ANNEX III

 

                         AMENDED AND RESTATED BYE-LAWS

 

                                       OF

 

                            COOPER INDUSTRIES, LTD.

 

    I HEREBY CERTIFY that the within written Amended and Restated Bye-laws are a

true copy of the Amended and Restated Bye-laws of COOPER INDUSTRIES, LTD. as

approved at the meeting of the above Company on the     day of            ,

2001.

 

                                            ------------------------------------

                                                          Director

 

                                      III-1

<PAGE>   63

 

                                     INDEX

 

<TABLE>

<CAPTION>

           BYE-LAW                                    SUBJECT

           -------                                    -------

   <C>                      <S>

 

              1-7           -- Share Capital, Rights and Voting

 

                8           -- Transfer of Shares

 

             9-13           -- Transmission of Shares

 

               14           -- Alteration of Capital

 

               15           -- Seal of the Company

 

            16-25           -- General Meetings of Shareholders

 

            26-34           -- Board of Directors

 

               35           -- Committees

 

            36-50           -- Officers

 

               51           -- Accounting Records

 

               52           -- Appointment of Auditor

 

            53-56           -- Indemnity

 

            57-59           -- Fair Price to Shareholders in Business Combinations

 

            60-61           -- Amendments

</TABLE>

 

                                      III-2

<PAGE>   64

 

                        AMENDED AND RESTATED BYE -- LAWS

                                       OF

                            COOPER INDUSTRIES, LTD.

 

                        SHARE CAPITAL, RIGHTS AND VOTING

 

 1. Share Capital and Rights.  The authorized share capital of the Company is

    U.S.$4,100,000 divided into 250,000,000 Class A common shares par value

    U.S.$.01 per share (the "Class A Common Shares"), 150,000,000 Class B common

    shares par value U.S.$.01 per share (the "Class B Common Shares") and

    10,000,000 Preferred Shares par value U.S.$.01 per share (the "Preferred

    Shares").

 

    A. Terms of the Class A Common Shares.

 

       Subject to these Bye-laws, holders of the Class A Common Shares shall:

 

       1. be entitled to one vote for each Class A Common Share held by such

          holder, on the relevant record date, on all matters submitted to a

          vote of the shareholders;

 

       2. be entitled to such dividends and other distributions in cash, shares

          or property of the Company out of assets or funds of the Company

          legally available therefor, as the Board of Directors may from time to

          time declare; and

 

       3. generally be entitled to enjoy all of the rights attaching to shares

          under the Companies Act (as used herein, the "Companies Act" means

          every Bermuda Statute from time to time in force concerning companies

          insofar as the same applies to the Company).

 

    B. Terms of the Class B Common Shares.

 

       Subject to these Bye-laws, the holders of the Class B Common Shares shall

       have all of the rights of the holders of the Class A Common Shares,

       except that:

 

       1. the holders of the Class B Common Shares shall not be entitled to

          vote, except as to matters for which the Companies Act specifically

          requires voting rights for otherwise nonvoting shares;

 

       2. if, at any time, a dividend or other distribution in cash, shares or

          other property is declared or paid on the Class A Common Shares, a

          like dividend or other distribution in kind and amount shall also be

          declared and paid on the Class B Common Shares;

 

       3. the holders of the Class B Common Shares shall have the right to

          convert their shares into Class A Common Shares on a one-for-one basis

          in the following circumstances:

 

         (a) to satisfy the obligations of the Company or its subsidiaries or

             affiliated companies to issue Class A Common Shares with regard to

             the exercise of share options or grants of shares pursuant to share

             incentive plans, employee share purchase plans or other stock

             compensation plans sponsored by the Company or its subsidiaries or

             affiliated companies; or

 

         (b) as consideration for any acquisition of stock or assets of a third

             party;

 

       4. in the event of transfer of Class B Common Shares to any person other

          than a wholly-owned subsidiary of the Company, the Class B Common

          Shares so transferred shall automatically be converted into Class A

          Common Shares on a one-for-one basis; and

 

       5. the holders of the Class B Common Shares shall have the right upon

          written notice to require the Company, subject to section 42A of the

          Companies Act, to purchase for cash the number of Class B Common

          Shares stated in such notice at the fair market value per share of the

          Class A Common Shares on the date of such notice. Any such purchase

          shall be settled within 180 calendar days of the day such notice is

          given and shall include simple interest from the date of the notice to

          but not including the payment date at a rate equal to the prime rate

          charged by the Chase Manhattan Bank or its successor. For purposes of

          this paragraph, the fair market value per share of the Class A Common

          Shares, as of any date, means the average of the high and low sales

          prices of a share of the Class A Common Shares as reported on the New

          York Stock Exchange composite tape on the

                                      III-3

<PAGE>   65

 

          applicable date, or if no sales of the Class A Common Shares were made

          on the Stock Exchange on that date, the average of the high and low

          prices as reported on the composite tape for the most recent preceding

          day on which sales of the Class A Common Shares were made. No

          dividends shall be declared on any Class B Common Shares for which

          notice has been given under this paragraph.

 

    C. Rights of Common Shares Upon Issuance of Additional Shares.  For the

       purposes of these Bye-laws, the rights attaching to any of the Class A

       Common Shares or the Class B Common Shares shall be deemed not to be

       altered by the allotment or issue by the Company of other shares ranking

       in priority for payment of dividends or with respect to capital, or which

       confer on the holders voting rights more favourable than those conferred

       on the Class A Common Shares or Class B Common Shares, and shall not

       otherwise be deemed to be altered by the creation or issue of further

       shares ranking pari pasu with such Common Shares, or by the purchase or

       redemption by the Company of any of its own shares.

 

    D. Preferred Shares.  The Board of Directors is hereby expressly authorized

       to provide for the issuance of all or any of the Preferred Shares in one

       or more classes or series, and to fix for each such class or series such

       voting power, full or limited, or no voting power, and such designations,

       preferences and relative, participating, optional or other special rights

       and such qualifications, limitations or restrictions thereof, as shall be

       stated and expressed in the resolution or resolutions adopted by the

       Board of Directors providing for the issuance of such class or series,

       including, without limitation, the authority to provide that any such

       class or series may be: (a) subject to redemption at the option of the

       Company or the holders, or both, at such time or times and at such price

       or prices; (b) entitled to receive dividends (which may be cumulative or

       non-cumulative) at such rates, on such conditions, and at such times, and

       payable in preference to, or in such relation to, the dividends payable

       on any other class or classes or any other series; (c) entitled to such

       rights upon the dissolution of, or upon any distribution of the assets

       of, the Company; or (d) convertible into, or exchangeable for, shares of

       any other class or classes of shares, or of any other series of the same

       or any other class or classes of shares, of the Company at such price or

       prices or at such rates of exchange and with such adjustments; all as may

       be stated in such resolution or resolutions.

 

 2. Options and Warrants.  The Board of Directors is authorized, from time to

    time, in its discretion, to grant such persons, for such periods and upon

    such terms as the Board deems advisable, options to purchase such number of

    shares of any class or classes or of any series of any class as the Board

    may deem advisable, and to cause warrants or other appropriate instruments

    evidencing such options to be issued.

 

 3. Purchase of Shares by Company.  The Board of Directors may, at its

    discretion, authorize the purchase by the Company of its own shares of any

    class upon such terms as the Board may determine, at any price (whether at

    par or above or below par), provided always that such purchase is effected

    in accordance with the provisions of the Companies Act.

 

 4. No Preemptive Rights.  No holder of shares of any class or other securities

    of the Company shall as such holder have any preemptive right to purchase

    shares of any class or other securities of the Company or shares or other

    securities convertible into or exchangeable for or carrying rights or

    options to purchase shares of any class of the Company, whether such shares

    or other securities are now or hereafter authorized, which at any time may

    be proposed to be issued by the Company or subjected to rights or options to

    purchase granted by the Company.

 

 5. Power to Issue Shares.  Subject to these Bye-laws, the Board of Directors

    shall have power to issue any authorized and unissued shares of the Company

    on such terms and conditions as it may determine. The Company may from time

    to time issue its shares in fractional denominations and deal with such

    fractions to the same extent as its whole shares and shares in fractional

    denominations shall have in proportion to the respective fractions

    represented thereby all of the rights of whole shares including but not

    limited to the right to vote, to receive dividends and distributions and to

    participate in a winding up.

 

 6. Dividends and Other Payments.  The Board of Directors may from time to time

    declare dividends or distributions out of assets or funds of the Company

    legally available therefor, including distributions out of contributed

    surplus, to be paid to the shareholders according to their rights and

    interests including such

 

                                      III-4

<PAGE>   66

 

    interim dividends as appear to the Board to be justified by the position of

    the Company. The Company may deduct from any dividend, distribution or other

    monies payable to a shareholder by the Company on or in respect of any

    shares all sums of money (if any) presently payable by the shareholder to

    the Company on account of calls or otherwise in respect of shares of the

    Company. No dividend, distribution or other monies payable by the Company on

    or in respect of any share shall bear interest against the Company.

 

 7. Certificates.  At the discretion of the Board of Directors or the Secretary,

    the Company may issue shares including Class A Common Shares, Class B Common

    Shares and Preferred Shares in uncertificated form upon the initial issuance

    of such shares or thereafter upon surrender of the certificates representing

    such shares.

 

                               TRANSFER OF SHARES

 

 8. Transfer of Shares.  Subject to the Companies Act and these Bye-laws, any

    shareholder may transfer all or any of the holder's shares by an instrument

    of transfer in the usual common form or in any other form which the Board of

    Directors or the Company's transfer agent may approve. The instrument of

    transfer of a share shall be signed by or on behalf of the transferor and

    where any share is not fully paid, the instrument of transfer shall also be

    signed by or on behalf of the transferee. The Board may decline to register

    any transfer unless:

 

    (a) the instrument of transfer is duly stamped and lodged with the Company,

        at such place as the Board shall appoint for the purpose, accompanied by

        the certificate for the shares (if any has been issued) to which it

        relates, and such other evidence as the Board may reasonably require to

        show the right of the transferor to make the transfer;

 

    (b) the instrument of transfer is in respect of only one class of share; and

 

    (c) where applicable, the permission of the Bermuda Monetary Authority with

        respect thereto has been obtained.

 

    Subject to any directions of the Board from time to time in force, the

    Secretary may exercise the powers and discretions of the Board under this

    Bye-law 8.

 

                             TRANSMISSION OF SHARES

 

 9. Representative of a Deceased Shareholder.  If a shareholder dies, the

    survivor or survivors, where the deceased was a joint holder, and the legal

    personal representative, where the deceased was a sole holder, shall be the

    only person recognised by the Company as having any title to the deceased

    holder's shares. Nothing herein contained shall release the estate of a

    deceased holder from any liability in respect of any share held by such

    deceased holder solely or jointly with other persons. For the purpose of

    this Bye-law, the legal personal representative means the person to whom

    probate or letters of administration has or have been granted, or failing

    any such person, such other person as the Board of Directors may in it is

    absolute discretion determine to be the person recognised by the Company for

    the purpose of this Bye-law.

 

10. Registration on Death or Transfer by Operation of Law.  Any person becoming

    entitled to a share in consequence of the death of a shareholder or

    otherwise by operation of applicable law, may be registered as a shareholder

    or may elect to nominate some person to be registered as a transferee of

    such share upon such evidence being produced as may from time to time be

    required by the Board of Directors or the Company's transfer agent. In

    either case, the Company shall 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 shareholder before such shareholder's death or transfer by operation of

    law, as the case may be.

 

11. Dividend Entitlement of Transferee.  A person becoming entitled to a share

    in consequence of the death of a shareholder or otherwise by operation of

    applicable law shall (upon such evidence being produced as may from time to

    time be required by the Board of Directors as to such entitlement) be

    entitled to receive and may give a discharge for any dividends or other

    monies payable in respect of the share, but such person

                                      III-5

<PAGE>   67

 

    shall not be entitled in respect of the share to receive notices of or to

    attend or vote at general meetings of the Company (whether annual or

    special) or, except as aforesaid, to exercise in respect of the share any of

    the rights or privileges of a shareholder until such person shall have

    become registered as the holder thereof. The Board may at any time give

    notice requiring such person to elect either to be registered himself or to

    transfer the share and, if the notice is not complied with within sixty

    days, the Board may thereafter withhold payment of all dividends and other

    moneys payable in respect of the shares until the requirements of the notice

    have been complied with.

 

12. Ownership of Shares.  Except as ordered by a court of competent jurisdiction

    or as required by law, no person shall be recognised by the Company as

    holding any share upon trust and the Company shall not be bound by or

    required in any way to recognise (even when having notice thereof) any

    equitable, contingent, future or partial interest in any share or any

    interest in any fractional part of a share or (except only as otherwise

    provided in these Bye-laws or by law) any other right in respect of any

    share except an absolute right to the entirety thereof in the registered

    holder.

 

13. Exercise of Power by Secretary.  Subject to any directions of the Board of

    Directors from time to time in force, the Secretary may exercise the powers

    and discretions of the Board under Bye-laws 9, 10, 11 and 12.

 

                             ALTERATION OF CAPITAL

 

14. Alteration of Capital.  The Company may from time to time by resolution of

    the shareholders or where required, of a separate class of shareholders:

 

    (a)  increase its authorized share capital by new shares of such amount and

         par value as it thinks expedient;

 

    (b)  divide its shares into several classes and attach thereto respectively

         any preferential, deferred, qualified or special rights, privileges or

         conditions;

 

    (c)  consolidate and divide all or any of its share capital into shares of

         larger par value than its existing shares;

 

    (d)  subdivide its shares or any of them into shares of smaller par value

         than is fixed by its Memorandum of Association, so, however, that in

         the subdivision the proportion between the amount paid and the amount,

         if any, unpaid on each reduced share shall be the same as it was in the

         case of the share from which the reduced share is derived;

 

    (e)  make provision for the issue and allotment of shares which do not carry

         any voting rights;

 

    (f)  cancel shares which, at the date of the passing of the resolution in

         that behalf, have not been taken or agreed to be taken by any person,

         and diminish the amount of its share capital by the amount of the

         shares so cancelled; and

 

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

 

                              SEAL OF THE COMPANY

 

15. Seal of the Company.  Any instrument to which the corporate seal of the

    Company is affixed shall be signed by either two directors, or by the

    Secretary and one director, or by any two officers of the Company, or by any

    one person whether or not a director or officer who has been authorized

    either generally or specifically to affirm use of the corporate seal;

    provided that any director or officer of the Company, or any resident

    representative of the Company appointed pursuant to the Companies Act (a

    "Resident Representative"), may affix a corporate seal over his or her

    signature alone to authenticate 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, officer or Resident

    Representative.

 

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<PAGE>   68

 

                        GENERAL MEETINGS OF SHAREHOLDERS

 

16. Annual General Meeting.  The annual general meeting of shareholders shall be

    held on such date and at such time as shall be designated from time to time

    by the Board of Directors and stated in the notice of the meeting, at which

    meeting the shareholders shall elect directors, appoint auditors and

    transact such other business as may properly be brought before the meeting.

 

17. Special General Meetings.  Special general meetings of shareholders, for any

    purpose or purposes, may be called by any of: (a) the Chairman of the Board

    of Directors, (b) the Deputy Chairman, (c) the Board of Directors, (d) the

    President or (e) the shareholders when requisitioned by shareholders

    pursuant to and in accordance with the provisions of the Companies Act. Such

    request shall state the purpose or purposes of the proposed meeting. At a

    special general meeting of the shareholders, only such business shall be

    conducted as shall be specified in the notice of meeting (or any supplement

    thereto) given by or at the direction of the Board of Directors.

 

18. Place of Meetings.  All general meetings of the shareholders may be held in

    Bermuda or at such other place and at such time as may be designated by the

    Chairman of the Board, the Deputy Chairman or the President and specified in

    the notice of meeting.

 

19. Notice of Meetings.  Written notice of each annual or special general

    meeting of the shareholders, stating the day, time, place, and purposes

    thereof, shall be given, not less than ten nor more than sixty days before

    the date of the meeting, to each shareholder of record as of the applicable

    record date who is entitled to vote at such meeting, by mail or by e-mail or

    any other electronic means at the shareholder's address as it appears on the

    register of shareholders or at any other address given in writing by such

    shareholder to the Company for such purpose. Notice of each annual or

    special general meeting shall also be given in the same manner as described

    above to any Resident Representative of the Company who has delivered a

    written notice to the Company's registered office requiring that such notice

    be sent to such Resident Representative. Any notice given in the manner set

    forth in this Bye-law 19 shall be deemed duly given and shall be deemed to

    have been served five days after dispatch if sent by post or twenty-four

    hours after its dispatch by any other means. Any shareholder or Resident

    Representative may waive any notice required to be given by law, the

    Memorandum, or the Bye-laws, and the attendance of any shareholder at any

    meeting, whether in person or by proxy without protesting, prior to or at

    the commencement of the meeting, the lack of proper notice shall be deemed

    to be a waiver by such shareholder of notice of such meeting. The accidental

    omission to give notice of a meeting or (in cases where instruments of proxy

    are sent out with the notice) the accidental omission to send such

    instrument of proxy to, or the non-receipt of notice of a meeting or such

    instrument of proxy by, any person entitled to receive such notice shall not

    invalidate the proceedings at that meeting.

 

20. Proxies.  Instruments executed by any shareholder appointing a proxy or

    corporate representative shall be in such form and may be accepted by the

    Company at such place and at such time as the Board of Directors or the

    Secretary of the Company shall from time to time determine, subject to

    applicable requirements of the United States Securities and Exchange

    Commission and the New York Stock Exchange or such other exchange or

    exchanges on which the Company's shares are listed. No such instrument

    appointing a proxy or corporate representative shall be voted or acted upon

    after 2 years from its date.

 

21. Quorum.  The holders of shares entitling them to exercise a majority of the

    voting power of the Company on the relevant record date shall constitute a

    quorum to hold a general meeting of the shareholders provided that at any

    meeting duly called at which a quorum is present, the holders of a majority

    of the voting shares represented thereat may adjourn such meeting from time

    to time without notice other than by announcement of the chairman of the

    meeting; and provided further that any meeting duly called at which a quorum

    is not present shall be adjourned and the Company shall provide notice

    pursuant to Bye-law 19 in the event that such meeting is to be reconvened.

 

22. Chairman of Meeting.  The Chairman of the Board (if any) or, in his or her

    absence, the Deputy Chairman or, in his or her absence, the President, shall

    preside as chairman at every general meeting. In the absence of the Chairman

    of the Board, the Deputy Chairman and the President, the directors present

    shall

 

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<PAGE>   69

 

    choose one of their number to act or if one director only is present he or

    she shall preside as chairman if willing to act. If no director is present,

    or if each of the directors present declines to take the chair, the persons

    present and entitled to vote at the meeting shall elect one of their number

    to be chairman.

 

23. Voting.  At all general meetings of the shareholders at which a quorum is

    present any question or proposal shall be decided by the affirmative vote of

    the holders of a majority of the total number of votes of the capital shares

    present in person or represented by proxy and entitled to vote on such

    question on the relevant record date, voting as a single class, except as

    otherwise required by law, the Memorandum of Association or these Bye-laws

    and except that directors shall be elected by a plurality of the votes cast

    by the holders of shares entitled to vote at such general meeting. The

    number of votes cast in favour or against such question or proposal, or

    abstaining shall be determined by a poll of the votes cast.

 

24. Record Date.  The Board of Directors shall fix a record date in order that

    the Company may determine the shareholders entitled to: (a) notice of or to

    vote at any general meeting of shareholders or any adjournment or

    postponement thereof, (b) consent to corporate action in writing without a

    meeting, (c) receive payment of any dividend or other distribution or

    allotment of rights, (d) exercise any rights in respect of any change,

    conversion or exchange of shares, or (e) for the purpose of any other lawful

    action. If no record date is fixed, the record date for determining

    shareholders for any such purpose shall be at the close of business on the

    day on which the Board of Directors adopts the resolution relating thereto.

 

25. Business to be Transacted.  At any annual general meeting, only such

    business shall be conducted as shall have been properly brought before the

    meeting: (a) by or at the direction of the Board of Directors, (b) by any

    shareholder of the Company who complies with the procedures set forth in

    this Bye-law 25, or (c) by any shareholders of the Company pursuant to the

    valid exercise of the power granted under the Companies Act. For business to

    be properly brought before an annual general meeting by a shareholder, the

    shareholder must have given timely notice thereof in proper written form to

    the Secretary of the Company and satisfied all requirements under applicable

    rules promulgated by the Securities and Exchange Commission or by the New

    York Stock Exchange or any other exchange on which the Company's securities

    are traded. To be timely for consideration at the annual general meeting, a

    shareholder's notice must be received by the Secretary at the Company's

    principal executive offices not less than 45 calendar days, or such greater

    length of time as permitted by appropriate rules of the U.S. Securities and

    Exchange Commission, in advance of the anniversary of the date that the

    Company's proxy statement was released to shareholders in connection with

    the previous year's annual general meeting (or no later than January 22,

    2002 with respect to the 2002 annual general meeting). To be in proper

    written form, a shareholder's notice to the Secretary must set forth as to

    each matter such shareholder proposes to bring before the annual general

    meeting: (a) a brief description of the business desired to be brought

    before the annual general meeting and the reasons for conducting such

    business at the annual general meeting, (b) the name and record address of

    such shareholder, (c) the class or series and number of capital shares of

    the Company which are owned beneficially or of record by such shareholder,

    (d) a description of all arrangements or understandings between such

    shareholder and any other person or persons (including their names) in

    connection with the proposal of such business by such shareholder and any

    material interest of such shareholder in such business, and (e) a

    representation that such shareholder intends to appear in person or by proxy

    at the annual general meeting to bring such business before the meeting. To

    be in proper written form, a shareholder's notice to the Secretary regarding

    nomination of any person for election to the Board of Directors must also

    set forth as to each person whom the shareholder proposes to nominate for

    election as a director: (a) the name, age, business address and residence

    address of the person, (b) the principal occupation or employment of the

    person, (c) the class or series and number of capital shares of the Company

    which are owned beneficially or of record by the person and (d) any other

    information relating to the person that would be required to be disclosed in

    a proxy statement or other filings required to be made in connection with

    solicitations of proxies for election of directors pursuant to Section 14 of

    the United States Securities Exchange Act of 1934, as amended (the "Exchange

    Act"), and the rules and regulations promulgated thereunder. Such notice

    must be accompanied by a written consent of each proposed nominee to being

    named as a nominee and to serve as a director if elected. No business shall

    be conducted at the annual general meeting of shareholders except business

    brought before the annual general meeting in

 

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    accordance with the procedures set forth in this Bye-law 25; provided,

    however, that, once business has been properly brought before the annual

    general meeting in accordance with such procedures, nothing in this Bye-law

    25 shall be deemed to preclude discussion by any shareholder of any such

    business.

 

                               BOARD OF DIRECTORS

 

26. Number; Election; Term.  The number of directors shall be not less than nine

    or more than fifteen. The number of directors to be elected at any time

    within the minimum and maximum limitations specified in the preceding

    sentence shall be determined from time to time by the Board of Directors

    pursuant to a resolution adopted by the affirmative vote of a majority of

    the directors in office. The directors shall be divided into three classes,

    designated Class I, Class II and Class III. Each class shall consist, as

    nearly as may be possible, of one-third of the total number of directors

    constituting the entire Board of Directors. The initial division of the

    Board of Directors into classes shall be made by the decision of the

    affirmative vote of a majority of the directors in office. The term of the

    initial Class I directors shall terminate on the date of the 2002 annual

    general meeting; the term of the initial Class II directors shall terminate

    on the date of the 2003 annual general meeting; and the term of the initial

    Class III directors shall terminate on the date of the 2004 annual general

    meeting. At each annual general meeting of shareholders beginning in 2002,

    successors to the class of directors whose term expires at that annual

    general meeting shall be elected for a three-year term. If the number of

    directors is changed, any increase or decrease shall be apportioned among

    the classes so as to maintain the number of directors in each class as

    nearly equal as possible. In no case will a decrease in the number of

    directors shorten the term of any incumbent director. A director shall hold

    office until the annual general meeting for the year in which his or her

    term expires and until his or her successor shall be elected and shall

    qualify, subject, however, to prior death, resignation, retirement,

    disqualification or removal from office. Any vacancy on the Board of

    Directors, including a vacancy that results from an increase in the number

    of directors or from the death, resignation, retirement, disqualification or

    removal of a director, shall be deemed a casual vacancy. Subject to the

    terms of any one or more classes or series of Preferred Shares, any casual

    vacancy may be filled by a majority of the Board of Directors then in

    office, provided that a quorum is present. Any director of any class elected

    to fill a vacancy resulting from an increase in the number of directors of

    such class shall hold office for a term that shall coincide with the

    remaining term of that class. Any director elected to fill a vacancy not

    resulting from an increase in the number of directors shall have the same

    remaining term as that of his or her predecessor. During any vacancy in the

    Board of Directors, the remaining directors shall have full power to act as

    the Board of Directors of the Company. No director shall be removed without

    an 80% vote of the voting power of the Company on the relevant record date

    in favour of such removal, unless a majority of the Board of Directors has

    previously voted in favour of said removal, in which case the shareholder

    voting requirements specified under the Companies Act shall apply. No person

    may be elected or appointed to serve as director except as provided in this

    Bye-law 26 and no person may be elected or appointed to serve as an

    alternate director under the provisions of the Companies Act.

 

27. Quorum; Chairman of Meetings.  A majority of the directors in office at the

    time shall constitute a quorum for a meeting of the Board of Directors;

    provided that at any meeting duly called, whether or not a quorum is

    present, a majority of the directors present may adjourn such meeting from

    time to time and place to place without notice other than by announcement by

    the chairman of the meeting. At such meeting of the Board at which a quorum

    is present, all questions and business shall be determined by the

    affirmative vote of not less than a majority of the directors present except

    as expressly provided in these Bye-laws. The Chairman of the Board or, in

    his or her absence, the Deputy Chairman, or in his or her absence, the

    President, shall preside as chairman at every meeting of the Board of

    Directors. In the absence of the Chairman, Deputy Chairman and President,

    the directors present may choose one of their number to be chairman of the

    meeting.

 

28. Organization Meeting.  Immediately after each annual general meeting of the

    shareholders, or special meeting held in lieu thereof, the Board of

    Directors, if a quorum is present, shall hold an organization meeting at the

    place designated by the Chairman of the Board, the Deputy Chairman or the

    President for the purpose of electing officers and transacting any other

    business. If for any reason such organization

                                      III-9

<PAGE>   71

 

    meeting is not held at such time, a special meeting for such purposes shall

    be held as soon thereafter as practicable.

 

29. Regular Meetings.  Regular meetings of the Board of Directors may be held at

    such times and places as may be provided for in resolutions adopted by the

    Board.

 

30. Special Meetings.  Special meetings of the Board of Directors may be held at

    any time upon call by the Chairman of the Board, the Deputy Chairman, the

    President or at least one-third of the directors.

 

31. Notice of Meetings.  Notice of any organization, regular or special meeting

    stating the place, date and hour of the meeting shall be given to each

    director either by mail not less than forty-eight (48) hours before the date

    of the meeting, by telephone, facsimile, e-mail or any other electronic

    means on not less than twenty-four (24) hours' notice, or on such shorter

    notice as the person or persons calling such meeting may deem necessary or

    appropriate in the circumstances. Any director may waive any notice required

    to be given by law, the Memorandum or the Bye-laws, and the attendance of a

    director at a meeting shall be deemed to be a waiver by such director of

    notice of such meeting. The accidental omission to give notice of a meeting

    to any director shall not invalidate the proceedings at that meeting. Unless

    otherwise indicated in the notice thereof, any business may be transacted at

    any organization, regular, or special meeting.

 

32. Action by Written Resolution.  A resolution in writing signed by all the

    directors in office or by all the members of a committee shall have the same

    force and effect as a resolution passed at a meeting of the Board or, as the

    case may be, of such committee duly called and constituted. Such resolution

    may be contained in one document or in several documents in the like form

    each signed by one or more of the directors or members of the committee

    concerned. A resolution in writing made in accordance with this section

    shall constitute minutes of the proceedings for purposes of the Companies

    Act.

 

33. Compensation.  The Board of Directors is authorized to fix a reasonable

    compensation for directors and to provide a fee and reimbursement of

    expenses for attendance at any meeting of the Board to be paid to each

    director who is not otherwise a salaried officer or employee of the Company.

 

34. Validity of Appointment.  All acts done by the Board of Directors or by any

    committee or by any person acting as a director or member of a committee or

    any person duly authorised by the Board or any committee, shall,

    notwithstanding that it is afterwards discovered that there was some defect

    in the appointment of any member of the Board or such committee or person

    acting as aforesaid or that they or any of them were disqualified or had

    vacated their office, be as valid as if every such person had been duly

    appointed and was qualified and had continued to be a director, member of

    such committee or person so authorised.

 

                                   COMMITTEES

 

35. Committees.  The Board of Directors at any time may elect from its number an

    executive committee and other committees, each of which shall consist of not

    less than three directors. Each member of each such committee shall hold

    office at the pleasure of the Board and may be removed by the Board at any

    time with or without cause. Vacancies occurring in the committee may be

    filled by the Board. During any vacancy on a committee, the remaining

    members shall have full power to act as the committee. Each committee may

    prescribe its own rules for calling and holding meetings and its method of

    procedure, subject, however, to any rules prescribed by the Board, and, if

    no such rules shall have been prescribed, the rules applicable to calling

    and holding meetings of the Board shall apply to the committee meetings. A

    quorum for any meeting of a committee shall consist of not less than a

    majority of the members in office at the time and at each meeting of the

    committee at which a quorum is present, all questions and business shall be

    determined by the affirmative vote of not less than a majority of the

    members present. Except as the executive committee's powers and duties may

    be limited or otherwise prescribed by the Board, the executive committee,

    during the intervals between the meetings of the Board, shall possess and

    may exercise all of the powers of the Board in the management and control of

    the business and property of the Company; and other committees shall have

    such powers of the Board as shall be from time to time delegated to them by

    the Board; provided, however, that no committee shall be empowered to elect

    directors to fill vacancies

                                      III-10

<PAGE>   72

 

    among the directors or on any committee of the directors. Subject to said

    exceptions, persons dealing with the Company shall be entitled to rely upon

    any action of a committee with the same force and effect as though such

    action had been taken by the Board. Subject to the rights of third persons,

    any action of a committee shall be subject to revision or alteration by the

    Board. The Board is authorized to fix a reasonable compensation for members

    of the committees.

 

                                    OFFICERS

 

36. Officers Designated.  Only the Board of Directors shall have the power to

    elect officers. The Board of Directors shall elect a President, one or more

    Vice Presidents, a Secretary, a Treasurer, a Controller, and in its

    discretion a Chairman of the Board, a Deputy Chairman of the Board, an

    Assistant Secretary or Secretaries, an Assistant Treasurer or Treasurers,

    and such other officers as the Board may see fit. The Company shall have a

    President and a Vice President, or a Chairman and a Deputy Chairman, who

    shall be directors of the Company, and may have other officers who may but

    need not be chosen from among the directors. Any two or more of such

    officers other than that of President and Vice President, Chairman of the

    Board and Deputy Chairman of the Board, Secretary and Assistant Secretary,

    or Treasurer and Assistant Treasurer, may be held by the same person, but no

    officer shall execute, acknowledge or verify any instrument in more than one

    capacity.

 

37. Tenure of Office.  The officers of the Company shall hold office until the

    next organization meeting of the Board and until their successors are chosen

    and qualified, except in case of resignation, death or removal. The Board

    may remove any officer at any time with or without cause by a majority vote

    of the directors in office at the time. A vacancy in any office, however

    created, may be filled by election by the Board.

 

38. Chairman of the Board.  The Chairman of the Board, if any, shall have such

    powers and duties as appertain to that office and as may be prescribed by

    the Board.

 

39. Deputy Chairman of the Board.  The Deputy Chairman of the Board, if any,

    shall have such powers and duties as appertain to that office and as may be

    prescribed by the Board.

 

40. President.  The President shall have such powers and duties as appertain to

    that office and as may be prescribed by the Board.

 

41. Vice Presidents.  The Vice Presidents in the order designated by the Board

    shall perform the duties of the President in case of the absence or

    disability of the latter, or when circumstances prevent the latter from

    acting, together with such other duties as the Board may prescribe. In case

    the President and such Vice Presidents are absent or unable to perform their

    duties, the Board may appoint a President pro tempore.

 

42. Secretary.  The Secretary shall keep the minutes of all meetings of the

    shareholders and the Board. He or she shall keep such books as may be

    required by the Board, shall have charge of the seal, minute books and stock

    books of the Company, and shall give all notices of meetings of the

    shareholders and of the Board, and shall have such other powers and duties

    as the Board may prescribe or are prescribed by the Companies Act.

 

43. Treasurer.  The Treasurer shall receive and have in charge all money, bills,

    notes, bonds, shares in other corporations and similar property belonging to

    the Company, and shall do with the same as may be ordered by the Board. The

    Treasurer shall formulate and administer credit and collection policies and

    procedures, and shall represent the Company in its relations with banks and

    other financial institutions, subject to instructions from the Board. On the

    expiration of the Treasurer's term of office, he or she shall turn over to

    his or her successor, or to the Board, all property, books, papers, and

    money of the Company in his or her hands.

 

44. Controller.  The Controller shall be the chief accounting officer of the

    Company, and shall supervise the keeping of the financial accounts of the

    Company.

 

45. Other Officers.  The other officers, if any, shall have such powers and

    duties as the Board may prescribe.

 

                                      III-11

<PAGE>   73

 

46. Change in Power and Duties of Officers.  Anything in these Bye-laws to the

    contrary notwithstanding, the Board may, from time to time, increase or

    reduce the powers and duties of the respective officers of the Company

    whether or not the same are set forth in these Bye-laws and may permanently

    or temporarily delegate the duties of any officer to any other officer,

    agent or employee and may generally control the action of the officers and

    require performance of all duties imposed upon them.

 

47. Compensation.  The Board is authorized to determine or to provide the method

    of determining the compensation of officers.

 

48. Bond.  Any officer, if required by the Board, shall give bond for the

    faithful performance of his or her duties. Any surety on such bond shall be

    the expense of the Company.

 

49. Signing Checks and Other Instruments.  The Board is authorized to determine

    or provide the method of determining how checks, notes, bills of exchange

    and any other instruments or documentation shall be signed, countersigned,

    or endorsed on behalf of the Company.

 

50. Authority to Transfer and Vote Securities.  The Chairman of the Board, the

    Deputy Chairman, the President, the Secretary or the Treasurer of the

    Company are each authorized to sign the name of the Company and to perform

    all acts necessary to effect a transfer of any shares, bonds, or other

    evidences of indebtedness or obligations, subscription rights, warrants, and

    other securities of another corporation owned by the Company and to issue

    the necessary powers of attorney for the same; and each such officer is

    authorized on behalf of the Company to vote such securities, to appoint

    proxies with respect thereto, and to execute consents, waivers and releases

    with respect thereto, or to cause any such action to be taken.

 

                               ACCOUNTING RECORDS

 

51. Records of Account.  The Company will cause to be kept proper records of

    account in accordance with the Companies Act. The records of account shall

    be kept at the registered office of the Company or at such other place or

    places as the Board of Directors thinks fit, and shall at all times be open

    to inspection by the directors; provided that if the records of account are

    kept at some place outside Bermuda, there shall be kept at an office of the

    Company in Bermuda such records as will enable the directors to ascertain

    with reasonable accuracy the financial position of the Company at the end of

    each six month period. No shareholder (other than an officer of the Company)

    shall have any right to inspect any accounting record or book or document of

    the Company except as conferred by law or authorized by the Board. A copy of

    the financial statements which are to be laid before the Company in general

    meeting, together with the auditor's report, shall be sent to each person

    entitled thereto in accordance with the Companies Act.

 

                             APPOINTMENT OF AUDITOR

 

52. Appointment of Auditor.  The shareholders of the Company at each annual

    general meeting shall appoint an auditor to audit the accounts of the

    Company and such auditor shall hold office until the shareholders appoint

    another auditor in accordance with the Companies Act. The remuneration of

    the auditor shall be fixed by the Board of Directors or in such manner as

    the Board may determine.

 

                                      III-12

<PAGE>   74

 

                                   INDEMNITY

 

53. General Scope of Indemnification.  The Company shall indemnify any director,

    officer, Resident Representative or any former director, officer or Resident

    Representative of the Company, or any person who is serving or has served at

    the request of the Company as a director, officer, or trustee of another

    corporation, joint venture, trust or other enterprise against expenses,

    including attorneys' fees, judgments, fines, and amounts paid in settlement

    actually and reasonably incurred by him or her in connection with any

    threatened, pending, or completed action, suit or proceeding, whether civil,

    criminal, administrative or investigative, other than an action by or in the

    right of the Company, to which he or she was, is, or is threatened to be

    made a party by reason of the fact that he or she is or was such director,

    officer, Resident Representative or trustee; provided always that the

    indemnity contained in this Bye-law shall not extend to any matter which

    would render it void pursuant to the Companies Act.

 

54. Claims by, or in Right of, the Company.  In the case of any threatened,

    pending or completed action, suit or proceeding by or in the right of the

    Company, the Company shall indemnify each person indicated in Bye-law 53

    against expenses, including attorneys' fees, actually and reasonably

    incurred in connection with the defense or settlement thereof, except no

    indemnification shall be made in respect of any claim, issue or matter as to

    which such person shall have been adjudged to be liable for fraud or

    dishonesty in the performance of his or her duty to the Company unless and

    only to the extent that the Supreme Court in Bermuda or the court in which

    such action or suit was brought shall determine upon application that

    despite the adjudication of liability, but in view of all the circumstances

    of the case, such person is fairly and reasonably entitled to indemnity for

    such expenses as the court shall deem proper.

 

55. Indemnification in Advance of Final Disposition.  Expenses, including

    attorneys' fees, incurred in defending any action, suit or proceeding

    referred to in Bye-laws 53 and 54 may be paid by the Company in advance of

    the final disposition of such action, suit, or proceeding as authorized by

    the Board in the specific case upon receipt of an undertaking by or on

    behalf of the director, officer, trustee or other indemnitee to repay such

    amount, unless it shall ultimately be determined that he or she is entitled

    to be indemnified by the Company as authorized in these Bye-laws.

 

56. Non-Exclusive.  It being the policy of the Company that indemnification of

    the persons specified in Bye-laws 53 and 54 shall be made to the fullest

    extent permitted by law, the indemnification provided by Bye-laws 53 through

    56 shall not be deemed exclusive (a) of any other rights to which those

    seeking indemnification or advancement of expenses may be entitled under the

    Memorandum of Association, the Bye-laws, any agreement, any insurance

    purchased by the Company, vote of shareholders or disinterested directors,

    or pursuant to the direction (however embodied) of any court of competent

    jurisdiction, or otherwise, both as to action in his or her official

    capacity and as to action in another capacity while holding such office, or

    (b) of the power of the Company to indemnify any person who is or was an

    employee or agent of the Company or of another corporation, joint venture,

    trust or other enterprise which he or she is serving or has served at the

    request of the Company, to the same extent and in the same situations and

    subject to the same determinations as are hereinabove set forth with respect

    to a director, officer, or trustee. As used in this Bye-law 56, references

    to the "Company" include all constituent corporations in a consolidation or

    merger in which the Company or a predecessor to the Company by consolidation

    or merger was involved. The indemnification provided by Bye-laws 53 through

    56 shall continue as to a person who has ceased to be a director, officer,

    trustee or Resident Representative and shall inure to the benefit of the

    heirs, executors, and administrators of such a person.

 

                                      III-13

<PAGE>   75

 

              FAIR PRICE TO SHAREHOLDERS IN BUSINESS COMBINATIONS

 

57. Fair Price.  The affirmative vote of the holders of not less than eighty

    percent (80%) of the voting power of the Company on the relevant record date

    shall be required for the approval or authorization of any "Business

    Combination" (as hereinafter defined); provided, however, that the eighty

    percent (80%) voting requirement shall not be applicable, and the provisions

    of the Companies Act and of these Bye-laws relating to the percentage of

    shareholder approval, if any, shall apply to any such Business Combination

    if:

 

     (a) The "Continuing Directors" of the Company (as hereinafter defined) by a

         two-thirds ( 2/3) vote have expressly approved the Business Combination

         either in advance of or subsequent to the acquisition of outstanding

         Class A Common Shares of the Company that caused the Related Person (as

         hereinafter defined) involved in the Business Combination to become a

         Related Person; or

 

     (b) If the following conditions are satisfied:

 

         (i) The aggregate amount of the cash and the fair market value of the

             property, securities or other consideration to be received in the

             Business Combination by holders of the Class A Common Shares of the

             Company, other than the Related Person involved in the Business

             Combination, is not less than the "Highest Per Share Price" (with

             appropriate adjustments for recapitalizations, reclassifications,

             stock splits, reverse stock splits and stock dividends) paid by the

             Related Person in acquiring any of its holdings of the Company's

             Class A Common Shares, all as determined by two-thirds ( 2/3) of

             the Continuing Directors; and

 

         (ii) A proxy statement complying with the requirements of the United

              States Securities Exchange Act of 1934, as amended, shall have

              been mailed at least thirty (30) days prior to any vote on the

              Business Combination, to all shareholders of the Company for the

              purpose of soliciting shareholder approval of the Business

              Combination. The proxy statement shall contain at the front

              thereof, in a prominent place, the position of the Continuing

              Directors as to the advisability (or inadvisability) of the

              Business Combination and, if deemed appropriate by two-thirds

              ( 2/3) of the Continuing Directors, the opinion of an investment

              banking firm selected by two-thirds ( 2/3) of the Continuing

              Directors as to the fairness of the terms of the Business

              Combination, from the point of view of the holders of the

              outstanding shares of the Company other than the Related Person

              involved in the Business Combination.

 

58. Definitions.  For purposes of Bye-laws 57 through 59:

 

     (a) The term "Business Combination" means

 

         (i) any merger, consolidation, amalgamation or share exchange of the

             Company or any of its subsidiaries into or with a Related Person,

             in each case irrespective of which corporation or company is the

             surviving entity;

 

         (ii) any sale, lease, exchange, mortgage, pledge, transfer or other

              disposition to or with a Related Person (in a single transaction

              or a series of related transactions) of all or a Substantial Part

              (as hereinafter defined) of the assets of the Company (including

              without limitation any securities of a subsidiary) or a

              Substantial Part of the assets of any of its subsidiaries;

 

        (iii) any sale, lease, exchange, mortgage, pledge, transfer or other

              disposition to or with the Company or to or with any of its

              subsidiaries (in a single transaction or series of related

              transactions) of all or a Substantial Part of the assets of a

              Related Person;

 

        (iv) the issuance or transfer of any securities of the Company or any of

             its subsidiaries by the Company or any of its subsidiaries to a

             Related Person (other than an issuance or transfer of securities

             which is effected on a pro rata basis to all shareholders of the

             Company);

 

         (v) any reclassification of securities (including any reverse stock

             split), recapitalization, or any other transaction involving the

             Company or any of its subsidiaries, that would have the effect of

             increasing the voting power of a Related Person;

 

                                      III-14

<PAGE>   76

 

         (vi) the adoption of any plan or proposal for the liquidation or

              dissolution of the Company proposed by or on behalf of a Related

              Person, and

 

        (vii) the entering into of any agreement, contract or other arrangement

              providing for any of the transactions described in this definition

              of Business Combination.

 

    (b)  The term "Related Person" shall mean any individual, corporation,

         partnership or other person or entity other than the Company or any of

         its subsidiaries which, as of the record date for the determination of

         shareholders entitled to notice of and to vote on any Business

         Combination, or immediately prior to the consummation of such

         transaction, together with its "Affiliates" and "Associates" (as

         defined in Rule 12b-2 of the Regulations under the United States

         Securities Exchange Act of 1934 as in effect at the date of the

         adoption of these Bye-laws by the shareholders of the Company

         (collectively and as so in effect, the "Exchange Act")), are

         "Beneficial Owners" (as defined in Rule 13d-3 of the Exchange Act) in

         the aggregate of twenty percent (20%) or more of the outstanding Class

         A Common Shares of the Company, and any Affiliate or Associate of any

         such individual, corporation, partnership or other person or entity.

         Notwithstanding the definition of "Beneficial Owners" in this

         subparagraph (b), any Class A Common Shares of the Company that any

         Related Person has the right to acquire pursuant to any agreement, or

         upon exercise of conversion rights, warrants or options, or otherwise,

         shall be deemed beneficially owned by the Related Person.

 

    (c)  The term "Substantial Part" shall mean more than twenty percent (20%)

         of the fair market value, as determined by two-thirds ( 2/3) of the

         Continuing Directors, of the total consolidated assets of the Company

         and its subsidiaries taken as a whole, as of the end of its most recent

         fiscal year ending prior to the time the determination is being made.

 

    (d)  For the purposes of paragraph (b)(i) of Bye-law 57, in the event of a

         Business Combination in which the Company is the surviving corporation,

         the term "other consideration to be received" shall include, without

         limitation, Class A Common Shares or other capital stock of the Company

         retained by holders of the Class A Common Shares other than Related

         Persons or parties to such Business Combination.

 

    (e)  The term "Continuing Directors" shall mean a director who either (i)

         was a member of the Board of Directors of the Company immediately prior

         to the time that the Related Person involved in a Business Combination

         became a Related Person, or (ii) was designated (before his or her

         initial election as director) as a Continuing Director by two-thirds of

         the then Continuing Directors.

 

    (f)  A "Related Person" shall be deemed to have acquired a common share of

         the Company at the time when such Related Person became the Beneficial

         Owner thereof. With respect to the shares owned by Affiliates,

         Associates or other persons whose ownership is attributed to a Related

         Person under the foregoing definition of Related Person, the price paid

         for said shares shall be deemed to be the higher of (i) the price paid

         upon the acquisition thereof by the Affiliate, Associate or other

         person or (ii) the market price of the shares in question at the time

         when the Related Person became the Beneficial Owner thereof.

 

    (g)  The term "Highest Per Share Price" as used in Bye-laws 57 through 59

         shall mean the highest price determined by two-thirds ( 2/3) of the

         Continuing Directors to have been paid at any time by the Related

         Person for any Class A Common Share or Class A Common Shares. In

         determining the Highest Per Share Price, all purchases by the Related

         Person shall be taken into account regardless of whether the shares

         were purchased before or after the Related Person became a Related

         Person. The Highest Per Share Price shall include any brokerage

         commissions, transfer taxes and soliciting dealers' fees paid by the

         Related Person with respect to Class A Common Shares of the Company

         acquired by the Related Person.

 

59. Amendment or Repeal of Fair Price Bye-laws.  Any amendment, change or repeal

    of Bye-laws 57 through 59, or any other amendment of the Company's Bye-laws

    which would have the effect of modifying or permitting circumvention of

    Bye-laws 57 through 59, shall require the favorable vote, at a meeting of

    the shareholders of the Company, of the holders of at least eighty percent

    (80%) of the voting power of the

                                      III-15

<PAGE>   77

 

    Company on the relevant record date; provided, however, that this Bye-law 59

    shall not apply to, and such eighty percent (80%) vote shall not be required

    for, any such amendment, change or repeal recommended to shareholders by

    two-thirds ( 2/3) of the Continuing Directors and such amendment, change or

    repeal so recommended shall require only the affirmative vote of a majority

    of the voting power of the Company on the relevant record date. For the

    purposes of this Bye-law 59 only, if at the time when any such amendment,

    change, or repeal is under consideration there is no proposed Business

    Combination (in which event, the definition of Continuing Director in

    paragraph (e) of Bye-law 58 would be inapplicable), the "Continuing

    Directors" shall be deemed to be those persons who are members of the Board

    of Directors of the Company at the time the Company becomes publicly traded

    on the New York Stock Exchange plus those persons who are Continuing

    Directors under clause (ii) of paragraph (e) of Bye-law 58, except that if

    there are no Continuing Directors under paragraph (e)(i) of Bye-law 58 then

    the Directors in office at the time such determination is made shall be

    deemed to be the Continuing Directors.

 

                                   AMENDMENTS

 

60. Amendments by Majority Vote.  Except as provided in Bye-law 61, these

    Bye-laws may be altered, changed, or amended in any respect, or superseded

    by new Bye-laws, in whole or in part, by the Board of Directors, subject to

    approval by the affirmative vote of the holders of record of shares

    entitling them to exercise a majority of the voting power of the Company on

    the relevant record date with respect thereto at an annual or special

    general meeting called for such purpose or without a meeting by the written

    consent of all of the holders of record of shares of the Company.

 

61. Amendments by Super Majority Vote.  Notwithstanding any other provisions of

    these Bye-laws or any provision of law which might otherwise permit a lesser

    vote or no vote, but in addition to any affirmative vote of the holders of

    any particular class or series of shares required by law or these Bye-laws,

    the affirmative vote of the holders of at least 80% of the Company's voting

    power on the relevant record date shall be required to alter, amend or

    repeal Bye-laws 26 and 57 through 61, except as provided in Bye-law 59.

 

                                      III-16