions of such conversion or exchange
                           (including, without limitation the price or prices or
                           the rate or rates of conversion or exchange or any
                           terms for adjustment thereof);

                  (f)      the amounts, if any, payable upon the Preferred
                           Shares in the event of voluntary liquidation,
                           dissolution or winding up of the Company in
                           preference of shares of any other class or series and
                           whether the Preferred

                                       31

<PAGE>

                           Shares shall be entitled to participate generally in
                           distributions on the Common Shares under such
                           circumstances;

                  (g)      the amounts, if any, payable upon the Preferred
                           Shares in the event of involuntary liquidation,
                           dissolution or winding up of the Company in
                           preference of shares of any other class or series and
                           whether the Preferred Shares shall be entitled to
                           participate generally in distributions on the Common
                           Shares under such circumstances;

                  (h)      sinking fund provisions, if any, for the redemption
                           or purchase of the Preferred Shares (the term
                           "sinking fund" being understood to include any
                           similar fund, however designated); and

                  (i)      any other relative rights, preferences, limitations
                           and powers of that series.

52.      Limitation on voting rights of Controlled Shares

         (1)      Subject to any rights or restrictions for the time being
attached to any class or classes of shares, on a poll at a general meeting every
Member of record present in person or by proxy shall have one vote for each
Common Share registered in his name in the register; PROVIDED, however, that,
subject to the following provisions of this Bye-law 52, if and for so long as
the number of issued Controlled Shares of any Person would constitute ten
percent (10%) or more of the total combined voting rights attaching to the
issued Common Shares of the Company (calculated after giving effect to any prior
reduction in voting rights attaching to Common Shares of other Persons as
provided in this Bye-law 52), each such issued Controlled Share, regardless of
the identity of the registered holder thereof, shall confer only a fraction of a
vote as determined by the following formula (the "Formula"):

         (T  -  C)  /  (9.1  x  C)

                                       32

<PAGE>

         Where:"T" is the aggregate number of votes conferred by all the issued
                  Common Shares immediately prior to that application of the
                  Formula with respect to such issued Controlled Shares,
                  adjusted to take into account each reduction in such aggregate
                  number of votes that results from a prior reduction in the
                  exercisable votes conferred by any issued Controlled Shares
                  pursuant to Bye-law 52(4) as at the same date;

                  "C" is the number of issued Controlled Shares attributable to
                  such Person.

         (2)      The Directors may, by notice in writing, require any Member to
provide within not less than ten (10) Business Days, complete and accurate
information to the registered office or such other place as the Directors may
designate in respect of any or all of the following matters:

                  (a)      the number of Common Shares in which such Member is
                           legally or beneficially interested;

                  (b)      the Persons who are beneficially interested in Common
                           Shares in respect of which such Member is the
                           registered holder;

                  (c)      the relationship, association or affiliation of such
                           Member with any other Member or Person whether by
                           means of common control or ownership or otherwise; or

                  (d)      any other facts or matters which the Directors may
                           consider relevant to the determination of the number
                           of Controlled Shares attributable to any Person.

         (3)      If any Member does not respond to any notice given pursuant to
Bye-law 52(2) above within the time specified therein or the Directors shall
have reason to believe that any information provided in relation thereto is
incomplete or inaccurate, the Directors may determine that the votes attaching
to any Common Shares registered in the name of such Member shall be disregarded
for all

                                       33

<PAGE>

purposes until such time as a response (or additional response) to such notice
reasonably satisfactory to the Directors has been received as specified therein.

         (4)      The Formula shall be applied successively as many times as may
be necessary to ensure that no Person shall be a 10% Shareholder at any time.
For the purposes of determining the votes exercisable by Members as at any date,
the Formula shall be applied to the shares of each Member in declining order
based on the respective numbers of total Controlled Shares attributable to each
Member. Thus, the Formula will be applied first to the votes of shares held by
the Member to whom the largest number of total Controlled Shares is attributable
and thereafter sequentially with respect to the Member with the next largest
number of total Controlled Shares. In each case, calculations are made on the
basis of the aggregate number of votes conferred by the issued Common Shares as
of such date, as reduced by the application of the Formula to any issued Common
Shares of any Member with a larger number of total Controlled Shares as of such
date.

         (5)      Notwithstanding the provisions of paragraphs (1) and (2) of
this Bye-law 52 above, having applied the provisions thereof as best as they
consider reasonably practicable, the Directors may make such final adjustments
to the aggregate number of votes attaching to the Common Shares of any Member
that they consider fair and reasonable in all the circumstances to ensure that
no Person shall be a 10% Shareholder at any time.

                                       34

<PAGE>

53.      Power to issue shares

         (1)      Subject to the provisions of these Bye-laws and to any rights
attaching to issued shares of the Company, the unissued shares of the Company
(whether forming part of the original share capital or any increased share
capital) shall be at the disposal of the Board, which may issue, offer, allot,
exchange or otherwise dispose of shares or options, warrants or other rights to
purchase shares or securities convertible into or exchangeable for shares
(including any employee benefit plan providing for the issuance of shares or
options or rights in respect thereof), at such times, for such consideration and
on such terms and conditions as it may determine (including, without limitation,
such preferred or other special rights or restrictions with respect to dividend,
voting, liquidation or other rights of the shares as may be determined by the
Board).

         (2)      Notwithstanding the foregoing provisions of this Bye-law, the
Company shall not issue any shares in a manner that the Board believes would
cause, by reason of such issuance, (i) the total Controlled Shares of any Person
other than an AIG Person to equal or exceed ten percent (10%) of the shares of
the Company or (ii) an AIG Person to become or continue to be a United States
25% Shareholder, in each case (i) and (ii) on an Unadjusted Basis; PROVIDED,
however, that, paragraph (ii) of this Bye-law 53(2) notwithstanding, the Company
may issue shares in a manner and amount that would cause an AIG Person to become
or continue to be a United States 25% Shareholder upon the exercise of the AIG
Option, in part or in full, in accordance with its terms.

         Notwithstanding the foregoing provisions of this Bye-law, the
restrictions of this Bye-law 53(2) shall not apply to any issuance of shares to
a person acting as an underwriter in the ordinary course of its business,
purchasing such shares pursuant to a purchase agreement to which the Company is
a party, for resale.

         (3)      The Board shall, in connection with the issue of any share,
have the power to pay such commission and brokerage as may be permitted by law.

                                       35

<PAGE>

         (4)      The Company shall not give, whether directly or indirectly,
whether by means of loan, guarantee, provision of security or otherwise, any
financial assistance for the purpose of or in connection with a purchase or
subscription made or to be made by any person of or for any shares in the
Company, but nothing in this Bye-law shall prohibit transactions permitted
pursuant to Sections 39A, 39B, and 39C of the Act.

54.      Variation of rights and alteration of share capital

         (1)      While the share capital is divided into different classes of
shares, the rights attached to any class (unless otherwise provided by the terms
of issue of the shares of that class) may, whether or not the Company is being
wound-up, be varied with the consent in writing of the holders of three-fourths
of the issued shares of that class or with the sanction of a resolution passed
by a majority of the votes cast at a separate general meeting of the holders of
the shares of the class in accordance with Section 47(7) of the Act. The rights
conferred upon the holders of the shares of any class issued with preferred or
other rights shall not, unless otherwise expressly provided by the terms of
issue of the shares of that class, be deemed to be varied by the creation or
issue of further shares ranking pari passu therewith.

         (2)      The Company may from time to time by resolution of the Members
change the currency denomination of, increase, alter or reduce its share capital
in accordance with the provisions of Sections 45 and 46 of the Act. Where, on
any alteration of share capital, fractions of shares or some other difficulty
would arise, the Board may deal with or resolve the same in such manner as it
thinks fit including, without limiting the generality of the foregoing, the
issue to Members, as appropriate, of fractions of shares and/or arranging for
the sale or transfer of the fractions of shares of Members.

                                       36

<PAGE>

55.      Registered holder of shares

         (1)      The Company shall be entitled to treat the registered holder
of any share as the absolute owner thereof and accordingly shall not be bound to
recognise any equitable or other claim to, or interest in, such share on the
part of any other person.

         (2)      Any dividend, interest or other monies payable in cash in
respect of shares may be paid by cheque or draft sent through the post directed
to the Member at such Member's address in the Register of Members or, in the
case of joint holders, to such address of the holder first named in the Register
of Members, or to such person and to such address as the holder or joint holders
may in writing direct. If two or more persons are registered as joint holders of
any shares any one can give an effectual receipt for any dividend paid in
respect of such shares.

56.      Death of a joint holder

         Where two or more persons are registered as joint holders of a share or
shares then in the event of the death of any joint holder or holders the
remaining joint holder or holders shall be absolutely entitled to the said share
or shares and the Company shall recognise no claim in respect of the estate of
any joint holder except in the case of the last survivor of such joint holders.

57.      Share certificates

         (1)      Every Member shall be entitled to a certificate under the seal
of the Company (or a facsimile thereof) specifying the number and, where
appropriate, the class of shares held by such Member and whether the same are
fully paid up and, if not, how much has been paid thereon. The Board may by
resolution determine, either generally or in a particular case, that any or all
signatures on certificates may be printed thereon or affixed by mechanical
means.

         (2)      The Company shall be under no obligation to complete and
deliver a share certificate unless specifically called upon to do so by the
person to whom such shares have been allotted.

                                       37

<PAGE>

         (3)      If any such certificate shall be proved to the satisfaction of
the Board to have been worn out, lost, mislaid or destroyed the Board may cause
a new certificate to be issued and request an indemnity for the lost certificate
if they see fit.

58.      Calls on shares

         The Board may from time to time make such calls as it thinks fit upon
the Members in respect of any monies unpaid on the shares allotted to or held by
such Members.

                               REGISTER OF MEMBERS

59.      Contents of Register of Members

         The Board shall cause to be kept in one or more books a Register of
Members and shall enter therein the following particulars:-

                  (a)      the name and address of each Member, the number and,
                           where appropriate, the class of shares held by such
                           Member and the amount paid or agreed to be considered
                           as paid on such shares;

                  (b)      the date on which each person was entered in the
                           Register of Members;

                  (c)      the date on which any person ceased to be a Member
                           for one year after such person so ceased; and

                  (d)      the country where such Member is resident.

60.      Inspection of Register of Members

                                       38

<PAGE>

         The Register of Members shall be open to inspection at the registered
office of the Company on every Business Day, subject to such reasonable
restrictions as the Board may impose, so that not less than two hours in each
business day be allowed for inspection. The Register of Members may, after
notice has been given by advertisement in an appointed newspaper to that effect,
be closed for any time or times not exceeding in the whole thirty days in each
year.

61.      Determination of record dates

         Notwithstanding any other provision of these Bye-laws, the Board may
fix any date as the record date for:

                  (a)      determining the Members entitled to receive any
                           dividend; and

                  (b)      determining the Members entitled to receive notice of
                           and to vote at any general meeting of the Company.

                               TRANSFER OF SHARES

62.      Instrument of transfer

         (1)      An instrument of transfer shall be in the form or as near
thereto as circumstances admit of Form "B" in the Schedule hereto or in such
other common form as the Board may accept. Such instrument of transfer shall be
signed by or on behalf of the transferor and transferee provided that, in the
case of a fully paid share, the Board may accept the instrument signed by or on
behalf of the transferor alone. The transferor shall be deemed to remain the
holder of such share until the same has been transferred to the transferee in
the Register of Members.

         (2)      The Board may refuse to recognise any instrument of transfer
unless it is accompanied by the certificate in respect of the shares to which it
relates and by such other evidence as the Board may reasonably require to show
the right of the transferor to make the transfer.

                                       39

<PAGE>

63.      Restriction on transfer

         (1)      Subject to the Act, this Bye-law 63 and such other of the
restrictions contained in these Bye-laws and elsewhere as may be applicable, and
except, in the case of any shares other than the Common Shares, as may otherwise
be provided by the terms of issuance thereof, any Member may sell, assign,
transfer or otherwise dispose of shares of the Company at the time owned by it
and, upon receipt of a duly executed form of transfer in writing, the Directors
shall procure the timely registration of the same. If the Directors refuse to
register a transfer for any reason they shall notify the proposed transferor and
transferee within thirty days of such refusal.

         (2)      The Directors shall decline to register a transfer of shares
if the Directors have reason to believe that the effect of such transfer would
be (i) to increase the number of total Controlled Shares of any Person other
than an AIG Person to ten percent (10%) or any higher percentage of the shares
of the Company or (ii) that an AIG Person would become or continue to be a
United States 25% Shareholder, in each case (i) and (ii) on an Unadjusted Basis.

         (3)      The Directors may, in their absolute and unfettered
discretion, decline to register the transfer of any shares if the Directors have
reason to believe (i) that such transfer may expose the Company, any subsidiary
thereof, any Member or any Person ceding insurance to the Company or any such
subsidiary to adverse tax or regulatory treatment in any jurisdiction or (ii)
that registration of such transfer under the Securities Act or under any blue
sky or other U.S. state securities laws or under the laws of any other
jurisdiction is required and such registration has not been duly effected
(PROVIDED, however, that in this case (ii) the Directors shall be entitled to
request and rely on an opinion of counsel to the transferor or the transferee,
in form and substance satisfactory to the Directors, that no such approval or
consent is required and no such violation would occur, and the Directors shall
not be obligated to register any transfer absent the receipt of such an
opinion).

         (4)      Without limiting the foregoing, the Board shall decline to
approve or register a transfer of shares unless all applicable consents,
authorisations, permissions or approvals of any

                                       40

<PAGE>

governmental body or agency in Bermuda, the United States or any other
applicable jurisdiction required to be obtained prior to such transfer shall
have been obtained.

         (5)      The registration of transfers may be suspended at such time
and for such periods as the Directors may from time to time determine; PROVIDED
that such registration shall not be suspended for more than forty-five days in
any period of three hundred and sixty five (365) consecutive days.

         (6)      The Directors may require any Member, or any Person proposing
to acquire shares of the Company, to certify or otherwise provide information in
writing as to such matters as the Directors may request for the purpose of
giving effect to Bye-laws 10(2), 10(4), 53(2), 63(2) and 63(3), including as to
such Person's status as a U.S. Person, its Controlled Shares and other matters
of the kind contemplated by Bye-law 52(2). Such request shall be made by written
notice and the certification or other information requested shall be provided to
such place and within such period (not less than ten (10) Business Days after
such notice is given unless the Directors and such Member or proposed acquiror
otherwise agree) as the Directors may designate in such request. If any Member
or proposed acquiror does not respond to any such request by the Directors as
requested, or if the Directors have reason to believe that any certification or
other information provided pursuant to any such request is inaccurate or
incomplete, the Directors may decline to register any transfer or to effect any
issuance or purchase of shares to which such request relates.

                                       41

<PAGE>

64.      Transfers by joint holders

         The joint holders of any share or shares may transfer such share or
shares to one or more of such joint holders, and the surviving holder or holders
of any share or shares previously held by them jointly with a deceased Member
may transfer any such share or shares to the executors or administrators of such
deceased Member.

65.      Lien on Shares

         (1)      The Company shall have a first and paramount lien and charge
on all shares (whether fully paid-up or not) registered in the name of a Member
(whether solely or jointly with others) for all debts, liabilities or
engagements to or with the Company (whether presently payable or not) by such
Member or his estate, either alone or jointly with any other Person, whether a
Member or not, but the Directors may at any time declare any share to be wholly
or in part exempt from the provisions of this Bye-law. The registration of a
transfer of any such share shall operate as a waiver of the Company's lien (if
any) thereon. The Company's lien (if any) on a share shall extend to all
dividends or other monies payable in respect thereof.

         (2)      The Company may sell, in such manner as the Directors think
fit, any shares on which the Company has a lien, but no sale shall be made
unless a sum in respect of which the lien exists is then presently payable, nor
until the expiration of fourteen days after a notice in writing stating and
demanding payment of such part of the amount in respect of which the lien exists
as is presently payable, has been given to the relevant Member, or the Person,
of which the Company has notice, entitled thereto by reason of such Member's
death or bankruptcy. Effective upon such sale, any certificate representing such
shares prior to such sale shall become null and void, whether or not it was
actually delivered to the Company.

         (3)      To give effect to any such sale the Directors may authorize
some Person to transfer the shares sold to the purchaser thereof. The purchaser
shall be registered as the holder of the shares comprised in any such transfer,
and he shall not be bound to see to the application of the purchase

                                       42

<PAGE>

money, nor shall his title to the shares be affected by any irregularity or
invalidity in the proceedings in reference to the sale.

         (4)      The proceeds of such sale shall be received by the Company and
applied in payment of such part of the amount in respect of which the lien
exists as is presently payable and the residue, if any, shall (subject to a like
lien for sums not presently payable as existed upon the shares before the sale)
be paid to the Person entitled to the shares at the date of the sale.

                             TRANSMISSION OF SHARES

66.      Registration on bankruptcy

         Any person becoming entitled to a share in consequence of the
bankruptcy of any Member may be registered as a Member upon such evidence as the
Board may deem sufficient or may elect to nominate some person to be registered
as a transferee of such share, and in such case the person becoming entitled
shall execute in favour of such nominee an instrument of transfer in the form,
or as near thereto as circumstances admit, of Form "B" in the Schedule hereto.
On the presentation thereof to the Board, accompanied by such evidence as the
Board may require to prove the title of the transferor, the transferee shall be
registered as a Member but the Board shall, in either case, have the same right
to decline or suspend registration as it would have had in the case of a
transfer of the share by that Member before such Member's bankruptcy.

                        DIVIDENDS AND OTHER DISTRIBUTIONS

67.      Declaration of dividends by the Board

         Subject to any rights or restrictions at the time lawfully attached to
any class of shares and subject to these Bye-laws, the Board may, in accordance
with Section 54 of the Act, declare a dividend to be paid to the Members, in
proportion to the number of shares held by them, and such

                                       43

<PAGE>

dividend may be paid in cash or wholly or partly in specie in which case the
Board may fix the value for distribution in specie of any assets.

68.      Other distributions

         The Board may declare and make such other distributions (in cash or in
specie) to the Members as may be lawfully made out of the assets of the Company.

69.      Reserve fund

         The Board may from time to time before declaring a dividend set aside,
out of the surplus or profits of the Company, such sum as it thinks proper as a
reserve fund to be used to meet contingencies or for equalising dividends or for
any other special purpose.

70.      Deduction of amounts due to the Company

         The Board may deduct from the dividends or distributions payable to any
Member all monies due from such Member to the Company on account of calls or
otherwise.

71.      Unclaimed dividends

         Any dividend unclaimed for a period of six (6) years from the date of
declaration of such dividend shall be forfeited and shall revert to the Company
and the payment by the Board of any unclaimed dividend, 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.

                                       44

<PAGE>

72.      Interest on dividend

         No dividend or distribution shall bear interest against the Company.

73.      Issue of bonus shares

         Subject to Bye-law 53(2), the Board may resolve to capitalise any part
of the amount for the time being standing to the credit of any of the Company's
share premium or other reserve accounts or to the credit of the profit and loss
account or otherwise available for distribution by applying such sum in paying
up unissued shares to be allotted as fully paid bonus shares pro rata to the
Members.

                        ACCOUNTS AND FINANCIAL STATEMENTS

74.      Records of account

         The Board shall cause to be kept proper records of account with respect
to all transactions of the Company and in particular with respect to:-

                  (a)      all sums of money received and expended by the
                           Company and the matters in respect of which the
                           receipt and expenditure relates;

                  (b)      all sales and purchases of goods by the Company; and

                  (c)      the assets and liabilities of the Company.

         Such records of account shall be kept at the registered office of the
Company or, subject to Section 83 (2) of the Act, at such other place as the
Board thinks fit and shall be available for inspection by the Directors during
normal business hours.

75.      Financial year end

                                       45

<PAGE>

         The financial year end of the Company may be determined by resolution
of the Board and failing such resolution shall be 31st December in each year.

76.      Financial statements

         Subject to any rights to waive laying of accounts pursuant to Section
88 of the Act, financial statements as required by the Act shall be laid before
the Members in general meeting.

                                      AUDIT

77.      Appointment of Auditor

         Subject to Section 88 of the Act and to Bye-Law 79, at the annual
general meeting or at a subsequent special general meeting in each year, an
independent representative of the Members shall be appointed by them as Auditor
of the accounts of the Company. Such Auditor may be a Member but no Director,
Officer or employee of the Company shall, during his or her continuance in
office, be eligible to act as an Auditor of the Company.

78.      Remuneration of Auditor

         The remuneration of the Auditor shall be fixed by the Company in
general meeting or in such manner as the Members may determine.

79.      Vacation of office of Auditor

         If the office of Auditor becomes vacant by the resignation or death of
the Auditor, or by the Auditor becoming incapable of acting by reason of illness
or other disability at a time when the

                                       46

<PAGE>

Auditor's services are required, the Board shall, as soon as practicable, fill
the vacancy thereby created.

80.      Access to books of the Company

         The Auditor shall at all reasonable times have access to all books kept
by the Company and to all accounts and vouchers relating thereto, and the
Auditor may call on the Directors or Officers of the Company for any information
in their possession relating to the books or affairs of the Company.

81.      Report of the Auditor

         (1)      Subject to any rights to waive laying of accounts or
appointment of an Auditor pursuant to Section 88 of the Act, the accounts of the
Company shall be audited at least once in every year.

         (2)      The financial statements provided for by these Bye-laws shall
be audited by the Auditor in accordance with generally accepted auditing
standards. The Auditor shall make a written report thereon in accordance with
generally accepted auditing standards and the report of the Auditor shall be
submitted to the Members in general meeting.

         (3)      The generally accepted auditing standards referred to in
paragraph (2) of this Bye-law shall be those of the United States of America and
the financial statements and the report of the Auditor shall disclose this fact.

                                       47

<PAGE>

                                     NOTICES

82.      Notices to Members of the Company

         A notice may be given by the Company to any member either by delivering
it to such Member in person or by sending it to such Member's address in the
Register of Members or to such other address given for the purpose. For the
purposes of this Bye-law, a notice may be sent by mail, courier service, cable,
telex, telecopier, facsimile or other mode of representing words in a legible
and non-transitory form.

83.      Notices to joint Members

         Any notice required to be given to a Member shall, with respect to any
shares held jointly by two or more persons, be given to whichever of such
persons is named first in the Register of Members and notice so given shall be
sufficient notice to all the holders of such shares.

84.      Service and delivery of notice

         Any notice shall be deemed to have been served at the time when the
same would be delivered in the ordinary course of transmission and, in proving
such service, it shall be sufficient to prove that the notice was properly
addressed and prepaid, if posted, and the time when it was posted, delivered to
the courier or to the cable company or transmitted by telex, facsimile or other
method as the case may be.

                                       48

<PAGE>

                               SEAL OF THE COMPANY

85.      The Seal

         The seal of the Company shall be in such form as the Board may from
time to time determine. The Board may adopt one or more duplicate seals for use
outside Bermuda.

86.      Manner in which seal is to be affixed

         The seal of the Company shall not be affixed to any instrument except
attested by the signature of a Director and the Secretary or any two Directors,
or some other person appointed by the Board for the purpose, provided that any
Director, or Officer, may affix the seal of the Company attested by such
Director or Officer's signature only to any authenticated copies of these
Bye-laws, the incorporating documents of the Company, the minutes of any
meetings or any other documents required to be authenticated by such Director or
Officer.

87.      Determination to wind up Company

         The Company may be wound up voluntarily by resolution of the Members.

                                   WINDING-UP

88.      Winding-up/distribution by liquidator

         If the Company shall be wound up the liquidator may, with the sanction
of a resolution of the Members, divide amongst the Members in specie or in kind
the whole or any part of the assets of the Company (whether they shall consist
of property of the same kind or not) and may, for such purpose, set such value
as he or she deems fair upon any property to be divided as aforesaid and may
determine how such division shall be carried out as between the Members or
different classes of Members. The liquidator may, with the like sanction, vest
the whole or any part of such assets in

                                       49

<PAGE>

trustees upon such trusts for the benefit of the Members as the liquidator shall
think fit, but so that no Member shall be compelled to accept any shares or
other securities or assets whereon there is any liability.

                             ALTERATION OF BYE-LAWS

89.      Alteration of Bye-laws

         No Bye-law shall be rescinded, altered or amended and no new Bye-law
shall be made until the same has been approved by a resolution of the Board and
by a resolution of the Members.

                                      *****

                                       ***

                                        *

                                       50exv4w18

 

Exhibit 4.18

March 31, 2003

U S Liquids Inc.

411 N. Sam Houston Pkwy. E.

Houston, TX 77060

Attention: Treasurer

     Re: Waiver, Fourteenth Amendment and Consent

Ladies and Gentlemen:

     Please refer to (a) the Second Amended and Restated Credit Agreement
dated as of February 3, 1999 (as previously amended, the “Credit Agreement”)
among U S Liquids Inc. (the “Company”), various financial institutions and Bank
of America, N.A. (formerly known as Bank of America National Trust and Savings
Association), as Agent; and (b) each of the following documents: the waiver
dated October 4, 2002, the waiver dated October 25, 2002, the waiver and
amendment dated as of December 23, 2002, the waiver and
amendment dated January
14, 2003 and the waiver and amendment dated as of January 31, 2003 (the “1/31
Waiver Letter and, together with the other letters referred to in this clause
(b), the “Prior Waiver Letters”). Capitalized terms used but not otherwise
defined herein have the respective meanings assigned thereto in the Credit
Agreement.

     1.     Introduction.

     The Company has requested that the Banks agree to (a) waive the
existing Events of Default under Section 10.6.3 and Section 12.1.11(c) of the
Credit Agreement, (b) defer certain reductions in the Commitment Amount and (c)
amend certain covenants set forth in the Credit Agreement.

     2.     Waivers,
Amendments and Consents.

     (a)  Waivers; Deferral of Commitment Reductions. Notwithstanding
anything to the contrary contained in the Credit Agreement or the Prior Waiver
Letters, (i) the Required Banks waive (x) any breach of the provisions of
Section 10.1.1 of the Credit Agreement resulting from a “going concern”
exception in the Company’s audit report for Fiscal Year 2002, (y) any Event of
Default arising from the failure of the Company to comply with Section 10.6.3 of
the Credit Agreement for the Computation Period ended December 31, 2002 and (z)
any breach of the provisions of Section 12.1.11(c) of the Credit Agreement
resulting from the resignation by Michael P. Lawlor from his position as the
Chairman of the Board and Chief Executive Officer of the Company; and (ii) the
Banks agree that the Company may defer to July 31, 2003 the $2,100,000 reduction
in the Commitment Amount that is currently scheduled to occur on March 31, 2003
and the $3,400,000 reduction in the Commitment Amount that is currently
scheduled to occur on April 15, 2003.

 

 

U S Liquids Inc.

March 31, 2003

Page 2

     (b)  Amendments to Credit Agreement. Subject to the terms and conditions
set forth in Section 3, the Credit Agreement is amended as follows:

               (i) The definition of “Termination Date” set forth in Section
1.1 is amended by deleting the reference to “April 15, 2003” therein and
substituting “July 31, 2003” therefor;

               (ii) Section 10.6.1 is amended in its entirety to read as
follows:

		
	 	     “10.6.1 Minimum Net Worth. Not permit the Net Worth of the
Company at any time during any month to be less than the applicable
amount set forth below:

	 	 	 	 	 
	Month	 	Minimum Net Worth
	
	 	

	March 2003
	 	$	16,012,000	 
	April 2003
	 	$	16,333,000	 
	May 2003
	 	$	16,665,000	 
	June 2003
	 	$	17,259,000	 
	July 2003
	 	$	17,789,000	.”

               (iii) Section 10.6.2 is amended in its entirety to read as
follows:

		
	 	     “10.6.2 Disbursements. Not permit the aggregate amount of
disbursements that constitute “U.S. Disbursements” (as set forth in the
projections delivered by the Company to the Banks on March [26], 2003)
during any period to exceed 105% of the amount designated as the “Total
U.S. Disbursements” in such projections for such period, it being
understood that for any period in which “U.S. Disbursements” are less
than 105% of such amount, the Company may carry-over such excess to the
succeeding period; provided, however, that cumulative “U.S.
Disbursements” for the entire period through July 31, 2003 shall not
exceed 105% of the aggregate “U.S. Disbursements” set forth for such
entire period in such projections.”

               (iv) Section 10.6.3 is amended in its entirety to read as
follows:

		
	 	     “10.6.3 Funded Debt to Adjusted EBITDA Ratio. Not permit the
Funded Debt to Adjusted EBITDA Ratio as of the last day of any month to
be greater than the applicable ratio set forth below:

	 	 	 	 	 
	Measurement Date	 	Maximum Ratio
	
	 	

	March 31, 2003
	 	 	5.44 to 1.0	 
	April 30, 2003
	 	 	6.15 to 1.0	 
	May 30, 2003
	 	 	6.37 to 1.0	 
	June 30, 2003
	 	 	7.03 to 1.0	 
	July 31, 2003
	 	 	6.58 to 1.0	.”

 

 

U S Liquids Inc.

March 31, 2003

Page 3

                    (v) Section 10.6.4 is amended in its entirety to read as
follows:

		
	 	     “10.6.4 Capital Expenditures. Not permit the aggregate amount
of Capital Expenditures (excluding amounts, if any, paid to consummate
acquisitions permitted by Section 10.11(c) which constitute Capital
Expenditures) made by the Company and its Subsidiaries to exceed (a)
$1,750,000 during any Fiscal Quarter ending after December 31, 2002 or
(b) $7,000,000 during any Fiscal Year ending after December 31, 2002;
provided that the amount set forth in clause (a) may be increased for
any Fiscal Quarter by an amount equal to the lesser of (x) $1,750,000
minus the actual amount of Capital Expenditures made during the prior
Fiscal Quarter and (y) $875,000.”

               (vi) Section 10.26 is amended in its entirety to read as follows:

		
	 	     “10.26 Minimum Cumulative EBITDA. Not permit cumulative EBITDA
for any period beginning on March 1, 2003 and ending on the last day of
any month thereafter to be less than the applicable amount set forth
below:

	 	 	 	 	 
	Period Ending	 	Cumulative EBITDA
	
	 	

	March 31, 2003
	 	$	1,725,000	 
	April 30, 2003
	 	$	3,670,000	 
	May 31, 2003
	 	$	5,621,000	 
	June 30, 2003
	 	$	7,931,000	 
	July 31, 2003
	 	$	10,096,000	.”

               (vii) Section 10.27 is amended in its entirety to read as follows:

		
	 	     “10.27 Accounts Receivable Coverage Ratio. Not permit the
ratio of (a) the net book value of accounts receivable (determined in
accordance with GAAP, but excluding all intercompany receivables) to
(b) Total Outstandings to be less than 0.32 to 1.0 at any time.”

     (c)  Consents. The Required Banks agree that, notwithstanding anything
to the contrary contained in the 1/31 Waiver Letter or in Section 4, the Company
may defer payment of the amendment fee for the 1/31 Waiver Letter and the waiver
fee set forth in Section 4 until July 31, 2003 (to the extent that such fees
have not been paid in accordance with Section 3(e)).

     3.     Terms and Conditions of Waiver, Amendments and Consents. In
consideration of the foregoing waiver, amendments and consents, the Company
agrees with the Agent and the Banks as follows:

     (a)  Limitation on Outstandings. During the period from the date hereof
through July 31, 2003, the Company shall not request, and the Banks shall have
no obligation to make (and the Issuing Bank shall have no obligation to issue),
any Loan or Letter of Credit if the Total Outstandings would exceed (i)
$85,348,000 for the week ending March 28, 2003, (ii)

 

 

U S Liquids Inc.

March 31, 2003

Page 4

$87,001,700 for the week ending April 4, 2003 and (iii) $87,811,700 for the week
ending April 11, 2003 and for each week ending thereafter; provided that, so
long as the Company has delivered the Balance Sheet Plan (as defined below) in
accordance with clause (b) below, upon approval of the Balance Sheet Plan by
each of the Banks, Total Outstandings shall not thereafter exceed at any time
during any week the amount designated as the “Facility Cap” for such week in the
financial projections delivered by the Company to the Banks on March [26], 2003.

          (b) Balance Sheet Plan. The Company shall deliver to the Agent and
the Banks not later than April 15, 2003 a detailed plan (the “Balance Sheet
Plan”) describing the manner in which the Company intends to reduce its leverage
during Fiscal Year 2003.

          (c) Letter of Intent. The Company shall deliver to the Agent (for
distribution to the Banks) on or before June 30, 2003 a copy of a signed letter
of intent in form and substance (and with a proposed purchaser) acceptable to
the Required Banks for the sale of one or more businesses of the Company and
its Subsidiaries that generated during Fiscal Year 2002, or is reasonably
expected to generate during Fiscal Year 2003, at least $3,000,000 in aggregate
net income (before deduction for interest expense, taxes and depreciation and
amortization expense).

          (d) Letter of Credit Fees; Interest. From and after April 1, 2003, (a)
accrued Letter of Credit fees under Section 5.2 of the Credit Agreement shall be
payable on the last Business Day of each month and (b) non-default interest
shall accrue on unpaid principal amount of all outstanding Loans and shall
payable as follows: (i) interest shall accrue on the unpaid principal amount of
all Loans up to $85,348,000 at a per annum rate equal to the sum of the
Reference Rate plus 4.0% and (ii) interest shall accrue on the unpaid principal
amount of all outstanding Loans in excess of $85,348,000 at a per annum rate
equal to the sum of the Reference Rate plus 6.0%, with the portion of such
interest in clauses (i) and (ii) accruing at the Reference Rate plus 4.0%
constituting “Current Interest” payable in cash currently on the last Business
Day of each month, and the balance of such interest constituting “Deferred
Interest”, the payment of which shall be deferred until the Termination Date (to
the extent that such interest has not been paid with Net Cash Proceeds as
described in clause (e) below).

          (e) Application of Net Cash Proceeds. All Net Cash Proceeds received by
the Company or any Subsidiary from any Asset Sale or issuance of Debt or equity
securities shall be applied in the following order:

               (i) first, to pay accrued fees and expenses of the Agent;

               (ii) second, to pay Deferred Interest;

               (iii) third, to pay deferred and unpaid amendment and waiver
fees (including those described in Section 2(c));

               (iv) fourth, to pay Current Interest, whether or not then due;

               (v) fifth, to pay principal on the Loans; and

 

 

U S Liquids Inc.

March 31, 2003

Page 5

               (vi) sixth, to pay all other liabilities of the Company and
its Subsidiaries under the Loan Documents.

          (g) Collateral Matters.

               (i) The Company agrees to use its best efforts, and to cause
each applicable Subsidiary to use its best efforts, to deliver to the Agent not
later than April 15, 2003 all original vehicle titles for the vehicles set forth
on Exhibit A of the officer’s certificate required to be delivered pursuant to
Section 4(e) (to the extent not previously delivered to the Agent) and to take
such other actions as may be necessary or advisable to note the lien of the
Agent on each such vehicle title; provided that the foregoing shall not apply to
vehicle titles that have been lost or destroyed so long as (x) the Company
provides a list of the applicable vehicles on or before April 15, 2003, (y) the
aggregate number of such vehicles is less than 75 and (z) the Company delivers a
certificate certifying that it has sought the issuance of replacement vehicle
titles for such vehicles from the appropriate governmental authorities and will,
and will cause the applicable Subsidiaries to, deliver such replacement vehicle
titles to the Agent promptly upon receipt.

               (ii) The Company agrees (x) to execute and deliver, and to
cause each applicable Subsidiary to execute and deliver, to the Agent a mortgage
on each parcel of real estate owned by the Company or such Subsidiary (to the
extent not previously delivered to the Agent) not later than April 15, 2003 and
(y) to use its best efforts, and to cause each applicable Subsidiary use its
best efforts, to execute and deliver to the Agent (and obtain any necessary
landlord consent to) a leasehold mortgage on each parcel of real estate leased
by the Company or such Subsidiary (to the extent not previously delivered to the
Agent) not later than April 30, 2003.

               (iii) The Company agrees to use its best efforts, and to cause
each applicable Subsidiary to use its best efforts, to cause each depository bank
(other than any Bank) at which the Company or such Subsidiary maintains a
deposit account to execute and deliver to the Agent not later than April 30,
2003 a blocked account agreement in form and substance satisfactory to the
Agent, it being understood that the Company shall, and shall cause each
applicable Subsidiary to, close each account maintained with a depositary bank
(other than any Bank) which has not so delivered a blocked account agreement and
cause the amounts deposited in such accounts to be deposited into accounts
maintained with one or more of the Banks not later than May 31, 2003.

          4. Effectiveness. This letter (other than the agreement of the Banks
set forth in Sections 2(a)(ii), 2(b)(i) and 2(c)) shall become effective upon
receipt by the Agent of the following:

          (a) counterparts hereof (or facsimiles thereof) executed by the Company
and the Required Banks;

 

 

U S Liquids Inc.

March 31, 2003

Page 6

          (b) a confirmation of the Guarantors substantially in the form of
Exhibit A;

          (c) subject to Section 2(c), a waiver fee for each Bank in the amount
equal to 0.50% of such Bank’s Commitment;

          (d) copies of resolutions of the Board of Directors of the Company
authorizing the execution and delivery by the Company of this letter and the
performance by the Company of its obligations hereunder;

          (e) an officer’s certificate in form and substance acceptable to
the Agent setting forth listings (and containing a representation and warranty by
the Company as to the completeness and accuracy of such listings) of (a) all
vehicles owned by the Company and its Subsidiaries, (b) all real property owned
or leased by the Company and its Subsidiaries, (c) all bank accounts maintained
by the Company and its Subsidiaries, and (d) copy of the financial projections
delivered by the Company to the Banks on March [26], 2003; and

          (f) evidence that the Company has paid all fees and expenses of the
Agent (including all attorneys’ fees and expenses) incurred on or prior to the
date hereof).

          The agreements of the Banks set forth in Sections 2(a)(ii), 2(b)(i) and 2(c)
shall become effective upon (i) receipt by the Agent of counterparts hereof (or
facsimiles thereof) executed by the Company and each Bank and (ii) satisfaction
of the conditions set forth in clauses (b) through (f) of the previous sentence.

          5. Miscellaneous.

          (a) This letter is limited to the matters specifically set forth herein
and shall not be deemed to constitute a waiver or consent with respect to any
other matter whatsoever. The Agent and the Banks hereby reserve all of their
rights, powers and remedies under the Credit Agreement and applicable law.

          (b) This letter may be executed in counterparts and by the parties
hereto on separate counterparts.

          (c) This letter shall be governed by the laws of the State of Illinois
applicable to contracts made and to be performed entirely within such State.

          (d) Except as otherwise expressly amended or modified herein, the
Credit Agreement and the Prior Waiver Letters (including the representations,
warranties, covenants and Events of Default contained therein) shall remain in
full force and effect and are hereby ratified and confirmed in all respects.

[Signature Pages Follow]

 

U S Liquids Inc.

March 31, 2003

Page 7

     Please acknowledge the foregoing by signing a copy of this letter and returning
it to the Agent.

	 	 	 	 	 	 
	 	 	 	 	Very truly yours,

	 	 	 	 	 

	 	 	 	 	BANK OF AMERICA, N.A., as Agent

	 	 	 	 	 

	 	 	 	 	By:

	 	 	 	 	 	

	 	 	 	 	Title:

	 	 	 	 	 	

	 	 	 	 	 

	 	 	 	 	BANK OF AMERICA, N.A., as a Bank

	 	 	 	 	 

	 	 	 	 	By:

	 	 	 	 	 	

	 	 	 	 	Title:

	 	 	 	 	 	

	 	 	 	 	 

	 	 	 	 	FLEET NATIONAL BANK

	 	 	 	 	 

	 	 	 	 	By:

	 	 	 	 	 	

	 	 	 	 	Title:

	 	 	 	 	 	

	 	 	 	 	 

	 	 	 	 	BANK ONE, NA

	 	 	 	 	 

	 	 	 	 	By:

	 	 	 	 	 	

	 	 	 	 	Title:

	 	 	 	 	 	

	 	 	 	 	 

	 	 	 	 	THE BANK OF NOVA SCOTIA

	 	 	 	 	 

	 	 	 	 	By:

	 	 	 	 	 	

	 	 	 	 	Title:

	 	 	 	 	 	

	 	 	 	 	 

	 	 	 	 	UNION BANK OF CALIFORNIA

	 	 	 	 	 

	 	 	 	 	By:

	 	 	 	 	 	

	 	 	 	 	Title:

	 	 	 	 	 	

 

U S Liquids Inc.

March 31, 2003

Page 8

	 	 	 	 	 	 
	 	 	 	 	COMERICA BANK

	 
	 	 	 	 	By:

	 	 	 	 	 	

	 	 	 	 	Title:

	 	 	 	 	 	

	 
	 	 	 	 	WELLS FARGO BANK, N.A.

	 
	 	 	 	 	By:

	 	 	 	 	 	

	 	 	 	 	Title:

	 	 	 	 	 	

	 
	 	 	 	 	BNP PARIBAS

	 
	 	 	 	 	By:

	 	 	 	 	 	

	 	 	 	 	Title:

	 	 	 	 	 	

	 
	 	 	 	 	By:

	 	 	 	 	 	

	 	 	 	 	Title:

	 	 	 	 	 	

	 	 	 
	ACKNOWLEDGED AND AGREED:
	 	
	U S LIQUIDS INC.	
	 	
	By:
         /s/ Cary M.
Grossman       	
	Title:             CFO                                        
	

 

CONFIRMATION

Dated as of
          , 2003

	 	 	 
	To:	 	
Bank of America, N.A., individually and as Agent,

and the other financial institutions party to the

Credit Agreement referred to below

     Please refer to the waiver, amendment and consent letter dated as of
                    ,
2003
(the “Waiver and Consent”) with respect to the Second Amended and Restated Credit Agreement
dated as of February 3, 1999 (as amended, the “Credit Agreement”) among U S Liquids Inc.,
various financial institutions (the “Banks”) and Bank of America, N.A.
(formerly known as Bank of America National Trust and Savings Association),
as Agent (the “Agent”).

     Each of the undersigned hereby confirms to the Agent and the Banks
that such undersigned has received a copy of the Waiver and Consent and that, after
giving effect to the Waiver and Consent and the transactions contemplated thereby,
each Loan Document to which such undersigned is a party continues in full force and
effect and is the legal, valid and binding obligation of such undersigned,
enforceable against such undersigned in accordance with its terms.

	 	 	 
	 	 	
EARTH BLENDS, INC.

MBO, INC.

THE NATIONAL SOLVENT EXCHANGE CORP.

PARALLEL PRODUCTS OF FLORIDA, INC.

PARALLEL PRODUCTS OF KENTUCKY, INC.

RE-CLAIM ENVIRONMENTAL LOUISIANA, L.L.C.

ROMIC ENVIRONMENTAL TECHNOLOGIES CORPORATION

USL FIRST SOURCE, INC.

U S LIQUIDS GREAT LAKES, INC.

U S LIQUIDS OF HOUSTON, L.L.C.

U S LIQUIDS OF DALLAS, L.L.C.

U S LIQUIDS OF CENTRAL TEXAS, L.L.C.

U S LIQUIDS OF CONNECTICUT, INC.

U S LIQUIDS OF GREATER CHICAGO, INC.

U S LIQUIDS OF PENNSYLVANIA, INC.

U S LIQUIDS OF TEXAS, INC.

U S LIQUIDS LP HOLDING CO.

U S LIQUIDS NORTHEAST, INC.

U S LIQUIDS TERMINAL SERVICES, INC.

U S LIQUIDS OF DETROIT, INC.

U S LIQUIDS OF FLORIDA, INC.

USL ENVIRONMENTAL SERVICES, INC.

USL GENERAL MANAGEMENT, INC.

USL PARALLEL PRODUCTS OF CALIFORNIA

 

	 	 	 	 	 
	 	 	WASTE RESEARCH AND RECOVERY, INC.

WASTE STREAM ENVIRONMENTAL, INC.
	 	 	 	 	 
	 	 	
By:
	 	/s/ Cary Grossman
	 	 	 	 	

	 	 	
Name:
	 	Cary Grossman
	 	 	 	 	

	 	 	
Title:
	 	VP
	 	 	 	 	

	 	 	 	 	 
	 	 	U S LIQUIDS OF LA., L.P.
	 	 	 	 	 
	 	 	By: MBO, Inc., its General Partner
	 	 	 	 	 
	 	 	
By:
	 	/s/ Cary Grossman
	 	 	 	 	

	 	 	
Name:
	 	Cary Grossman
	 	 	 	 	

	 	 	
Title:
	 	VP
	 	 	 	 	

	 	 	 	 	 
	 	 	USL MANAGEMENT LIMITED PARTNERSHIP
	 	 	 	 	 
	 	 	By: USL General Management, Inc., its General Partner
	 	 	 	 	 
	 	 	
By:
	 	/s/ Cary Grossman
	 	 	 	 	

	 	 	
Name:
	 	Cary Grossman
	 	 	 	 	

	 	 	
Title:
	 	VP
	 	 	 	 	

	 	 	 	 	 
	 	 	GEM MANAGEMENT, INC.
	 	 	 	 	 
	 	 	
By:
	 	/s/ Joan Dobrzynski
	 	 	 	 	

	 	 	
Name:
	 	Joan Dobrzynski
	 	 	 	 	

	 	 	
Title:
	 	President

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