Issuing And Paying Agency Agreement-11/9/00

EXECUTION COPY


ISSUING AND PAYING AGENCY AGREEMENT
[U.S. ISSUER AND GUARANTOR]


This Agreement, dated as of, November 9, 2000, is by and among Telecomunicaciones de Puerto Rico, Inc. (the "Issuer"), Puerto Rico Telephone Company and Celulares Telef6nica, Inc. (each a "Guarantor" and collectively the "Guarantors") and The Chase Manhattan Bank ("Chase").


1. APPOINTMENT AND ACCEPTANCE


The Issuer and the Guarantors hereby request that Chase act as the Issuer's issuing and paying agent in connection with the issuance and payment of certain short-term promissory notes of the Issuer (the "Notes"), as further described herein, and Chase agrees to act as such agent upon the terms and conditions contained in this Agreement.


2. COMMERCIAL PAPER PROGRAMS


The Issuer may establish one or more commercial paper programs under this Agreement by delivering to Chase a completed program schedule (the "Program Schedule") with respect to such program. Chase has given the Issuer a copy of the current form of Program Schedule, and the Issuer shall complete and return its first Program Schedule to Chase prior to or simultaneously with the execution of this Agreement. In the event that any of the information provided in, or attached to, a Program Schedule shall change, the Issuer shall promptly inform Chase of such change in writing.


3. NOTES


All Notes issued by the Issuer under this Agreement shall be short-term promissory notes, guaranteed by the Guarantors, exempt from the registration requirements of the Securities Act of 1933, as amended, and from the registration requirements of applicable state securities laws. The Notes may be placed by dealers (the "Dealers") pursuant to Section 4 hereof. Notes shall be issued in either certificated or book-entry form.


4. AUTHORIZED REPRESENTATIVES


The Issuer shall deliver to Chase a certified copy of duly adopted corporate resolutions from its Board of Directors (or other governing body) authorizing the issuance of Notes under each program established pursuant to this Agreement and a certificate of incumbency, with specimen signatures attached, of those officers, employees and agents of the Issuer authorized to take certain actions with respect to the Notes as provided in this Agreement. The Guarantors shall deliver to Chase a certified copy of duly adopted corporate resolutions from each of their Board of Directors (or other governing body) authorizing it's the guaranty of the Notes and a certificate of incumbency, with specimen signatures attached, of those officers, employees and agents of the Guarantors authorized to execute this Agreement and take certain actions with


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respect to the Notes as provided in this Agreement. Each person named on any certificate of incumbency of the Issuer or the Guarantors is hereinafter referred to as an "Authorized Representative". Until Chase receives any subsequent incumbency certificates, Chase shall be entitled to rely on the last incumbency certificate delivered to it by the Issuer or the Guarantors for the purpose of determining such party's Authorized Representatives. The Issuer and each Guarantor represents and warrants that each of its Authorized Representatives may appoint other officers, employees and agents (the "Delegates"), including without limitation any Dealers, to issue instructions to Chase under this Agreement, and take other actions on its behalf hereunder, provided that notice of the appointment of each Delegate is delivered to Chase in writing. Each such appointment shall remain in effect unless and until revoked by the Issuer or the Guarantors in a written notice to Chase.


5. CERTIFICATED NOTES


If and when the Issuer intends to issue certificated notes ("Certificated Notes"), the Issuer and Chase shall agree upon the form of such Notes. Thereafter, the Issuer shall from time to time deliver to Chase adequate supplies of Certificated Notes which will be in bearer form, serially numbered, and shall be executed by the manual or facsimile signature of an Authorized Representative of each of the Issuer and each of the Guarantors. Chase will acknowledge receipt of any supply of Certificated Notes received from the Issuer, noting any exceptions to the shipping manifest or transmittal letter (if any), and will hold the Certificated Notes in safekeeping for the Issuer in accordance with Chase's customary practices. Chase shall not have any liability to the Issuer or the Guarantors to determine by whom or by what means a facsimile signature may have been affixed on Certificated Notes, or to determine whether any facsimile or manual signature is genuine, if such facsimile or manual signature resembles the specimen signature attached to the certificate of incumbency with respect to such Authorized Representative. Any Certificated Note bearing the manual or facsimile signature of a person who is an Authorized Representative on the date such signature was affixed shall bind the Issuer and the Guarantors after completion thereof by Chase, notwithstanding that such person shall have ceased to hold his or her office on the date such Note is countersigned or delivered by Chase.


6. BOOK-ENTRY NOTES


The Issuer's Book-entry notes ("Book-Entry Notes") shall not be issued in physical form, but their aggregate face amount shall be represented by a master note (the "Master Note") in the form of Exhibit A hereto executed by the Issuer and each of the Guarantors pursuant to the book-entry commercial paper program of The Depository Trust Company ("DTC"). Chase shall maintain the Master Note in safekeeping, in accordance with its customary practices, on behalf of Cede & Co., the registered owner thereof and nominee of DTC. As long as Cede & Co. is the registered owner of the Master Note, the beneficial ownership interest therein shall be shown on, and the transfer of ownership thereof shall be effected through, entries on the books maintained by DTC and the books of its direct and indirect participants. The Master Note and the Book-entry Notes shall be subject to DTC's rules and procedures, as amended from time to time. Chase shall not be liable or responsible for sending transaction statements of any kind to DTC's participants or the beneficial owners of the Book-entry Notes, or for maintaining, supervising or reviewing the records of DTC or its participants with respect to such Notes. In connection with DTC's program, the Issuer and the Guarantors understand that as one of the conditions of their participation therein, it shall be necessary for the Issuer, each Guarantor and Chase to enter into a Letter of Representations, in the form of Exhibit B hereto, and for DTC to receive and accept


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such Letter of Representation. In accordance with DTC's program, Chase shall obtain from the CUSIP Service Bureau a written list of CUSIP numbers for the Book-entry Notes, and Chase shall deliver such list to DTC. The CUSIP Service Bureau shall bill the Issuer directly for the fee or fees payable for the list of CUSIP numbers for the Book-entry Notes.


7. ISSUANCE INSTRUCTIONS TO CHASE; PURCHASE PAYMENTS


The Issuer and the Guarantors understand that all instructions under this Agreement are to be directed to Chase's Commercial Paper Department. Chase shall provide the Issuer and the Guarantors, or, if applicable, the Issuer's Dealers, with access to Chase's Money Market Issuance System or other electronic means (collectively, the "System") in order that Chase may receive electronic instructions for the issuance of Notes. Electronic instructions must be transmitted in accordance with the procedures furnished by Chase to the Guarantors, the Issuer or its Dealers in connection with the System. These transmissions shall be the equivalent to the giving of a duly authorized written and signed instruction which Chase may act upon without liability. In the event that the System is inoperable at any time, an Authorized Representative or a Delegate may deliver written, telephone or facsimile instructions to Chase, which instructions shall be verified in accordance with any security procedures agreed upon by the parties. Chase shall incur no liability to the Issuer or the Guarantors in acting upon instructions believed by Chase in good faith to have ?.been given by an Authorized Representative or a Delegate. In the event that a discrepancy exists between a telephonic instruction and a written confirmation, the telephonic instruction will be deemed the controlling and proper instruction. Chase may electronically record any conversations made pursuant to this Agreement, and the Issuer and each of the Guarantors hereby consent to such recordings. All issuance instructions regarding the Notes must be received by 1:00 p.m. New York time in order for the Notes to be issued or delivered on the same day.


(a) Issuance and Purchase of Book-entry Notes. Upon receipt of issuance instructions with respect to Book-entry Notes, Chase shall transmit such instructions to DTC and direct DTC to cause appropriate entries of the Book-entry Notes to be made in accordance with DTC's applicable rules, regulations and procedures for book-entry commercial paper programs. Chase shall assign CUSIP numbers to the Book-entry Notes to identify the aggregate principal amount of outstanding Book-entry Notes in DTC's system, together with the aggregate unpaid interest (if any) on such Notes. Promptly following DTC's established settlement time on each issuance date, Chase shall access DTC's system to verify whether settlement has occurred with respect to the Book-entry Notes. Prior to the close of business on such business day, Chase shall deposit immediately available funds in the amount of the proceeds due the Issuer (if any) to the Issuer's account at Chase and designated in the applicable Program Schedule (the "Account"), provided that Chase has received DTC's confirmation that the Book-entry Notes have settled in accordance with DTC's applicable rules, regulations and procedures. Chase shall have no liability to the Issuer or the Guarantors whatsoever if any DTC participant purchasing a Book-entry Note fails to settle or delays in settling its balance with DTC or if DTC fails to perform in any respect.


(b) Issuance and Purchase of Certificated Notes. Upon receipt of issuance instructions with respect to Certificated Notes, Chase shall: a) complete each Certificated Note as to principal amount, date of issue, maturity date, place


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of payment, and rate or amount of interest if such Note is interest bearing) in accordance with such instructions; b) countersign each Certificated Note; and c) deliver each Certificated Note in accordance with such instructions. Whenever Chase is instructed to deliver any Certificated Note by mail, Chase shall strike from the Certificated Note the word "Bearer," insert as payee the name of the person so designated by the Issuer or the Guarantors and effect delivery by mail to such payee or to such other person as is specified in such instructions to receive the Certificated Note. The Issuer and each of the Guarantors understand that, in accordance with the custom prevailing in the commercial paper market, delivery of Certificated Notes shall be made before the actual receipt of payment for such Notes in immediately available funds, even if Chase is instructed to deliver a Certificated Note against payment. Therefore, once Chase has delivered a Certificated Note to the designated recipient, the Issuer and the Guarantors shall bear the risk that such recipient may fail to remit payment of such Note or return such Note to Chase. Delivery of Certificated Notes shall be subject to the rules of the New York Clearing House in effect at the time of such delivery. Funds received in payment of Certificated Notes shall be credited to the Account.


8. USE OF SALES PROCEEDS IN ADVANCE OF PAYMENT


Chase is not obligated to credit the Issuer's Account unless and until payment of the purchase price of each Note is received by Chase. From time to time, Chase, in its sole discretion, may permit the Issuer to have use of funds payable with respect to the Notes prior to Chase's receipt of the sales proceeds of such Notes. If Chase makes a deposit, payment or transfer of funds on behalf of the Issuer before Chase receives payment for any Notes, such deposit, payment or transfer of funds shall represent an advance by Chase to the Issuer to be repaid promptly, and in any event on the same day as it is made, from the proceeds of the sale of the Notes, or by the Issuer or the Guarantors if such proceeds are not received by Chase.


9. PAYMENT OF MATURED NOTES


On any day when a Note matures or is prepaid, the Issuer shall transmit, or cause to be transmitted, to the Account, prior to 2:30 p.m. New York time on the same day, an amount of immediately available funds sufficient to pay the aggregate principal amount of such Note and any applicable interest due. Chase shall pay the interest (if any) and principal on a Book-entry Note to DTC in immediately available funds, which payment shall be by net settlement of Chase's account at DTC. Chase shall pay Certificated Notes upon presentment. Chase may without liability to the Issuer or the Guarantors refuse to pay any Note that would result in an overdraft to the Account.


10. OVERDRAFTS


(a) Intra-day overdrafts with respect to each Account shall be subject to Chase's policies as in effect from time to time.


(b) An overdraft will exist in an Account if Chase, in its sole discretion, (i) permits an advance to be made pursuant to Section 8, notwithstanding the provisions of Section 8, and such advance is not repaid in full on the same day as it is made, or (ii) pays a Note pursuant to Section 9 in excess of the available


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collected balance in such Account. Overdrafts shall be subject to Chase's established banking practices, including, without limitation, the imposition of interest, funds usage charges and administrative fees. The Issuer shall repay any such overdraft, fees and charges no later than the next business day, together with interest on the overdraft at the rate established by Chase for the Account, computed from and including the date of the overdraft to the date of repayment.


11. NO PRIOR COURSE OF DEALING


No prior action or course of dealing on the part of Chase with respect to advances of the purchase price or payments of matured Notes shall give rise to any claim or cause of action by the Issuer or the Guarantors against Chase in the event that Chase refuses to payor settle any Notes for which the Issuer or the Guarantors has not timely provided funds as required by this Agreement.


12. RETURN OF CERTIFICATED NOTES


Chase will in due course cancel any Certificated Note presented for payment and return such Note to the Issuer. Chase shall also cancel and return to the Issuer any spoiled or voided Certificated Notes. Promptly upon written request of the Issuer or at the termination of this Agreement, Chase shall destroy all blank, unissued Certificated Notes in its possession and furnish a certificate to the Issuer certifying such actions.


13. INFORMATION FURNISHED BY CHASE


Upon the reasonable request of the Issuer or the Guarantors, Chase shall promptly provide the Issuer or the Guarantors with information with respect to any Note issued and paid hereunder, provided that the Issuer or the Guarantors deliver such request in writing and, to the extent applicable, includes the serial number or note number, principal amount, payee, date of issue, maturity date, amount of interest (if any) and place of payment of such Note.


14. REPRESENTATIONS AND WARRANTIES


(a) The Issuer represents and warrants that: (i) it has the right, capacity and authority to enter into this Agreement; and (ii) it will comply with all of its obligations and duties under this Agreement. The Issuer further represents and agrees that each Note issued and distributed upon its instruction pursuant to this Agr ...