Document:

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                          COMMONWEALTH OF PENNSYLVANIA
   [INSURANCE                 INSURANCE DEPARTMENT
    DEPARTMENT                      Office of
      SEAL]                  Regulation of Companies
                             1345 Strawberry Square
                              Harrisburg, PA 17120

                 Telephone (717) 783-2142    Fax (717) 787-8557
                            www.insurance.state.pa.us
                                January 23, 2001

Reliance Insurance Company
c/o George R. Baker
Three Parkway
Philadelphia, PA 19102

RE:     Amended Letter of Agreement

Dear Sir:

         On August 17, 2000 the Pennsylvania Insurance Department ("Department")
and Reliance Insurance Company ("Reliance") entered into an agreement
("Agreement") which set forth a schedule of reports and other transactions for
the Department's review, comment, or approval. Since the date of that Agreement,
Reliance has increased its loss and loss adjustment reserves with a resulting
reduction in policyholders' surplus. Therefore, the Department desires to
receive further information on a continuing basis concerning the financial
condition of Reliance, and Reliance is willing to cooperate with the Department
in such endeavors. Accordingly, the Department and Reliance hereby enter into
this Amended Letter of Agreement ("Amended Agreement") amending the August 17,
2000 Agreement to set forth a schedule of reports and other transactions for the
Department's review, comment, and/or approval. Reliance and the Department
agree, so long as this Amended Agreement is in effect, as follows:

         1. In case any provision of this Amended Agreement requires that the
Department has the right to approve a transaction or action, Reliance shall give
written notice of the intention of taking such action, and provide all necessary
information with respect to such transaction or action at least ten (10)
business days (or in the case of Paragraph 16 of this Amended Agreement, five
(5) business days) prior to the consummation of such transaction or the taking
of such action. If the Department shall not have disapproved such transaction or
action prior to the end of such 10 (or 5) business day period, the transaction
or action shall be deemed approved by the Department. In any event, Reliance may
consummate any such transaction or take any such action following approval by
the Department given prior to such 10 (or 5) business day period.

         2. Reliance has obtained a resolution of the Board of Directors
authorizing a senior officer(s) of Reliance Insurance Company, to execute this
Amended Agreement for Reliance. A copy of the resolution is attached as Exhibit
A.

         3. This Amended Agreement shall remain in full force and effect until:

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            a. Reliance and the Department shall mutually agree to dissolve this
               Agreement; or

            b. The Department commences any proceedings in the Pennsylvania
               Commonwealth Court under Article V of the Insurance Department
               Act of May 17, 1921 for the appointment of a rehabilitator or
               liquidator of Reliance; or

            c. A declaration by the Department of the dissolution of this
               Amended Agreement if Reliance shall have breached this Amended
               Agreement in any material respect provided that the Department
               shall have given written notice to Reliance of such breach and
               Reliance shall not have cured such breach within 10 business days
               of receipt of such notice. The Department shall also provide the
               holders of Reliance Financial Services Corporation secured debt,
               or their designated agent, a copy of such notice of breach. Upon
               such dissolution of this Amended Agreement, the Department may
               take any action authorized by law, and Reliance hereby agrees
               that the Department shall be entitled to issue a cease and desist
               order or to secure injunctive or other equitable relief with
               respect to such material breach as the interests of Reliance's
               policyholders, creditors, shareholders or the public may require.
               In the event that the Department takes any such action, the
               Department will provide the holders of Reliance Financial
               Services Corporation secured debt copies of any notices the
               Department is required to give Reliance. Reliance will not oppose
               the issuance of such cease and desist order or the granting of
               such relief for any such material breach, without prejudice to
               Reliance to seek relief as appropriate before the Pennsylvania
               Commonwealth Court.

         4. This Amended Agreement is in addition to and in conjunction with
(but not a part of) the Order of Supervision dated January 29, 2001 which
designates and appoints Stephen J. Johnson or his successor as the Supervisor of
Reliance, which provides for the appointment of a Representative of the
Commissioner and the Supervisor and which sets forth additional responsibilities
of Reliance.

         5. Reliance shall make the following reports:

            a. Reliance shall submit to the Department a monthly summary
               statutory financial information report on the consolidated
               results of operations and the financial position of Reliance, no
               later than the last day of the month following the month subject
               to the report, in the form approved by the Department, except
               that the report need not be filed with respect to the four (4)
               months, March, June, September or December,

            b. Within ten (10) business days of the request of the Department,
               Reliance shall file, in a form acceptable to the Commissioner or
               her Supervisor, the plan for the runoff of Reliance's
               liabilities. Reliance shall regularly review the filed runoff
               plan and recommend revisions as necessary for the Department's
               review.

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            c. Reliance shall, not later than May 1 of each year (commencing May
               1, 2002), submit to the Department an annual report in which the
               actual results of the runoff during the prior year are compared
               to the projections for such year as contained in the runoff plan
               as filed with the Department, as required in Section b. of this
               Paragraph 5. Each report shall also contain an analysis of all
               material variances between the actual and projected results.

            d. Reliance shall, not later than May 1 in each year (commencing May
               1, 2002), submit to the Department a revised runoff plan
               projected as of January of such year, updating the projections
               contained in the runoff plan filed pursuant to section 5.b. above
               to reflect the actual results of the runoff during the prior year
               and any changes in the assumptions.

            e. Reliance shall submit to this Department a report of aging
               reinsurance balances at the time of filing each quarterly and
               annual statement of financial condition with the Department,
               commencing with the filing with respect to the year ended
               December 31, 2000. Each such report shall contain explanations
               for reinsurance balances in existence over 90 days and shall
               describe actions Reliance has taken and will take to collect
               these balances.

            f. Reliance shall submit to the Department any additional reports
               that the Department reasonably determines are necessary to
               ascertain the financial condition of Reliance.

         6. Reliance shall submit the following financial reporting documents
and information to the Representative when available or when received by
Reliance:

            a. Quarterly and annual balance sheets and operating income
               statements prepared in accordance with generally accepted
               accounting principles if prepared in the ordinary course of
               business;

            b. Quarterly and Annual Statements for Reliance and its insurance
               company subsidiaries prepared in accordance with statutory
               accounting principles, and all other regular financial reporting
               documents and information required by law;

            c. Any material reports, evaluations, or analytical papers prepared
               by Reliance or its consultants regarding the operations of
               Reliance, including its existing or projected financial
               condition;

            d. Any reports requested by the Department pursuant to Paragraph
               5.e. above regarding the status of reserves and reinsurance
               recoverables;

            e. Any and all reports as reasonably requested by the Representative
               as determined to be necessary to perform its duties hereunder;

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            f. All filings made with the Securities and Exchange Commission by
               Reliance Group Holdings; and

            g. Reliance shall also notify the Representative of any and all
               other material matters before senior management employees on a
               continuing basis and related to the business or operations of
               Reliance, including, but not limited to, meetings and memoranda
               and other communications. Reliance and the Representative shall
               develop protocols which will set forth systems for providing
               information to the Representative and for identifying senior
               management employees who will provide information concerning such
               material matters.

         7. Reliance shall provide the same indemnification for the
Representative and employees and consultants of the Representative for claims
arising out of or related to the performance of their duties under this Amended
Agreement as that which Reliance provides its officers, directors, and
employees, except that the indemnification provided hereunder shall not extend
to any claim arising out of or related to the gross negligence or willful
misconduct or recklessness of the Representative or the employees and
consultants of the Representative, or to any claim by the Department against the
Representative or the employees and consultants of the Representative.

         8. Reliance shall not make any payments, dividends, or other
distributions to or engage in any transactions with any affiliate (as defined in
Article XIV, Section 1401 of the Insurance Department Act of 1921, 40 P.S.
ss.991.1401) of Reliance, without the prior written approval of the Department,
except payments to and transactions with Reliance's insurance company
subsidiaries.

         9. Reliance shall not accept any non-cash capital contributions from
any affiliate (as defined in Paragraph 8 above) without the prior written
approval of the Department.

         10. Reliance shall not make any withdrawal of monies from its bank
accounts nor make any disbursement, payment, or transfer of assets outside the
ordinary course of business in an amount exceeding 5% of its then aggregate cash
and investments without prior approval by the Department, unless pursuant to
contracts existing as of the date of this Amended Agreement or pursuant to a
transaction submitted for and after approval by the Department.

         11. Reliance shall not make any new investment of its funds without
prior approval of the Department unless such investment is:

            a. in connection with any existing real estate development project;

            b. in accordance with Reliance's existing investment guidelines
               (except for new real estate investment assets or securities with
               a National Association of Insurance Commissioners Securities
               Valuation designation of 3 through 6);

            c. a fixed income security, which has a National Association of
               Insurance Commissioners Securities Valuation Office designation
               of 1 or 2, or has an

                                      -4-
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               investment grade rating of a nationally recognized statistical
               rating agency relied upon by the National Association of
               Insurance Commissioners; or

            d. an equity security included in the S&P 500 Index or the Russell
               2000 Index if, after giving effect to such investment, the
               aggregate value of all equity security investments then owned by
               Reliance does not exceed 5% of the aggregate value of all
               investments then owned by Reliance.

         12. Reliance shall not incur any debt, obligation or liability for
borrowed money not related directly to the ordinary course of business without
the prior written approval of the Department.

         13. Reliance shall not loan monies to any person without the prior
written approval of the Department, except that Reliance may, without such
approval of the Department, invest in securities as permitted in Paragraph 11,
make loans and advances to its insurance subsidiaries in the ordinary course of
business consistent with past practices, and make advances to employees in the
ordinary course of business consistent with past practices.

         14. Reliance shall not pledge or assign any of its assets without the
prior written approval of the Department except: (1) pursuant to security
arrangements under reinsurance contracts existing on the date of this Amended
Agreement; (2) pursuant to security agreements in connection with repurchase and
similar investment arrangements in the ordinary course of business consistent
with past practices; (3) pursuant to other security arrangements existing on the
date of this Amended Agreement; (4) pursuant to transactions or agreements
approved by the Department hereunder, or (5) pursuant to statutory deposits as
described in Paragraph 27, below.

         15. Reliance shall not, in any transaction or series of related
transactions, dispose of any fixed assets of plant, property or equipment having
a book value of $2,500,000 or more without the prior written approval of the
Department.

         16. Reliance shall not enter into any new reinsurance agreement nor
amend any reinsurance agreement without the Department's prior written approval,
except that Reliance may, without such approval:

            a. renew or amend reinsurance agreements existing on the date of
               this Amended Agreement or approved by the Department hereunder,
               if the terms thereof remain unchanged in all material respects;
               and

            b. enter into any new reinsurance agreement or amend or renew any
               reinsurance agreement whose total subject premiums do not exceed
               or are not reasonably expected to exceed $10,000,000,

         17. Reliance shall not grant any salary increase to any Reliance
officer without the prior written approval of the Department, except for a
salary increase in any calendar year which does not exceed 5% of such officer's
salary as at the beginning of the year. Reliance will not grant salary increases
to its employees other than officers without the prior written approval of the

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Department, except for salary increases which, in any calendar year, in the
aggregate do not exceed 5% of the aggregate annual salary compensation payable
by Reliance at the commencement of such year,

         18. Reliance shall pay no bonus, commission, stock, stock option,
directors' fees, or other type of emolument or non-salary compensation to any
Reliance offcer, director or employee without the prior written approval of the
Department, except

            a. emoluments, including vacations and payments in lieu of
               vacations, health, life, disability and other insurance plans and
               arrangements under agreements and plans existing on the date
               hereof;

            b. bonus payments including "retention" bonuses under commitments,
               plans and agreements existing on the date hereof; and

            c. directors' fees under agreements and plans existing on the date
               hereof,

         19. Reliance shall not add any individual who is not currently a senior
officer of Reliance or one of its affiliates to the board of directors of
Reliance without prior written approval by the Department. Reliance shall not
appoint any individual who is not currently a senior officer of Reliance or one
of its affiliates as a chief executive officer, chief operating officer, chief
financial officer, chief actuarial officer, general counsel or chief claims
officer (each position henceforth referred to as "Key Officer") of Reliance
without prior approval by the Department (it being understood that Reliance may
appoint Acting Key Officers pending appointment of individuals as Key Officers
on a permanent basis without such prior approval and Reliance will notify the
Department of any such appointment within 5 business days following such an
appointment).

         20. Reliance shall not change the terms of any written group
remuneration, consulting, deferred compensation or bonus plans covering all
officers and employees of Reliance, or any remuneration, consulting, deferred
compensation and bonus plans covering any director or any Key Officer of
Reliance without prior written approval of the Department, except to the extent
otherwise permitted hereby or approved by the Department hereunder.

         21. Reliance shall not enter into any new third party administrator or
management agreement or amend any such agreement existing on the date hereof,
without prior written approval of the Department, except for agreements in
respect of which annual payments by Reliance thereunder do not exceed or are not
reasonably expected to exceed $1,000,000 and for agreements approved by the
Department hereunder if the terms thereof remain unchanged in all material
respects.

         22. Within a period of time mutually agreed upon by Reliance and the
Department, but not in excess of ninety (90) days of the effective date of this
Amended Agreement, Reliance shall disclose to the Department the existence of
all material written current contracts or agreements

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between Reliance and any corporation, incorporated or unincorporated
association, partnership, limited partnership, limited liability partnership,
joint venture, or limited liability corporation.

         23. Reliance shall not consummate any material transactions, as defined
in Chapter 27 of Title 31 of the Pennsylvania Code, with any person (whether or
not affiliated) without the Department's prior written approval.

         24. Reliance shall not change or amend Reliance's bylaws without prior
written approval of the Department.

         25. Reliance shall not merge or consolidate with or be acquired by an
entity or person without prior approval of the Department.

         26. Reliance shall not alter the corporate ownership structure of
Reliance Insurance Company and any subsidiary as shown on Schedule Y to
Reliance's most recent report to the Department, without prior written approval
of the Department.

         27. Reliance and its insurance company subsidiaries shall not establish
statutory security deposits, in addition to deposits existing on the date
hereof, except to the extent required by law, with any insurance regulatory
authority (other than the Commonwealth of Pennsylvania) without the Department's
prior written approval.

         28. Reliance shall annually meet with the Department, at the
Department's request, by the end of May of each year that this Amended Agreement
is in effect to review the operating results of Reliance. Reliance shall also
meet with the Department at other times upon reasonable advance notice by the
Department.

         29. Reliance shall not write any new policies of insurance, except as
required by law or contract, without prior written approval of the Department.

         30. Reliance agrees that, if the Department engages any outside
independent consultants to assist the Department in its analyses of Reliance's
condition, the consultants' fees shall be paid by Reliance. The Department will
not enter into such fee arrangements without reasonable prior notice to
Reliance.

         31. Reliance shall not waive, or take any action, or fail to take any
action, which may be deemed to constitute a waiver of any rights to satisfaction
of obligations owed to Reliance by any affiliate of Reliance, without prior
written approval of the Department.

         32. Reliance shall make all books and records available to the
Department for inspection upon request.

         33. All information, documents and copies thereof obtained by or
disclosed to the Department and the Representative and his consultants,
employees, and agents designated (Designees) to have access to such information,
documents and copies thereof pursuant to this Amended Agreement and the Order of
Supervision dated January 29, 2001 will be kept strictly

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confidential by the Department and the Representative and his Designees and not
disclosed to any third party except for information which is generally available
to the public. In the event that the Department is required to disclose any of
such information, the Department will give Reliance prompt written notice of
such request.

         34. This Amended Agreement supersedes any existing agreements between
Reliance and the Department.

/s/ Stephen J. Johnson                  January 23, 2001
------------------------------------    ----------------
Stephen J. Johnson, CPA                 Date
Deputy Insurance Commissioner
Pennsylvania Insurance Department

/s/ George E. Bello                     January 25, 2001
------------------------------------    ----------------
Reliance Insurance Company              Date

                                      -8-Exhibit 4.1

                          CERTIFICATE OF INCORPORATION

                                       OF

                       HUNGARIAN TELEPHONE AND CABLE CORP.

                              (as amended to date)

                  The  undersigned,   a  natural  person,  for  the  purpose  of
organizing a corporation  for conducting the business and promoting the purposes
hereinafter stated,  under the provisions and subject to the requirements of the
laws of the State of Delaware  (particularly  Chapter 1, Title 8 of the Delaware
Code and the acts  amendatory  thereof  and  supplemental  thereto,  and  known,
identified,  and  referred to as the  "General  Corporation  Law of the State of
Delaware"), hereby certifies that:

                  FIRST:   The name of the corporation (hereinafter called the
"corporation") is Hungarian Telephone and Cable Corp.

                  SECOND:  The address,  including  street,  number,  city,  and
county,  of the registered office of the corporation in the State of Delaware is
15 East  North  Street,  City of  Dover,  County  of  Kent;  and the name of the
registered  agent of the corporation in the State of Delaware at such address is
XL Corporate Services, Inc.

                  THIRD:   The  purpose  of  the corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.

                  FOURTH:  The total  number of shares of all  classes  of stock
which the  corporation  is authorized to issue is thirty  million  (30,000,000),
consisting  of five million  (5,000,000)  shares of preferred  stock,  par value
one-tenth of one cent ($.001) per share (the "Preferred Stock"), and twenty-five
millions  (25,000,000)  shares of common stock,  par value one-tenth of one cent
($.001) per share (the "Common Stock").

                  Each  issued  and  outstanding  share of  Common  Stock  shall
entitle the holder of record thereof to one vote.

                  The Preferred Stock may be issued in one or more series as may
be determined from time to time by the Board of Directors. All shares of any one
series of Preferred  Stock will be identical  except as to the date of issue and
the dates from which dividends on shares of the series issued on different dates
will cumulate, if cumulative. Authority is hereby expressly granted to the Board
of Directors to authorize the issuance of one or more series of Preferred Stock,
and to fix by  resolution  or  resolutions  providing for the issue of each such
series  the  voting  powers,   the  designation,   preferences,   and  relative,
participating,  optional,  redemption,  conversion,  exchange  or other  special
rights,  qualifications,  limitations or  restrictions  of such series,  and the
number of shares in each series,  to the full extent now or hereafter  permitted
by law.

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                  The  redemption,  purchase or  acquiring by the Company of any
shares of its  Preferred  Stock,  shall not be deemed to reduce  the  authorized
number of shares of Preferred Stock of the Company.  Any shares of the Company's
Preferred Stock redeemed,  retired,  purchased or otherwise acquired  (including
shares acquired by conversion) shall be cancelled and shall assume the status of
authorized but unissued  Preferred Stock in the same manner as if the shares had
never been issued as shares of any series of Preferred Stock and be undesignated
as to future series.

                  FIFTH:   The  name  and mailing address of the incorporator is
as follows:

         NAME                                    MAILING ADDRESS

         Frank R. Cohen                          445 Park Avenue
                                                 New York, New York  10022

                  SIXTH:   The corporation is to have perpetual existence.

                  SEVENTH:  Whenever a  compromise  or  arrangement  is proposed
between this  corporation  and its creditors or any class of them and/or between
this  corporation  and its  stockholders  or any  class  of them,  any  court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of this corporation or of any creditor or stockholder  thereof or on
the  application  of any receiver or receivers  appointed  for this  corporation
under ss. 291 of Title 8 of the Delaware Code or on the  application of trustees
in  dissolution or of any receiver or receivers  appointed for this  corporation
under ss. 279 of Title 8 of the Delaware  Code order a meeting of the  creditors
or class of creditors,  and/or of the  stockholders  or class of stockholders of
this corporation,  as the case may be, to be summoned in such manner as the said
court directs.  If a majority in number  representing  three fourths in value of
the  creditors or class of  creditors,  and/or of the  stockholders  or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
compromise  or  arrangement,  the said  compromise or  arrangement  and the said
reorganization  shall, if sanctioned by the court to which the said  application
has been made, be binding on all the creditors or class of creditors,  and/or on
all the stockholders or class of creditors,  and/or corporation, as the case may
be, and also on this corporation.

                  EIGHTH: For the management of the business and for the conduct
of the affairs of the corporation,  and in further definition,  limitation,  and
regulation  of the powers of the  corporation  and of its  directors  and of its
stockholders or any class thereof, as the case may be, it is further provided:

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                  1. The  management  of the  business  and the  conduct  of the
         affairs of the  corporation  shall be vested in its Board of Directors.
         The number of  directors  which  shall  constitute  the whole  Board of
         Directors  shall be fixed by, or in the manner provided in, the Bylaws.
         The phrase  "whole  Board" and the phrase  "total  number of directors"
         shall be deemed to have the same  meaning,  to wit, the total number of
         directors which the corporation  would have if there were no vacancies.
         No election of directors need be by written ballot.

                  2. After the original or other Bylaws of the corporation  have
         been adopted,  amended, or repealed,  as the case may be, in accordance
         with the  provisions of ss. 109 of the General  Corporation  Law of the
         State of Delaware,  and, after the corporation has received any payment
         for any of its stock,  the power to adopt,  amend, or repeal the Bylaws
         of the  corporation  may be  exercised by the Board of Directors of the
         corporation;   provided,   however,   that   any   provision   for  the
         classification  of directors of the  corporation  for  staggered  terms
         pursuant to the  provisions of subsection (d) of ss. 141 of the General
         Corporation  Law of the  State of  Delaware  shall  be set  forth in an
         initial  Bylaw or in a Bylaw  adopted by the  stockholders  entitled to
         vote of the corporation unless provisions for such classification shall
         be set forth in this certificate of incorporation.

                  3. Whenever the corporation  shall be authorized to issue only
         one class of stock,  each  outstanding  share shall  entitle the holder
         thereof  to  notice  of,  and the  right to vote  at,  any  meeting  of
         stockholders.  Whenever the  corporation  shall be  authorized to issue
         more  than one  class of stock,  no  outstanding  share of any class of
         stock  which  is  denied  voting  power  under  the  provisions  of the
         certificate  of  incorporation  shall entitle the holder thereof to the
         right to vote at any meeting of  stockholders  except as the provisions
         of  paragraph  (2)  of  subsection  (b)  of  ss.  242  of  the  General
         Corporation  Law of the  State of  Delaware  shall  otherwise  require;
         provided,  that no share of any such class  which is  otherwise  denied
         voting power shall entitle the holder thereof to vote upon the increase
         or decrease in the number of authorized shares of said class.

                  4. All meetings of  stockholders  shall be held in  accordance
         with  ss.  211  and  it  shall  not  be  permitted  for  an  action  of
         stockholders  to be  taken  by a  consent  of  stockholders  in lieu of
         meeting as provided for in ss. 228.

                  NINTH:  The  personal   liability  of  the  directors  of  the
corporation is hereby  eliminated to the fullest  extent  permitted by paragraph
(7) of subsection (b) of ss. 102 of the General  Corporation Law of the State of
Delaware, as the same may be amended and supplemented.

                                       -3-
<PAGE>

                  TENTH: The corporation  shall, to the fullest extent permitted
by ss. 145 of the General Corporation Law of the State of Delaware,  as the same
may be amended and  supplemented,  indemnify  any and all persons  whom it shall
have power to  indemnify  under said section from and against any and all of the
expenses,  liabilities,  or other  matters  referred  to in or  covered  by said
section,  and the  indemnification  provided  for  herein  shall  not be  deemed
exclusive of any other rights to which those  indemnified  may be entitled under
any  Bylaw,  agreement,  vote of  stockholders  or  disinterested  directors  or
otherwise,  both as to action in another capacity while holding such office, and
shall  continue  as to a  person  who  has  ceased  to be a  director,  officer,
employee, or agent and shall inure to the benefit of the heirs,  executors,  and
administrators of such a person.

                  ELEVENTH:  From  time to time  any of the  provisions  of this
certificate of incorporation  may be amended,  altered,  or repealed,  and other
provisions  authorized by the laws of the State of Delaware at the time in force
may be added or  inserted  in the  manner  and at the  time  conferred  upon the
stockholders of the corporation by this certificate of incorporation are granted
subject to the provisions of this Article ELEVENTH.

Signed on March 20, 1992

                                                   /s/ Frank R. Cohen
                                                   Incorporator

                                       -4-

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