Document:

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Exhibit 10.10 (n)

Self-Administered

Automatic Reinsurance Agreement

Effective January 1, 2003

between

Citizens Insurance Company of America

Denver, Colorado

(hereinafter referred to as the “Ceding Company”)

and

Scottish Re Limited

(formerly known as World-Wide Reassurance Company Limited)

Windsor, England

(hereinafter referred to as the “Reinsurer”)

 

 

ARTICLE I

BASIS OF REINSURANCE

1. On and after the effective date of this Agreement, the Ceding Company shall cede to Reinsurer,
subject to the limitations outlined in Exhibit III, 2! of the First Excess, i.e., the amount of new
direct agency and brokerage Standard and Substandard individual issues of Life Insurance policies
and Waiver of Premium Disability benefits in excess of the Ceding Company’s regular retention for
such benefits as shown in Exhibit II. Reinsurer shall automatically accept such First Excess within
the limits indicated in Exhibit III, provided that the Ceding Company has applied its normal
underwriting rules and retains its regular retention Life insurance volume is ceded on a yearly
renewable term basis while Waiver of Premium benefits are ceded on a coinsurance basis.

2. The term “new direct agency and brokerage issues” as used in this Article shall include issues
on the lives of U.S. Citizens and non-U.S. Citizens as stipulated in Appendix I-A. It shall not
include reinsurance business, or except as provided herein, issues of conversions.

3. If the Ceding Company is already on the risk for its regular retention under policies
previously issued, reinsurance up to the limits indicated in Exhibit III will be accepted
automatically in accordance with Paragraph 1 above, provided the Ceding Company has assessed the
risk under the new application by applying the same underwriting rules it would have applied had
the new policy fallen completely within its regular retention.

4. Any risk which falls within the automatic coverage granted by this Agreement may nevertheless
be submitted to Reinsurer for its underwriting opinion. If such risk is acceptable for coverage, it
shall automatically be reinsured under this Agreement. Any other risk ineligible for automatic
coverage hereunder, or which the Ceding Company desires to reinsure facultatively, may be submitted
to Reinsurer for facultative underwriting by forwarding to Reinsurer copies of the original
applications, all medical examinations or reports, inspection reports and all other information
which the Ceding Company may have pertaining to the insurability of the risk Any such risk shall,
upon acceptance by the Ceding Company of Reinsurer’s underwriting decision, be reinsured under this
Agreement.

5. The reinsurance under this Agreement shall be maintained in force as long as the original
policy carried by the Ceding Company remains in force, except as provided in Articles VII Automatic
Reinsurance Coverage after Policy Change, IX Recapture, and XVIII Duration of Agreement;
Termination.

6. Notwithstanding any provision to the contrary in Article I Basis of Reinsurance of said
Agreement, Reinsurer shall be automatically bound under any claim for which the Ceding Company is
liable under a conditional receipt issued in respect of business reinsured automatically or
submitted exclusively to Reinsurer tinder said Article I, Reinsurer’s liability on standard
retention on the policy applied for. In no event, however, shall Reinsurer’s liability on any one
life, including previous reinsurances ceded to Reinsurer, by the Ceding Company, exceed the
automatic acceptance limits provided by this Agreement.

7. The Ceding Company s conditional receipt is attached hereto and the Ceding Company shall be
obligated to advise Reinsurer of any changes or modifications of such receipt

 

 

ARTICLE II

MODES OF NOTIFICATION AND CESSION

1. The first notice to Reinsurer regarding any automatic cession will be sent to Reinsurer within
15 working days following the Issue Month

2. For risks to be reinsured facultatively hereunder in accordance with Article I, Paragraph 4,
the Ceding Company shall forward to Reinsurer a Preliminary Surplus Advice marked “Facultative”
within five (5) working days after the original policy has been reported delivered and paid for.

ARTICLE III

LIABILITY OF RENSURER

1. The liability of Reinsurer shall begin and terminate simultaneously with that of the Ceding
Company provided that, in the case of a facultative submission, Reinsurer has notified the Ceding
Company of its acceptance of the risk and the Ceding Company has mailed a Preliminary Surplus
Advice in accordance with Paragraph 3 of Article II Mode of Notification and Cession.

2. Reinsurer has no liability under this Agreement for any policy amount or benefit not expressly
referred to in Article I Basis of Reinsurance, or in any Addendum to this Agreement relating to
reinsurance of other benefits.

3. The Ceding Company will provide Reinsurer with copies of its policy and rider forms, rate
schedules and underwriting rules for the business eligible for reinsurance under this Agreement and
shall keep Reinsurer informed of any changes therein. See Appendix II.

4. Reinsurer shall not be liable for any amount paid by the Ceding Company for punitive,
exemplary, or compensatory damages awarded arising out of the conduct of the Ceding Company in the
investigation, trial, or settlement of any claim, or the failure to pay or a delay to pay any
benefits under any policy unless Reinsure was informed of the circumstances and participated in the
decision which resulted in such liability.

ARTICLE IV

PLANT OF REINSURANCE

1. Life reinsurance shall be ceded on the Risk Premium basis for the Net Amount at Risk reinsured.
For the purpose of this Agreement, the Net Amount at Risk reinsured during any calendar year is
defined as the difference between the First Excess (as defined in Article I and Exhibit III) and
the reserve thereon at the end of the prior calendar year. Such reserve shall be determined as the
statutory mean reserve based on the Ceding Company’s reserve standard unless an approximate method
of determination is applicable as shown in Exhibit IV In either case, reserves shall be rounded to
the nearer dollar.

2. For original policies issued on a level term plan for twenty (20) years or less or on a
reducing term plan for any period of years, the Net Amount at Risk reinsured during all years shall
be for the amount of the First Excess reinsured and reserves shall be disregarded.

3. Except as otherwise proved in Exhibit IV hereof, or by Addendum to this Agreement, the Net
Amount at Risk reinsured :will be level during any calendar year.

 

 

4. Reinsurance of Waiver of Premium Disability benefits shall be in accordance with the original
policy terms of the Ceding Company subject to the limitations in Exhibit III.

ARTICLE V

REINSURANCE PREMIUMS

1. The reinsurance premiums for Life reinsurance shall consist of a basic rate per thousand of Net
Amount at Risk reinsured in accordance with the schedule of rates attached hereto (Exhibit I).
Rates for females at ages 15 and higher are equal to the rates for a male four years younger. For
females aged 11-14, male’s age 10 rates are used. Male and female rates for ages 0-10 are
identical.

2. For purposes of premium calculation, based on the table of rates contained in Exhibit I, the
attained age shall be taken as the issue age last birthday, plus the difference between the
respective calendar year and the calendar year. at issue.

3. The reinsurance premiums for Waiver of Premium Disability benefits shall be as shown in Exhibit
I.

4. Except as otherwise provided in Exhibit III, for all new reinsurance originating without
current evidence of insurability (conversions, options, etc.) calendar years for entering the
premium table, Exhibit I will be counted starting with the calendar year of the last check of
insurability.

5. All reinsurance premiums payable by the Ceding Company to Reinsurer under this Agreement shall
be paid on the calendar year basis in advance regardless of the mode of premium payment of the
policies reinsured. Reinsurance premiums shall be payable as long as the reinsurance remains in
force. Should any reinsurance be reduced or terminated within any calendar year, the proportionate
part of the reinsurance premium paid shall be refunded at the beginning of the calendar year next
following the reduction or termination provided, however, that for policies reduced or terminated during the second calendar year after issue the refund shall not exceed 50%
of the reinsurance premium paid

6 For technical reasons relating to the uncertain status of deficiency reserve requirements by the
various state insurance departments, the Life reinsurance premiums contained herein cannot be
guaranteed for more than one year For all reinsurance ceded at these rates, however, Reinsurer
shall continue to accept premiums no lower than those arrived at based on these rate schedules

ARTIVLE VI

PREMIUM TAXES, EXCISE TAXES AND POLICY EXPENSES

1. When Reinsurer is not required to pay state or country premium taxes, levees, or charges based
on premiums, on reinsurance premiums received from the Ceding Company, it shall reimburse the
Ceding Company for any such taxes the latter may be required to pay with respect to the part of the
premium received under the Ceding Company’s original policies which is remitted to reinsurer as
reinsurance premium.

2. The Ceding Company shall bear the expense of all medical examinations, inspection fees, and
other charges incurred in connection with the issuance of any policy reinsured hereunder.

 

 

3. Reinsurer will reimburse the Ceding Company for any excise taxes paid by the Ceding Company in
connection with this agreement.

ARTICLE VII

AUTOMATIC REINSURANCE COVERAGE AFTER POLICY CHANGE

1. Reinsurer will continue to grant automatic reinsurance coverage in accordance with the
provisions of this Agreement after renewal, conversion or amendment of any policy reinsured
hereunder provided that the amounts and benefits to be reinsured following the change do not exceed
the amounts and benefits initially reinsured hereunder in respect of such policy. The following
rules will apply for the recalculation of the amounts reinsured with Reinsurer after a policy
change.

2. If an original policy is reduced, the Ceding Company will retain the same Net Amount at Risk
and the same other benefits on that life that it had before the reduction. The reduction shall be
applied first to the reinsurance based on the original policy or policies reduced or terminated. If
further reduction in reinsurance is required, the policies for which reinsurance is to be
terminated or reduced shall be determined by the chronological order in which they were issued, the
first issued being the first terminated or reduced and so on If the reinsurance required to be
reduced under this Article is shared among Reinsurer and other reinsurers, the reductions shall be
pro-rated among all reinsurers in proportion to the amount of reinsurance claimed by each If the
amount of reinsurance remaining is less than the amount of the minimum cession specified in Exhibit
II, such reinsurance shall be cancelled.

3. If any policy reinsured hereunder is changed to extended term insurance, Reinsurer’s proportion
of the amount of insurance under such policy shall remain unchanged.

4. Should any change or conversion of any policy reinsured hereunder increase the Net Amount at
Risk or other benefits insured, Reinsurer’s proportion of the amount of insurance and benefits
under such policy shall remain unchanged unless the limits provided under Paragraph I are exceeded.
In the event that the limits under Paragraph 1 are exceeded, Reinsurer will accept both the excess
and any additional amounts required to be reinsured in order to keep the Ceding Company’s retention
within the limits stated in Exhibit II, provided that the total Net Amount at Risk reinsured after
the increase does not exceed the limitations of Automatic Coverage (Exhibit HI), and provided
further that such increase is underwritten in accordance with Article I Basis of Reinsurance,
Paragraph 3. Premiums for the amended cessions will be calculated in accordance with Article V
Reinsurance Premiums, Paragraph 4.

5. If after any reinsured policy has been terminated, changed to reduced paid-up insurance or
changed to extended term insurance, such policy is reinstated according to the general
reinstatement rules of the Ceding Company, the reinsurance hereunder shall be restored with the
same Net Amount at Risk and other benefits reinsured as if no change bad occurred.

6.Policies issued because of options exercised under provisions of Guaranteed Insurability benefits
are not included under this Agreement, and shall be added by Addendum if such benefits are to be
reinsured.

 

 

ARTICLE VIII

INFORMATION TO REINSURER AFTER POLICY CHANGE

1. All amendments and terminations of reinsurance under this Agreement occurring during any
calendar year will be shown in the List of Amendments prepared for such calendar year in accordance
with Article Xl List of Risks Reinsured and List of Amendments.

2. If any policy change increases the Net Amount at Risk or other benefits reinsured hereunder by
more than 10%, the Ceding Company will include this information in the monthly notification report
described under Article II, paragraph I.

ARTICLE IX

RECAPTURE

1. The Ceding Company is entitled to recapture reinsurance ceded to the Reinsurer under this
agreement on all policies that have been in force for at least 10 years.

2. In order to effect recapture, the Ceding Company will reduce each cession eligible under this
Agreement by an amount which will increase the Net Amount at Risk for life insurance or other
benefit retained by the Ceding Company to its then regular retention. Any recapture reducing the
Net Amount at Risk reinsured below the amount of the minimum cession according to Exhibit II will
result in complete recapture of the reinsurance on that life.

3. Before recapturing on a cession according to this provision, the Ceding Company will proceed
with all recaptures allowed for policies previously issued on the same life and for all other
reinsurance cessions on the same policy, whoever the reinsurer may be.

4. The Ceding Company may waive recapture on any recapture date, but only if such waiver applies
to all reinsurance then eligible for recapture hereunder.

5 The Ceding Company shall notify Reinsurer at least sixty (60) days prior to each recapture date
of its intended recapture action. Any questions of recapture eligibility or procedure will then be
resolved during such sixty (60) day period.

6. If recapture is effected, the List of Risks Reinsured for the calendar year following recapture
will identify the risks involved and show the new reinsurance amounts applicable. In the event
recapture results in cancellation of any cession, such cancellation will be shown on the List of
Amendments for the calendar year of recapture.

7. It is hereby agreed and understood that risks of which no part is retained by the Ceding
Company or where the Ceding Company does not retain its regular retention limit at issue, shall be
considered not subject to recapture.

ARTICLE X

CLAIMS

1. In the event any policy is terminated by death while reinsured under this Agreement, Reinsurer
shall pay to the Ceding Company the Net Amount at Risk reinsured with respect to such policy during
the calendar year of death.

 

 

2. In the event Waiver of Premium Disability benefits are validly claimed under any policy
reinsured for such benefits hereunder, Reinsurer shall pay the Ceding Company annually during the
continuance of disability the yearly gross premium (exclusive of the premiums for the Waiver
benefit itself) due under such policy for the reinsured portion of the Waiver benefit. In suitable
cases, the Ceding Company and Reinsurer may agree to replace the annual payments of Reinsurer by
the payment of a lump sum If disability terminates, a refund, if appropriate, will be made by the
Ceding Company to Reinsurer. The payment of reinsurance premiums in accordance with Article V
Reinsurance Premiums for the other benefits still reinsured will continue during the disability
claim period.

3. In the event any policy reinsured hereunder becomes a claim before such policy has appeared on
any List of Risks Reinsured, the Ceding Company will calculate the amount payable by Reinsurer in
accordance with this Agreement and will submit to Reinsurer all papers necessary to demonstrate
that the risk involved was covered automatically hereunder.! In addition, the Ceding Company will
inform Reinsurer of all other reinsurance, if any, ceded on the same policy.

4. For any claim incurred after the policy affected has appeared on a List of Risks Reinsured,
Reinsurer will pay the Net Amount at Risk or other benefits reinsured, as appropriate, shown in the
List of Risks Reinsured applicable to the calendar year of incurral, unless the benefits reinsured
were amended according to Article VII Automatic Reinsurance Coverage after Policy Change, but not
reflected in such List. In such case, Reinsurer will pay the Net Amount at Risk or other benefits
reinsured which would appear in the List of Amendments for the calendar year of incurral, and the
Ceding Company shall furnish proof that the amended Net Amount at Risk and other benefits reinsured
are in accordance with the provisions of this Agreement.

5. In the event less than the full amount insured is paid as a claim or if any special expenses
are incurred in the settlement of a claim (such as attorney’s fees, court and arbitration costs,
special investigations, etc., but excluding salaries of employees), Reinsurer and the Ceding
Company shall share in the amount of such reduction or special expenses in proportion to their
respective Net Amounts at Risk under the policy affected.

6. Reinsurer and the Ceding Company shall share in any increase or reduction resulting from the
Insured’s misstatement of his age in proportion to their respective Net Amounts at Risk under the
policy affected.

7. Notice will be sent to the Reinsurer of any claim reinsured under this agreement. In every
case of loss, proofs acceptable to the Ceding Company shall likewise be taken as sufficient by
Reinsurer. The Ceding Company shall forward to the reinsurer copies of death certificates for each
claim by the most efficient means available.

8. At the end of each calendar quarter, a copy of the checks showing payment of all claims and
claim expenses paid by the Ceding Company during the quarter and reinsured by the Reinsurer under
this agreement will be provided to the Reinsurer and paid within ten days of receipt by the
Reinsurer. Should the total amount of claims and claim expenses paid by the Ceding Company exceed
$250,000 prior to the end of any quarter, proof of such payments will be provided to the Reinsurer
and paid within ten days of receipt by the Reinsurer.

9. The Reinsurer agrees to reimburse the Ceding Company for each claim with respect to which this
agreement affords indemnity within 90 days after Reinsurer

 

 

received proof which is satisfactory to the Reinsurer that the Ceding Company has paid the claim

ARTICLE XI

LIST OF RISKS REINSURED AND LIST OF AMENDMENTS

1. Before January 15 of each calendar year following the date of this Agreement, the Ceding
Company will provide Reinsurer with the Risks Reinsured for the current year This List will include
List of Amendments All reinsurance in force under this Agreement at the beginning of the calendar
year and contain information as outlined in Exhibit V.

2. Before January 15 of each calendar year, beginning with the second year following the date of
this Agreement, the Ceding Company will provide Reinsurer, for adjustment of coverage and premium,
with the List of Amendments for the preceding calendar year. This List will include all cessions
amended during –the preceding calendar year in accordance with Article VII Automatic Reinsurance
Coverage after Policy Change, exclusive of (a) amendments occurring during the calendar year of
issue of any policy, and (b) certain corrections referred to in Article XIII Errors and Omissions.
In detail, the List will contain information as outlined in Exhibit VI

ARTICLE XII

ACCOUNTING AND NONDISCLOSURE OF CONFIDENTIAL INFORMATION

1. The Ceding Company shall remit the total of the reinsurance and premiums shown in the List of
Risks Reinsured simultaneously with the List.

2. Should the balance of changes in reinsurance premiums for the preceding calendar year shown in
the List of Amendments be in favor of Reinsurer, the Ceding Company shall remit said balance,
increased by 2% for interest, simultaneously with the List. Should this balance be in favor of the
Ceding Company, Reinsurer shall remit said balance, increased by 2% for interest, within ten (10)
working days of receipt of the List.

3. Reinsurer is entitled to ask for correction of any of the Lists within ninety (90) days after
their receipt. The amount of any correction in reinsurance premiums is due immediately after
agreement between the Ceding Company and Reinsurer.

4. Failure of the Ceding Company to pay any of the reinsurance premiums shown in the List of Risks
Reinsured by March 31 of the calendar year covered by such List shall automatically terminate the
liability of Reinsurer under this Agreement as of midnight on that date. Payment of only a portion
of this premium by said March 31 shall reduce the liability of Reinsurer under this Agreement as of midnight on
that date. The reduced liability will be determined by applying to the total liability under this
Agreement the ratio of the reinsurance premiums paid to the total of the reinsurance premiums due.
Payment of a portion or of the total of the outstanding premiums and interest, if any, after said
March 31 shall reinstate a proportionate part of the total liability of Reinsurer effective on and
after the date of receipt of the payment at Reinsurer’s home office.

5. All amounts due under Paragraphs 1, 2, and 3 preceding and not paid by March 31 of the
respective calendar year, are subject to 0.5% additional interest for each full month after March
31.

 

 

6. Since reinsurance coverage and premium payments are on the calendar year basis, Reinsurer will
not hold any reserves, other than claims reserves, for the reinsurance covered by this Agreement at
the end of the calendar year.

7. During the course of business necessary under this Agreement, Ceding Company may reveal to
Reinsurer certain confidential or proprietary information which includes but is not limited to the
following various trade secrets, data processing methods, marketing concepts, programs, formulas,
pattern device inventions, processes, policy forms and identities of customers, sales agents, managing agents,
associates and employees of Ceding Company. Reinsurer shall not disclose, directly or indirectly,
to others, including corporate subsidiaries and affiliates, any confidential or proprietary
information of Ceding Company except as may be specifically authorized in writing by a senior
officer of Ceding Company. Reinsurer will also do all things necessary to prevent any of its
employees, representatives and agents from disclosing any such information. Reinsurer further
agrees to use any confidential or proprietary information of Ceding Company solely for the purpose
of reinsurance under this agreement.

8. In the course of performance of the Reinsurer’s duties and obligations under this agreement,
the Reinsurer may receive nonpublic personal information (i.e., any and all personal, financial,
and/or health information) associated with the Company’s policies that are the subject matter of
this Agreement. Such nonpublic information shall be held in the strictest confidence by the
Reinsurer and its agents, employees, affiliates, and representatives, and shall not be used for any
purpose other than the performance of its duties and obligations under this Agreement. The
Reinsurer Shall establish and adopt appropriate procedures to protect the privacy, confidentiality,
and security of all such information, consistent with the requirements of the Gramm-Leach-Blilely
Act (formally known as the Financial Services Modernization Act of 1999”) and any other applicable
privacy laws or regulations

ARTICLE XIII

ERRORS AND OMISSIONS

1. The List of Risks Reinsured is the basis for the reinsurance coverage provided by Reinsurer for
the respective calendar year on the reinsurance in force at the beginning of that year Any
unintentional clerical error or omission in the amounts reinsured shall not be corrected during the
current calendar year but will be reflected in the List of Risks Reinsured for the subsequent
calendar year, unless by such error or omission

     a. any risk not eligible for reinsurance under this Agreement is shown as reinsured, or

     b. the amount retained by the ceding Company exceeds its retention at issue (Exhibit II) by
more than $5,000 or

     c. the benefits reinsured by Reinsurer and other reinsurers exceed the benefits insured under
the policy less the Ceding Company’s retention thereon, if any, or

     d. the amount of any benefit reinsured by Reinsurer exceeds 125% of the corresponding amount
during the preceding calendar year, or

     e. the amount of any benefit reinsured by Reinsurer exceeds the Automatic Coverage (Exhibit
III).

 

 

2. In those cases described in Paragraph 1, Reinsurer shall be notified in writing and the
reinsurance shall be corrected retroactively. Correction of the reinsurance premium will be
accounted for in the List of Amendments applicable to the calendar year in which the error was
discovered. The Ceding Company shall also check its entire reinsured portfolio for similar
discrepancies.

3. Any other failure of either party to comply with any provision of this Agreement, if shown to
be unintentional and the result of misunderstanding or oversight, shall be corrected by restoring
both parties to the positions they would have occupied had no such error or oversight occurred.

ARTICLE XIV

INSPECTION OF RECORDS

Reinsurer shall have the right, at any reasonable time, to inspect, at the office of the Ceding
Company, all books, records and documents relating to the reinsurance under this Agreement.

ARTICLE XV

INSOLVENCY

1. In the event of insolvency of the Ceding Company, the liquidator, receiver or statutory
successor shall give Reinsurer written notice of the pendency of a claim on a policy reinsured
hereunder within a reasonable time after such claim is filed in the insolvency proceeding. During
the pendancy of any such claim, Reinsurer may investigate such claim and interpose in the name of
the Ceding Company (its liquidator, receiver or statutory successor), but at its own expense, in
the proceeding where such claim is to be adjudicated, any defense or defenses which Reinsurer may
deem available to the Ceding Company or its liquidator, receiver or statutory successor.

2. In the event of insolvency of the Ceding Company, the liquidator, receiver or statutory
successor shall give Reinsurer written notice of the pendency of a claim on a policy reinsured
hereunder within a reasonable time after such claim is filed in the insolvency proceeding. During
the pendency of any such claim, Reinsurer may investigate such claim and interpose in the name of
the Ceding Company (its liquidator, receiver or statutory successor), but at its own expense, in
the proceeding where such claim is to be adjudicated, any defense or defenses which Reinsurer may
deem available to the Ceding Company or its liquidator, receiver or statutory successor.

3. The expense thus incurred by Reinsurer shall be chargeable, subject to court approval, against
the Ceding Company as part of the expense of liquidation to the extent of a proportionate share of
the benefit which may accrue to the Ceding Company solely as a result of the defense undertaken by
Reinsurer. Where two or more reinsurers are participating in the same claim and a majority in
interest elects to interpose a defense or defenses to any such claim, the expense shall be
apportioned in accordance with the terms of the respective reinsurance agreements as though such
expense had been incurred by the Ceding Company.

4. In the event of insolvency of the CEDING COMPANY, the arbitration provisions of this agreement
shall also be subject to the laws of the State of Colorado.

 

 

ARTICLE XVI

ARBITRATION

1 All disputes and differences between the two contracting parties Arbitration upon which an
amicable understanding cannot be reached are to be decided by arbitration The arbitrators shall
regard this Agreement rather from the standpoint of practical business and equity than from that of
the strict law, for the purpose of carrying out its evident intent.

2. The court of arbitration, which is to be held in the city in which the Executive office of the
Ceding Company is located, shall consist of three arbitrators who must be executive officers of
life insurance companies, other than the two parties to this Agreement, familiar with the
reinsurance business. One of the arbitrators is to be appointed by the Ceding Company, the second
by Reinsurer, and the third is to be selected by these two representatives before the beginning of
the arbitration. Should the two arbitrators be unable to agree upon the choice of a third, the
appointment shall be left to the President of the American Council of Life Insurance, or its
successor organization.

3. The arbitrators shall decide by a majority of votes and from their written decision there can
be no appeal. The cost of arbitration, including the fees of the arbitrators, shall be borne by the
losing party unless the arbitrators shall decide otherwise.

ARTICLE XVII

PARTIES TO AGREEMENT

COLORADO LAW

1. This is an agreement solely between the Ceding Company and Reinsurer. The acceptance of
reinsurance hereunder shall not create any right or legal relation whatever between Reinsurer and
the insured or the beneficiary under any policy of the Ceding Company which may be reinsured
hereunder

2. All provisions of this reinsurance agreement including the arbitration provisions are subject
to the laws of the State of Colorado.

3. During the continuance of any insurance contracts under this Agreement, Reinsurer agrees to
either maintain continuous qualification as a reinsurer in the State of Colorado, or maintain a
Letter of Credit as security acceptable under Colorado statute § 10-3-118(6).

4. This agreement shall constitute the entire agreement between the parties with respect to the
business being reinsured hereunder. There are no other understandings between the parties other
than as expressed in this agreement. Any change or modification to this agreement shall be null and
void unless made by amendment to this agreement and signed by both parties.

ARTICLE XVIII

DURATION OF THE AGREEMENT; TERMINATION

1. This Agreement shall be unlimited as to its duration, but may be terminated at any time, for
new reinsurances only, by either party giving not less than ninety (90) days notice of termination
in writing to the other party and the Colorado Insurance Department by registered mail stating the
Termination Date. Reinsurers shall continue to accept reinsurance during ninety. (90) days
aforesaid and shall remain liable on all reinsurance already placed in force

 

 

under the terms of this Agreement until such contracts are terminated between the original insured
and the Ceding Company.

2. In the event of non-payment of any amounts due hereunder by either party within three (3)
months of the respective due dates, except as provided by Article XIII Errors and Omissions,
Paragraph 2, the other party shall have the right to cancel all reinsurance in force under this
Agreement by giving thirty (30) days written notice. Payment of the amounts due, with interest
according to Article XII Accounting, Paragraph 5, during such thirty (30) days will nullify the
cancellation.

ARTICLE XIX

HOMICIDE BENEFIT LIMITATION

The Ceding Company limits the death benefit to the return of all premiums paid if the cause of
death is homicide, except in some countries as listed in Exhibit VII, where the Ceding Company
currently pays the full death benefit in the case of homicide if the insured was noninvolved in the
commission of a crime. As of the date of this Agreement, it is agreed by both parties that the
Ceding Company may offer the less strict version of this benefit limitation in all remaining
countries that are classified as an “A” risk, as shown in Appendix I-A.

1. The Reinsurer shall also allow the Ceding Company a contingent profit commission of 50% of the
net profits under this Agreement. The “net profit” portion of the contingent profit commission
calculation shall be as follows:

     a. Premiums Earned in Calendar Year, less

     b. Claims Incurred in Calendar Year, less

     c. Losses accumulated from prior calculations, less

     d. Reinsurer Expenses, equal to 15% of Earned Premium

2. The terms “Premiums” and “Claims” include those premiums and claims for Waiver of Premium
Benefits. Incurred claims for Waiver of Premium benefits are defined as “Paid Claims Plus the
Change in Disabled Life reserves.”

3.The contingent profit commission calculation will take place six (6) months after the end of the
experience year for which the calculation will be performed. The first calculation will take place
as soon as practicable after July 1, 2004.

ARTICLE XX

CONTINGENT PROFIT COMMISSION

1. The Reinsurer shall also allow the Ceding Company a contingent profit commission of 50% of the
net profits under this Agreement. The “net profit” portion of the contingent profit commission
calculation shall be as follows:

     a. Premiums Earned in Calendar Year, less

     b. Claims Incurred in Calendar Year, less

     c. Losses accumulated fro prior calculations, less

 

 

     d. Reinsurer Expenses, equal to 15% of Earned Premium

2. The terms “Premiums” and “Claims” include those premiums and claims for Waiver of Premium
Benefits. Incurred claims for Waiver of Premium benefits are defined as “Paid Claims Plus the
Change in Disabled Life Reserves.”

3. Any claims incurred in the year in questions, paid more than 24 months after the year, would
require a recalculation of the profit commission for that year.

4. The contingent profit commission calculation will take place six (6) months after the end of
the experience year for which the calculation will be performed. The first calculation will take
place as soon as practicable after July 1, 2004.

ARTICLE XXI

EFFECTIVE DATE; EXECUTION

The said Citizens Insurance Company of America, Denver, Colorado, and the said Reinsurer, declare
that this Agreement and all its terms shall be effective as of January 1, 2003, and shall apply to
eligible policies applied for on and after such date, notwithstanding that such policies may have
been backdated for up to six (6) months to save age. In witness whereof they have by their
respective officers executed and delivered this Agreement in duplicate.

ARTICLE XXII

REINSURANCE INTERMDIARY

Ballantyne, McKean & Sullivan Limited, London, UK, or one of its affiliated and subsidiary
corporations duly licensed as a reinsurance intermediary, is hereby recognized as the Reinsurance
Intermediary negotiating the Agreement for all business hereunder. All communications (including
but not limited to notices, statements, premiums, return premiums, commissions, taxes and losses),
relating thereto will be transmitted to the Cedant or the Reinsurer through the Reinsurance
Intermediary, except for those mutually agreed administrative or financial functions specifically
undertaken by the Cedant directly with the Reinsurer, in which case the Reinsurance Intermediary
will receive copies of all information. Payments by the Cedant to. the Reinsurance Intermediary
will be deemed payment to the Reinsurer. Payment by the Reinsurer to the Reinsurance Intermediary
will be deemed payment to the Cedant only to the extent that such payments are actually received by
the Cedant.

 

 

	 	 	 	 	 
	 	 	CITIZENS INSURANCE COMPANY OF AMERICA
	 
	 	 	 	 
	

	 	By:
	 	/s/ J. Val Smith
	

	 	 	 	 
	

	 	Title:
	 	Executive Vice President/Chief Actuary
	

	 	 	 	 
	

	 	Date:
	 	January 26, 2003
	

	 	 	 	 
	 
	 	 	 	 
	 	 	SCOTTISH RE LIMITED
	 
	 	 	 	 
	

	 	By:
	 	/s/ David Huntley
	

	 	 	 	 
	

	 	Title:
	 	CEO
	

	 	 	 	 
	

	 	Date:
	 	16 January 2004
	

	 	 	 	 
	 
	 	 	 	 
	

	 	By:
	 	/s/ John Greenhaugh
	

	 	 	 	 
	

	 	Title:
	 	Director and Actuary
	

	 	 	 	 
	

	 	Date:
	 	9 January 2004
	

	 	 	 	 

 

 

Exhibit I

SAR Reinsurance Premiums

1. Reinsurance premiums under this Agreement for the first calendar year (from the effective date
of the policy to the next December 31) are, with certain exceptions noted below, zero.

2 A list of countries from which applications for life insurance are accepted is included in
“Appendix I-A Foreign National Business”. Each country is categorized as either and “A”, “B”. or
“C” country, depending on the country’s risk factor. Life reinsurance premiums for standard risks
in the “A” countries shall be calculated by multiplying the Net Amount at Risk reinsured during the
calendar year by the appropriate premium rate for such year from the appropriate schedule shown in
this Exhibit:

Age Last Birthday       SAR NR ALB

The rates for the “B” countries will equal the rates for the “A” countries from the table above
plus $0.50 per 1000 of NAAR. The rates for the “C” countries will equal the rates for the “A”
countries from the table above plus $1.50 per 1000 of NAAR.

Rates for females shall be in accordance with the respective rate schedule applicable.

3. Life reinsurance premiums for substandard risks accepted subject to a Table Rating shall be
calculated by multiplying the corresponding standard risk life reinsurance premiums by the
appropriate Mortality Factor from the table:

	 	 	 	 	 	 	 	 	 	 
	 	Table Rating	 	 	Mortality Factor	 	 
	 	A
	 	 	(1	)	 	 	1.25	 
	 	AA
	 	 	(11/2	)	 	 	1.375	 
	 	B
	 	 	(2	)	 	 	1.5	 
	 	BB
	 	 	(21/2	)	 	 	1.625	 
	 	C
	 	 	(3	)	 	 	1.75	 
	 	D
	 	 	(4	)	 	 	2.00	 
	 	E
	 	 	(5	)	 	 	2.25	 
	 	F
	 	 	(6	)	 	 	2.50	 

4. Life reinsurance premiums for substandard risks accepted subject to a flat extra premium shall
be the sum of

     (a)The applicable standard or substandard reinsurance premiums, calculated from Paragraphs 2
and 3 above, and

     (b)The following percentages of the policy annual flat extra premiums applicable to the
initial amount of reinsurance hereunder on such risks:

	 	 	 	 	 	 	 	 	 
	Term of Flat	 	Second	 	 	Subsequent	 
	Extra Premium	 	Calendar Year	 	 	Calendar Years	 
	More than five years
	 	 	102.5	%	 	 	90	%
	Five years or less
	 	 	135.0	%	 	 	90	%

 

 

Exhibit I (continued)

5. Reinsurance premiums for Waiver of Premium Disability benefits payable for the second and later
calendar years shall be equal to 90% of the policy annual premiums for such benefits applicable to
the amount of such benefits reinsured hereunder If premiums for the Waiver of Premium Disability
benefit are automatically included in the gross Life Insurance premiums under any policy
reinsurance hereunder, then reinsurance premiums for the Waiver of Premium Disability benefit, for
second and later calendar years, shall be 100% of the Ceding Company’s net annual premiums for the
reinsured amount of such benefit.

6. For standard risks only, the reinsurance premium for the excess over $3,000,000 on any one life
reinsured under this Agreement for the first calendar year (from the effective date of the policy
to the next December 31) shall be based on the second calendar year rate for the issue age. Such
first year premium shall be prorated over the year of issue as follows:

First year prorated premium = n/360 (tabular rate), where n is the number of days from the issue
date to December 31, assuming 30-day months, and the tabular rate is the second calendar-year rate
for

the age at issue.

7. The Life reinsurance premiums for reinsurance of Joint Whole Life policies at Standard or
Substandard rates shall for each insured be 85% of the premium applicable for an individual life
shown in Exhibit I of the Agreement. Such rate shall be applied to the Net Amount at Risk for each
individual.

In case of reinsurance under a Joint Whole Life Policy where the Joint Insureds die

simultaneously or within 60 days of each other, thus requiring the Ceding Company to pay twice the
amount of Life Insurance insured under the Joint Whole Life Policy, Reinsurer shall for each of the
joint lives reinsured pay the net amount at risk plus 50% of the terminal reserve used in
calculating the net amount at risk in accordance with Article IV, Paragraph 1, relating to the
amount reinsured on the respective life.

 

 

EXHIBIT II

Retention Limits of the Ceding Company

The retention limits of the Ceding Company on any one life for the benefits reinsured hereunder are
as follows:

Life Insurance

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issue	 	 	 	 	 	 	 	 	 
	Ages	 	Standard	 	 	Substandard	 	 	 	 
	 	 	 	 	 	 	Tables 1	 	 	Tables 7	 
	 	 	 	 	 	 	through 6	 	 	through 16	 
	All
Ages
	 	 	100,000	 	 	 	100,000	 	 	None to
	 
	 	 	 	 	 	 	 	 	 	be accepted

Minimum Cession: $5,000

Waiver of Premium Disability Benefits

Same as for Life Insurance

Accidental Death Benefits

None

 

 

EXHIBIT III

Limits and Special Conditions for the First Excess

1 Overall Limits

Automatic coverage of any risk of Life Insurance with or without Waiver of Premium Disability
benefits shall be granted under this Agreement only if, according to the Ceding Company’s papers,
the overall sum in force and applied for on the same life with all insurance companies does not
exceed 3,000,000 of Life Insurance with or without Waiver of Premium Disability benefits.

2 First Excess

The First Excess of the Ceding Company to be automatically covered under this Agreement, including
previous reinsurance ceded to Reinsurer by the Ceding Company on the same life, is defined as
follows:

     a. Life Insurance

     1. Issue ages up to 75 years.

     2. Standard and Substandard risks up to and including Table 6 (25 0% total mortality)
written by the Ceding Company on any non-U S Citizens in countries stipulated in Appendix
I-A

     3 International Risks 400% of the retention of the Ceding Company, but not more than
$400,000 on any one life.

     The minimum cession will be $5,000. If the total First Excess is less than such
minimum, the Ceding Company will increase its retention to the full amount insured on that
life.

     b. Waiver of Premium Disability Benefits

     Same as for Life Insurance, subject to age and substandard issue limits imposed by the Ceding
Company on such risks.

3 Supplementary Benefit Forms

Supplementary benefits to be covered automatically under this Agreement shall be those provided in
the following policy forms issued by the Ceding Company:

     a. Waiver of Premium Disability Benefits, Forms as stated in Appendix II.

     b. Increasing Term Death Benefit in amount of Premium Coverage. 100% reinsurance shall be
provided for an amount equal to or greater than $5,000 with respect to each person.

     c. No Accidental Death supplemental benefits are covered under this Agreement.

 

 

Exhibit IV

Calculation of the Net Amount at Risk Reinsured

For calculating the Net Amount at Risk according to Article IV Plan of Reinsurance, Paragraph 1,
the Ceding Company will use the following approximate procedure

- Subtract Tabular Benefit Decreases

- Subtract Decreases in Commuted Value

- Add Tabular Benefit Increases

- Add Built-In Return Premium Benefit Increases

- Subtract Accumulated Statutory Mean Reserves

 

 

Exhibit V

List of Risks Reinsured

The List of Risks Reinsured will be prepared at the beginning of each calendar year in accordance
with Article XI and will include, for each cession in force at that time, the following information
for the applicable reinsurance, in policy number order

1. Basic

     a. Policy Number

     b. Name of Insured (last name first)

     c. Plan code

     d. Sex

     e. Date of birth (month, day, year)

     f. Effective date of issue (month, day, year)

     g. Age at issue

     h. Business code (new, new with issue effective before preceding calendar year, converted,
reinstated, unchanged, amended by change of direct policy, amended by recapture),

2. Life insurance

     a. Rating (Table and/or Flat Extra)

     b. Total Gross Life Amount Insured on this policy

     c. Amount of First Excess reinsured

     d. Attained age for the current calendar year

     e. Life Net Amount at Risk reinsured for the current calendar year

     f. Life reinsurance premium for the current calendar year.

3. Waiver of Premium Disability benefits

     a. Rating

     b. Insured Code (Insured, Payor)

     c. Benefit Code

     d. Life Amount reinsured for WPD !

     e. WPD reinsurance premium for the current calendar year.

A policy count and subtotals for new issues and renewals along with grand totals should be provided
for items in Sub-paragraphs 2d, 2e, 2f, 3d, and 3e.

 

 

Exhibit VI

List of Amendments

The List of Amendments will be prepared as of the end of each calendar year in accordance with
Article XI, and will include, for each cession which is amended during that calendar year because
of policy change (Article VII) or because of certain errors and omissions (Article XIII), the
following information for the applicable reinsurance:

1. Basic

     a. Policy Number

     b. Name of insured (last name first)

     c. Sex

     d. Date of birth (month, day, year)

     e. Attained age for the calendar year

     f. Amendment Code

     g. Effective date of amendment (month, day, year)

     h. Number of days from date of amendment through December 31 of the calendar year (for
business amended in the second calendar year not more than 183 days).

2. Life Insurance

     a. Rating (Table and/or Flat Extra)

     b. Life Net Amount at Risk reinsured on last List of Risks Reinsured or prior
to amendment

     c. New Life Net Amount at Risk reinsured

     d. Adjustment to life reinsurance premium for the calendar year.

3. Waiver of Premium Disability benefits

     a. Rating

     b. Life amount reinsured for WPD on last List of Risks Reinsured or prior to amendment

     c. New Life amount reinsured for WPD

     d. Adjustment to WPD reinsurance premium for the calendar year.

A policy count and subtotals by Amendment Code along with a grand total should be provided for
items in Sub-paragraphs 2b, 2c, 2d, 3b, 3c, and 3d.

 

 

The List of Amendments will also include policies with issue dates in the previous calendar year
which failed to appear on the List of Risks Reinsured applicable to the current calendar year.

 

 

Exhibit VII

List of Countries with Less Strict Homicide Benefit Limitation

In the following countries, a less strict version of the Homicide Benefit Limitation is currently
offered, as stated in Article XIX In the standard version of this limitation, the death benefit
paid in the event the insured dies in a homicide is the return of all premiums paid on the policy
This less strict version will pay the full death benefit if the insured dies in a homicide and the
insured’s death was not due to their involvement in the commission of a crime The Ceding Company
reserves the right to also offer this less strict version to all countries classified as an “A”
country, should they choose to do so Country classifications are outlined in Appendix I-A.

Countries where the less strict Homicide Benefit Limitation is currently offered

1. France

2. Spain

3. Italy

4. Germany

5. Holland

6. Norway

7. Denmark

8. Belgium

9. Luxemburg

10. Austria

11. Switzerland

12. Portugal

13. Venezuela

14. Chile

15. Brazil

16. Japan

17. Panama

18. Argentina

19. Paraguay

20. Uruguay

21. Costa Rica

22. Taiwan

 

 

Appendix I

CITIZENS’

INTERNATIONAL GUIDELINES

1. Premiums or remittances must be in U.S. Currency, and checks from U.S. banks only.

2. Minimum issue amount is $50,000, except ages 66 to 75 where minimum issue is $10,000 and the
maximum is $25,000 (see 7d).

3.We will keep our full retention on each risk. (In force coverage and current application
combined.)

4.Amounts over our binding authority, including prior coverage, will be sent to. Reinsurer on a
facultative basis. ($500,000 for AUL, $600,000 for BMA/ERC split)

5.Application and medical papers must be written in English, Spanish, Portuguese, or Chinese.

6.Supplemental benefits will be offered only on rider forms that contain special protective
exceptions.

7.We will not consider applications on:

a)political or military figures or their families;

b)private pilots or crew members without an extra rate or an aviation exclusion;

c)children under the age of 18 for an amount exceeding $1 50.000 except on a facultative basis

(includes in force and applied for);

d)applicant over age 65, except for lower amount special plans offered to age 75 with $25,000

maximum (unless for business insurance and facultatively accepted);

e)applicants with coronary artery disease or insulin-dependent diabetic, except when 100%
facultatively accepted

f)will not issue with a rating over Table Six.

8.We will use appointed examiners or, when available, Embassy-affiliated doctors for all medical
examinations. (See attached Medical Requirements per age and amount.)

9.Consumer Reports required on face amounts of $150,000 or more, except in Colombia, where it is
required for all amounts. All consumer report investigative firms must be approved by the Home
Office Chief Underwriter.

10. Require APS on all children age 5 and under. Other APS’s may be required by Underwriting.

11. All questions on Part I and Part II of application must be answered, even if medical exam
(Part III) has same questions.

 

 

GUIDELINES ON VARIOUS LIMITS EFFECTIVE

I. NON-MEDICAL LIMITS

INTERNATIONAL MARKET

	 	 	 
	Issue Ages	 	Amounts
	0 through 39

	 	Up to $150,000

II. BASIC LIFE COVERAGE LIMITS

INTERNATIONAL MARKET

	 	 	 	 	 	 	 	 	 
	Age	 	Minimum	 	Maximum
	0-1

	 	 	50,000	 	 	 	150,000	 
	18-75

	 	 	250,000	 	 	 	500,000	 

See Special Requirements on amounts $250,001 & Up

III. WAIVER OF PREMIUM LIMITS

INTERNATIONAL MARKET

-Same as Basic Life Coverage Limit for each plan

IV.ACCIDENTAL DEATH LIMITS

INTERNATIONAL MARKET

-Equal to face amount of Basic Life Benefit not to exceed 150,000 on each person for all policies
with all companies.

V. RETURN OF PREMIUM LIMITS

INTERNATIONAL MARKET

-Same as Basic Benefit limit.

VI.SUBSTANDARD LIMITS

INTERNATIONAL MARKET

-Table Ratings—Table 6 (25 0%) or less

-Flat Extra Ratings—No limit.

[LIST OF COUNTRY RATING JANUARY 1, 2003]exv10w34

 

EXHIBIT 10.34

364-DAY CREDIT AGREEMENT

Dated as of March 1, 2005

TELECOMUNICACIONES DE PUERTO RICO, INC., a Puerto Rico corporation (the “Borrower”), PUERTO
RICO TELEPHONE COMPANY, INC., a Puerto Rico corporation (“PRTC” and, collectively with each
Significant Subsidiary (as hereinafter defined) that shall become a guarantor hereunder in
accordance with Section 5.01(j), the “Guarantors”), the banks, financial institutions and
other institutional lenders (the “Initial Lenders”) listed on the signature pages hereof
and Citibank, N.A. (“Citibank”), as administrative agent (in such capacity, the
“Agent”) for the Lenders (as hereinafter defined), agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

     SECTION 1.01. Certain Defined Terms.

As used in this Agreement, the following terms shall have the following meanings (such meanings to
be equally applicable to both the singular and plural forms of the terms defined):

     “Advance” means an advance by a Lender to the Borrower as part of a Borrowing
and refers to a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a
“Type” of Advance).

     “Affiliate” means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such Person or is a
director or officer of such Person. For purposes of this definition, the term “control”
(including the terms “controlling”, “controlled by” and “under common control with”) of a
Person means the possession, direct or indirect, of the power to vote 10% or more of the
Voting Stock of such Person or to direct or cause the direction of the management and
policies of such Person, whether through the ownership of Voting Stock, by contract or
otherwise.

     “Agent’s Account” means the account of the Agent maintained by the Agent at
Citibank with its office at 399 Park Avenue, New York, New York 10043, Account No. 36852248,
Attention: Loan Investor Services.

     “Applicable Lending Office” means, with respect to each Lender, such Lender’s
Domestic Lending Office in the case of a Base Rate Advance and such Lender’s Eurodollar
Lending Office in the case of a Eurodollar Rate Advance.

 

 

     “Applicable Margin” means, as of any date, a percentage per annum determined by
reference to the Performance Level in effect on such date as set forth below:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Applicable	 	 	 	 	 	 	 	 	 	 	 	 	Applicable	 
	 	 	 	 	Margin for Base	 	 	Applicable Margin	 	 	Applicable Margin	 	 	Margin for	 
	 	 	 	 	Rate Advances	 	 	for Base Rate	 	 	for Eurodollar	 	 	Eurodollar	 
	 	 	 	 	Prior to Term	 	 	Advances On and	 	 	Rate Advances	 	 	Rate Advances On	 
	 	Performance	 	 	Loan	 	 	After Term Loan	 	 	Prior to Term Loan	 	 	and After Term Loan	 
	 	Level	 	 	Conversion Date	 	 	Conversion Date	 	 	Conversion Date	 	 	Conversion Date	 
	 	Level 1

	 	 	 	0.000	%	 	 	 	0.000	%	 	 	 	0.400	%	 	 	 	0.850	%	 
	 	Level 2

	 	 	 	0.000	%	 	 	 	0.00	%	 	 	 	0.500	%	 	 	 	0.975	%	 
	 	Level 3

	 	 	 	0.000	%	 	 	 	0.100	%	 	 	 	0.600	%	 	 	 	1.100	%	 
	 	Level 4

	 	 	 	0.000	%	 	 	 	0.625	%	 	 	 	0.700	%	 	 	 	1.625	%	 
	 	Level 5

	 	 	 	0.000	%	 	 	 	1.275	%	 	 	 	1.000	%	 	 	 	2.275	%	 
	 

     “Applicable Percentage” means, as of any date prior to the Term Loan Conversion
Date, a percentage per annum determined by reference to the Performance Level in effect on
such date as set forth below:

	 	 	 	 	 	 	 	 
	 
	 	Performance Level	 	 	Applicable Percentage	 
	 	Level 1

	 	 	 	0.075	%	 
	 	Level 2

	 	 	 	0.100	%	 
	 	Level 3

	 	 	 	0.125	%	 
	 	Level 4

	 	 	 	0.175	%	 
	 	Level 5

	 	 	 	0.275	%	 
	 

     “Applicable Utilization Fee” means, as of any date prior to the Term Loan
Conversion Date that the aggregate Advances exceed 50% of the aggregate Commitments, a
percentage per annum determined by reference to the Performance Level in effect on such date
as set forth below:

	 	 	 	 	 	 	 	 
	 
	 	Performance Level	 	 	Applicable Utilization Fee	 
	 	Level 1

	 	 	 	0.125	%	 
	 	Level 2

	 	 	 	0.125	%	 
	 	Level 3

	 	 	 	0.125	%	 
	 	Level 4

	 	 	 	0.250	%	 
	 	Level 5

	 	 	 	0.500	%	 
	 

     “Assignment and Acceptance” means an assignment and acceptance entered into by
a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of
Exhibit C hereto.

     “Base Rate” means a fluctuating interest rate per annum in effect from time to
time, which rate per annum shall at all times be equal to the higher of:

     (a) the rate of interest announced publicly by Citibank in New York, New York,
from time to time, as Citibank’s base rate that is offered to its customers
generally (before giving effect to any applicable margin); and

     (b) 1/2 of one percent per annum above the Federal Funds Rate.

     “Base Rate Advance” means an Advance that bears interest as provided in Section
2.06(a)(i).

2

 

     “Borrower” has the meaning specified in the recital of parties.

     “Borrower’s Account” means the account of the Borrower maintained by the
Borrower at Citibank with its office at 399 Park Avenue, New York, New York 10043, Account
No. 4078-8269.

     “Borrowing” means a borrowing consisting of simultaneous Advances of the same
Type made by each of the Lenders pursuant to Section 2.01.

     “Business Day” means a day of the year on which banks are not required or
authorized by law to close in New York City or San Juan, Puerto Rico, provided that,
if the applicable Business Day relates to any Eurodollar Rate Advances, “Business Day” means
a day of the year on which banks are not required or authorized by law to close in New York
City or San Juan, Puerto Rico and on which dealings are carried on in the London interbank
market.

     “Commitment” has the meaning specified in Section 2.01.

     “Consolidated” refers to the consolidation of accounts in accordance with GAAP.

     “Consolidated Assets” means, for any period, the total assets of the Borrower
and its Subsidiaries as shown on the audited Consolidated balance sheet or unaudited
Consolidated balance sheet, as the case may be, as of the end of the most recent fiscal
quarter preceding such period.

     “Controlling Interest” means (a) ownership of at least 35% plus one share, of
the Voting Stock of the Borrower and (b) the ability to appoint a majority of the Board of
Directors of the Borrower.

     “Convert”, “Conversion” and “Converted” each refers to a
conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.07
or 2.08.

     “Debt” of any Person means, without duplication, (a) all indebtedness of such
Person for borrowed money, (b) all obligations of such Person for the deferred purchase
price of property or services (other than trade payables incurred in the ordinary course of
such Person’s business for which collection proceedings have not been commenced,
provided that trade payables for which collection proceedings have commenced shall
not be included in the term “Debt” so long as the payment of such trade payables is being
contested in good faith and by proper proceedings and for which appropriate reserves are
being maintained), (c) all obligations of such Person evidenced by notes, bonds, debentures
or other similar instruments, (d) all obligations of such Person created or arising under
any conditional sale or other similar title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of such
property), (e) all obligations of such Person as lessee under leases that have been, in
accordance with GAAP, recorded as capital leases, (f) all obligations of such Person in
respect of acceptances, letters of credit or similar extensions of credit, (g) all net
obligations of such Person in respect of Hedge Agreements, (h) all Debt of others referred
to in clauses (a) through (g) above or clause (i) below guaranteed directly, or indirectly
through a Subsidiary, by such Person, or in effect guaranteed directly, or indirectly
through a Subsidiary, by such Person through a written agreement either (1) to pay or
purchase such Debt or to advance or supply funds for the payment or purchase of such Debt or
(2) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of such Debt or
to assure the holder of such Debt against loss and (i) all Debt referred to in clauses (a)
through (h) above secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including, without
limitation, accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Debt.

3

 

     “Debt to EBITDA Ratio” of any Person at any date means the ratio of (a) Debt of
the types that, in accordance with GAAP, would be classified as indebtedness on a
Consolidated balance sheet of such Person on such date to (b) EBITDA for the period of four
fiscal quarters of such Person ended on or immediately prior to such date, provided
that for purposes of clause (a) of this definition, Debt shall not include (1) the
obligations specified in clause (g) of the definition thereof set forth above or (2) with
respect to the Borrower, any obligations which may be assumed by the Borrower for guaranties
of any indebtedness of the Borrower’s employee stock ownership plan up to an aggregate
principal amount of $28,903,500.

     “Default” means any Event of Default or any event that would constitute an
Event of Default but for the requirement that notice be given or time elapse or both.

     “Disclosed Litigation” has the meaning specified in Section 3.01(b).

     “Domestic Lending Office” means, with respect to any Lender, the office of such
Lender specified as its “Domestic Lending Office” opposite its name on Schedule I hereto or
in the Assignment and Acceptance pursuant to which it became a Lender, or such other office
of such Lender as such Lender may from time to time specify to the Borrower and the Agent.

     “EBITDA” means the sum, determined on a Consolidated basis, of the Borrower’s
(i) net income (or net loss), (ii) interest expense, (iii) income tax expense, (iv)
depreciation expense, (v) amortization expense and (vi) non-cash severance charges in an
aggregate amount not to exceed $20,000,000 in calendar year 2004 and $20,000,000 in calendar
year 2005.

     “EBITDA to Interest Ratio” of any Person on any date means the ratio of (a)
EBITDA for the period of four fiscal quarters of such Person ended on or immediately prior
to such date to (b) interest payable on, and amortization of debt discount in respect of,
all Debt of such Person for the period of four fiscal quarters of such Person ended on or
immediately prior to such date, provided that for purposes of clause (b) of this
definition, Debt shall not include the obligations specified in clause (g) of the definition
thereof set forth above.

     “Effective Date” has the meaning specified in Section 3.01.

     “Eligible Assignee” means (i) a Lender; (ii) an Affiliate of a Lender that is a
financial institution and is majority-owned by such Lender; (iii) any commercial bank
organized under the laws of the Commonwealth of Puerto Rico having total assets in excess of
$1,000,000,000 or any other commercial bank having total assets in excess of $1,000,000,000
that has an Applicable Lending Office that is not subject to deduction or withholding of
Taxes; or (iv) any other Person approved by the Agent and, so long as no Default has
occurred and is continuing, the Borrower, such approval not to be unreasonably withheld;
provided, however, that neither the Borrower nor any Affiliate of the
Borrower shall qualify as an Eligible Assignee.

     “Environmental Action” means any action, suit, demand, demand letter, claim,
notice of non-compliance or violation, notice of liability or potential liability,
investigation, proceeding, consent order or consent agreement relating in any way to any
Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment, including, without
limitation, (a) by any governmental or regulatory authority for enforcement, cleanup,
removal, response, remedial or other actions or damages and (b) by any governmental or
regulatory authority or any third party for damages, contribution, indemnification, cost
recovery, compensation or injunctive relief.

4

 

     “Environmental Law” means any federal, state, local or foreign statute, law,
ordinance, rule, regulation, code, order, judgment, decree or judicial or agency
interpretation, policy or guidance relating to pollution or protection of the environment,
health, safety or natural resources, including, without limitation, those relating to the
use, handling, transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.

     “Environmental Permit” means any permit, approval, identification number,
license or other authorization required under any Environmental Law.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated and rulings issued thereunder.

     “ERISA Affiliate” means any Person that for purposes of Title IV of ERISA is a
member of the Loan Parties’ controlled group, or under common control with the Borrower,
within the meaning of Section 414 of the Internal Revenue Code.

     “ERISA Event” means (a) the occurrence of a reportable event, within the
meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day notice
requirement with respect to such event has been waived by the PBGC; (b) the application for
a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of
any Plan of a notice of intent to terminate such Plan pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment referred to in Section
4041(e) of ERISA); (d) the cessation of operations at a facility of any of the Loan Parties
or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the
withdrawal by any of the Loan Parties or any ERISA Affiliate from a Multiple Employer Plan
during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2)
of ERISA; (f) the imposition of a lien under Section 302(f) of ERISA with respect to any
Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such
Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to
terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or
condition described in Section 4042 of ERISA that is reasonably expected to result in the
termination of, or the appointment of a trustee to administer, a Plan.

     “Eurocurrency Liabilities” has the meaning assigned to that term in Regulation
D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

     “Eurodollar Lending Office” means, with respect to any Lender, the office of
such Lender specified as its “Eurodollar Lending Office” opposite its name on Schedule I
hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no
such office is specified, its Domestic Lending Office), or such other office of such Lender
as such Lender may from time to time specify to the Borrower and the Agent.

     “Eurodollar Rate” means, for any Interest Period for each Eurodollar Rate
Advance comprising part of the same Borrowing, an interest rate per annum equal to the rate
per annum obtained by dividing (a) the rate per annum (rounded upward to the nearest whole
multiple of 1/100 of 1% per annum) appearing on Moneyline Telerate Markets Page 3750 (or any
successor page) as the London interbank offered rate for deposits in U.S. dollars at
approximately 11:00 A.M. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period or, if for any reason such
rate is not available, the average (rounded upward to the nearest whole multiple of 1/100 of
1% per annum, if such average is not such a multiple) of the rate per annum at which
deposits in U.S. dollars are offered by the principal office of each of the Reference Banks
in London, England to prime banks in the London interbank market at 11:00 A.M. (London time)
two Business Days before the first day of such Interest Period in an amount approximately
equal to such Reference Bank’s pro rata share of the contemplated Eurodollar Rate Advance
comprising part of such Borrowing to be outstanding during such Interest Period

5

 

and for a period equal to such Interest Period by (b) a percentage equal to 100% minus
the Eurodollar Rate Reserve Percentage for such Interest Period. The Eurodollar Rate for
any Interest Period for each Eurodollar Rate Advance comprising part of the same Borrowing
shall be determined by the Agent on the basis of applicable rates furnished to and received
by the Agent from the Reference Banks two Business Days before the first day of such
Interest Period, subject, however, to the provisions of Section 2.07.

     “Eurodollar Rate Advance” means an Advance that bears interest as provided in
Section 2.06(a)(ii).

     “Eurodollar Rate Reserve Percentage” for any Interest Period for all Eurodollar
Rate Advances comprising part of the same Borrowing means the reserve percentage applicable
two Business Days before the first day of such Interest Period under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve
System in New York City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of liabilities that includes
deposits by reference to which the interest rate on Eurodollar Rate Advances is determined)
having a term equal to such Interest Period.

     “Events of Default” has the meaning specified in Section 6.01.

     “Federal Funds Rate” means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published for such day (or, if such day is not a Business Day, for
the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate
is not so published for any day that is a Business Day, the average of the quotations for
such day on such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.

     “GAAP” means (a) in the case of the preparation of all financial reporting
requirements, generally accepted accounting principles in the United States, as in effect
from time to time, and (b) in the case of the calculation, certification and compliance with
all financial tests and covenants, generally accepted accounting principles in the United
States, as in effect on the date of the financial statements delivered to each Lender in
accordance with Section 4.01(e), in each case applied on a consistent basis both as to
classification of items and amounts.

     “Guaranteed Obligations” has the meaning specified in Section 7.01.

     “Guaranty” has the meaning specified in Section 7.01.

     “Hazardous Materials” means (a) petroleum and petroleum products, byproducts or
breakdown products, radioactive materials, asbestos-containing materials, polychlorinated
biphenyls and radon gas and (b) any other chemicals, materials or substances designated,
classified or regulated as hazardous or toxic or as a pollutant or contaminant under any
Environmental Law.

     “Hedge Agreements” means interest rate swap, cap or collar agreements, interest
rate future or option contracts, currency swap agreements, currency future or option
contracts and other similar agreements.

     “Information Memorandum” means the information memorandum dated February 11,
2005 used by the Agent in connection with the syndication of the Commitments.

6

 

     “Interest Period” means, for each Eurodollar Rate Advance comprising part of
the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the
date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance and ending
on the last day of the period selected by the Borrower pursuant to the provisions below and,
thereafter, with respect to Eurodollar Rate Advances, each subsequent period commencing on
the last day of the immediately preceding Interest Period and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three or six months, and subject to clause (iii) of this
definition, any other period, as the Borrower may, upon notice received by the Agent not
later than 11:00 A.M. (New York City time) on the third Business Day prior to the first day
of such Interest Period, select; provided, however, that:

     (i) the Borrower may not select any Interest Period that ends (x) after the
Termination Date or (y) if the Advances have been converted to a term loan pursuant
to Section 2.05 prior to or on the last day of the prior Interest Period, that ends
after the Maturity Date;

     (ii) Interest Periods commencing on the same date for Eurodollar Rate Advances
comprising part of the same Borrowing shall be of the same duration;

     (iii) in the case of any such Borrowing, the Borrower shall not be entitled to
select an Interest Period having duration of any period other than one, two, three
or six months unless, by 2:00 P.M. (New York City time) on the third Business Day
prior to the first day of such Interest Period, each Lender notifies the Agent that
such Lender will be providing funding for such Borrowing with such Interest Period
(the failure of any Lender to so respond by such time being deemed for all purposes
of this Agreement as an objection by such Lender to the requested duration of such
Interest Period, provided that each Lender shall use commercially reasonable good
faith efforts to so respond); provided further that, if any or all of the Lenders
object to the requested duration of such Interest Period, the duration of the
Interest Period for such Borrowing shall be one, two, three or six months, as
specified by the Borrower in the applicable Notice of Borrowing as the desired
alternative to the selected Interest Period; and

     (iv) whenever the last day of any Interest Period would otherwise occur on a
day other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day, provided,
however, that, if such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last day of such Interest
Period shall occur on the next preceding Business Day; and

     (v) whenever the first day of any Interest Period occurs on a day of an initial
calendar month for which there is no numerically corresponding day in the calendar
month that succeeds such initial calendar month by the number of months equal to the
number of months in such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month.

     “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and rulings issued thereunder.

     “Lenders” means the Initial Lenders and each Person that shall become a party
hereto pursuant to Section 9.07.

     “Lien” means any lien, security interest or other charge or encumbrance of any
kind.

     “Loan Party” means each of the Borrower and the Guarantors.

7

 

     “Material Adverse Change” means any material adverse change in the business,
condition (financial or otherwise), operations, performance, properties or prospects of any
Loan Party or any Loan Party and its Subsidiaries taken as a whole.

     “Material Adverse Effect” means a material adverse effect on (a) the ability of
any Loan Party to conduct its business on substantially the same basis as conducted on the
Effective Date or (b) the ability of any Loan Party to service its Debt obligations on a
timely basis.

     “Maturity Date” means the earlier of (a) the first anniversary of the
Termination Date and (b) the date of termination in whole of the aggregate Commitments
pursuant to Section 2.04 or 6.01.

     “Moody’s” means Moody’s Investors Service, Inc.

     “Multiemployer Plan” means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is making or accruing an
obligation to make contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.

     “Multiple Employer Plan” means a single employer plan, as defined in Section
4001(a)(15) of ERISA, that (a) is maintained for employees of any Loan Party or any ERISA
Affiliate and at least one Person other than such Loan Party and the ERISA Affiliates or (b)
was so maintained and in respect of which any Loan Party or any ERISA Affiliate could have
liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.

     “Note” means a promissory note of the Borrower payable to the order of any
Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness
of the Borrower to such Lender resulting from the Advances made by such Lender.

     “Notice of Borrowing” has the meaning specified in Section 2.02(a).

     “Other Taxes” has the meaning specified in Section 2.13(b).

     “Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56,
signed into law October 26, 2001.

     “PBGC” means the Pension Benefit Guaranty Corporation (or any successor).

     “Performance Level” means, as of any date of determination, the level set forth
below as then in effect for the Borrower, as determined in accordance with the following
provisions of this definition:

	 	Level 1:   	 Public Debt Rating of at least A- by S&P or A3 by Moody’s.
	 
	 	Level 2:   	 Public Debt Rating of lower than Level 1 but at least BBB+
by S&P or Baa1 by Moody’s.
	 
	 	Level 3:   	 Public Debt Rating of lower than Level 2 but at least BBB
by S&P or Baa2 by Moody’s.
	 
	 	Level 4:   	 Public Debt Rating of lower than Level 3 but at least BBB-
by S&P or Baa3 by Moody’s.
	 
	 	Level 5:   	 Public Debt Rating of lower than Level 4.

8

 

     For purposes of the foregoing, (a) if only one of S&P and Moody’s shall have in effect
a Public Debt Rating, the Performance Level shall be determined by reference to the
available rating and (b) if the Public Debt Ratings established by S&P and Moody’s shall
fall within different Performance Levels, the Performance Level shall be based upon the
higher rating unless such Public Debt Ratings differ by two or more levels, in which case
the rating one level higher than the lower rating level will apply.

     “Permitted Liens” means, with respect to any Person, (a) Liens for taxes,
assessments and governmental charges and levies to the extent not required to be paid under
Section 5.01(b) hereof; (b) pledges or deposits to secure obligations under workers’
compensation laws or similar legislation; (c) pledges or deposits to secure performance in
connection with bids, tenders, contracts (other than contracts for the payment of money) or
leases to which such Person is a party; (d) deposits to secure public or statutory
obligations of such Person; (e) materialmen’s, mechanics’, carriers’, workers’, repairmen’s
or other like Liens in the ordinary course of business, or deposits to obtain the release of
such Liens to the extent such Liens, in the aggregate, would not have a Material Adverse
Effect; (f) deposits to secure surety and appeal bonds to which such Person is a party; (g)
other pledges or deposits for similar purposes in the ordinary course of business; (h) Liens
created by or resulting from any litigation or legal proceeding which at the time is
currently being contested in good faith by appropriate proceedings; (i) leases made, or
existing on property acquired, in the ordinary course of business; (j) landlord’s Liens
under leases to which such Person is a party; (k) zoning restrictions, easements, licenses,
and restrictions on the use of real property or minor irregularities in title thereto, which
do not materially impair the use of such property in the operation of the business of such
Person or the value of such property for the purpose of such business; and (l) bankers’
liens, rights of set-off or analogous rights granted or arising by operation of law to any
deposits held by or other indebtedness owing by any lender or any affiliate thereof to or
for the credit or account of such Person.

     “Permitted Receivables Financing” means any financing pursuant to which the
Borrower or any Subsidiary of the Borrower may sell, convey, or otherwise transfer to a
Receivables Subsidiary or any other Person (in the case of transfer by a Receivables
Subsidiary), or grant a security interest in, any accounts receivable (and related assets)
of the Borrower or such Subsidiary, provided that such financing shall be on customary
market terms and shall be non-recourse to the Borrower and its Subsidiaries (other than the
Receivables Subsidiary) except to a limited extent customary for such transactions. The
grant of a security interest in any accounts receivable of the Borrower or any Subsidiary of
the Borrower (other than a Receivables Subsidiary) to secure Debt under any credit facility
shall not be deemed a Permitted Receivables Financing.

     “Person” means an individual, partnership, corporation (including a business
trust), joint stock company, trust, unincorporated association, joint venture, limited
liability company or other entity, or a government or any political subdivision or agency
thereof.

     “Plan” means a Single Employer Plan or a Multiple Employer Plan.

     “Public Debt Rating” means, as of any date, the rating that has been most
recently announced by any of S&P or Moody’s, as the case may be, for any class of non-credit
enhanced long-term senior unsecured debt issued by the Borrower. For purposes of the
foregoing, (a) if any rating established by S&P or Moody’s shall be changed, such change
shall be effective as of the date on which such change is first announced publicly by the
rating agency making such change; and (b) if S&P or Moody’s shall change the basis on which
ratings are established, each reference to the Public Debt Rating announced by S&P or
Moody’s, as the case may be, shall refer to the then equivalent rating by S&P or Moody’s, as
the case may be.

     “Receivables Subsidiary” means a bankruptcy-remote, special-purpose wholly
owned Subsidiary formed in connection with a Permitted Receivables Financing.

9

 

     “Reference Banks” means initially, Citibank, Banco Bilbao Vizcaya Argentaria
Puerto Rico and Bank of Nova Scotia, Hato Rey, Puerto Rico or, if less than three of such
banks are able to furnish timely information in accordance with Section 2.07, any other
commercial bank designated by the Borrower and approved by the Required Lenders as
constituting a “Reference Bank” hereunder.

     “Register” has the meaning specified in Section 9.07(d).

     “Required Lenders” means at any time Lenders owed at least a majority in
interest of the then aggregate unpaid principal amount of the Advances owing to Lenders, or,
if no such principal amount is then outstanding, Lenders having at least a majority in
interest of the Commitments.

     “S&P” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.

     “Services Agreement” means the Services Agreement, dated as of March 2, 2004,
by and among the Borrower, PRTC and Verizon Corporate Services Group Incorporated, as
amended, modified renewed or replaced from time to time.

     “Significant Subsidiary” means at any time, with respect to the Borrower, any
Subsidiary, other than a Receivables Subsidiary, the assets of which, in the aggregate,
exceed 5% of the Consolidated Assets, determined in accordance with GAAP.

     “Single Employer Plan” means a single employer plan, as defined in Section
4001(a)(15) of ERISA, that (a) is maintained for employees of the Borrower or any ERISA
Affiliate and no Person other than the Loan Parties and the ERISA Affiliates or (b) was so
maintained and in respect of which any Loan Party or any ERISA Affiliate could have
liability under Section 4069 of ERISA in the event such plan has been or were to be
terminated.

     “Solvent” and “Solvency” mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (b) the present fair salable value of the assets of such Person
is not less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such Person’s ability
to pay such debts and liabilities as they mature and (d) such Person is not engaged in
business or a transaction, and is not about to engage in business or a transaction, for
which such Person’s property would constitute an unreasonably small capital. The amount of
contingent liabilities at any time shall be computed as the amount that, in the light of all
the facts and circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability after taking into account any
indemnification pursuant to the terms of any agreements entered into in connection
therewith.

     “Subsidiary” of any Person means any corporation, partnership, joint venture,
limited liability company, trust or estate of which (or in which) more than 50% of (a) the
issued and outstanding capital stock having ordinary voting power to elect a majority of the
Board of Directors of such corporation (irrespective of whether at the time capital stock of
any other class or classes of such corporation shall or might have voting power upon the
occurrence of any contingency), (b) the interest in the capital or profits of such limited
liability company, partnership or joint venture or (c) the beneficial interest in such trust
or estate, is at the time directly or indirectly owned or controlled by such Person, by such
Person and one or more of its other Subsidiaries or by one or more of such Person’s other
Subsidiaries.

     “Taxes” has the meaning specified in Section 2.13(a).

     “Term Loan Conversion Date” means the Termination Date on which all Advances
outstanding on such date are converted into a term loan pursuant to Section 2.05.

10

 

     “Term Loan Election” has the meaning specified in Section 2.05.

     “Termination Date” means the earlier of February 28, 2006 and the date of
termination in whole of the Commitments pursuant to Section 2.04 or 6.01.

     “Verizon” means Verizon Communications Inc., a Delaware corporation.

     “Voting Stock” means capital stock issued by a corporation, or equivalent
interests in any other Person, the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been suspended by the happening
of such a contingency.

     “Withholding Tax Change” means the approval by either the Chamber of
Representatives or the Senate of the Commonwealth of Puerto Rico of any proposal to change
any applicable law, treaty or government rule, regulation or order which would require the
Borrower to deduct or withhold any Taxes from or in respect of any sum payable hereunder or
under any Note to any Lender or the Agent.

SECTION 1.02. Computation of Time Periods. In this Agreement in the computation of
periods of time from a specified date to a later specified date, the word “from” means “from and
including” and the words “to” and “until” each mean “to but excluding”.

SECTION 1.03. Accounting Terms. All terms of an accounting or financial nature not
specifically defined herein shall be construed in accordance with GAAP.

ARTICLE II

AMOUNTS AND TERMS OF THE ADVANCES

SECTION 2.01. The Advances. Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make Advances to the Borrower from time to time on any Business Day
during the period from the Effective Date until the Termination Date in an aggregate amount not to
exceed at any time outstanding the amount set forth opposite such Lender’s name on Schedule I
hereof or, if such Lender has entered into any Assignment and Acceptance, set forth for such Lender
in the Register maintained by the Agent pursuant to Section 9.07(d), as such amount may be reduced
pursuant to Section 2.04 (such Lender’s “Commitment”). Each Borrowing shall be in an
aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and shall
consist of Advances of the same Type made on the same day by the Lenders ratably according to their
respective Commitments. Within the limits of this Section 2.01, the Borrower may borrow under this
Section 2.01, prepay pursuant to Section 2.09 and reborrow under this Section 2.01.

SECTION 2.02. Making the Advances. (a) Each Borrowing shall be made on notice, given not
later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the
proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances, or the
Business Day of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances,
by the Borrower to the Agent, which shall give to each Lender prompt notice thereof by telecopier
or facsimile. Each such notice of a Borrowing (a “Notice of Borrowing”) shall be by
telephone, confirmed immediately in writing, or telecopier or facsimile in substantially the form
of Exhibit B hereto, specifying therein the requested (i) date of such Borrowing, (ii) Type of
Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case
of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such
Advance. Each Lender shall, before 12:00 noon (New York City time) on the date of such Borrowing,
make available for the account of its Applicable Lending Office to the Agent at the Agent’s
Account, in same day funds, such Lender’s ratable portion of such Borrowing. After the Agent’s
receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III,
the Agent will make such funds available to the Borrower at the Borrower’s Account.

(b) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not
select Eurodollar Rate Advances for any Borrowing if the aggregate obligation of the Lenders to
make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.07 or 2.11 and (ii) the
Eurodollar Rate Advances may not be outstanding as part of more than twelve separate Borrowings.

(c) Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any
Borrowing that

11

 

the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate
Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by
such Lender as a result of any failure to fulfill on or before the date specified in such Notice of
Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without
limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the
Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such
failure, is not made on such date.

(d) Unless the Agent shall have received notice from a Lender prior to the time of any Borrowing
that such Lender will not make available to the Agent such Lender’s ratable portion of such
Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on
the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent
may, in reliance upon such assumption, make available to the Borrower on such date a corresponding
amount. If and to the extent that such Lender shall not have so made such ratable portion
available to the Agent, such Lender and the Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest thereon, for each day from the
date such amount is made available to the Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to Advances
comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such
Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute
such Lender’s Advance as part of such Borrowing for purposes of this Agreement and the Borrower
shall be relieved of its obligations to repay such amount under this Section 2.02(d).

(e) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall
not relieve any other Lender of its obligation hereunder to make its Advance on the date of such
Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the
Advance to be made by such other Lender on the date of any Borrowing.

SECTION 2.03. Fees. (a) Facility Fee. The Borrower agrees to pay to the Agent
for the account of each Lender a facility fee on the aggregate amount of such Lender’s Commitment
from the Effective Date in the case of each Initial Lender and from the later of the Effective Date
and the effective date specified in the Assignment and Acceptance pursuant to which it became a
Lender in the case of each other Lender until the Termination Date at a rate per annum equal to the
Applicable Percentage in effect from time to time, payable in arrears quarterly on the last day of
each March, June, September and December, commencing March 31, 2005, and on the Termination Date.

(b) Utilization Fee. The Borrower agrees to pay to the Agent for the account of each
Lender from the Effective Date until the Termination Date a Utilization Fee on the aggregate amount
of such Lender’s Advances for each day that the aggregate Advances exceed 50% of the aggregate
Commitments at a rate per annum equal to the Applicable Utilization Fee in effect from time to
time, payable in arrears quarterly on the last day of each March, June, September and December,
commencing March 31, 2005, and on the Termination Date.

(c) Agent’s Fees. The Borrower shall pay to the Agent for its own account such fees as may
from time to time be agreed between the Borrower and the Agent.

SECTION 2.04. Termination or Reduction of the Commitments. (a) Optional. The
Borrower shall have the right, upon at least three Business Days’ notice to the Agent, to terminate
in whole or reduce ratably in part the unused portions of the respective Commitments of the
Lenders, provided that each partial reduction shall be in the aggregate amount of
$10,000,000 or an integral multiple of $1,000,000 in excess thereof.

     (b) Mandatory. On the Termination Date, if the Borrower has made the Term Loan
Election in accordance with Section 2.05 prior to such date, and from time to time thereafter upon
each prepayment of the Advances, the Commitments of the Lenders shall be automatically and
permanently reduced on a pro rata basis by an amount equal to the amount by which (i) the aggregate
Commitments immediately prior to such reduction exceeds (ii) the aggregate unpaid principal
amount of all Advances outstanding at such time.

SECTION 2.05. Repayment of Advances. The Borrower shall, subject to the next succeeding
sentence, repay to the Agent for the ratable account of the Lenders on the Termination Date the
aggregate principal amount of the Advances then outstanding. The Borrower may, upon not less than
one Business Day notice to the Agent, elect (the “Term Loan Election”) to convert all of
the Advances outstanding on the Termination Date in effect at such time into a term loan which the
Borrower shall repay in full ratably to the Lenders on the Maturity Date; provided that the
Term Loan Election may not be exercised unless the applicable conditions in Section 3.02 are
satisfied on the date of notice of the Term Loan Election and on the date on
which the Term Loan Election is to be effected. All Advances converted into a term loan pursuant
to this Section 2.05 shall continue to constitute Advances except that the Borrower may not
reborrow pursuant to Section 2.01 after all or any portion of such Advances have been prepaid
pursuant to Section 2.09.

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SECTION 2.06. Interest. (a) Scheduled Interest. The Borrower shall pay interest
on the unpaid principal amount of each Advance owing to each Lender from the date of such Advance
until such principal amount shall be paid in full, at the following rates per annum:

     (i) Base Rate Advances. During such periods as such Advance is a Base Rate
Advance, a rate per annum equal at all times to the sum of (x) the Base Rate in effect from
time to time plus (y) the Applicable Margin in effect from time to time, payable in
arrears quarterly on the last day of each March, June, September and December during such
periods and on the date such Base Rate Advance shall be Converted or paid in full.

     (ii) Eurodollar Rate Advances. During such periods as such Advance is a
Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for
such Advance to the sum of (x) the Eurodollar Rate for such Interest Period for such
Advance, plus (y) the Applicable Margin in effect from time to time, payable in
arrears on the last day of such Interest Period and, if such Interest Period has a duration
of more than three months, on each day that occurs during such Interest Period every three
months from the first day of such Interest Period and on the date such Eurodollar Rate
Advance shall be Converted or paid in full.

(b) Default Interest. Upon the occurrence and during the continuance of an Event of
Default under Section 6.01(a), the Borrower shall pay interest on (i) the unpaid principal amount
of each Advance owing to each Lender, payable in arrears on the dates referred to in clause (a)(i)
or (a)(ii) above, at a rate per annum equal at all times to 2% per annum above the rate per annum
required to be paid on such Advance pursuant to clause (a)(i) or (a)(ii) above and (ii) to the
fullest extent permitted by law, the amount of any interest, fee or other amount payable hereunder
that is not paid when due, from the date such amount shall be due until such amount shall be paid
in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate
per annum equal at all times to 2% per annum above the rate per annum required to be paid on Base
Rate Advances pursuant to clause (a)(i) above.

SECTION 2.07. Interest Rate Determination. (a) Each Reference Bank agrees to furnish to
the Agent timely information for the purpose of determining each Eurodollar Rate. If any one or
more of the Reference Banks shall not furnish such timely information to the Agent for the purpose
of determining any such interest rate, the Agent shall determine such interest rate on the basis of
timely information furnished by the remaining Reference Banks. The Agent shall give prompt notice
to the Borrower and the Lenders of the applicable interest rate determined by the Agent for
purposes of Section 2.06(a)(i) or (ii), and the rate, if any, furnished by each Reference Bank for
the purpose of determining the interest rate under Section 2.06(a)(ii).

(b) If, with respect to any Eurodollar Rate Advances, the Required Lenders notify the Agent that
the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost
to such Required Lenders of making, funding or maintaining their respective Eurodollar Rate
Advances for such Interest Period, the Agent shall forthwith so notify the Borrower and the
Lenders, whereupon (i) each Eurodollar Rate Advance will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Advance, and (ii) the obligation of the
Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall be suspended until the
Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no
longer exist.

(c) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar
Rate Advances in accordance with the provisions contained in the definition of “Interest Period” in
Section 1.01, the Agent will forthwith so notify the Borrower and the Lenders and such Advances
will automatically, on the last day of the then existing Interest Period therefor, Convert into
Base Rate Advances.

(d) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances
comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than
$10,000,000, such Advances shall automatically Convert into Base Rate Advances.

(e) Upon the occurrence and during the continuance of any Event of Default under Section 6.01(a),
(i) each Eurodollar Rate Advance will automatically, on the last day of the then existing Interest
Period therefor, Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make,
or to Convert Advances into, Eurodollar Rate Advances shall be suspended.

(f) If fewer than two Reference Banks determine and furnish timely information to the Agent for
determining the Eurodollar Rate for any Eurodollar Rate Advances,

     (i) the Agent shall forthwith notify the Borrower and the Lenders that the interest
rate cannot be determined for such Eurodollar Rate Advances,

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     (ii) each such Advance will automatically, on the last day of the then existing
Interest Period therefor, Convert into a Base Rate Advance (or if such Advance is then a
Base Rate Advance, will continue as a Base Rate Advance), and

     (iii) the obligation of the Lenders to make Eurodollar Rate Advances or to Convert
Advances into Eurodollar Rate Advances shall be suspended until the Agent shall notify the
Borrower and the Lenders that the circumstances causing such suspension no longer exist.

SECTION 2.08. Optional Conversion of Advances. The Borrower may on any Business Day, upon
notice given to the Agent not later than 11:00 A.M. (New York City time) on the third Business Day
prior to the date of the proposed Conversion and subject to the provisions of Sections 2.07 and
2.11, Convert all Advances of one Type comprising the same Borrowing into Advances of the other
Type; provided, however, that any Conversion of Eurodollar Rate Advances into Base
Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate
Advances and any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an
amount not less than $10,000,000. Each such notice of a Conversion shall, within the restrictions
specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted and
(iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest
Period for each such Advance. Each notice of Conversion shall be irrevocable and binding on the
Borrower.

SECTION 2.09. Optional Prepayments of Advances. The Borrower may, upon notice not later
than 11:00 A.M. (New York City time) for Base Rate Advances and upon at least two Business Days’
notice to the Agent for Eurodollar Rate Advances stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding
principal amount of the Advances comprising part of the same Borrowing in whole or ratably in part,
together with accrued interest to the date of such prepayment on the principal amount prepaid;
provided, however, that (x) each partial prepayment shall be in an aggregate
principal amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof and (y) in
the event of any such prepayment of a Eurodollar Rate Advance, the Borrower shall be obligated to
reimburse the Lenders in respect thereof pursuant to Section 9.04(c).

SECTION 2.10. Increased Costs. (a) If, due to either (i) the introduction of or any
change in or in the interpretation of any law or regulation or (ii) the compliance with any written
guideline or request from any central bank or other governmental authority (whether or not having
the force of law), there shall be any increase in the cost to any Lender of agreeing to make or
making, funding or maintaining Eurodollar Rate Advances (excluding for purposes of this Section
2.10 any such increased costs resulting from (i) Taxes or Other Taxes (as to which Section 2.13
shall govern) and (ii) changes in the basis of taxation of overall net income or overall gross
income by the United States or by the foreign jurisdiction or state under the laws of which such
Lender is organized or has its Applicable Lending Office or any political subdivision thereof),
then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand
to the Agent), pay to the Agent for the account of such Lender additional amounts sufficient to
compensate such Lender for such increased cost (whether or not such increased costs arise prior to
the receipt of written notification from such central bank or other governmental authority);
provided that the Borrower shall not be required to pay any such increased costs to the
extent such increased costs accrued prior to the date that is six months prior to such notice,
provided further that, if the change in law or circumstance giving rise to such
increased costs or reductions is retroactive, then the six-month period referred to above shall be
extended to include the period of retroactive effect thereof. A certificate as to the amount of
such increased cost, submitted to the Borrower and the Agent by such Lender, shall be conclusive
and binding for all purposes, absent error in the calculation of such amount.

(b) If any Lender determines that compliance with any law or regulation or any written guideline or
request from any central bank or other governmental authority (whether or not having the force of
law) affects or would affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender (excluding any reserves included in the
computation of the Eurodollar Rate) and that the amount of such capital is increased by or based
upon the existence of such Lender’s commitment to lend hereunder and other commitments of this
type, then, upon demand by such Lender (with a copy of such demand to the Agent), the Borrower
shall pay to the Agent for the account of such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender or such corporation (whether or not
such amounts arise prior to the receipt of
written notification from such central bank or other governmental authority) in the light of such
circumstances, to the extent that such Lender reasonably determines such increase in capital to be
allocable (in the proportion that such Lender’s Commitment hereunder bears to all of such Lender’s
commitments of this type) to the existence of

14

 

such Lender’s commitment to lend hereunder; provided that the Borrower shall not be required to compensate such Lender to the extent
such amounts arose prior to the date that is six months prior to such notice, provided
further that, if the change in law or circumstance giving rise to such increased costs or
reductions is retroactive, then the six-month period referred to above shall be extended to include
the period of retroactive effect thereof. A certificate as to such amounts submitted to the
Borrower and the Agent by such Lender shall be conclusive and binding for all purposes, absent
error in the calculation of such amounts.

(c) Any Lender claiming any additional amounts payable pursuant to this Section 2.10 agrees to use
reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to
minimize such additional amounts and to change the jurisdiction of its Applicable Lending Office if
the making of such a change would avoid the need for, or reduce the amount of, any additional
amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender, be
otherwise notably disadvantageous to such Lender. The Borrower shall reimburse such Lender for
such Lender’s reasonable expenses incurred in connection with such change or in considering such a
change in an amount not to exceed the Borrower’s pro rata share of such expenses based on such
Lender’s Commitment and Advances and the total lending commitments and loans of such Lender to its
similarly situated customers.

SECTION 2.11. Illegality. Notwithstanding any other provision of this Agreement, if any
Lender shall notify the Agent that the introduction of or any change in or in the interpretation of
any law or regulation makes it unlawful, or any central bank or other governmental authority having
relevant jurisdiction asserts that it is unlawful, for any Lender or its Eurodollar Lending Office
to perform its obligations hereunder to make Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances hereunder, (i) each Eurodollar Rate Advance made by such Lender will
automatically, upon such demand, Convert into a Base Rate Advance and (ii) the obligation of such
Lender to make Eurodollar Rate Advances or to Convert Advances into Eurodollar Rate Advances shall
be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances
causing such suspension no longer exist.

SECTION 2.12. Payments and Computations. (a) The Borrower shall make each payment
hereunder and under the Notes without counterclaim or set-off not later than 11:00 A.M. (New York
City time) on the day when due in U.S. dollars to the Agent at the Agent’s Account in same day
funds. The Agent will promptly thereafter cause to be distributed like funds relating to the
payment of principal or interest or fees ratably (other than amounts payable pursuant to Section
2.03, 2.10, 2.13 or 9.04(c)) to the Lenders for the account of their respective Applicable Lending
Offices, and like funds relating to the payment of any other amount payable to any Lender to such
Lender for the account of its Applicable Lending Office, in each case to be applied in accordance
with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and
recording of the information contained therein in the Register pursuant to Section 9.07(c), from
and after the effective date specified in such Assignment and Acceptance, the Agent shall make all
payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender
assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date directly between themselves.

(b) All computations of interest based on the Base Rate shall be made by the Agent on the basis of
a year of 365 or 366 days, as the case may be, and all computations of interest based on the
Eurodollar Rate or the Federal Funds Rate and of fees shall be made by the Agent on the basis of a
year of 360 days, in each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest or fees are payable. Each
determination by the Agent of an interest rate hereunder shall be conclusive and binding for all
purposes, absent error in the calculation of such interest rate.

(c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than
a Business Day, such payment shall be made on the next succeeding Business Day, and such extension
of time shall in such case be included in the computation of payment of interest or fee, as the
case may be; provided, however, that, if such extension would cause payment of
interest on or principal of Eurodollar Advances to be made in the next following calendar month,
such payment shall be made on the next preceding Business Day.

(d) Unless the Agent shall have received notice from the Borrower prior to the time on which any
payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the
Agent may assume that the Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due
date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall
not have so made such payment in full to the Agent, each Lender
shall repay to the Agent forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such Lender until the
date such Lender repays such amount to the Agent, at the Federal Funds Rate.

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SECTION 2.13. Taxes. (a) Subject to subsections (e) and (f) below, any and all payments
by the Borrower hereunder or under the Notes shall be made, in accordance with Section 2.12, free
and clear of and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto imposed by Puerto
Rico, the United States or any political subdivision of either (or in the case of any payments by
or on behalf of the Borrower through an account or branch outside the United States or Puerto Rico
or by or on behalf of the Borrower by a payor that is not a United States person or not organized
or resident in Puerto Rico such payments shall be made free and clear of and without deduction for
any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto imposed by a foreign jurisdiction or any political subdivision
thereof), excluding, in the case of each Lender and the Agent, taxes imposed on its overall
net income, and franchise taxes imposed on it in lieu of net income taxes (x) in the case of a
Lender pursuant to the laws of the jurisdiction (or any political subdivision or taxing authority
therein) in which it is organized or in which the principal office of such Lender, or Applicable
Lending Office of such Lender is located, or (y) in the case of any payment to the Agent in its
capacity as Agent, the jurisdiction (or any political subdivision or taxing authority therein) in
which it is organized or in which the principal office of the Agent is located or in which the
office designated by the Agent to act as Agent is located (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or
under the Notes being hereinafter referred to as “Taxes”). Subject to subsections (e) and
(f) below, if the Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note to any Lender or the Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.13) such Lender or the Agent (as the
case may be) receives an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance with applicable law.
Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Agent, at
its address referred to in Section 9.02, the original or a certified copy of a receipt evidencing
payment thereof. For purposes of this subsection (a) and subsection (e), the terms “United
States” and “United States person” shall have the meanings specified in Section 7701 of
the Internal Revenue Code.

(b) In addition, the Borrower agrees to pay any stamp or documentary taxes or any other excise or
property taxes, charges or similar levies that arise from any payment made hereunder or under the
Notes or from the execution, delivery or registration of, performing under, or otherwise with
respect to, this Agreement or the Notes as a result of the introduction of or any change in or in
the interpretation of any law or regulation after the Effective Date (hereinafter referred to as
“Other Taxes”).

(c) Subject to subsections (d), (e) and (f) below, the Borrower shall indemnify each Lender and the
Agent for the full amount of Taxes or Other Taxes (to the extent not previously paid under
subsection (a) or (b) above) imposed on or paid by such Lender or the Agent (as the case may be)
and any liability (including penalties, interest and expenses but excluding any taxes imposed by
any jurisdiction on amounts payable under this Section 2.13) arising therefrom or with respect
thereto. This indemnification shall be made within 30 days from the date such Lender or the Agent
(as the case may be) makes written demand therefor.

(d) Each Lender organized under the laws of a jurisdiction outside of Puerto Rico from time to
time, as requested in writing by the Borrower (but only so long as such Lender remains lawfully
able to do so), shall provide each of the Agent and the Borrower with two properly and accurately
completed and duly executed original copies of any form, document or other certificate that is
necessary for such Lender to be exempt from, or entitled to a reduced rate of Taxes or payments
hereunder or under the Notes or for the Borrower to determine the applicable rate of deduction or
withholding of any Taxes. If any Lender which is organized under the laws of a jurisdiction
outside of Puerto Rico is unable to provide the above-described forms, documents or other
certificates for a relevant interest period (or if the Lender’s appropriate personnel responsible
for providing the forms, documents or other certificates actually become aware that the forms,
documents or other certificates provided by it are inaccurate), such Lender shall notify the
Borrower in writing prior to or immediately upon the commencement of such relevant interest period.

(e) For any period with respect to which a Lender has failed to provide the Borrower with the
appropriate form, document or other certificate requested by the Borrower in accordance with
Section 2.13(d) (other than if such failure is due to a change in any applicable
law, treaty or government rule, regulation or order, or any change in the interpretation,
administration or application thereof occurring subsequent to the date hereof such that such Lender
is not lawfully able to provide the Borrower with the appropriate form, document or other
certificate, or if such form,
document or other certificate is no longer required to establish an exemption from the applicable
tax), such Lender shall not be entitled to indemnification under Section 2.13(a) or (c) with
respect to Taxes by reason of such failure and the Borrower shall be entitled to withhold Taxes
from payments to such Lender; provided, however, that should a Lender become
subject to Taxes because of its failure to deliver a form, document or other certificate required
hereunder, the Borrower shall take such steps at such Lender’s expense as such Lender shall
reasonably request to

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assist such Lender to recover such Taxes.

(f) Notwithstanding anything else contained in this Section 2.13, the Borrower shall only be
required to pay additional sums with respect to Taxes (subject to subsection (h) below) to a Lender
(or the Agent, as the case may be) pursuant to subsection (a) or (c) above if the obligation to pay
such Taxes results from such Lender’s inability to obtain a complete exemption from Taxes as a
result of (i) any amendment to the laws (or any regulations thereunder), or any amendment to, or
change in, an interpretation or application of any such laws or regulations by any legislative
body, court, governmental agency or regulatory authority adopted or enacted after the date hereof
(or in the case of an entity that becomes a Lender after the date hereof, the date such entity
becomes a Lender), (ii) an amendment, modification or revocation of any existing applicable tax
treaty ratified, enacted or amended after the date hereof (or in the case of an entity that becomes
a Lender after the date hereof, the date such entity becomes a Lender), or (iii) the ratification
of a new tax treaty ratified after the date hereof (or in the case of an entity that becomes a
Lender after the date hereof, the date such entity becomes a Lender).

(g) In the event that the Borrower makes an additional payment under Section 2.13(a) or 2.13(c) for
the account of any Lender and such Lender, in its sole opinion, determines that it has finally and
irrevocably received or been granted a credit against, or relief or remission from, or repayment
of, any tax paid or payable by it in respect of or calculated with reference to the deduction or
withholding giving rise to such additional payment, such Lender shall, to the extent that it
determines that it can do so without prejudice to the retention of the amount of such credit,
relief, remission or repayment, pay to the Borrower such amount as such Lender shall, in its sole
opinion, have determined is attributable to such deduction or withholding and will leave such
Lender (after such payment) in no worse position than it would have been had the Borrower not been
required to make such deduction or withholding. Nothing contained herein shall (i) interfere with
the right of a Lender to arrange its tax affairs in whatever manner it thinks fit or (ii) oblige
any Lender to claim any tax credit or to disclose any information relating to its tax affairs or
any computations in respect thereof or (iii) require any Lender to take or refrain from taking any
action that would prejudice its ability to benefit from any other credits, reliefs, remissions or
repayments to which it may be entitled. Each Lender and the Agent shall reasonably cooperate with
the Borrower at the Borrower’s written request and sole expense, in contesting any Taxes or Other
Taxes the Borrower would bear pursuant to this Section 2.13, provided, however,
that (i) no tax return of such Lender or the Agent is or would be held open as a result of such
contest, (ii) neither such Lender nor the Agent is required to reopen a tax year that has already
closed and (iii) such Lender and the Agent shall, in the sole opinion of such Lender and the Agent,
respectively, have determined that such contest will leave such Lender and the Agent, respectively,
in no worse position than it would have been in had it not contested such Taxes or Other Taxes.
Nothing contained herein shall interfere with the right of a Lender or the Agent to arrange its tax
affairs in whatever manner it thinks fit, if in the sole judgment of such Lender or the Agent, such
contest would be disadvantageous to such Lender or the Agent. In pursuing a contest in the
Lender’s or the Agent’s name, such Lender or the Agent will be represented by counsel of such
Lender’s or the Agent’s choice, and will defend against, settle or otherwise control the contest
and will not relinquish control or decision making over the contest.

(h) (i) Any Lender claiming any additional amounts payable pursuant to this Section 2.13 or (ii)
upon a Withholding Tax Change, each Lender, agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to avoid or minimize such additional amounts
and to change the jurisdiction of its Applicable Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any additional amounts that may thereafter
accrue and would not, in the reasonable judgment of such Lender, be otherwise notably
disadvantageous to such Lender. The Borrower shall reimburse such Lender for such Lender’s
reasonable expenses incurred in connection with such change or in considering such a change in an
amount not to exceed the Borrower’s pro rata share of such expenses based on such Lender’s
Commitment and Advances to the Borrower and the total lending commitments and loans of such Lender
to its similarly situated customers.

SECTION 2.14. Sharing of Payments, Etc. If any Lender shall obtain any payment (whether
voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of
the Advances owing to it (other than pursuant to Section 2.10, 2.13, 9.01(b), 9.04(c) or 9.07) in
excess of its ratable share of payments on account of the Advances obtained by all the Lenders,
such Lender shall forthwith purchase from the other Lenders such participations in the Advances
owing to them as shall be necessary to cause such purchasing Lender to share the excess payment
ratably with each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the
extent of
such recovery together with an amount equal to such Lender’s ratable share (according to the
proportion of (i) the amount of such Lender’s required repayment to (ii) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender by delivering payment pursuant to this Section
2.14 may, to the fullest extent permitted by law, exercise all its rights of payment (including the
right of set-off) with respect to such

17

 

participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.

SECTION 2.15. Use of Proceeds. The proceeds of the Advances shall be available (and the
Borrower agrees that it shall use such proceeds) solely for general corporate purposes of the
Borrower and its Subsidiaries, including, without limitation, to provide a backstop for commercial
paper, provided that such proceeds shall not be used for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the
Federal Reserve System).

ARTICLE III

CONDITIONS TO EFFECTIVENESS AND LENDING

SECTION 3.01. Conditions Precedent to Effectiveness of Section 2.01. Section 2.01 of this
Agreement shall become effective on and as of the first date (the “Effective Date”) on
which the following conditions precedent have been satisfied:

     (a) There shall have occurred no Material Adverse Change since December 31, 2003 other
than as disclosed in Schedule 3.01(a) hereto.

     (b) There shall exist no action, suit, investigation, litigation or proceeding
affecting any of the Loan Parties or any of their respective Subsidiaries pending or
threatened before any court, governmental agency or arbitrator that (i) could be reasonably
likely to have a Material Adverse Effect other than the matters described on Schedule
3.01(b) hereto (the “Disclosed Litigation”) or (ii) is initiated by any Person other
than a Lender in its capacity as a Lender that purports to affect the legality, validity or
enforceability of this Agreement or any Note or the consummation of the transactions
contemplated hereby, and there shall have been no material adverse change in the status, or
financial effect on any Loan Party, of the Disclosed Litigation from that described on
Schedule 3.01(b) hereto.

     (c) All governmental and third party consents and approvals necessary in connection
with the execution, delivery and performance of this Agreement and the Notes shall have been
obtained (without the imposition of any conditions that could reasonably be expected to
materially adversely affect the ability of any Loan Party to perform its obligations
hereunder) and shall remain in effect, and no law or regulation shall be applicable that
restrains, prevents or imposes adverse conditions upon the transactions contemplated hereby
that could reasonably be expected to materially adversely affect the ability of any Loan
Party to perform its obligations hereunder.

     (d) The Borrower shall have notified each Lender and the Agent in writing as to the
proposed Effective Date.

     (e) The Borrower shall have paid all invoiced fees and expenses of the Agent and the
Lenders (including the invoiced fees and expenses of counsel to the Agent).

     (f) On the Effective Date, the following statements shall be true and the Agent shall
have received for the account of each Lender a certificate signed by a duly authorized
officer of the Borrower, dated the Effective Date, stating that:

     (i) The representations and warranties contained in Section 4.01 are correct on
and as of the Effective Date, and

     (ii) No event has occurred and is continuing that constitutes a Default.

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     (g) The Agent shall have received on or before the Effective Date the following, each
dated such day, in form and substance satisfactory to the Agent and (except for the Notes)
in sufficient copies for each Lender:

     (i) The Notes to the order of the Lenders, respectively.

     (ii) Certified copies of the resolutions of the Board of Directors of each Loan
Party approving the transactions contemplated by this Agreement and the Notes and of
all documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement and such Notes.

     (iii) A certificate of the Secretary or an Assistant Secretary of each Loan
Party certifying the names and true signatures of the officers of each Loan Party
authorized to sign this Agreement and the Notes and the other documents to be
delivered hereunder.

     (iv) A certificate, in substantially the form of Exhibit D hereto, attesting to
the Solvency of each Loan Party after giving effect to the Borrowings contemplated
hereunder, from the chief financial officer of each such Loan Party.

     (v) A favorable opinion of Curtis, Mallet-Prevost, Colt & Mosle, New York
counsel for the Loan Parties, substantially in the form of Exhibit E hereto.

     (vi) A favorable opinion of Roberto Garcia, Esq., Vice President and General
Counsel of the Borrower, substantially in the form of Exhibit F hereto.

     (vii) A favorable opinion of Shearman & Sterling LLP, counsel for the Agent, in
form and substance satisfactory to the Agent.

     (h) The termination in whole of the commitments of the lenders party to the 364-Day
Credit Agreement dated as of March 2, 2004 (the “Existing Credit Agreement”) among
the Borrower, PRTC, as guarantor, Citibank, as administrative agent, Banco Bilbao Vizcaya
Argentaria Puerto Rico, as syndication agent, and Banco Popular de Puerto Rico, FirstBank
Puerto Rico and Scotiabank de Puerto Rico, as co-documentation agents, and the payment in
full of all obligations outstanding under the Existing Credit Agreement. Each of the
Initial Lenders that is a party to the Existing Credit Agreement hereby waives the
requirement of three Business Days notice to terminate the commitments under the Existing
Credit Agreement.

SECTION 3.02. Conditions Precedent to Each Borrowing and the Term Loan Conversion Date.
The obligation of each Lender to make an Advance on the occasion of each Borrowing and the Term
Loan Election shall be subject to the conditions precedent that the Effective Date shall have
occurred and on the date of such Borrowing or the Term Loan Conversion Date the following
statements shall be true (and each of the giving of the applicable Notice of Borrowing, the
acceptance by the Borrower of the proceeds of such Borrowing and the notice of Term Loan Election
shall constitute a representation and warranty by the Borrower that on the date of such Borrowing
or the Term Loan Conversion Date such statements are true):

     (a) the representations and warranties contained in Section 4.01 are correct in all
material respects on and as of the date of such Borrowing or the Term Loan Conversion Date,
before and after giving effect to such Borrowing and to the application of the proceeds
therefrom, or the Term Loan Election, as though made on and as of such date, and

     (b) no event has occurred and is continuing, or would result from such Borrowing or
from the application of the proceeds therefrom, or the Term Loan Election, that constitutes
a Default.

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SECTION 3.03. Determinations Under Section 3.01. For purposes of determining compliance
with the conditions specified in Section 3.01, each Lender shall be deemed to have consented to,
approved or accepted or to be satisfied with each document or other matter required thereunder to
be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of
the Agent responsible for the transactions contemplated by this Agreement shall have received
notice from such Lender prior to the date that the Borrower, by notice to the Lenders, designates
as the proposed Effective Date, specifying its objection thereto. The Agent shall promptly notify
the Lenders of the occurrence of the Effective Date.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and
warrants as follows:

     (a) Each Loan Party is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation.

     (b) The execution, delivery and performance by each Loan Party of this Agreement and
the Notes executed by it and the consummation of the transactions contemplated hereby, are
within such Loan Party’s corporate powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) such Loan Party’s charter or by-laws (or other
equivalent organizational documents) or (ii) any law or any material contractual restriction
binding on or affecting such Loan Party or, to the knowledge of the chief financial officer
of the Borrower, any other contract the breach of which would limit the ability of any Loan
Party to perform its obligations under this Agreement or the Notes.

     (c) No authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body or any other third party is required for the
due execution, delivery and performance by any Loan Party of this Agreement or the Notes.

     (d) This Agreement has been, and each of the Notes when delivered hereunder will have
been, duly executed and delivered by the Borrower. This Agreement has been duly executed
and delivered by each Guarantor. Assuming that this Agreement has been duly executed by the
Agent and each of the Initial Lenders, this Agreement is, and each of the Notes when
delivered hereunder will be, the legal, valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with their respective terms. Assuming that
this Agreement has been duly executed by the Agent and each of the Initial Lenders, this
Agreement is the legal, valid and binding obligation of each Guarantor enforceable against
each Guarantor in accordance with its terms.

     (e) The Consolidated balance sheet of the Borrower and its Subsidiaries as at December
31, 2003, and the related Consolidated statements of income and cash flows of the Borrower
and its Subsidiaries for the fiscal year then ended, accompanied by an opinion of Ernst &
Young LLP, independent public accountants, and the Consolidated balance sheet of the
Borrower and its Subsidiaries as at September 30, 2004, and the related Consolidated
statements of income and cash flows of the Borrower and its Subsidiaries for the nine months
then ended, duly certified by the chief financial officer of the Borrower, copies of which
have been furnished to each Lender, fairly present, subject, in the case of said balance
sheet as at September 30, 2004, and said statements of income and cash flows for the nine
months then ended, to year-end audit adjustments, the Consolidated financial condition of
the Borrower and its Subsidiaries as at such dates and the Consolidated results of the
operations of the Borrower and its
Subsidiaries for the periods ended on such dates, all in accordance with generally
accepted accounting principles consistently applied.

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     (f) There is no pending or (to the knowledge of any Loan Party) threatened action or
proceeding, including, without limitation, any Environmental Action, affecting any Loan
Party or any of its Subsidiaries before any court, governmental agency or arbitrator that is
initiated by any Person other than a Lender in its capacity as a Lender that purports to
affect the legality, validity or enforceability of this Agreement or any Note.

     (g) Neither the Borrower nor any of its Subsidiaries is an Investment Company, as such
term is defined in the Investment Company Act of 1940, as amended.

     (h) No Loan Party is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board
of Governors of the Federal Reserve System), and no proceeds of any Advance will be used to
purchase or carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.

     (i) The obligations of the Borrower under this Agreement, and the obligations of each
Guarantor under the Subsidiary Guaranty rank pari passu in right of payment with all other
senior unsecured Debt of such Person.

ARTICLE V

COVENANTS OF THE LOAN PARTIES

SECTION 5.01. Affirmative Covenants. So long as any Advance shall remain unpaid or any
Lender shall have any Commitment hereunder, each Loan Party will:

     (a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to
comply, in all material respects, with all applicable laws, rules, regulations and orders,
such compliance to include, without limitation, compliance with ERISA, Environmental Laws
and the Patriot Act, except where the failure to so comply would not have a Material Adverse
Effect.

     (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges or levies imposed upon it or upon its property and (ii)
all lawful claims that, if unpaid, might by law become a Lien upon its property;
provided, however, that neither any Loan Party nor any of its Subsidiaries
shall be required to pay or discharge any such tax, assessment, charge or claim that is
being contested in good faith and by proper proceedings and as to which appropriate reserves
are being maintained, unless and until any Lien resulting therefrom attaches to its property
and becomes enforceable against its other creditors and the aggregate of such Liens would
have a Material Adverse Effect.

     (c) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to
maintain, insurance with responsible and reputable insurance companies or associations in
such amounts and covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which such Loan Party
or such Subsidiary operates; provided, however, that such Loan Party and its
Subsidiaries may self-insure to the extent consistent with prudent business practice.

     (d) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause
each of its Subsidiaries to preserve and maintain, its corporate existence, rights (charter
and statutory) and franchises; provided, however, that each Loan Party and
its Subsidiaries may consummate any transaction permitted under Section 5.02(b) and
provided further that neither any Loan Party nor any of its Subsidiaries
shall be
required to preserve any right or franchise if the senior management of such Loan Party
or of such Subsidiary shall determine that the preservation thereof is no longer desirable
in the conduct of the business

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of such Loan Party or such Subsidiary, as the case may be,
and that the loss thereof is not disadvantageous in any material respect to such Loan Party
or such Subsidiary.

     (e) Visitation Rights. During normal business hours and upon reasonable notice
from time to time, permit the Agent or any of the Lenders or any agents or representatives
thereof, to examine and make copies of and abstracts from the records and books of account
of (excluding any confidential information), and visit the properties of, such Loan Party
and any of its Subsidiaries, and to discuss the affairs, finances and accounts of such Loan
Party and any of its Subsidiaries with the appropriate representatives of such Loan Party
and together with the appropriate representatives of such Loan Party’s independent certified
public accountants.

     (f) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper
books of record and account, in which full and correct entries shall be made of all
financial transactions and the assets and business of such Loan Party and each such
Subsidiary in accordance with generally accepted accounting principles in effect from time
to time.

     (g) Maintenance of Properties, Etc. Maintain and preserve, and cause each of
its Subsidiaries to maintain and preserve, its material properties that are used or useful
in the conduct of its business in good working order and condition, ordinary wear and tear
excepted.

     (h) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries
to conduct, all transactions otherwise permitted under this Agreement with any of their
Affiliates, other than another Loan Party, (i) on terms that are fair and reasonable and no
less favorable to such Loan Party or such Subsidiary than it would obtain in a comparable
arm’s-length transaction with a Person not an Affiliate except where the failure to do so,
in the aggregate, would not have a Material Adverse Effect, (ii) as required by the Federal
Communications Commission’s rules and regulations for transactions among affiliates or (iii)
as contemplated by the Services Agreement.

     (i) Reporting Requirements. Furnish to the Lenders:

     (i) as soon as available and in any event within 60 days after the end of each
of the first three quarters of each fiscal year of the Borrower, the Consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and
the Consolidated statements of income and cash flows of the Borrower and its
Subsidiaries for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter, duly certified (subject to year-end audit
adjustments) by the chief financial officer, treasurer or controller of the Borrower
as having been prepared in accordance with generally accepted accounting principles
and certificates of the chief financial officer, treasurer or controller of the
Borrower as to compliance with the terms of this Agreement and setting forth in
reasonable detail the calculations necessary to demonstrate compliance with Section
5.03, provided that in the event of any change in GAAP used in the
preparation of such financial statements, the Borrower shall also provide, if
necessary for the determination of compliance with Section 5.03, a statement of
reconciliation showing the calculations used for purposes of Section 5.03;

     (ii) as soon as available and in any event within 120 days after the end of
each fiscal year of the Borrower, a copy of the annual audited report for such year
for the Borrower and its Subsidiaries, containing the Consolidated balance sheet of
the Borrower and its Subsidiaries as of the end of such fiscal year and the
Consolidated statements of income and cash flows of the Borrower and its
Subsidiaries for such fiscal year, in each case accompanied by an opinion acceptable
to the Required Lenders by Ernst & Young LLP or other independent public
accountants of nationally recognized standing and certificates of the chief
financial officer, treasurer or controller of the Borrower as to compliance with the
terms of this Agreement and

22

 

setting forth in reasonable detail the calculations
necessary to demonstrate compliance with Section 5.03, provided that in the
event of any change in GAAP used in the preparation of such financial statements,
the Borrower shall also provide, if necessary for the determination of compliance
with Section 5.03, a statement of reconciliation showing the calculations used for
purposes of Section 5.03;

     (iii) as soon as possible and in any event within five Business Days after the
occurrence of each Default continuing on the date of such statement, a statement of
the chief financial officer, treasurer or controller of the Borrower setting forth
details of such Default and the action that the Borrower has taken and proposes to
take with respect thereto;

     (iv) promptly after the sending or filing thereof, copies of any quarterly and
annual reports and proxy solicitations that any Loan Party sends to any of its
securityholders, and copies of any reports on Form 8-K that such Loan Party files
with the Securities and Exchange Commission (other than reports on Form 8-K filed
solely for the purpose of incorporating exhibits into a registration statement
previously filed with the Securities and Exchange Commission);

     (v) prompt notice of all actions and proceedings before any court, governmental
agency or arbitrator affecting any Loan Party or any of its Subsidiaries of the type
described in Section 3.01(b); and

     (vi) such other information respecting any Loan Party or any of its
Subsidiaries as any Lender through the Agent may from time to time reasonably
request.

     (j) Certain Obligations Respecting Subsidiaries. The Borrower will take such
action, and will cause each of its Significant Subsidiaries and any Significant Subsidiary
formed with the intent of merging with or into a Person that will be a Significant
Subsidiary subject to this provision to take such action, from time to time as shall be
necessary to ensure that all Significant Subsidiaries of the Borrower are party to, as Loan
Parties, the Guaranty provided in Article VII hereof. Without limiting the generality of
the foregoing, in the event that the Borrower or any of its Significant Subsidiaries shall
form or acquire any new Significant Subsidiary, the Borrower or the respective Significant
Subsidiary will cause such new Significant Subsidiary to (i) become a party hereto and to
the Guaranty pursuant to a written instrument in form and substance satisfactory to the
Agent, and (ii) deliver such proof of corporate action, incumbency of officers, opinions of
counsel and other documents relating to the foregoing as is consistent with those delivered
by each Loan Party pursuant to Section 3.01 hereof, or as any Lender or the Agent shall have
reasonably requested.

     SECTION 5.02. Negative Covenants. So long as any Advance shall remain unpaid
or any Lender shall have any Commitment hereunder, the Borrower will not:

     (a) Liens, Etc. Create or suffer to exist, or permit any of its Subsidiaries
to create or suffer to exist, any Lien on or with respect to any of its properties, whether
now owned or hereafter acquired, or assign for security purposes (but not in connection with
a bona fide sale thereof), or permit any of its Subsidiaries to assign for security purposes
(but not in connection with a bona fide sale thereof), any right to receive income;
provided that nothing in this Section 5.02 shall be construed to prevent or restrict
the following:

     (i) Permitted Liens,

     (ii) purchase money Liens upon or in any real property or equipment acquired or
held by the Borrower or any of its Subsidiaries in the ordinary course of business
to secure the purchase price of such property or equipment or to secure Debt
incurred solely for the purpose of

23

 

financing the acquisition of such property or
equipment, or Liens existing on such property or equipment at the time of its
acquisition or conditional sales or other similar title retention agreements with
respect to property hereafter acquired or extensions, renewals or replacements of
any of the foregoing for the same or a lesser amount, provided,
however, that no such Lien shall extend to or cover any properties of any
character other than the real property or equipment being acquired, and no such
extension, renewal or replacement shall extend to or cover any properties not
theretofore subject to the Lien being extended, renewed or replaced,

     (iii) the Liens existing on the Effective Date and described on Schedule
5.02(a) hereto and other undisclosed Liens existing on the Effective Date securing
obligations in aggregate amount not to exceed $10,000,000,

     (iv) Liens on property of a Person existing at the time such Person is merged
into or consolidated with the Borrower or any of its Subsidiaries; provided
that any such Liens that were created during the period immediately prior to such
merger, consolidation or acquisition were created in the ordinary course of business
of such Person and the Debt secured by such Liens does not exceed the fair market
value of the assets (including intangible assets) of such Person so merged into or
consolidated with the Borrower or any of its Subsidiaries,

     (v) the replacement, extension or renewal of any Lien permitted by clauses
(iii) and (iv) above upon or in the same property theretofore subject thereto or the
replacement, extension or renewal (without increase in the amount or extension of
the final maturity date) of the Debt secured thereby,

     (vi) Liens not otherwise permitted pursuant to clauses (i) through (v) above
securing obligations not to exceed at any one time the amount of $10,000,000, and

     (vii) Liens on property of a Receivables Subsidiary created in connection with
a Permitted Receivables Financing.

     (b) Mergers, Etc. Merge or consolidate with or into, or convey, transfer,
lease or otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or hereafter acquired) to, any
Person, or permit any of its Subsidiaries to do so, except that (i) any Subsidiary of the
Borrower may merge or consolidate with or into, or dispose of assets to, any other
Subsidiary of the Borrower, (ii) any Subsidiary of the Borrower may merge into or dispose of
assets to the Borrower, and (iii) the Borrower may merge with any Subsidiary of Verizon so
long as the surviving corporation assumes all obligations of the Borrower hereunder and
under the Notes and each Guarantor confirms in writing its guarantee obligations hereunder
upon the occurrence of and following such merger, and provided, in each case, that
no Default shall have occurred and be continuing at the time of such proposed transaction or
would result therefrom.

     (c) Accounting Changes. Make or permit, or permit any of its Subsidiaries to
make or permit, any change in accounting policies or reporting practices, except (i) as
required or permitted by generally accepted accounting principles or (ii) where the effect
of such change, together with all other changes in accounting policies or reporting
practices made pursuant to this clause (ii) since the Effective Date, is immaterial to the
Borrower and its Subsidiaries taken as a whole.

     (d) Subsidiary Debt. Permit any of its Subsidiaries to create or suffer to
exist, any Debt other than:

     (i) Debt owed to the Borrower or to a wholly owned Subsidiary of the Borrower,

24

 

     (ii) Debt which may be borrowed and outstanding from time to time under the
credit agreements existing on and as of the Effective Date and described on Schedule
5.02(d) hereto (the “Existing Debt”), and any Debt extending the maturity
of, or refunding or refinancing, in whole or in part, the Existing Debt,
provided that the principal amount of such Existing Debt shall not be
increased above the principal amount thereof outstanding immediately prior to such
extension, refunding or refinancing, and the direct and contingent obligors therefor
shall not be changed, as a result of or in connection with such extension, refunding
or refinancing,

     (iii) unsecured Debt incurred in the ordinary course of business aggregating
not more than $150,000,000 for PRTC and for all of the other Guarantors not more
than $75,000,000 in the aggregate at any one time outstanding,

     (iv) Debt in respect of operating leases,

     (v) indorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, and

     (vi) Debt incurred by a Receivables Subsidiary created in connection with a
Permitted Receivables Financing.

SECTION 5.03. Financial Covenants. So long as any Advance shall remain unpaid or any
Lender shall have any Commitment hereunder, the Borrower will:

     (a) Debt to EBITDA Ratio. Maintain a Debt to EBITDA Ratio, as at the end of
each fiscal quarter of the Borrower, of not more than 3.0:1.0.

     (b) EBITDA to Interest Ratio. Maintain an EBITDA to Interest Ratio, as at the
end of each fiscal quarter of the Borrower, of not less than 3.5:1.0.

ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.01. Events of Default. If any of the following events (“Events of
Default”) shall occur and be continuing:

     (a) The Borrower shall fail to pay any principal of any Advance when the same becomes
due and payable; or the Borrower shall fail to pay any interest on any Advance within five
Business Days after the same becomes due and payable; or any fees or other amounts payable
under this Agreement or any Note are not paid within five Business Days after the same
becomes due and payable; or

     (b) Any representation or warranty made or deemed made by the Borrower herein or by the
Borrower (or any of its officers) in connection with this Agreement shall prove to have been
incorrect in any material respect when made or deemed made; or

     (c) (i) Any Loan Party shall fail to perform or observe any term, covenant or agreement
contained in Section 5.01(d), (e), (h), (i)(iii), (i)(v) or (j), 5.02 or 5.03, (ii) any Loan
Party shall fail to perform or observe any term, covenant or agreement contained in Section
5.01(i) (other than clauses (iii) and (v) thereof) if such failure shall remain unremedied
for five Business Days after written notice thereof shall have been given to such Loan Party
by the Agent or any Lender or (iii) any Loan Party shall fail to perform or observe any
other term, covenant or agreement contained in this Agreement on its part to be
performed or observed if such failure shall remain unremedied for 30 days after written
notice thereof shall have been given to such Loan Party by the Agent or any Lender; or

25

 

     (d) Article VII is breached by any Guarantor or shall cease to be in full force and
effect or any Guarantor shall so state in writing; or

     (e) The Borrower or any of its Subsidiaries shall fail to pay any principal of or
premium or interest on any Debt that is outstanding in a principal, or in the case of Hedge
Agreements net, amount of at least $20,000,000 in the aggregate (but excluding Debt
outstanding hereunder) of the Borrower or such Subsidiary (as the case may be) (the
“Requisite Amount”), when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such failure shall
continue after the later of five Business Days and the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt; or any such Debt aggregating
the Requisite Amount shall be declared due and payable in accordance with its terms or any
other event shall occur or condition shall exist under any agreement or instrument relating
to any such Debt aggregating the Requisite Amount and shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if the effect of such event
or condition is to accelerate the maturity of such Debt; or any such Debt aggregating the
Requisite Amount shall be required to be prepaid or redeemed (other than by a regularly
scheduled required prepayment or redemption), purchased or defeased in accordance with its
terms, or any offer to prepay, redeem, purchase or defease such Debt shall be required to be
made in accordance with its terms, in each case prior to the stated maturity thereof where
the cause of such prepayment, redemption, purchase or defeasance or offer therefor is the
occurrence of an event or condition that is premised on a material adverse deterioration of
the financial condition, results of operation or properties of the Borrower or any of its
Subsidiaries, provided that with respect to Debt aggregating the Requisite Amount of
the types described in clauses (h) or (i) of the definition of “Debt” and to the extent such
Debt relates to the obligations of any Person other than the Borrower or any of its
Subsidiaries, no Event of Default shall occur so long as the payment of such Debt is being
contested in good faith and by proper proceedings and as to which appropriate reserves are
being maintained; or any event shall occur or condition shall exist under any agreement or
instrument relating to any Debt that is outstanding in a principal, or in the case of Hedge
Agreements net, amount of at least $40,000,000 and shall continue after the applicable grace
period, if any, specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or permit the acceleration of, the maturity of such Debt; or

     (f) The Borrower or any of its Subsidiaries shall generally not pay their respective
debts as such debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Borrower or its Subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property and, in the case of any
such proceeding instituted against it (but not instituted by it), either such proceeding
shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought
in such proceeding (including, without limitation, the entry of an order for relief against,
or the appointment of a receiver, trustee, custodian or other similar official for, it or
for any substantial part of its property) shall occur; or the Borrower or its Subsidiaries
shall take any corporate action to authorize any of the actions set forth in this subsection
(f) under any law relating to bankruptcy, insolvency or reorganization or relief of debtors;
or

     (g) Judgments or orders for the payment of money in excess of $30,000,000 in the
aggregate shall be rendered against the Borrower or its Subsidiaries and enforcement
proceedings shall have been commenced by any creditor upon such judgment or order for which
a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; provided, however, that any
such judgment or order shall not be an Event of Default under this Section 6.01(g) if
and for so long as (i) (A) the amount of such judgment or order is covered by a valid and
binding policy of insurance between the defendant and the insurer or insurers covering
payment thereof, (B) such insurer shall be rated, or, if

26

 

more than one insurer, at least 90%
of such insurers as measured by the amount of risk insured, shall be rated, at least “A-” by
A.M. Best Company or its successor or its successors and (C) such insurer(s) has been
notified of, and has not disputed the claim made for payment of, the amount of such judgment
or order or (ii) (A) the amount of such judgment or order is covered by a valid and binding
indemnification agreement between the defendant and an indemnitor, (B) such indemnitor shall
have a rating for any class of its non-credit enhanced long-term senior unsecured debt of
not lower than BBB+ by S&P or Baa3 by Moody’s and (C) such indemnitor has been notified of,
and has not disputed the claim made for payment of, the amount of such judgment or order; or

     (h) (i) Verizon shall cease for any reason to maintain, directly or indirectly, the
Controlling Interest; or (ii) the Borrower shall for any reason cease to own 100% of the
Voting Stock of any Guarantor; or

     (i) Any Loan Party or its ERISA Affiliates shall incur, or shall be reasonably likely
to incur, liability that would have a Material Adverse Effect as a result of one or more of
the following: (i) the occurrence of any ERISA Event; (ii) the partial or complete
withdrawal of such Loan Party or its ERISA Affiliates from a Multiemployer Plan; or (iii)
the reorganization or termination of a Multiemployer Plan; then, and in any such event, the
Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice
to the Borrower, declare the obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the Notes, all interest
thereon and all other amounts payable under this Agreement to be forthwith due and payable,
whereupon the Notes, all such interest and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Borrower; provided, however, that
in the event of an actual or deemed entry of an order for relief with respect to the
Borrower under the Federal Bankruptcy Code, (A) the obligation of each Lender to make
Advances shall automatically be terminated and (B) the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.

ARTICLE VII

GUARANTY

SECTION 7.01. Guaranty; Limitation of Liability. (a) Each Guarantor hereby jointly and
severally unconditionally and irrevocably guarantees the punctual payment when due, whether at
stated maturity, by acceleration or otherwise, of all obligations of each other Loan Party now or
hereafter existing under this Agreement or any Note, whether for principal, interest, fees,
expenses or otherwise (such obligations, to the extent not paid by such Loan Party or specifically
waived in accordance with Section 9.01, being the “Guaranteed Obligations”), and agrees to
pay any and all expenses (including reasonable counsel fees and expenses) incurred by the Agent or
the Lenders in enforcing any rights under this Article VII (this “Guaranty”). Without
limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts
that constitute part of the Guaranteed Obligations and would be owed by any Loan Party to the Agent
or any Lender under this Agreement or any Note but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such
Loan Party.

(b) (i) Each Guarantor and, by its acceptance of this Guaranty, the Agent and each other Lender,
hereby confirms that it is the intention of all such parties that this Guaranty not constitute a
fraudulent transfer or fraudulent conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal, state or Commonwealth
of Puerto Rico law to the extent applicable to this Guaranty. To effectuate the foregoing
intention, the Agent, each other Lender and each Guarantor hereby irrevocably agrees that the
obligations of each Guarantor under this Guaranty shall not exceed the greater of
(A) the benefit realized by such Guarantor from the proceeds of the Advances made from time to time
by the Borrower to such Guarantor and (B) the maximum amount that will, after giving effect to such
maximum amount and all other probable contingent and fixed liabilities of such Guarantor that are
relevant under applicable law, and

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after giving effect to any collections from, rights to receive
contribution from, or payments made by or on behalf of each other Guarantor in respect of the
obligations of such other Guarantor under this Guaranty, result in the obligations of such
Guarantor under this Guaranty not constituting a fraudulent transfer or fraudulent conveyance. For
purposes hereof, “Bankruptcy Law” means Title 11, United States Code, or any similar
Federal, state or Commonwealth of Puerto Rico law for the relief of debtors.

     (ii) Each Guarantor agrees that in the event any payment shall be required to be made
to the Lenders under this Guaranty, such Guarantor will contribute, to the maximum extent
such that the contribution will not result in a fraudulent transfer or fraudulent
conveyance, such amounts to each other Guarantor so as to maximize the aggregate amount paid
to the Lenders under this Agreement and the Notes.

SECTION 7.02. Guaranty Absolute. Each Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of this Agreement and the Notes,
regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of the Agent or the Lenders with respect thereto. The obligations
of each Guarantor under this Guaranty are independent of the Guaranteed Obligations, and a separate
action or actions may be brought and prosecuted against such Guarantor to enforce this Guaranty,
irrespective of whether any action is brought against the Borrower or any other Guarantor or
whether the Borrower or any other Guarantor is joined in any such action or actions. The liability
of each Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective
of, and, to the maximum extent permitted by law, each Guarantor hereby irrevocably waives, any
defenses it may now or hereafter have in any way relating to, any or all of the following:

     (a) any lack of validity or enforceability of this Agreement or any agreement or
instrument relating hereto;

     (b) any change in the time, manner or place of payment of, or in any other term of, all
or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to
departure from this Agreement or any Note, including, without limitation, any increase in
the Guaranteed Obligations resulting from the extension of additional credit to the Borrower
or otherwise;

     (c) any taking, exchange, release or non-perfection of any collateral, or any taking,
release or amendment or waiver of or consent to departure from any other guaranty, for all
or any of the Guaranteed Obligations;

     (d) any change, restructuring or termination of the corporate structure or existence of
the Borrower; or

     (e) any other circumstance (including, without limitation, any statute of limitations)
or any existence of or reliance on any representation by the Agent or any Lender that might
otherwise constitute a defense available to, or a discharge of, any Guarantor, the Borrower
or any other guarantor or surety other than payment when due.

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the
Agent or any Lender upon the insolvency, bankruptcy or reorganization of the Borrower or any
Guarantor or otherwise, all as though such payment had not been made.

SECTION 7.03. Waiver. Each Guarantor hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Guaranteed Obligations and this
Guaranty, the right to require application against the property of the Borrower or any other
Guarantor, and any requirement that the Agent or any Lender exhaust any right or take any action
against the Borrower or any other Person or any collateral. Each Guarantor acknowledges that it
will receive direct and indirect benefits from the financing arrangements contemplated herein and
that the waiver set forth in this Section 7.03 is knowingly made in
contemplation of such benefits. Each Guarantor hereby waives any right to revoke this Guaranty,
and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed
Obligations, whether existing now or in the future.

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SECTION 7.04. Continuing Guaranty; Assignments. This Guaranty is a continuing
guaranty and shall (a) remain in full force and effect until the later of the cash payment in full
of the Guaranteed Obligations and all other amounts payable under this Guaranty and the Termination
Date, (b) be binding upon each Guarantor, its successors and assigns and (c) inure to the benefit
of and be enforceable by the Lenders, the Agent and their successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), any Lender may assign or otherwise
transfer all or any portion of its rights and obligations hereunder (including, without limitation,
all or any portion of its Commitment, the Advances owing to it and the Note or Notes held by it) to
any other Person, and such other Person shall thereupon become vested with all the benefits in
respect thereof granted to such Lender herein or otherwise, in each case as provided in Section
9.07.

SECTION 7.05. Subrogation. No Guarantor will exercise any rights that it may now or
hereafter acquire against the Borrower or any other insider guarantor that arise from the
existence, payment, performance or enforcement of such Guarantor’s obligations under this Guaranty,
including, without limitation, any right of subrogation, reimbursement, exoneration, contribution
or indemnification and any right to participate in any claim or remedy of the Agent or any Lender
against the Borrower, any other Guarantor or any other insider guarantor or any collateral, whether
or not such claim, remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from the Borrower, any other Guarantor
or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or
in any other manner, payment or security solely on account of such claim, remedy or right, unless
and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall
have been paid in full in cash and the Termination Date shall have occurred. If any amount shall
be paid to any Guarantor in violation of the preceding sentence at any time prior to the later of
the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this
Guaranty and the Termination Date, such amount shall be held in trust for the benefit of the Agent
and the Lenders and shall forthwith be paid to the Agent to be credited and applied to the
Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or
unmatured, in accordance with the terms of this Guaranty, or to be held as collateral for any
Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) any
Guarantor shall make payment to the Agent or any Lender of all or any part of the Guaranteed
Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this
Guaranty shall be paid in full in cash and (iii) the Termination Date shall have occurred, the
Agent and the Lenders will, at such Guarantor’s request and expense, execute and deliver to such
Guarantor appropriate documents, without recourse and without representation or warranty, necessary
to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed
Obligations resulting from such payment by such Guarantor.

ARTICLE VIII

THE AGENT

SECTION 8.01. Authorization and Action. Each Lender hereby appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers and discretion under
this Agreement as are delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the Notes), the Agent
shall not be required to exercise any discretion or take any action, but shall be required to act
or to refrain from acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders and such instructions shall be binding upon all
Lenders and all holders of Notes; provided, however, that the Agent shall not be
required to take any action that exposes the Agent to personal liability or that is contrary to
this Agreement or applicable law. The Agent agrees to give to each Lender prompt notice of each
notice given to it by the Borrower pursuant to the terms of this Agreement.

SECTION 8.02. Agent’s Reliance, Etc. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Agreement, except for its or their own gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, the Agent: (i) may
treat the payee of any Note as the holder thereof until the Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor,
and an Eligible Assignee, as assignee, as provided in Section 9.07; (ii) may consult
with legal counsel (including counsel for the Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no
warranty or representation to any Lender and shall not be responsible to any Lender for any

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statements, warranties or representations (whether written or oral) made in or in connection with
this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement on the part of any Loan
Party or to inspect the property (including the books and records) of any Loan Party except as
specifically set forth in this Agreement; (v) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement
or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability
under or in respect of this Agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopier, facsimile or telegram) believed by it to be
genuine and signed or sent by the proper party or parties.

SECTION 8.03. Citibank and Affiliates. With respect to its Commitment, the Advances made
by it and the Note or Notes issued to it, Citibank shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not the Agent; and the
term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its Affiliates may accept deposits from, lend money to, act as
trustee under indentures of, accept investment banking engagements from and generally engage in any
kind of business with, any Loan Party, any of its Subsidiaries and any Person who may do business
with or own securities of any Loan Party or any of its Subsidiaries, all as if Citibank were not
the Agent and without any duty to account therefor to the Lenders.

SECTION 8.04. Lender Credit Decision. Each Lender acknowledges that it has, independently
and without reliance upon the Agent or any other Lender and based on the financial statements
referred to in Section 4.01 and such other documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or any other Lender
and based on such documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this Agreement.

SECTION 8.05. Indemnification. The Lenders agree to indemnify the Agent (to the extent
not reimbursed by the Borrower), ratably according to the respective principal amounts of the
Advances owed each of them (or if no Advances are at the time outstanding, ratably according to
their Commitments), from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against the Agent in any way relating
to or arising out of this Agreement or any action taken or omitted by the Agent under this
Agreement, in each case whether or not such investigation, litigation or proceeding is brought by
any Lender, its directors, shareholders or creditors or the Agent is otherwise a party thereto,
provided that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent’s gross negligence or willful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including reasonable counsel fees) incurred by the Agent in connection with
the preparation, execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, to the extent that the Agent is not reimbursed
for such expenses by the Borrower.

SECTION 8.06. Successor Agent. The Agent may resign at any time by giving written notice
thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the
Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right
to appoint a successor Agent which, so long as no Default shall have occurred and be continuing,
shall be subject to the Borrower’s approval, which approval shall not be unreasonably withheld. If
no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted
such appointment, within 30 days after the retiring Agent’s giving of notice of resignation or the
Required Lenders’ removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a commercial bank organized or licensed under
the laws of the United States of America or of any State thereof or the Commonwealth of Puerto Rico
and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed
to and become vested with all the rights, powers, discretion, privileges and duties of the retiring
Agent, and the retiring Agent, upon appointment
of such successor Agent, shall be discharged from its duties and obligations under this Agreement.
After any retiring Agent’s resignation or removal hereunder as Agent, the provisions of this
Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement.

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SECTION 8.07. Other Agents. Banco Bilbao Vizcaya Argentaria Puerto Rico and Bank of Nova
Scotia, Hato Rey, Puerto Rico have been designated as co-syndication agents, Banco Popular de
Puerto Rico and FirstBank Puerto Rico have been designated as co-documentation agents, and certain
other Lenders have been designated as managing agents or co-agents and the use of such titles does
not impose on Banco Bilbao Vizcaya Argentaria Puerto Rico, Banco Popular de Puerto Rico, FirstBank
Puerto Rico, Bank of Nova Scotia, Hato Rey, Puerto Rico or such other Lender any rights, duties or
obligations greater than those of any other Lender.

ARTICLE IX

MISCELLANEOUS

SECTION 9.01. Amendments, Etc. (a) No amendment or waiver of any provision of this
Agreement or the Notes, nor consent to any departure by any Loan Party therefrom, shall in any
event be effective unless the same shall be in writing and signed by the Required Lenders, and then
such waiver or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that (i) no amendment, waiver or
consent shall, unless in writing and signed by all the Lenders, do any of the following: (A) waive
any of the conditions specified in Section 3.01, (B) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Notes, or the number of Lenders, that shall be
required for the Lenders or any of them to take any action hereunder, (C) release any Guarantor
from any of the obligations imposed upon it by this Agreement or (D) amend this Section 9.01; and
(ii) no amendment, waiver or consent shall, unless in writing and signed by the Required Lenders
and each Lender that has or is owed obligations under this Agreement or the Notes that are modified
by such amendment, waiver or consent, (A) increase the Commitment of such Lender or subject such
Lender to any additional obligations, (B) reduce the principal of, or interest on, the Note held by
such Lender or any fees or other amounts payable hereunder to such Lender, (C) postpone any date
fixed for any payment of principal of, or interest on, the Note held by such Lender or any fees or
other amounts payable hereunder to such Lender or (D) waive the application of Section 2.14; and
provided further that no amendment, waiver or consent shall, unless in writing and
signed by the Agent in addition to the Lenders required above to take such action, affect the
rights or duties of the Agent under this Agreement or any Note.

(b) Each Lender grants (x) to the Agent the right to purchase all (but not less than all)
of such Lender’s Commitments and Advances owing to it and the Notes held by it and all of
its rights and obligations hereunder and under the Notes at a price equal to the aggregate
amount of outstanding Advances owed to such Lender (together with all accrued and unpaid
interest, fees and other amounts owed to such Lender), and (y) to the Borrower the right to
cause an assignment of all (but not less than all) of such Lender’s Commitments and
Advances owing to it and the Notes held by it and all of its rights and obligations
hereunder and under the Notes to Eligible Assignees at a price equal to the aggregate
amount of outstanding Advances (together with all accrued and unpaid interest, fees and
other amounts owed to such Lender) owed to such Lender, which right may be exercised by the
Agent or the Borrower, as the case may be, if such Lender refuses to execute any amendment,
waiver or consent which requires the written consent of all the Lenders and to which
Lenders owed at least 90% of the aggregate unpaid principal amount of Advances or, if no
such principal amount is then outstanding, Lenders having at least 90% of the Commitments,
the Agent and the Borrower have agreed. Each Lender agrees that if the Agent or the
Borrower, as the case may be, exercises its option hereunder, it shall promptly execute and
deliver all agreements and documentation necessary to effectuate such assignment as set
forth in Section 9.07.

SECTION 9.02. Notices, Etc. (a) All notices and other communications provided for
hereunder shall be in writing (including telecopier, telegraphic or electronic mail communication)
and either (x) mailed, telecopied, telegraphed or delivered by hand or by courier, or (y) as and to
the extent set forth in the proviso to this first sentence of Section 9.02(a)and in Section
9.02(b), by e-mail and electronic posting: if to the Borrower or PRTC, at 1513 Roosevelt Avenue,
10th Floor, Guaynabo, Puerto Rico 00968 or P.O. Box 360998 San Juan, Puerto Rico
00936-0998, Attention: Adail Ortiz (fax no.(787) 749-9024), with a copy to Maria Elena de la Cruz
(fax no. (787) 783-2919); if to any Initial Lender, at its Domestic Lending Office specified
opposite its name on Schedule I hereto; if to any other Lender, at its Domestic Lending Office
specified in the Assignment and
Acceptance pursuant to which it became a Lender; and if to the Agent, at its address at Two Penns
Way, New Castle, Delaware 19720, Attention: Loan Investor Services; or, as to any Loan Party or the
Agent, at such other address as shall be designated by such party in a written notice to the other
parties and, as to each other party, at such other address as shall be designated by such party in
a written notice to the Borrower and the Agent, provided that materials required to be
delivered pursuant to Section 5.01(i)(i), (ii) or (iv) shall be delivered to the Agent as specified
in Section 9.02(b) and by the

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Agent to the Lenders as specified in Sections 9.02(b) and (c). All
such notices and communications shall, when mailed, telecopied, faxed or e-mailed, be effective
when deposited in the first class mails or, in the case of international delivery, when deposited
with mails or couriers that deliver within two Business Days, or telecopied, faxed or confirmed by
e-mail, provided that notices and communications to the Agent pursuant to Article II, III
or VIII shall not be effective until received by the Agent, and provided, further,
that notices and communications to any Person required to be provided hereunder within five
Business Days shall only be made by hand or via telecopy, facsimile or courier. Delivery by
telecopier or facsimile of an executed counterpart of any amendment or waiver of any provision of
this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall
be effective as delivery of a manually executed counterpart thereof.

(b) So long as Citibank or any of its Affiliates is the Agent, materials required to be delivered
pursuant to Section 5.01(i)(i), (ii) and (iv) shall be delivered to the Agent in an electronic
medium in a format acceptable to the Agent and the Lenders by e-mail at
oploanswebadmin@citigroup.com or such other e-mail address as the Agent shall notify to the
Borrower, and such delivery to the Agent shall constitute delivery by the Borrower to the Agent and
the Lenders for purposes of Section 5.01(i)(i), (ii) or (iv), as the case may be. The Borrower
agrees that the Agent may make such materials, as well as any other written information, documents,
instruments and other material relating to the Borrower, any of its Subsidiaries or any other
materials or matters relating to this Agreement, the Notes or any of the transactions contemplated
hereby delivered to the Agent by the Borrower hereunder (collectively, the
“Communications”) available to the Lenders by posting such Communications on Intralinks or
a substantially similar electronic system which is in general use for such purposes (the
“Platform”). The Borrower acknowledges that (i) the distribution of material through an
electronic medium is not necessarily secure and that there are confidentiality and other risks
associated with such distribution, (ii) the Platform is provided “as is” and “as available” and
(iii) neither the Agent nor any of its Affiliates warrants the accuracy, adequacy or completeness
of the Communications or the Platform and each expressly disclaims liability for errors or
omissions in the Communications or the Platform; provided that (x) the Agent shall use
reasonable commercial efforts to ensure that all Communications delivered by the Borrower to the
Agent for posting on the Platform are posted thereon in their entirety and as delivered by the
Borrower, and (y) in the event that the Agent shall become aware that the Platform has been subject
to unauthorized access or otherwise is experiencing problems that may lead to breaches of
confidentiality or failures of appropriate posting or access, then the Agent shall promptly notify
the Borrower and shall cease to utilize the Platform for the purposes specified herein until such
problems shall have been resolved. No warranty of any kind, express, implied or statutory,
including, without limitation, any warranty of merchantability, fitness for a particular purpose,
non-infringement of third party rights or freedom from viruses or other code defects, is made by
the Agent or any of its Affiliates in connection with the Platform.

(c) Each Lender agrees that notice from the Agent to it (as provided in the next sentence) (a
“Notice”) specifying that any Communications have been posted to the Platform shall
constitute effective delivery of such information, documents or other materials by the Borrower and
the Agent to such Lender for purposes of this Agreement; provided that if requested by any
Lender the Agent shall deliver a copy of the Communications to such Lender by e-mail or telecopier.
Each Lender agrees (i) to notify the Agent in writing of such Lender’s e-mail address to which a
Notice may be sent by electronic transmission (including by electronic communication) on or before
the date such Lender becomes a party to this Agreement (and from time to time thereafter to ensure
that the Agent has on record an effective e-mail address for such Lender) and (ii) that any Notice
may be sent to such e-mail address.

SECTION 9.03. No Waiver; Remedies. No failure on the part of any Lender or the Agent to
exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.

SECTION 9.04. Costs and Expenses. (a) The Borrower agrees to pay on demand all
reasonable out-of-pocket costs and expenses of the Agent and the Arranger in connection with the
preparation, execution, delivery, administration, modification and amendment of this Agreement, the
Notes and the other documents to be delivered hereunder, including, without limitation, (A) all due
diligence, syndication (including printing and distribution), transportation, computer,
duplication, appraisal, audit and insurance expenses and (B) the reasonable fees and expenses of
counsel for the Agent with respect thereto and with respect to advising
the Agent as to its rights and responsibilities under this Agreement. Such expenses shall be paid
by the Borrower upon presentation of an itemized invoice (after reasonable time for the Borrower to
review such invoice), regardless of whether the transactions contemplated by this Agreement are
consummated. The Borrower further agrees to pay on demand all costs and expenses of the Agent and
the Lenders, if any (including, without limitation, reasonable counsel fees and expenses), in
connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the Notes and the other documents to be delivered hereunder, including, without
limitation, reasonable

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fees and expenses of counsel for the Agent and each Lender in connection
with the enforcement of rights under this Section 9.04(a).

(b) The Borrower agrees to indemnify and hold harmless the Agent and each Lender and each of their
Affiliates and their officers, directors, employees, agents and advisors (each, an “Indemnified
Party”) from and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of or in connection
with or by reason of, or in connection with the preparation for a defense of, any investigation,
litigation or proceeding arising out of, related to or in connection with (i) the Notes, this
Agreement, any of the transactions contemplated herein or the actual or proposed use of the
proceeds of the Advances or (ii) the actual or alleged presence of Hazardous Materials on any
property of the Borrower or any of its Subsidiaries or any Environmental Action relating in any way
to the Borrower or any of its Subsidiaries, in each case whether or not such investigation,
litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or
an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are consummated, except to the extent such
claim, damage, loss, liability or expense (A) is found by a court of competent jurisdiction to have
resulted from such Indemnified Party’s gross negligence or willful misconduct, (B) arises from
disputes among two or more Lenders (but not including any such dispute that involves a Lender to
the extent such Lender is acting in any different capacity (i.e., Agent or Arranger) under
the Credit Agreement or the Notes or to the extent that it involves the Agent’s syndication
activities) or (C) arises from or relates to a breach by such Indemnified Party of its obligations
under this Agreement. The Borrower also agrees not to assert any claim against the Agent, any
Lender, any of their Affiliates, or any of their respective directors, officers, employees,
attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive
damages arising out of or otherwise relating to the Notes, this Agreement, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of the Advances.

(c) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the
Borrower (or pursuant to Section 9.01(b)) to or for the account of a Lender other than on the last
day of the Interest Period for such Advance, as a result of a payment, prepayment or Conversion
pursuant to this Agreement or acceleration of the maturity of the Notes pursuant to Section 6.01,
the Borrower shall, upon demand by such Lender (with a copy of such demand to the Agent), pay to
the Agent for the account of such Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses that it may reasonably incur as a result of such payment or
Conversion, including, without limitation, any loss (excluding loss of anticipated profits), cost
or expense incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by any Lender to fund or maintain such Advance.

(d) Without prejudice to the survival of any other agreement of the Borrower hereunder, the
agreements and obligations of the Borrower contained in Sections 2.10, 2.13 and 9.04 shall survive
the payment in full of principal, interest and all other amounts payable hereunder and under the
Notes.

SECTION 9.05. Right of Set-off. Upon (i) the occurrence and during the continuance of any
Event of Default and (ii) the making of the request or the granting of the consent specified by
Section 6.01 by the Required Lenders to authorize the Agent to declare the Notes due and payable
pursuant to the provisions of Section 6.01 and notice to the Borrower as required under Section
6.01, each Lender and each of its Affiliates is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other indebtedness at any time
owing by such Lender or such Affiliate to or for the credit or the account of any Loan Party
against any and all of the obligations of such Loan Party now or hereafter existing under this
Agreement and the Note held by such Lender, whether or not such Lender shall have made any demand
under this Agreement or such Note and although such obligations may be unmatured. Each Lender
agrees promptly to notify the applicable Loan Party after any such set-off and application,
provided that the failure to give such notice shall not affect the validity of such set-off
and application. The rights of each Lender and its Affiliates under this Section are in addition
to other rights and remedies (including, without limitation, other rights of set-off) that such
Lender and its Affiliates may have.

SECTION 9.06. Binding Effect. This Agreement shall become effective
(other than Section 2.01, which shall only become effective upon satisfaction of the conditions
precedent set forth in Section 3.01) when it shall have been executed by the Borrower and the Agent
and when the Agent shall have been notified by each Initial Lender that such Initial Lender has
executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the
Agent and each Lender and their respective successors and assigns, except that the Borrower shall
not have the right to assign its rights hereunder or any interest herein without the prior written
consent of all of the Lenders.

33

 

SECTION 9.07. Assignments and Participations. (a) Each Lender may, with the consent of
the Agent (except as provided in clause (g) below) and, so long as no Default has occurred and is
continuing, the Borrower (such consent, in the case of the Agent or the Borrower, not to be
unreasonably withheld) and, so long as no Default has occurred and is continuing, if demanded by
the Borrower (1) pursuant to Section 9.01(b), (2) following a request for a payment to or on behalf
of such Lender under Section 2.10 or Section 2.13, (3) following a Withholding Tax Change affecting
payments to such Lender or (4) following a notice given by such Lender pursuant to Section 2.11,
upon at least ten Business Days’ notice to such Lender and the Agent, will, assign to one or more
Persons all or a portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Advances owing to it and the Note or Notes held
by it); provided, that the Borrower may make demand with respect to a Lender that has given
notice pursuant to Section 2.11 only if the Borrower makes such demand of all Lenders similarly
situated that have given such notice; provided, further, that (i) each such
assignment shall be of a constant, and not a varying, percentage of all rights and obligations
under this Agreement and the Notes, (ii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an assignment of all of a Lender’s rights and
obligations under this Agreement, the amount of the Commitment of the assigning Lender being
assigned pursuant to each such assignment (determined as of the date of the Assignment and
Acceptance with respect to such assignment) shall in no event be less than $10,000,000 or an
integral multiple of $1,000,000 in excess thereof, (iii) each such assignment shall be to an
Eligible Assignee, (iv) each such assignment made as a result of a demand by the Borrower shall be
arranged by the Borrower after consultation with the Agent and shall be either an assignment of all
of the rights and obligations of the assigning Lender under this Agreement or an assignment of a
portion of such rights and obligations made concurrently with another such assignment or other such
assignments that together cover all of the rights and obligations of the assigning Lender under
this Agreement, (v) no Lender shall be obligated to make any such assignment as a result of a
demand by the Borrower unless and until such Lender shall have received one or more payments from
either the Borrower or one or more Eligible Assignees in an aggregate amount at least equal to the
aggregate outstanding principal amount of the Advances owing to such Lender, together with accrued
interest thereon to the date of payment of such principal and all other amounts payable to such
Lender under this Agreement and (vi) the parties to each such assignment shall execute and deliver
to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance,
together with any Notes subject to such assignment and a processing and recordation fee of $3,500
(which shall be paid by Persons other than the Borrower unless such assignment is made as a result
of a demand by the Borrower). Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned
to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights other than rights of indemnification
 under Section 9.04 or otherwise relating to a time
prior to the effective date of such Assignment and Acceptance and be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto).

(b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and
the assignee thereunder confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any
other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the financial condition of
any Loan Party or the performance or observance by any Loan Party of any of its obligations under
this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with copies of the financial
statements referred to in Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such Assignment and
Acceptance;
(iv) such assignee will, independently and without reliance upon the Agent, such assigning Lender
or any other Lender and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action under this
Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and
discretion under this Agreement as are delegated to the Agent by the terms hereof, together with
such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations that by the terms of
this Agreement are required to be performed by it as a Lender.

(c) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender, an assignee
representing that

34

 

it is an Eligible Assignee and the Borrower, together with the Note or Notes
subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed
and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance,
(ii) record the information contained therein in the Register and (iii) give prompt notice thereof
to the Borrower. Within five Business Days after its receipt of such notice, the Borrower, at its
own expense, shall execute and deliver to the Agent in exchange for the surrendered Note a new Note
to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it pursuant
to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment hereunder
a new Note to the order of the assigning Lender in an amount equal to the Commitment retained by it
hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A hereto.

(d) The Agent shall maintain at its address referred to in Section 9.02 a copy of each Assignment
and Acceptance delivered to and accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitment of, and principal amount of the Advances owing to, each
Lender from time to time (the “Register”). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Lenders
may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes
of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at
any reasonable time and from time to time upon reasonable prior notice.

(e) Each Lender may sell participations to one or more banks or other entities (other than the
Borrower or any of its Affiliates) in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its Commitment, the Advances
owing to it and the Notes held by it); provided, however, that (i) such Lender’s
obligations under this Agreement (including, without limitation, its Commitment to the Borrower
hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder
of any such Note for all purposes of this Agreement, (iv) the Borrower, the Agent and the other
Lenders shall continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement and (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any provision of this
Agreement or any Note, or any consent to any departure by the Borrower therefrom, except that a
Lender may agree with a participant as to the manner in which the Lender shall exercise the
Lender’s rights to approve any amendment, waiver or consent to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such participation, or postpone
any date fixed for any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such participation.

(f) Any Lender may at any time, without the consent of the Agent or the Borrower, create a security
interest in all or any portion of its rights under this Agreement (including, without limitation,
the Advances owing to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve System,
provided, however, that no such assignment shall have the effect of increasing the
costs payable by the Borrower.

(g) Any Lender may at any time, without the consent of, but with notice to the Agent, assign all or
part of its rights or obligations under this Agreement to any Affiliate of such Lender,
provided, however, that no such assignment shall have the effect of increasing the
costs payable by the Borrower.

SECTION 9.08. Nondisclosure. None of the Agent, any Lender or any Affiliate thereof shall
disclose without the prior consent of the Borrower (other than to the Agent, another Lender or any
such Affiliate, their respective directors, employees, auditors, affiliates or counsel who shall
agree to be bound by the terms of this provision) any information with respect to the Loan Parties
or any Subsidiary thereof contained in financial statements, projections or reports provided to the
Agent, any Lender or any Affiliate thereof by, or on behalf of, the Loan Parties or any Subsidiary,
provided that the Agent, any Lender or any Affiliate thereof may disclose any such
information (a) as has become generally available to the public in a manner, or through actions,
which do not violate the terms of this Section 9.08, (b) to, or as may be required or appropriate
in any report, statement or testimony submitted to, any municipal, state or federal regulatory body
having or claiming to have jurisdiction over the Agent, any Lender or any Affiliate thereof or to
the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations
(whether in the United States or elsewhere) or their successors, (c) as may be required or
appropriate in response to any summons or subpoena or in connection with any litigation, (d) in
order to comply with any law, order, regulation or ruling applicable to the Agent, any Lender or
any Affiliate thereof and (e) to a prospective co-lender or participant in the amounts outstanding
hereunder or under the Advances, provided, however, that such prospective co-lender
or participant executes an agreement containing provisions substantially identical to those
contained in this Section 9.08 and which shall by its terms inure to the benefit of the Borrower
and provided, further,

35

 

that to the extent practicable, the Agent, each Lender and
their respective Affiliates shall use reasonable best efforts to provide prior written notice of
such disclosure to the Borrower.

SECTION 9.09. Governing Law. This Agreement and the Notes shall be governed by, and
construed in accordance with, the laws of the State of New York.

SECTION 9.10. Execution in Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall constitute one and
the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by
telecopier or facsimile shall be effective as delivery of a manually executed counterpart of this
Agreement.

SECTION 9.11. Jurisdiction, Etc. (a) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New
York State court or federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action
or proceeding may be heard and determined in any such New York State court or, to the extent
permitted by law, in such federal court. Each of the Loan Parties hereby agrees that service of
process in any such action or proceeding brought in any such New York State court or in such
federal court may be made upon CT Corporation System at its offices at 111 Eighth Avenue, 13th
Floor, New York, N.Y. 10011 (the “Process Agent”) and each Loan Party hereby irrevocably
appoints the Process Agent its authorized agent to accept such service of process, and agrees that
the failure of the Process Agent to give any notice of any such service shall not impair or affect
the validity of such service or of any judgment rendered in any action or proceeding based thereon.
Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any right that any party may
otherwise have to bring any action or proceeding relating to this Agreement or the Notes in the
courts of any jurisdiction.

(b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Agreement or the Notes
in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to
the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.

SECTION 9.12. Patriot Act Notice. Each Lender and the Agent (for itself and not on behalf
of any Lender) hereby notifies the Borrower that pursuant to the requirements of the Patriot Act,
it is required to obtain, verify and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information that will allow
such Lender or the Agent, as applicable, to identify the Borrower in accordance with the Patriot
Act. The Borrower shall provide, to the extent commercially reasonable, such information and take
such actions as are reasonably requested by the Agent or any Lenders in order to assist the Agent
and the Lenders in maintaining compliance with the Patriot Act.

36

 

SECTION 9.13. Waiver of Jury Trial. Each of the Borrower, the Guarantors, the Agent and
the Lenders hereby irrevocably waives all right to trial by jury in any action, proceeding or
counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this
Agreement or the Notes or the actions of the Agent or any Lender in the negotiation,
administration, performance or enforcement thereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized, as of the date first above written.

	 	 	 	 	 
	 	 	TELECOMUNICACIONES DE PUERTO RICO, INC., as
Borrower
	 
	 	 	 	 
	

	 	By
	 	                                                            
	

	 	 	 	     Title:
	 
	 	 	 	 
	 	 	PUERTO RICO TELEPHONE COMPANY, INC.,
as Guarantor
	 
	 	 	 	 
	

	 	By
	 	                                                            
	

	 	 	 	     Title:
	 
	 	 	 	 
	 	 	CITIBANK, N.A.

as Administrative Agent
	 
	 	 	 	 
	

	 	By
	 	                                                            
	

	 	 	 	     Title:

37

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	ARTICLE I	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 1.02.
	 	Computation of Time Periods
	 	 	11	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 1.03.
	 	Accounting Terms
	 	 	11	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE II	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.01.
	 	The Advances
	 	 	11	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.02.
	 	Making the Advances
	 	 	11	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.03.
	 	Fees
	 	 	12	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.04.
	 	Optional Termination or Reduction of the Commitments
	 	 	12	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.05.
	 	Repayment of Advances.
	 	 	12	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.06.
	 	Interest
	 	 	13	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.07.
	 	Interest Rate Determination
	 	 	13	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.08.
	 	Optional Conversion of Advances
	 	 	14	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.09.
	 	Optional Prepayments of Advances
	 	 	14	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.10.
	 	Increased Costs
	 	 	14	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.11.
	 	Illegality
	 	 	15	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.12.
	 	Payments and Computations
	 	 	15	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.13.
	 	Taxes
	 	 	16	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.14.
	 	Sharing of Payments, Etc.
	 	 	17	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 2.15.
	 	Use of Proceeds
	 	 	18	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE III	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 3.01.
	 	Conditions Precedent to Effectiveness of Section 2.01
	 	 	18	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 3.02.
	 	Conditions Precedent to Each Borrowing and the Term Loan Conversion Date
	 	 	 19	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 3.03.
	 	Determinations Under Section 3.01
	 	 	20	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 4.01.
	 	Representations and Warranties of the Borrower
	 	 	20	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE V	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 5.01.
	 	Affirmative Covenants
	 	 	21	 

38

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	

	 	SECTION 5.02.
	 	Negative Covenants
	 	 	23	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 5.03.
	 	Financial Covenants
	 	 	25	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 6.01.
	 	Events of Default
	 	 	25	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 7.01.
	 	Guaranty; Limitation of Liability
	 	 	27	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 7.02.
	 	Guaranty Absolute
	 	 	28	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 7.03.
	 	Waiver
	 	 	28	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 7.04.
	 	Continuing Guaranty; Assignments
	 	 	29	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 7.05.
	 	Subrogation
	 	 	29	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VIII	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 8.01.
	 	Authorization and Action
	 	 	29	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 8.02.
	 	Agent’s Reliance, Etc.
	 	 	29	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 8.03.
	 	Citibank and Affiliates
	 	 	30	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 8.04.
	 	Lender Credit Decision
	 	 	30	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 8.05.
	 	Indemnification
	 	 	30	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 8.06.
	 	Successor Agent
	 	 	30	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 8.07.
	 	Other Agents
	 	 	31	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IX	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 9.01.
	 	Amendments, Etc.
	 	 	31	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 9.02.
	 	Notices, Etc.
	 	 	31	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 9.03.
	 	No Waiver; Remedies
	 	 	32	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 9.04.
	 	Costs and Expenses
	 	 	32	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 9.05.
	 	Right of Set-off
	 	 	33	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 9.06.
	 	Binding Effect
	 	 	33	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 9.07.
	 	Assignments and Participations
	 	 	34	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 9.08.
	 	Nondisclosure
	 	 	35	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 9.09.
	 	Governing Law
	 	 	36	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 9.10.
	 	Execution in Counterparts
	 	 	36	 

39

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	

	 	SECTION 9.11.
	 	Jurisdiction, Etc.
	 	 	36	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 9.12.
	 	Patriot Act Notice
	 	 	36	 
	 
	 	 	 	 	 	 	 	 
	

	 	SECTION 9.13.
	 	Waiver of Jury Trial
	 	 	37	 

40

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