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                                                                   EXHIBIT 10.24

                         COLLECTIVE BARGAINING AGREEMENT

                                   BETWEEN THE

                              PUERTO RICO TELEPHONE

                                     AND THE

                           INDEPENDENT BROTHERHOOD OF

                           TELEPHONE COMPANY EMPLOYEES

                                 EFFECTIVENESS:

                              FROM OCTOBER 23, 1999

                             UNTIL OCTOBER 22, 2003

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                                    ARTICLE 1
                         RECOGNITION OF THE BROTHERHOOD

SECTION 1

         The Company recognizes the Brotherhood as the exclusive representative
for all the employees included in the Bargaining Unit, as defined in Article 2
of this Collective Bargaining Agreement for the purposes of negotiation and
collective bargaining in everything relating to salaries, work conditions, job
tenure, complaints, grievances and all those conditions and provisions that
affect the employees covered by this Agreement.

                                    ARTICLE 2
                                 BARGAINING UNIT

SECTION 1

         The Bargaining Unit covered by this Agreement is the one certified by
the Puerto Rico Labor Relations Board, in case P-91-5 D-93-1224 E dated February
10, 1995 and any other position which has been included by the Local Board since
this said date.

SECTION 2

         The Company will send the Brotherhood on or around sixty days after the
effective date of this Agreement, a list of all the positions (by levels) that
are included in this appropriate unit. This list will include the names of the
Brotherhood members by employee number, sex, positions, social security number,
hiring date, birthdate, postal address and actual salaries.

                                    ARTICLE 3
                            RIGHTS OF THE MANAGEMENT

SECTION 1

         The Brotherhood recognizes that the administration of the Collective
Bargaining Agreement and the direction of the labor force are the exclusive
prerogative of the Company. Therefore, the Company retains and shall maintain
the exclusive control of all the matters relating to the operation, handling and
administration of its business, including, but without having it being construed
as a limitation, the administration and handling of its departments and
operations, the work organization and methods, the processes, methods and
procedures for the rendering of the service, the determination of the equipment,
parts and service to be purchased, the assignment of work hours, the direction
of the personnel, the right to employ, classify, re-classify, transfer and
discipline employees and all the functions inherent to the administration and/or
handling of the business except those expressly limited by the terms in this
Agreement.

SECTION 2

         If any employee understands that he/she has been treated in a
discriminatory, arbitrary or unfair fashion in accordance to the terms of this
contract or any provision of this contract has been violated due to any action
taken by the Company by virtue of the previous Section, such allegation shall be
submitted by the Brotherhood or by the employee to the Grievance Procedure
established in this Agreement.

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                                    ARTICLE 4
                                   UNION SHOP

SECTION 1

         All employees who are covered by this Agreement who at the date of the
signing of the same are a member of the Brotherhood, are obligated as a
condition of employment to continue on as members of the Brotherhood and in the
event of new personnel, the latter will be obligated as a condition of
employment to join the Brotherhood within the thirty (30) days following
beginning to work for the Company and in both cases to pay dues to the
Brotherhood during the effectiveness of this Agreement.

SECTION 2

         The Company, at the written requirement of the Brotherhood, will fire
or suspend from his/her job any employee who is not affiliated or stops being
affiliated as a bona-fide member of the Brotherhood. Said written requirement
must be notified to the Company by certified mail and with a copy to the
affected employee by certified mail.

SECTION 3

         The Company will put a copy of this clause in visible places in
existing departments in the Island of Puerto Rico, for knowledge of the
personnel.

SECTION 4

         In the event that a competent entity determines that the separation to
which Section 2 of this Article refers was unjustified or illegal, the
Brotherhood shall be the only one responsible for all the damages caused by said
dismissal, and the Brotherhood will safeguard the Company and reimburse it for
any expense or outlay in which the Company may incur as a result of said
dismissal.

SECTION 5

         The Company and the Brotherhood agree that the Brotherhood shall have
the opportunity to meet during thirty (30) minutes with the recently hired
employees, as part of the general orientation process, for the purpose of
providing them information about the Brotherhood and the Collective Bargaining
Agreement. The time invested during the work shift of each employee given
orientation shall be paid as time worked. This orientation shall be carried out
during the fifteen (15) days following the start of the union member employee or
from the time that the Company notifies the start, whichever occurs first. Said
notification should be sent to the HIETEL with two (2) days of advance notice
prior to the orientation date.

                                    ARTICLE 5
                                 DUES CHECK-OFF

SECTION 1

         During the effectiveness of this Collective Bargaining Agreement, the
Company commits itself to automatically deduct from the salary received by all
the employees covered by the definition of the Bargaining Unit, the sum of the
initiation dues, the regular dues and any uniform special dues which the Union
establishes for its members after receiving the written authorization on the
part of the employee. The authorization for the regular dues shall be for a
minimum term of one (1) year and shall be extended year after year, while the
employee occupies a position within the Bargaining Unit. This authorization
shall be irrevocable for a period of one (1) year from the

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date of the authorization. The Brotherhood shall notify the Company in writing
with regard to the dues to be checked off from the employees covered by this
Agreement. The Brotherhood shall comply with all the applicable procedures and
laws prior to the establishment of said dues and the sum of said deductions
shall be deposited by the Company, by means of a direct deposit to the HIETEL's
bank account.

SECTION 2

         a)       The Company shall hand over to the Treasurer of the
                  Brotherhood or the Officer designated by him, after rendering
                  the bond required by law, the document evidencing the deposit
                  of the amount of the corresponding dues during the ten (10)
                  calendar days after the payment of every two (2) weeks has
                  been made except when there are extraordinary circumstances
                  intervening in which case the term shall not exceed ten (10)
                  additional days. The Company shall send the Brotherhood a
                  summary every two (2) weeks with the names of the employees
                  who have had said deductions made, in addition, containing the
                  individual sum and the total of the same. The Company will
                  check off the initiation dues in the amount and installments
                  certified by the Brotherhood for all employees joining the
                  Brotherhood, after receiving the written authorization from
                  the employee.

         b)       The Company shall not forward dues until the Brotherhood has
                  shown it that the Treasurer or the designated Officer have
                  rendered the bond required by law.

         c)       In all cases of suspension or dismissal in which an
                  Arbitrator, court or administrative entity has determined that
                  the suspension of the employee or the dismissal of the
                  employee was not justified and has ordered the reinstatement
                  of the employee with all the total or partial salaries that it
                  did not receive in cases of dismissal or has ordered the total
                  or partial payment of the salaries not received during the
                  suspension, the Company must deduct from said payment the
                  total of the Union dues not paid by the employee during the
                  time that the employee was dismissed or suspended, as the case
                  may be, and forward its sum to the Brotherhood in conformity
                  to this article.

         d)       The parties agree that in those cases of suspension or
                  dismissals that were settled and as part of the agreement the
                  total or partial payment of salaries not received by the
                  employee have been agreed upon, the Company must also deduct
                  from said pay the total of the Brotherhood dues not paid by
                  the employee during the time that the employee was dismissed
                  or suspended and to forward its sum to the Brotherhood in the
                  terms stated above.

         e)       With regard to the deduction of dues to which reference is
                  made in paragraphs c) and d) of this section, it shall be the
                  obligation of the Brotherhood to notify the Company on a
                  timely basis about the total sum of dues that the employee is
                  to have checked off.

SECTION 3

         In the event that any competent entity determines that any dues have
been illegally set or deducted, the Brotherhood shall release the Company from
all liability and shall indemnify and pay directly any reimbursement ordered by
said entity.

SECTION 4

         During the effective period of this Collective Bargaining Agreement,
the Company shall send the Brotherhood, on a monthly basis, a report regarding
the employees who are enjoying any of the leaves established in this Collective
Bargaining Agreement, which duration shall be of thirty (30) calendar days or
more, with said report having to state the name of the employee and his number,
the position occupied by him, the department, the work center, the leave which
he is enjoying and up to where it is possible, the duration of the leave stating
the possible return date.

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SECTION 5

         During the effective period of this Agreement, the Company must check
off the Union dues in all those cases in which an employee from the bargaining
unit is enjoying the benefits of any of the leaves with pay acknowledged in the
Agreement, except under the Prolonged Illness Leave, (Act 139), and forward its
sum on the basis of the terms stated above, it being provided that in those
cases under Act 139 (SINOT), the Company, once the employee has returned to his
job, must withhold the Union dues that were not paid by the employee during said
leave and forward their sum to the Union in the terms stated in this article.
The total of said check offs must be made during the first three pay periods.

                                    ARTICLE 6
                   COOPERATION ON THE PART OF THE BROTHERHOOD

SECTION 1

         The Brotherhood, as well as its members, agree to promote, at all times
and as fully as possible good service and efficient operation. The Brotherhood
and its members also agree with the Company to produce maximum production during
each daily workday.

                                    ARTICLE 7
                            RESPECT AND CONSIDERATION

SECTION 1

         The Company and its functionaries obligate themselves to give to the
employees and the Brotherhood the best treatment, respect and consideration
possible for the purpose of maintaining the best relations between the
employees, the Brotherhood and the Company.

SECTION 2

         The Brotherhood and the employees from the Bargaining Unit obligate
themselves to observe toward the Company and its functionaries the best
treatment, respect and consideration possible for the purpose of maintaining the
best relations between the employees, the Brotherhood and the Company.

                                    ARTICLE 8
                                  PRODUCTIVITY

SECTION 1

         The Brotherhood and the Company acknowledge that the productivity must
be increased to confront competition in the telecommunications service.

         To that effect, the Brotherhood agrees that the employees belonging to
the Brotherhood shall commit themselves to render the maximum of their
productivity, attendance, timeliness, efficiency and effectiveness, with order
and discipline. All of it in accordance to Article 6, Cooperation on the part of
the Brotherhood.

                                    ARTICLE 9
                          DELEGATES OF THE BROTHERHOOD

SECTION 1

         The delegates shall represent the Brotherhood in the process of
administrating the Collective Bargaining Agreement before the Company.

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         The Delegates shall provide orientation to the employees covered by
this Collective Bargaining Agreement with regard to their responsibilities and
rights; in like manner they will watch out and have the faculty of helping their
co-workers when these have a complaint or grievance or when their presence is
required by any boss or supervisor.

SECTION 2

         The delegates from the Brotherhood shall be limited to dealing with the
grievances and matters relating to the application of the Collective Bargaining
Agreement in their work area.

SECTION 3

         No Delegate may intervene in another department or area which is not
the one to which he/she has been designated, with the exception of those work
areas or departments where there has been no Delegate appointed, in which case
the Delegate from another department nearby may act as the appointed Delegate in
that other operational unit or department, as long as he/she has been previously
authorized in writing by the President of the Brotherhood or his/her authorized
representative.

         The Brotherhood shall be entitled to appoint sub-delegates or
substitute delegates which shall act only in the absence of the official
Delegate.

SECTION 4

         The Delegate shall utilize the time in an adequate fashion for the
quickest solution of the grievances. When it is necessary for a Delegate from
the Brotherhood to deal with a grievance or related matter, he/she must:

         a.       Notify his/her immediate supervisor with reasonable time to
                  forego his/her regular work and deal with the grievance or
                  related matter.

         b.       The delegates shall receive pay up to a maximum of one and a
                  half (1 1/2) hour for each grievance.

         c.       Returning to his/her work upon finishing dealing with the
                  matter if his/her work schedule has not ended.

         d.       The meetings between the Delegate and the employee which
                  require his/her services in accordance with this Agreement
                  work shall be carried out in the area immediately next to the
                  employee's work area.

         e.       When it is necessary for a Delegate to hold a private
                  conversation with an employee during time with or without pay
                  for the Company to process a grievance or to deal with a
                  matter relating to the application of the Collective
                  Bargaining Agreement in accordance to the Grievance Procedure,
                  he must obtain express authorization from the Supervisor.

SECTION 5

         The Company, on its part, may take the actions and measures that it
deems necessary and relevant in such manner that faithful compliance be given to
the provisions of this Article, including the time requested by a delegate be
utilized exclusively for the purpose stated above.

         The Brotherhood commits itself to comply with and promote the faithful
compliance of this Article in such manner that the time requested by the
Delegate is utilized exclusively for the aforementioned purpose.

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SECTION 6

         When the Company expands its services creating additional units and
increases the personnel substantially in the additional services, the parties,
after a previous agreement, will convene the appointment of the corresponding
delegates.

SECTION 7

         The Delegate shall represent the employees covered by this Collective
Bargaining Agreement when the employee so requires it in the different stages of
the Grievance Procedure, with the President of the Brotherhood or the person on
whom he/she delegates in writing being able to participate in said
representation.

SECTION 8

         The Company will not acknowledge any Delegate until the President of
the Brotherhood has informed the Director of the Department of Labor and
Employee Affairs in writing and the Delegate has received his appointment.

         The delegates shall have to be regular employees of the Company.

SECTION 9

         The parties shall reach an agreement as to the time, number and place
where the delegates will act. It being provided that there will not be more than
one Delegate and one Sub-delegate carrying out functions for each of the
Company's operational units.

SECTION 10

         The Area Delegate appointed by the President of the Brotherhood shall
be recognized by the Company and these will receive the same treatment, respect
and courtesy that must be given to the Officers of the Brotherhood. The Company
will not recognize any Area Delegate until the President of the Brotherhood has
informed the Director of Labor and Employee Affairs in writing and he/she has
received his/her designation.

         The Area Delegate shall be appointed to represent and replace the
Officers of the Brotherhood and when they visit the shop or specific areas for
which they have been appointed, they shall have all the prerogatives that the
Officers of the Brotherhood have. The Area Delegate must comply with what is
provided in Section 4 of this Article.

                                   ARTICLE 10
                     VISITS FROM OFFICERS OF THE BROTHERHOOD

SECTION 1

         The President of the Brotherhood or the members of the Executive
Committee shall have access to the Company premises during working hours for the
purpose of resolving grievances, investigating work conditions and verifying
compliance with this Collective Bargaining Agreement. The members of the
Elections Committee during periods of internal elections of the Brotherhood
shall have access to the Company premises for the sole purpose of administrating
and coordinating said elections. Prior notice shall be given in writing, of no
less than 24 hours, to the Director of the Department of Labor and Employee
Affairs in both situations.

SECTION 2

         Upon the arrival of the President or a member of the Executive
Committee or a member of the Elections Committee, he/she shall identify
himself/herself and inform the purpose of his/her visit and shall go in person
before the officer of the Company that he/she is going to visit or the
representative designated by him/her.

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SECTION 3

         The President of the Brotherhood may appoint representatives to carry
out any of the functions of said Committee. The Company will not recognize the
representatives appointed as such until the President of the Brotherhood has
notified the Director or the Department of Labor and Employee Affairs in writing
about their designation as such, including a description of the matters that
said representatives shall be authorized to handle in the name of the
Brotherhood. Not more than one Representative shall be appointed to deal with
one single matter.

         The representatives appointed by the President of the Brotherhood shall
be recognized by the Company and shall receive the same treatment, respect and
courtesy that must be rendered to the officers of the Brotherhood, it being
provided that these representatives shall have access to the Company premises
for the purpose of dealing with the matters authorized to be dealt with in the
name of the Brotherhood. Upon the arrival of these representatives, they shall
identify themselves and inform the purpose of their visit and they shall appear
in person before the Officer of the Company that they are going to visit or the
representative designated by him/her.

SECTION 4

         The visits of the President, Officer or Representative of the
Brotherhood shall not interrupt the operations of the Company and the work of
the employees.

                                   ARTICLE 11
                              PERSONNEL ACTIVITIES

SECTION 1

         The Company and the Brotherhood agree that no union propaganda or
activity of any nature whatsoever shall be allowed by employees or
representatives of the Brotherhood will not allow any during their working hours
within or outside the Company's premises, except those expressly contained in
the Collective Bargaining Agreement.

SECTION 2

         No union propaganda or activity of any nature whatsoever shall be
allowed within the Company's premises on the part of the employees, delegates
and officers of the Brotherhood during their free time, if by doing so they are
occasioning any one or more of the following conditions:

         a.       Interrupts or distracts the work of the personnel that is
                  working.

         b.       Constitutes a disturbance or harm to the Company.

         c.       Occasions a state of disorder or violence.

SECTION 3

         The Company and the Brotherhood agree that the working hours are for
each employee to devote them to his/her work for the Company and therefore, it
is not permissible to allow working time to matters which are foreign to work
such as, for example: discussions about sports, politics, religion, sales, and
personal activities, etc. Neither are such activities permissible during the
free time of the employee but within the Company's premises if it occasions any
one or more of the conditions in clauses a, b and c of the preceding Section.

SECTION 4

         No employee shall have access to the buildings or premises of the
Company without prior express authorization from the Supervisor of the site or
the Company's Security Department, except for the regular work place and during
his/her regular work schedule. In the event of receiving such authorization, the
employee will be accompanied at all times by said Supervisor or by the person
appointed by him/her unless the Supervisor or the person appointed by him/her
determines, in his/her discretion, that it is not necessary to accompany him/her
and he/she so informs it in writing to the visiting employee. Under no
circumstance will the employee be allowed to enter onto Company property if
there is no Supervisor, or the person appointed by him/her available to
accompany the employee.

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                                   ARTICLE 12
                     PUBLICATION, ADJUDICATION OF POSITIONS
                                AND APPOINTMENTS

SECTION 1

         The Company will publish at all the work centers the newly created
positions, the vacant ones or ones which could be left vacant in the near future
corresponding to the Bargaining Unit that is going to be covered, specifically
the requirements for the same. The Company will send the Brotherhood a copy of
said publication. Upon the cancellation of a published position, the Brotherhood
shall be notified about said cancellation and the reasons for its cancellation.

SECTION 2

         All regular employees who meet the requirements for a published
position may apply for the same by submitting the corresponding petition in the
form supplied by the Company within the term established in the publication to
the Recruiting Department, with return receipt requested.

SECTION 3

         The Company will only consider those employees who meet the
requirements, who have filed the petitions within the period established in the
publication and who can fulfill the functions of the position immediately upon
having it adjudicated to them or if they are enjoying their vacation leave, upon
the conclusion of the same or if they are receiving benefits from the State
Insurance Fund or using sick leave, within the thirty (30) days of having it
adjudicated to them.

SECTION 4

         All vacant positions or those of new creation shall be adjudicated to
the more senior employee who qualify within the following order of priority
except in the case of promotion or transfer from one classification to another
where seniority shall not be the determinant criteria for the adjudication of
the position pursuant to what is provided in Section 6 of this Article.

         a.       Employees who will be affected by personnel reductions.

         b.       CTI employees who does not approved their probationary period
                  in PRT.

         c.       Employees who may have suffered an occupational illness or
                  accident that prevents them from performing the functions that
                  they used to perform in their positions prior to said illness
                  or accident. This priority shall not have the scope of
                  postponing the time term provided by law within which an
                  employee reserves his/her job tenure from the term of the
                  occupational accident or illness onwards.

         d.       Employees who may have suffered non-occupational illness or
                  accident that prevents them from performing the functions that
                  they used to carry out in their positions prior to said
                  illness or accident. This priority shall not have the scope of
                  postponing the time term provided by law within which an
                  employee reserves his/her job tenure from the term of the
                  unknown occupational accident or illness onwards.

         e.       Employees who request transfer to the same occupational
                  classification.

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         f.       Employees who have requested promotions. For the purposes of
                  this Agreement, promotion shall be understood to mean the
                  movement of one employee from one position to another position
                  which has a superior salary level and those changes from a
                  position for which the maximum level of the series is inferior
                  to the maximum level of the new position.

         g.       Employees who have requested transfer from one classification
                  to another. No employee may request a transfer from one
                  classification to another until after fifteen (15) months have
                  elapsed in one position and he/she must remain in said
                  position a minimum of fifteen (15) months after said movement.
                  In addition, upon being granted this transfer, the employee in
                  his/her new position, must approve a three (3) month
                  probationary period.

         h.       Employees who have requested demotions. No employee may
                  request a demotion until after having been for fifteen (15)
                  months in one position and he/she must remain in said position
                  a minimum of fifteen (15) months after said demotion.

         i.       Ex-employees which the Company may have laid-off within the
                  twelve (12) months before due to the scarcity or reduction of
                  work.

SECTION 5

         The vacancies which arise due to the adjudication of the positions as a
result of the priorities mentioned in the previous Section, shall be covered in
the first instance by petition for transfer to the same occupational
classification, promotion, then transfer to another occupational classification
and finally demotion and if they were not filled that way, by means of external
recruiting. The transfer to which this Section makes reference is only that type
of transfer which makes the employees work center be closer to his/her
residence, as long as the employee has been more than fifteen (15) months in
his/her position.

SECTION 6

         In those cases in which the adjudication of a vacant position or one of
new creation represents a transfer from one classifications to another or
promotion for the applicant employee, the position will be adjudicated among the
candidates that fulfill the requirements in accordance to the following factors:
seniority; evaluations already written and carried out in the normal course of
employment during the past two (2) years; attendance and punctuality record for
the past two (2) years; disciplinary record for the past two (2) years; related
experience and training.

         The seniority shall prevail over all other factors if this were to turn
out to be equal between the employees being considered to cover the new or
vacant positions.

SECTION 7

         No employee who has had a position adjudicated to him/her us a result
of a transfer, transfer from one classification to another or a promotion will
have the right to request another position until fifteen (15) months have
elapsed from the date when the adjudication was made effective or until the
employee has reached the maximum of the existing progression for his/her present
occupational classification, whatever happens first.

SECTION 8

         In those cases in which an employee, due to a petition on his/her part,
has a position of a lower level adjudicated to him/her, in other words, which
represents a demotion, his/her salary shall be adjusted to the lower level
position.

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SECTION 9

         Nothing that has been previously stated in this Article shall have the
scope of limiting the faculty of the Company to transfer employees due to
service needs nor the Company's rights to recruit external personnel for those
positions, which have not been covered by means of internal recruiting in
accordance to this Collective Bargaining Agreement.

SECTION 10

         Within the five (5) working days following the adjudication of a vacant
or newly created position, the Company must send to the Brotherhood, by
certified mail with return receipt requested, a copy of the adjudication of the
same.

SECTION 11

         The Company shall send the Brotherhood a copy of all publications
regarding vacant positions or those of new creation.

                                   ARTICLE 13
                           TRANSFER BETWEEN COMPANIES

SECTION 1

         Those positions which have not being covered through internal
recruitment could be posted externally and in CTI.

         CTI employees who file a petition will compete in similar conditions
with external candidates. In those cases in which the position is adjudicated to
a CTI employee, PRT will recognize the seniority and the accrued benefits in CTI
and will begin to accrue the benefits to which are entitle PRT employees.

         The Company and the Brotherhood agrees that the Brotherhood will have
the opportunity to meet during 15 minutes with CTI employees who will be
transferred to PRT, with the objective of orienting them in relation to this
Article.

SECTION 2

         The employee has to work for a period of 90 days to the satisfaction of
the Company, as a condition to become a regular employee. If the employee does
not approve the probationary period, he will return to his previous position if
his former position is vacant in CTI with the corresponding salary if he would
have continued in the position in CTI.

         Any employee from CTI who does not approve the probationary period in
PRT, could file a grievance in first stage in PRT as it is stated in the
Grievance Procedure Article of PRT.

         The CTI employee who does not approve the probationary period in PRT,
and file a grievance for this concept and his position is not available in CTI,
could be considered for a position in PRT with a similar level to his former
position in CTI with the corresponding salary if he would have continued in said
position or in a position with an inferior level with the corresponding salary
adjustment according to priorities established in Article 12, Section 4 b, of
PRT Collective Agreement.

SECTION 3

         Any CTI employee that files a petition for a position in PRT and said
position is not adjudicated to him, may file a grievance in third stage
according to Section 5 of CTI Grievance Procedure.

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                                   ARTICLE 14
                      PROBATIONARY PERIOD FOR NEW EMPLOYEES

SECTION 1

         Every candidate for entry as employee, must have previously approved
those written or evaluation examinations required by the Company.

SECTION 2

         A condition for regular appointment shall be that the employee has
worked to the satisfaction of the Company for a Probationary Period of one
hundred and twenty (120) days. The training period for the probationary employee
at the training centers recognized by the Company will be part of the
Probationary Period.

SECTION 3

         All employees, during their Probationary Period, must be evaluated
monthly periodically with regard to, among other factors, their capacity to
assimilate training, their productivity, their efficiency, their timeliness,
their attendance to work, their habits, attitudes and general behavior. The
Company will hand the employee a copy of each monthly evaluation, except when
the employee has abandoned the service and is not available.

SECTION 4

         Each new hired employee who satisfactorily approves the Probationary
Period shall be appointed as a regular employee by means of an official notice
to the employee and to the Brotherhood.

SECTION 5

         All probationary new employees will have to submit themselves to those
medical examinations required by the Company and the result of said medical
examinations shall have to be satisfactory, as far as the Company is concerned,
as an employment condition. The cost, if any, of these examinations shall be
paid for by the Company.

SECTION 6

         All employees who join the Company by virtue of a transfer, sale,
merger, expropriation or lease shall have the provisions of this article
applicable to them.

SECTION 7

         The Company is entitled to order or decree the lay-off of any
probationary employee within the terms of Section 2, without such lay-off giving
rise to any grievance whatsoever before the entities established by this
Collective Bargaining Agreement for the resolution of controversies and
grievances.

                                   ARTICLE 15
                              MEDICAL EXAMINATIONS

SECTION 1

         The Company may require any regular employees to submit themselves to
medical examinations and of any other type of a medical nature. The cost, if
any, of the same, shall be paid for by the Company. This prerogative may not be
utilized in a discriminatory fashion against the members of the Brotherhood.

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SECTION 2

         The Company will compensate the employee for the time that the
examination takes. Such examination should be carried out within his/her regular
work day.

                                   ARTICLE 16
                                    SENIORITY

SECTION 1

         Seniority shall be understood to mean the total time of service
credited to an employee by the Company. Credited time shall be all the time of
regular work days that an employee has worked in a continuous fashion for the
Company as well as all the leaves with pay. Leaves without pay that are granted
to the employees members of the Executive Committee of the Brotherhood during
the terms for which they have been elected shall be credited to their seniority
in the Company.

SECTION 2

         The seniority right shall expire due to any of the following reasons:

         a.       Resignation

         b.       Dismissal

         c.       Lay-off for twelve (12) consecutive months or upon the receipt
                  of the compensation provided in Section 4 of Article 19 -
                  Reduction of Personnel and Reinstatement.

         d.       Absence due to occupational illness or accident in excess of
                  his/her occupational illness or accident leave.

         e.       Absence due to non-occupational illness or accident in excess
                  of the term established in this Agreement or until his/her
                  prolonged illness leave is exhausted, whichever is greater.

         f.       By not accepting an available position and for which he/she
                  qualifies, while being on preferential employment list.

         g.       Accepting a position outside of the Bargaining Unit, unless
                  the employee decides to return and/or the Company decides to
                  return him/her to his/her old position, within the six (6)
                  months following his/her departure from the Bargaining Unit.

SECTION 3

         Probationary employees will not accrue seniority until they have
approved their respective probationary periods, in which case the seniority will
be retroactive to the date when they began their respective probationary
periods.

                                   ARTICLE 17
                                   PROMOTIONS

SECTION 1

         A promotion shall be understood to mean the movement of an employee
from one position to another position which has a greater salary level and those
changes when a position for which the maximum level of the period is inferior to
the maximum level of the new position.

SECTION 2

         In the promotions, the employees from the Company who have requested a
promotion and who qualify for the same as required by Article 12 Section 6
relating to Publication, Adjudication of Positions and Appointments, shall be
given priority. Seniority shall prevail over the other factors, if these were to
turn out to be equal among the employees to be considered for the covering of
the positions in promotion. When an employee changes occupational classification
due to a promotion for which he/she applied, he/she may not request a change
until fifteen (15) months from said promotion have elapsed.

                                       12
<PAGE>   14

SECTION 3

         All promoted employee shall be subject to a probationary period of
ninety (90) days during which they will have to demonstrate having ability,
knowledge, skills and the efficiency which in the judgement of the Company is
required in the new position. In the cases of promotions, which require special
training, said training period shall be part of this probationary period. The
employee may return to his previous position before the expiration of his
probationary period, if said position is vacant.

SECTION 4

         The progression to a superior level within the same classification,
shall not be considered a promotion. These progressions shall be carried out in
conformity to the requirements established by the Company in the Duty Sheet.

SECTION 5

         In the event that an employee is promoted, he/she shall be entitled to
receive 4% of salary increase for the next salary level to which he/she is
promoted. Example: 10-11.

         If the promotion includes more than one salary level, he/she may
receive 4% for the first salary level to which he is promoted and 2% increase
for each additional level of increase. Example: 10-12 = 6% Total Salary
increase.

         If after the corresponding percentage increase is granted and the
employee remains under the minimum of the level to which he is promoted, his
salary will be increased for the minimum of the scale.

SECTION 6

         If the employee were not to satisfactorily approve his/her probationary
period, the employee would return to his/her previous position with the salary
that would have corresponded to him/her if he/she had continued in the previous
position. The Company will reinstate to their previous position and salary the
employees who would have been promoted as a result of the vacancy that the
promotion of said employee would have brought about. If as a result of said
promotion a new employee would have been hired, the Company would be free to
separate said new employee.

SECTION 7

         Except in cases where events occur beyond the control of the Company
and/or the service may be adversely affected, the employee shall be placed in
the position of promotion within a period that shall not exceed thirty (30) days
from the date when the Recruiting Department adjudicates the same.

                                   ARTICLE 18
                                    TRANSFERS

SECTION 1

         For the purpose of this Agreement, transfers shall be understood to
mean:

         Any permanent change from one section, division or department to
another, from one work center to another, or from one municipality to another,
whether it is from one position to another in the same classification or to a
position in another classification with the same level.

                                       13
<PAGE>   15

SECTION 2

         There shall be two (2) types of transfers:

         a.       Transfers due to a formal petition on the part of the
                  employee, which is that which is produced upon filing out a
                  written petition, through the Recruiting Department. It shall
                  be a requirement to have been a minimum of fifteen (15) months
                  in the position occupied by the employee to be able to file a
                  petition for transfer. In the event that the transfer is to a
                  position which is different from that one occupied by the
                  employee, he/she must meet the minimum requirements in effect,
                  required for the position to which he/she is going to be
                  transferred and he/she shall be subject to a probationary
                  period of three (3) months.

         b.       Transfers when the Company determines it due to service need.
                  Whenever the Company determines to transfer an employee due to
                  service need, the transfer will be made taking into
                  consideration employee's seniority so that, the less senior
                  qualified employee will be transferred unless that there is a
                  voluntary qualified employee more senior.

         c.       The employee may, after this type of transfer has been carried
                  out, question it through the Grievance Procedure.

         d.       In the event that there arises a need to cover the position
                  which the transferred employees left vacant due to service
                  needs within the following one hundred and eighty (180) days
                  after the transfer has taken place, he/she, the transferred
                  employee, shall have priority to return to said position. Once
                  the hundred and eighty (180) days have elapsed, the position
                  shall be filled following the process established in Article
                  12, Publication, Adjudication of Positions and Appointments.

SECTION 3

         Except in cases where events occur beyond the control of the Company
and/or the service may be adversely affected, the employee shall be placed in
the transfer position within a period that shall not exceed thirty (30) days
from the date when the Recruiting Department adjudicates the same.

SECTION 4

         When the Company is interested in permanently transferring an employee
due to service needs, it will notify the employee and the Brotherhood with
thirty (30) days of prior notice, except when there are extraordinary
circumstances in which case it will notify with ten (10) days of prior notice.
In case of transfers due to the need of service where the employee remains where
his work center normally resides or when such transfer is between the building
around Plaza Telefonica (Roosevelt 1500, 1513 and 1515), the advance
notification will be with no less than fifteen (15) days.

SECTION 5

         The Company will recognize the right to barter between the employees as
long as the Company determines, in its sole discretion, that there exists
equality of circumstances, category, capacity, efficiency and ability. In the
event of a barter, the expenses occasioned by the transfer shall be paid for by
the employees.

SECTION 6

         The transfer may not be used in an arbitrary, discriminatory and unfair
fashion or as a disciplinary measure or action.

                                       14
<PAGE>   16

                                   ARTICLE 19
                    REDUCTION OF PERSONNEL AND REINSTATEMENT

SECTION 1

         When the Company determines the need to carry out personnel lay-off or
transfers due to lack of sufficient work or due to reasons of economy in
particular classifications of employment, it shall prepare a lay-off or transfer
plan, as the case may be, in accordance to the provisions of this Agreement. The
Company will notify by certified mail or in person in writing with regard to the
lay-off or transfer to the employees who are affected and to the Brotherhood
including in the notice a copy of the Plan, with no less than fifteen (15)
working days prior to the date when the lay-off or transfer is to be effective
and such reduction shall be carried out observing the following order:

         a.       Probationary employee in the affected classification

         b.       Regular employee in the inverse order of seniority in the
                  affected classification

         In cases of lay-off or transfers, the employees who are members of the
Boards of Directors and the delegates shall have super-seniority in their
classification.

         The determination of the number of employees that are needed to perform
a task is an exclusively managerial task which may not be questioned through the
Grievance Procedure.

SECTION 2

        a.        In the event that an employee with at least one (1) year of
                  seniority is subject to lay-off, he/she may choose to bump
                  another employee in a lateral or inferior classification with
                  less seniority in which the bumper is qualified to perform the
                  work immediately or any other classification in which the
                  bumper may have worked previously on more than one occasion
                  and continues being capable of carrying out the work
                  immediately.

         b.       Any regular employee with at least one (1) year of seniority
                  who is bumped as a result of the procedure established in the
                  preceding paragraph (a), shall be equally entitled to bump by
                  means of seniority by following exactly the procedure
                  established in the preceding paragraph.

SECTION 3

         Any employee who is laid off and who at the moment of the suspension
has one year or more of seniority, shall be entitled to a compensation
equivalent to two (2) weeks of salary plus one (1) week for each year of
seniority up to a maximum of twenty (20) weeks.

SECTION 4

         Any laid-off employee and who at the moment of the suspension has at
least one year or more of seniority shall be included in a list of preferential
employment for a maximum of twelve (12) months.

SECTION 5

         The compensation provided in the preceding Section 3 shall be paid at
the end of the twelve (12) month period indicated in the preceding Section 4. In
the alternative, a laid-off employee may choose to receive the compensation for
lay-off indicated previously at any moment after being the notified the lay-off,
but said employee shall be excluded from the preferential employment list as
soon as he/she receives said compensation.

                                       15
<PAGE>   17

SECTION 6

         The regular employees who have been laid-off shall be included in a
registry of eligible, utilizing the criterion of seniority and they shall have
the preference provided in Section 4 of the Article regarding Publication,
Adjudication of Positions and Appointments to occupy regular new or vacant
positions within the bargaining unit, as long as the employee is qualified and
capable of fulfilling such position.

SECTION 7

         The Company will supply the Brotherhood a copy of this list of eligible
with the name of the employee, position that he/she used to occupy and the years
of service, in like manner, it will inform the changes on the list, if any.

SECTION 8

         When the possibility of re-employment arises, the Company will get in
touch with the laid-off ex-employee by certified mail and his/her last address,
with copy to the Brotherhood, granting the employee ten (10) working days in
which to accept the position. If he/she were not to accept or answer within the
term, he/she shall lose the right granted in this Article and shall be
eliminated from the corresponding list. If he/she answers within said term
indicating that he/she cannot accept the job due to extraordinary reasons which
in effect make the acceptance of the position being offered impossible and it is
so proven to the Company within said term, the laid-off employee shall not lose
the right to re-employment with regard to any other vacancy that arise later on
in his/her classification within the term of nine (9) months after his/her
lay-off, pursuant to how it is provided further on.

SECTION 9

         The right to re-employment, as provided in this Article, will be
extinguished within nine (9) months after having ceased as a Company employee,
except that he/she does not accept or does not answer a letter offering a
vacancy, pursuant to what is provided in the previous section. If positions are
to be frozen during this period, the right will be extended for a period of time
equal to that of the freeze.

                                   ARTICLE 20
                                RECLASSIFICATION

SECTION 1

         When the Brotherhood considers that a position has had functions or
duties of a superior position assigned to it or that its duties and functions
have evolved in a substantial and permanent manner toward a position of a
superior level or that functions and duties of greater complexity have been
assigned to it, the President or in his/her absence, the authorized
Representative, shall submit a petition for reclassification in writing to the
Director of the Department of Labor and Employee Affairs indicating the criteria
and reasons justifying the petition.

SECTION 2

         No reclassification petitions shall be accepted for positions which are
not at the maximum salary level of their class shall be accepted, if this class
is made up of progression levels.

SECTION 3

         The assignment of additional duties or functions of equal, similar or
lesser complexity and/or the increase in the volume of work shall not imply a
reclassification.

                                       16
<PAGE>   18

SECTION 4

         The Director of the Department of Labor and Employee Affairs will
notify the President of the Brotherhood about the Company's position about the
petition for reclassification within a period of ninety (90) days from the
receipt of the same. If it were determined that a position must be reclassified,
its reclassification shall be effective as of the date of the written notice
sent by the Company to the Brotherhood.

SECTION 5

         No petitions for reclassification of positions from the Bargaining Unit
shall be accepted if within the last three (3) years, a petition regarding the
same position has been filed.

SECTION 6

         In the event that an employee is reclassified, he/she shall be entitled
to receive 4% of salary increase for the next salary level to which he/she is
reclassified. Example: 10-11.

         If the reclassification includes more than one salary level, he/she may
receive 4% for the first salary level to which he is reclassified and 2%
increase for each additional level of increase. Example: 10-12 = 6% Total Salary
increase.

         If after the corresponding percentage increase is granted and the
employee remains under the minimum of the level to which he is reclassified, his
salary will be increased to the minimum of the scale.

                                   ARTICLE 21
                                 PERSONNEL FILES

SECTION 1

         The official file for each employee is the file in possession of the
Company under the custody of the Records Division. The imposed notices,
reprimands, warnings or disciplinary actions which do not appear in the official
file, may not be utilized for any purpose.

SECTION 2

         Any employee may review his personnel file, previous petition and
coordination with his immediate supervisor.

SECTION 3

         The Company agrees in presenting the official personnel file when the
employee has pending hearing a grievance in the third stage of the Grievance
Procedure and the employee has previously requested in writing its presentation
and that the employee understands that in the official file there appear charges
which are not in agreement with the facts. The President or the member of the
Executive Committee may examine the employee file in the third stage of the
Grievance Procedure if the employee so allows it and is present.

SECTION 4

         In addition, the Company agrees in presenting the personnel file to all
union members whose petition for promotion, transfer or change to a position of
an inferior salary level has been denied and he/she requests in writing

                                       17
<PAGE>   19

to examine his/her file and has a grievance in the third stage regarding his/her
promotion, transfer or change to a position with an inferior salary level
pending.

SECTION 5

         When in the employee's file, after its presentation, there appear
charges or documents which do not adjust themselves to the real fact, the
Company, after investigating the facts, agrees to withdraw the documents
presented and/or correct them if it were necessary.

SECTION 6

         The Company shall send the Brotherhood and deliver to the corresponding
Delegate a copy of all disciplinary actions that are notified in writing to an
employee included in the Bargaining Unit. The Company shall send the Brotherhood
a copy of all personnel movement duly approved and relating to employees from
the Bargaining Unit.

SECTION 7

         The Company will not supply any person or entity different from it,
information which arises from the personnel file of the employee, without
his/her written authorization, unless there is a judicial order, in which case
they will be notified previously. When there is a judicial or legal mandate, the
employee will be notified simultaneously with regard to the handing over of the
document, unless the judicial order or the law expressly forbids it.

SECTION 8

         The employee will be entitled to be supplied a copy of all documents
that are placed in his/her personnel file containing information regarding
his/her person.

                                   ARTICLE 22
                           WORK OF THE BARGAINING UNIT

SECTION 1

         The Company agrees that the personnel employed in the capacity of
supervisor or non-supervisor which are not included within the Bargaining Unit,
will not perform work assigned to employees within the Bargaining Unit, except
in cases of emergency and/or circumstances when employees from the Bargaining
Unit, as it is defined in this Agreement, are not available. None of what has
been previously stated shall limit the normal function of the management to
instruct, train and direct the work of employees within the Bargaining Unit.

                                       18
<PAGE>   20

SECTION 2

         For effects of this article "emergency cases" shall mean cases of Acts
of God such as:

         a.       National Emergency

         b.       Hurricanes

         c.       Fires

         d.       Floods

         e.       Earthquakes

         f.       Cases of major breakdowns where the number of employees
                  available is not sufficient and/or when they have not been
                  able to correct it.

SECTION 3

         For the purpose of this Article the concept "when employees from the
Bargaining Unit are not available", shall signify circumstances such as the ones
in which:

         a.       There is a requirement to work overtime and the personnel from
                  the Bargaining Unit, of the required classification, is not
                  available to work overtime.

         b.       When work has accumulated in an abnormal fashion and the
                  available personnel from the Bargaining Unit is not sufficient
                  to cover the needs of the service. This circumstance may not
                  justify performing work of the appropriate unit with personnel
                  that is not from the Unit in a specific place or
                  classification for more than one hundred and eighty (180)
                  days.

         c.       When due to the absence of personnel from the Bargaining Unit,
                  the service is affected, requiring other personnel to perform
                  the work.

         When the situations being considered in paragraphs b and c arise, the
Company will exhaust the resource of bringing available personnel from the
Bargaining Unit of the same classification from other work centers of the
Company belonging to the same department and located in the same geographical
area where the need exists, as long as the operation of these other work centers
is not affected.

         During the course of time of the process of exhausting the resource of
bringing personnel from the Bargaining Unit, the Company may take the necessary
measures so that service will not be interrupted as long as the instrument of
these measures do not annul the purpose stated in the preceding paragraph.

         It being understood, however, that the previous provision shall apply
solely and exclusively when the situation being considered in paragraphs b. and
c. are due to or are the direct consequence of the normal outcome of the
services rendered by the Company. Under no circumstances shall it apply when the
situations being considered in paragraphs b. and c. are the direct or indirect
result of actions from personnel from the Bargaining Unit geared toward
producing an abnormal accumulation of work: such as slowdowns, abnormal or
agreed upon absences of personnel from the Bargaining Unit of the Company or any
action of the ones stated in the Non-Strike and Non-Lockout Article of the
Collective Bargaining Agreement and/or disciplinary actions taken as a result of
the aforementioned conduct.

         The personnel from the contracting unit shall perform the duties
corresponding to it when the exceptions indicated in this Article arise.

         The intention of the parties in this Agreement is to prevent managerial
personnel from displacing personnel from the Bargaining Unit in their regular
work and in working overtime and at no time whatsoever forbidding that the
operations be carried out in a normal fashion as a public service enterprise.

         This agreement does not have the intention of allowing the supervisors
to perform work of the Bargaining Unit at all time.

                                       19
<PAGE>   21

SECTION 4

         The Company agrees that it shall not assign supervision, executive,
managerial or confidential work to employees who belong to and are included in
the Bargaining Unit.

         The Company may assign work from other bargaining units to the
employees covered by this Collective Bargaining Agreement in all those
situations and circumstances which are not expressly forbidden and/or which are
allowed in the Collective Bargaining Agreements applicable to said other
bargaining units. In situations of scheduled official activities from said other
bargaining units, the employees included in this unit will not be bound to
perform the work of said other bargaining units, but they will not be able to
refuse to perform the work of their own Unit.

                                   ARTICLE 23
                                HEALTH AND SAFETY

SECTION 1

         The Brotherhood and the Company agree that the safety conditions at
work are the responsibility of the employees and the Company.

         The Company agrees to provide safe work conditions and methods and to
eliminate unsafe work situations, in regard to which the Brotherhood agrees to
cooperate with the Company.

SECTION 2

         The employees must comply with and follow the safety norms established
by the Company, by the laws and/or by the regulations.

         The Company's requirement which requires that the employee carry
identification card with them in a visible place, accrediting them as employees,
shall be complied with by all the personnel, the cost of the identification card
shall be paid for by the Company.

SECTION 3

         Any employee who suffers a work accident or who becomes ill during
working hours and that his/her injury or illness results in an emergency case
where immediate medical or hospitalization services are required, shall be
entitled, after receiving the authorization of a supervisor, to have any Company
vehicle that is available be utilized for his/her transportation and such
vehicle may be driven by any person authorized to drive motor vehicles if the
driver in charge of the vehicle is not available or accessible at the time of
the accident.

SECTION 4

         The Company shall provide and maintain adequate sanitary facilities, as
well as drinking water and the Brotherhood shall promote the adequate use of
said facilities.

SECTION 5

         The Company shall provide the Brotherhood with a copy of all the
periodic reports that it submits to any government agency with regard to
occupational accidents.

                                       20
<PAGE>   22

SECTION 6

         The Company shall comply with all the applicable provisions of federal
and local laws and regulations of Puerto Rico administrated by the Department of
Health or the Department of Labor and Human Resources with regard to work and
safety facilities and conditions.

SECTION 7

         In those cases in which the Company determines to establish new work
centers, the Brotherhood shall be notified within thirty (30) days of prior
notice for the purpose of it having the opportunity to examine the same before
beginning operations in said centers and may express its observations and
recommendations. In special cases, the Company and the Brotherhood will reach an
agreement to establish the inspection within a lesser period of time.

SECTION 8

         The Company, through its Accident Prevention Division, agrees to
provide the Brotherhood with the work accident reports and studies performed by
any laboratory on or before thirty (30) calendar days following the accident.

                                   ARTICLE 24
                              DRUG TESTING PROGRAM

SECTION 1

         The Brotherhood and the Company recognize that the use and abuse of
controlled substances is an alarming problem in the country and affects the
working force negatively. The Brotherhood, worried about the health and safety
of its members, recognizes the risk to which its employees may be exposed due to
the use and abuse of controlled substances.

SECTION 2

         The Company, aware of its responsibility to protect the health and
safety of its employees and clients, as well as of its responsibility to watch
out for the productivity and efficient performance of the services that its
employees render the People, wishes to state its concern with regard to the
problem that the use and abuse of drugs by the employees represents.

SECTION 3

         For such reason, in order to maintain a work environment free of the
problems associated with the use and abuse of controlled substances and to
protect the health and safety of the employees covered in this Bargaining Unit,
the parties, after a careful and conscious analysis of all the elements involved
in this problem, voluntarily and in free exercise of their contractual
faculties, pursuant to law, agree that the Company may adopt a Drug Testing
Program for the employees in accordance to Act #59 of August 8, 1997.

                                   ARTICLE 25
                                 BULLETIN BOARD

SECTION 1

         The Company will allow the Brotherhood the use of bulletin boards in
places to be determined by a mutual agreement between the parties.

         In these bulletin boards, notices regarding the following matters shall
be posted:

         a.       Summons to meetings, which shall limit themselves to
                  specifying the place, time and date of said activities.

                                       21
<PAGE>   23

         b.       Appointment of officers, committees and delegates.

         c.       Results of negotiations, elections and matters, which
                  constitute common projects between the Company and the
                  Brotherhood.

         d.       Social, union, recreational, educational or cultural
                  activities.

SECTION 2

         The installation and cost of these bulletin boards shall be paid for by
the Company.

SECTION 3

         It is agreed that the notices which are posted will not contain
political, or religious material or material which tends to slander, defame or
affect the image of the Company or its officers.

         The Company will not allow to post notices which are contrary to and in
violation of this clause.

                                   ARTICLE 26
                              WORK DAY AND OVERTIME

SECTION 1

         To the effect of this Agreement, for the purpose of calculating
overtime, the work week shall consist of forty (40) and the daily work day shall
consist of eight (8) hours. The work week shall consist of five (5) consecutive
days.

SECTION 2

         No employee shall work overtime without first having received
authorization from his/her immediate Supervisor or from his/her immediate
superiors. When the company determines that the needs of the service require
working overtime, it may request from any employee that he/she work overtime and
the employee will work it, unless he/she can show that he/she has just cause for
not working said overtime.

SECTION 3

         The Company shall assign the overtime work without privileges. As long
as it is operationally possible and the demands of the service so allow it, the
employees who request it voluntarily shall be taken into consideration.

SECTION 4

         The overtime that the Company requires to be worked in excess of the
forty (40) hours per week shall be paid for at the rate of time double the rate
paid for regular hours of work. The hours that the Company requires be worked in
excess of eight (8) hours per day, shall be paid at the rate of double the rate
per hour paid for regular hours.

SECTION 5

         When an employee is required to work outside of the place where he/she
resides, the time during which the employee is not really working, such as, but
without this being understood as a limitation, the time for meals, sleeping,
etc. shall not be considered as time worked.

SECTION 6

         The employees covered by this Agreement may enjoy a fifteen (15) minute
rest during the course of each

                                       22
<PAGE>   24

four (4) hour period of work as long as the service is not affected and the
emergencies are handled. The Company will program the manner in which the
employees will enjoy this rest period.

SECTION 7

         All employees are entitled to enjoy one (1) hour for meals, which they
must begin to enjoy not before the end of the third hour nor after the end of
the fifth hour of their regular work shift of daily work. The time worked during
the period destined for the consumption of meals shall be compensated at the
rate at twice (2) the rate per hour of regular work.

SECTION 8

         For the convenience of the employees covered by this Agreement, in the
case of the meal consumption periods that take place outside of the employee's
regular work day, said period shall be obviated (shall not be enjoyed) subject
to not having work performed more than two (2) hours after the regular work day.
This Agreement does not have the effect of eliminating an employee's right to
enjoy his/her meal hour when at any given time he/she has worked more than two
(2) hours after his/her regular work day. If this situation were to arise and
the employee does not enjoy his /her meal consumption period, the Company is
bound to pay the penalty which the law provides for that particular hour.

SECTION 9

         The provisions contained in this Article shall apply only to those
employees of the Company covered by this Agreement who are not exempt or who may
not be exempt in the future by any law, regulation, decree or any other
provision referring to the payment of additional compensation for extra hours of
work. Notwithstanding, the exempt employees covered by this Agreement may
receive payment under this Article on the basis of time and a half subject to
the procedure of supplementary compensation for exempt employees which is in
effect. (P-FI-011 June 30, 1995) The Company will not make any changes to this
departmental procedure during the duration of this agreement.

                                   ARTICLE 27
                                 VACATION LEAVE

SECTION 1

         The personnel from the Bargaining Unit shall enjoy the vacation leave
in the following manner:

         a.       Those employees who have less than three (3) years of
                  employment shall enjoy vacation leave during the effective
                  period of this Agreement at the rate of one and two thirds (1
                  2/3) working days for each month of work.
         b.       Those employees who have three (3) years or more of employment

                  but less than seven (7), shall enjoy vacation leave during the
                  effective period of this Agreement at the rate of one and five
                  sixths (1 5/6) working days for each month of work.

         c.       Those employees who have seven (7) years or more but less than
                  ten (10) years, shall enjoy vacation leave during the
                  effective period of this Agreement at the rate of two and one
                  sixth working days (2 1/6) for each month of work.

         d.       Employees who have ten (10) years or more shall enjoy vacation
                  leave during the effective period of this Agreement, at the
                  rate of two and a half (2 1/2) working days for each month of
                  work.

         To be entitled to enjoy the days of vacation leave during the working
month, the employee must have worked at least one hundred (100) hours of labor
in said month. The employee who works less than one hundred (100) hours in any
month shall enjoy vacation leave in the proportion that the number of hours
which the employee in fact worked in that month is to one hundred (100) hours;
for example: if an employee who is entitled to enjoy vacation leave under clause
b of this Section works seventy-five (75) hours in a particular month, the
employee shall

                                       23
<PAGE>   25

be entitled to enjoy in that month seventy-five percent (75%) of (1 5/6) days on
the basis of one working day of eight (8) hours, ten percent point nine (10.99)
rounded to eleven (11) hours of vacation leave in that month. At the beginning
of the enjoyment of his/her vacation leave, the employee will receive the
equivalent to the hours accrued on the basis of the applicable aforementioned
formula by multiplying the regular basic rate of pay by employee hour.

SECTION 2

         The vacation leave will be taken during the period of twelve (12)
months following the date of the anniversary of entry of the employee. It being
provided that if at the end of said period of twelve (12) month it has not been
possible to grant the employee the vacation leave that he/she should have
enjoyed during the same, these shall be paid to him/her at double the regular
rate per hour, and that vacation leave which was accrued during said twelve (12)
month period shall begin to be enjoyed at the time when the aforementioned
vacation leave is paid. The provisions contained in this Section shall apply
solely to those employees of the Company covered by this agreement who are not
exempt or who may not be exempt in the future by any other law, regulation,
decree, or any other provision whatsoever referring to the payment of additional
compensation for extra hour of work.

SECTION 3
         The Company shall determine the dates when the annual vacation leave
period that it will grant each employee is to begin and end, taking care in the
first instance of the Company's operational needs. However, any observation made
by the employee with regard to the date of his/her preference for taking his/her
vacation leave shall be taken into consideration if this is possible. It being
provided that if there are two or more interests of employees in conflict with
regard to the date for taking vacation leave, the employee with the greater
seniority shall have preference.

SECTION 4

         All employees will be entitled to receive the equivalent of the
vacation leave that they have accrued as of the date of their resignation or
separation from employment in cash.

SECTION 5

         The employee who is enjoying vacation leave will not be called to work
until he/she has finished said vacation leave, except in an emergency case when
they may have to be interrupted due to service needs. Upon finishing the work
for which he/she was called, the employee shall enjoy the vacation leave which
he/she still has remaining, including the days when he/she was called back to
work.

SECTION 6

         The period of time in which the employee covered by this Collective
Bargaining Agreement is enjoying Sick Leave or Vacation Leave shall count, for
purposes of this Article only as hours worked, once he/she has returned to work.

SECTION 7

         When an employee is enjoying annual vacation leave and becomes ill for
a period of two (2) or more consecutive working days, it must be charged to sick
leave, if the employee requests it as long and as he/she presents medical
evidence, in conformity with Article 29, Section 5, (Sick Leave), that he/she is
ill, in which case the employee upon ending his/her illness shall continue the
vacation leave for a period equivalent to the balance of his/her authorized and
unused vacation leave.

SECTION 8

         At the petition of the employee the Company may schedule the annual
vacation leave in two (2) separate periods within the same year in which the
employee is entitle to enjoy the same.

                                       24
<PAGE>   26

SECTION 9

         The employee may request through written petition the payment in cash
of his/her accrued vacation leave in excess of the maximum number of days of
vacation leave established by law. The granting of this request shall require an
agreement between the Company, the employee and the sindical representative.

                                   ARTICLE 28
                              SPECIAL SPORTS LEAVE

SECTION 1

         It is agreed to grant a Special Sports Leave, in conformity to Act 49
of July 23, 1992, as amended, to the employees who qualify.

SECTION 2

         The employee who request this leave must count with the written
certification from the Olympic Committee of Puerto Rico to represent Puerto Rico
in Olympic Games, Panamerican Games, Central American Games or in regional or
world championships.

SECTION 3

         All employee who is duly certified by the Puerto Rico Olympic Committee
to represent Puerto Rico in the competitions listed in Section 2 of this
article, shall present to the Company, with at least ten (10) days in advance to
their going off to compete, a certified copy of the document crediting him to
represent Puerto Rico in said competition, which shall contain information about
the time that said athlete will be participating in the aforementioned
competition.

SECTION 4

         The employee must submit to his immediate supervisor, within the first
ten (10) days of each month, a certification in which the time utilized in the
Federation or in the Olympic Committee during the preceding month is stated.

         The Company shall grant a bonus of $500.00 to each participating
athlete who makes use of this leave for a period of at least five (5) days.

                                   ARTICLE 29
                                   SICK LEAVE

SECTION 1

         The employees covered by this Agreement shall accrue Sick Leave at the
rate of one and a half (1 1/2) working days for each month in which they have
worked at least one hundred (100) hours of labor. Those employees who work less
than one hundred (100) hours in the month will accrue Sick Leave in the
proportion that the number of hours that they worked in the month is to one
hundred (100) hours; in other words, if they work seventy-five (75) hours in the
month, they shall accrue seventy-five percent (75%) of one and a half (1 1/2)
working days on the basis of one day of work of eight (8) hours, in other words,
nine (9) hours of work.

         The period of time in which the employee covered by this Collective
Bargaining Agreement is enjoying Sick Leave or Vacation Leave shall count for
purposes of this Article only as hours worked once the employee returns to work.

                                       25
<PAGE>   27

SECTION 2

         The Sick Leave unused by the employee during the course of the year
shall be accrued for the successive years up to a maximum of seventy-five (75)
days. On the date of retirement under the benefits of the Company's Pension Plan
or disability determined by the Social Security, the employee shall be paid for
the days of Sick Leave which have accrued up to a maximum of seventy-five (75)
days. This benefit shall be calculated multiplying by eight (8) the regular
basic rate of pay per hour that the employee was receiving at the time of
his/her retirement or disability.

SECTION 3

         The Sick Leave accrued in excess of seventy-five (75) days shall be
liquidated after six (6) months have elapsed since the signing of the Agreement.
The Company will begin to pay the excess of Sick Leave to which the employee is
entitled, within a period of eight (8) weeks from the date of the annual
anniversary of Vacation Leaves, calculating by eight (8) the regular basic rate
of pay per hour which the employee is receiving, at the rate of fifty percent
(50%) during the first two year of the agreement and fifty five (55%) the third
year.

SECTION 4

         In the event of having to be absent from work for whatever reason, the
employee must let his/her immediate Supervisor know about it during the first
twenty four (24) hours of absence.

SECTION 5

         The employee who is absent due to illness in excess of two (2) days
must present to his/her Supervisor upon returning to his/her work a Medical
Certificate in which the date of the consultation to the physician, the
diagnosis and the estimate made by the physician of the days he/she must be out
of work must be specified. In the event that the employee continues ill for a
period greater than three (3) days or more, the employee must make said
certificate reach his/her Supervisor within the first three (3) days of absence
from his/her job, except in the cases of Acts of God when said certificate must
be sent to the Supervisor as soon as possible. The employee shall receive pay
for the benefits provided in this Article only when he/she complies with what is
provided in this Section.

SECTION 6

         The Company shall inform the employees the balance of days accrued for
Sick Leave on an annual basis.

                                   ARTICLE 30
                               EXTENDED SICK LEAVE

SECTION 1

         In the event that a regular employee is absent for a consecutive period
greater than five (5) working days due to reasons of illness verified by means
of a Medical Certificate which complies with the requirements provided in the
Article regarding Sick Leave, the employee will receive benefits at the rate of
one (1) week at full salary and three (3) weeks at half (1/2) salary for each
year of service up to a maximum of eleven (11) weeks at full salary and
thirty-nine (39) weeks at half (1/2) salary. In the event that the benefit under
the Non-Occupational Disability Insurance Act (Act 139) were to turn out to be
greater than the ones established herein, only the ones which are greater shall
be granted.

         If the employee were not discharged after the aforementioned weeks have
elapsed and at his/her written petition, a Leave Without Pay shall be approved
for the purposes of holding his/her job until completing a maximum of fifty-two
(52) weeks, the employee may be reinstated to his/her job, as long as he/she
complies with the terms and

                                       26
<PAGE>   28

conditions which the law establishes, among other requirements, that he/she has
to have been discharged and be physically and mentally qualified to exercise the
functions of his/her job.

SECTION 2

         The Company reserves itself the right to examine by physicians chosen
by it, those cases which it deems necessary; the expense for these examinations
shall be paid for by the Company.

SECTION 3

         All accidents and/or illnesses of an occupational nature are excluded
from the benefit provided in Section 1 of this Article.

SECTION 4

         The first five (5) consecutive working days of absence prior to the
enjoyment of prolonged sick leave shall be charged to regular sick leave that
the employee has have accrued. The Brotherhood members who request this benefit
may use the sick leave and vacations before enjoyment of the prolonged sick
leave.

SECTION 5

         To be entitled to the accrual of the benefit considered in Section 1 of
this Article during successive periods of illness, the employee must perform
his/her functions without any interruption whatsoever during a thirteen (13)
week period, between one illness and another.

                                   ARTICLE 31
                             OCCUPATIONAL SICK LEAVE

SECTION 1

         All regular employees who have to be absent due to an occupational
accident or illness so certified by the State Insurance Fund Corporation, shall
be entitled to receive their regular salary during the first twenty-six (26)
weeks from the moment of the accident.

SECTION 2

         In the event that the employee is absent from his/her job in excess of
the first twenty-six (26) weeks, the employee shall be entitled to receive, in
addition, half of his/her regular salary during the following thirty-five (35)
weeks.

SECTION 3

         The Company shall withhold from this Leave the per diems that the
employee receives from the State Insurance Fund Corporation during this period.

SECTION 4

         In the event that any employee is absent from his/her work due to
reasons of an alleged occupational accident or illness and until the State
Insurance Fund Corporation (SIFC) issues a certification of causal relationship,
the Company will pay him/her the benefit to which he/she is entitled under the
provisions of the Article regarding Extended Sick Leave and/or Act 139 (SINOT),
up to a maximum of seven (7) weeks at full salary and nineteen (19) weeks at
half salary.

                                       27
<PAGE>   29

         Once the SICF issues a certification of causal relationship, the
Company will charge the benefits paid under the Occupational Sick Leave provided
in this Article and credit the benefits paid during said period to the extended
sick leave accrued by the employee.

         In the case of employees who do not have the total Extended Illness
benefits said remaining benefits under Act 139 will be paid. It being made clear
that the benefits for extended illness and/or SINOT and the ones for
Occupational Sick Leave and/or SIF are mutually exclusive among each other; in
other words, that the employee may not receive both benefits at the same time.

                                   ARTICLE 32
                                 MATERNITY LEAVE

SECTION 1

         Any employee in a state of pregnancy shall be entitled to a rest period
of four (4) weeks before and four (4) weeks after the birth, with full pay at
the rate of her regular salary.

SECTION 2

         The employee may choose to take up to one week of pre natal rest and
extend up to seven (7) weeks the post natal rest to which she is entitled as
long as she presents her Supervisor with a medical certificate crediting that
she is in condition to work up to one week before the delivery.

SECTION 3

         If an employee were to suffer a complication after the birth that
prevented her from working for a term exceeding four (4) weeks, to be counted
from the day of the delivery, the Company will grant an additional rest period
for a term which shall not exceed fifteen (15) additional weeks without pay, as
long as before the expiration of the rest period she presents a medical
certificate crediting such complication. It been provided that the employee may
charge the fifteen (15) weeks to her vacations, sick leave or extended sick
leave.

SECTION 4

         The employee that adopts a child younger than seven (7 ) years shall
have the same benefits (maternity leave) as any other employee has for natural
births after presenting legal documentation proving that the adoption process
was completed.

SECTION 5

         With one (1) month of anticipation before the beginning of the leave,
the employee shall present the Company with a medical certification crediting
her condition and indicating the probable date of delivery, or in the case of
adoption the presenting of documents of the date of adoption. Upon complying
with this requirement, the employee shall receive the corresponding pay in
accordance to the provided in Section 1, in advance at the moment that she
begins to enjoy this leave.

SECTION 6

         The employee who suffers a miscarriage shall be entitled and may claim
the same benefits enjoyed by the employee who has a normal delivery. However, to
receive such benefits, the miscarriage must be one of such nature that it
produces the same physiological effect that regularly arise as a result of the
delivery, in accordance to the decree and certification of the physician taking
care of her during the miscarriage. Said benefit shall be from the miscarriage
onward.

                                       28
<PAGE>   30

SECTION 7

         The employee and her supervisor will coordinate the use of the
facilities and or refrigerators if said refrigerators are necessary and that are
available in the employees work center so that she could extract and preserve
the milk. The employee must be responsible of the adequate use of the stored
milk and the Company's equipment to be used by her for such use. The employee
must present medical evidence that shows that she is lactating. The employee
will have five (5) additional minutes per break for a term of fifteen (15) labor
days for the extraction of the milk.

SECTION 8

         The absences motivated by this leave will not be considered to the
effect of absenteeism in the performance evaluation.

SECTION 9

         The use and enjoyment of this leave will not cause loss of seniority.

                                   ARTICLE 33
                   FAMILY AND MEDICAL LEAVES OF ABSENCE (FMLA)

SECTION 1

         The employees covered by this Agreement shall be eligible for a Family
Medical Leave in accordance with the Family and Medical Leave Act of 1993 (FMLA)
and the regulations to implement said law.

SECTION 2

         The purpose of the leave shall be as follows:

         a.       for the birth and care of a newborn child of the employee, or
                  the placement of a child with the employee for adoption or
                  foster care.

         b.       to care for a spouse, biological or adoptive parent, or person
                  who has acted in role as parent with day-to-day
                  responsibility, or child (biological, adopted, foster or
                  stepchild or legal ward or child for whom the employee has
                  day-to-day parental responsibility) who has a "serious health
                  condition".

         c.       for a serious health condition of the employee which makes the
                  employee unable to perform the functions of the position of
                  such employee. When it is legally applicable, employees will
                  be required to provide a "fitness for duty" certification, to
                  return to work after such leave. The Company may act according
                  to Article 15 Medical Exams.

SECTION 3

         The total period of this leave will be up to twelve (12) work weeks
within a twelve (12) months period, calculated on a "rolling" twelve (12)
months. Any leave or absence provided in the Collective Bargaining Agreement,
whether paid or without pay, that are qualified under the Family Medical Leave
Act, shall run concurrently with the Family Medical Leave.

SECTION 4

         Employees who have completed at least twelve (12) months of accredited
service at the beginning of the leave and worked at least 1,250 hours during
such period may be eligible for leave.

                                       29
<PAGE>   31

SECTION 5

         The FMLA excludes employees where there are less than fifty (50)
employees within seventy-five (75) miles of the employee's work site. The
Company will attempt to accommodate requests for FMLA leave for employees at
remote locations, however, such requests may be denied based on business
necessity.

SECTION 6

         Leave may be taken on an intermittent or reduced schedule basis for
reasons specified in Sections 2.b and 2.c if determined to be "medically
necessary" as defined in the Department of Federal Labor Regulations 29 CFR Part
825. It may not be taken intermittently or on a reduced schedule basis for
reasons specified in paragraph 2.a unless approved by the Company.

SECTION 7

         If an employee is granted intermittent or reduced schedule leave as
stated in Sections 2b and 2c, the Company may require such employee to transfer
temporarily to
an available alternative, equivalent, position that better accommodates
recurring periods of leave than the employee's regular position.

SECTION 8

         The Company may elect to replace any employee on leave with temporary
or contract employees for the duration of the leave without affecting or being
affected by the Article 65 (Contract Labor) of the Collective Bargaining
Agreement.

SECTION 9

         Employees shall be required to present, to the satisfaction of the
Company's Benefits and Licenses Department, documentation concerning the basis
for the requested leave of absence. Failure to provide medical certification
within fifteen (15) days of the request for leave may result in denial of leave.

SECTION 10

         Employees shall provide the Company with at least thirty (30) days
advance notice of intent to take leave when foreseeable.

SECTION 11

         In cases where both spouses are employed by the Company, and both
spouses are eligible for FMLA leave, they will be permitted to take a combined
total of 12 weeks of FMLA leave during the applicable 12-month period for any
one qualifying circumstance. Where the husband and wife both use a portion of
the total 12 week FMLA leave entitlement for one qualified circumstance, the
husband and wife would each be entitled to the difference between the amount he
or she took individually and 12 weeks for FMLA leave for a different purpose.

SECTION 12

         While on FMLA leave, eligible employees shall continue to receive
company-paid life insurance and medical/dental benefits to the extent provided
to active employees.

                                       30
<PAGE>   32

SECTION 13

         Upon return to work, employees granted FMLA leave shall receive
accredited service for the period of the leave. There is no break in service for
purposes of vesting, eligibility to participate in pension plans and other types
of benefits and seniority.

SECTION 14

         Subject to Item 15 below, at the end of the approved leave (or each
segment of the leave, as applicable), employees shall be guaranteed
reinstatement to the same or equivalent job.

SECTION 15

         Reinstatement is subject to any contractual provisions of the
Collective Bargaining Agreement, which cover adjustments to the workforce that
may have occurred during the leave of affected employees.

SECTION 16

         Employees who wish to change their projected return date may request
the change and the Company will endeavor to accommodate such requests.

SECTION 17

         Employees, while on leave, shall be considered to have terminated
employment if they accept employment with another employer, engage in business
for profit, and/or apply for unemployment insurance benefits.

SECTION 18

         The provisions of this Article are not subject to the grievance or
arbitration procedure of the Collective Bargaining Agreement except for the
application for reinstatement by employees on leave.

SECTION 19

         All terms herein shall be defined as set forth in the Federal
Department of Labor Regulations, 29 CFR Part 825.

SECTION 20

         The Company has the right to act in accordance with the Family and
Medical Leave Act of 1993 and to comply with the regulations provide by the
Federal Department of Labor.

SECTION 21

         Any employee to whom the Company authorize this leave, once he returns
to work, will be oblige to pay the Brotherhood all Union Dues pending to be paid
during the leave in bi-weekly payments. This deductions will in addition to he
regular dues.

                                       31
<PAGE>   33

                                   ARTICLE 34
                                LEAVE WITHOUT PAY
                             FOR BROTHERHOOD AFFAIRS

SECTION 1

         The Company and the Brotherhood shall reach an agreement about the
number of persons and time without pay to be granted to personnel designated by
the Brotherhood for attendance to a convention or other worker activity.

SECTION 2

         The Brotherhood shall notify the immediate supervisor in writing with
copy to the Department of Employee and Labor Affairs with at least five (5)
working days of prior notice to the designated personnel and the probable
duration of the absence.

SECTION 3

         The Brotherhood agrees that, upon making its petition for free time for
Brotherhood activities, it will give the proper consideration to the number of
employees affected for the purpose of there being no interruption to the
Company's operations due to the lack of available personnel.

SECTION 4

         The time that any employee is on leave for Brotherhood affairs shall be
considered as service time purposes of seniority.

         The employee, upon returning to the Company, shall be entitled to the
occupational level and salary corresponding to him/her as if he/she had been
working.

                                   ARTICLE 35
                    LEAVE FOR ADMINISTRATIVE FUNCTIONS OF THE
                         COLLECTIVE BARGAINING AGREEMENT

SECTION 1

         PRT shall grant two (2) Union Leaves with pay and two Union Leaves
without pay to the Brotherhood for those PRT employees that HIETEL assign to
administer the agreement. It being understood that with regard to this leave,
PRT shall only pay the sum of the salaries, minus the corresponding deductions
of law with the HIETEL having to pay the fringe benefits and any other deduction
or contribution. The total Union leaves for both, PRT and CTI will not exceed of
(3) three leaves with pay and (3) three without pay.

SECTION 2

         Union Leave with pay shall be understood to mean that PRT will pay his
net monthly salary to the employee enjoying said Leave, Christmas bonus and the
Company's contribution to the health plan. It being understood that with regard
to the Union Leave with Pay as well as the Union Leave without Pay the benefits
for Sick Leave, Vacation Leave and any other benefits, deductions or
contributions shall be agreed upon internally between said employee and the
Brotherhood, and in no case whatsoever shall they be paid as an additional and
separate compensation from the salary by the Company.

                                       32
<PAGE>   34

SECTION 3

         These leaves do not imply an obligation of payment for the concept of
per diems, lodging, mileage, transfers, overtime, differentials, assistance for
studies, scholarships and other benefits provided by the Collective Bargaining
Agreement, but the time of service on Union Leave shall be acknowledged for
purposes of retirement and seniority, as if it were time worked.

SECTION 4

         In the event that any Section of this article were to be declared
invalid or illegal by a Court with jurisdiction, the parties bind themselves to
enter into immediate negotiations for the purpose of agreeing a substitute
provision, mutually satisfactory for such article or section.

                                   ARTICLE 36
                                LEAVE WITHOUT PAY

SECTION 1

         Any employee who wishes a Leave Without Pay to be absent from his/her
job shall request permission in writing from the Company by sending a copy of
his/her petition to the President of the Brotherhood. It shall be at the
discretion of the Company to grant said Leave Without Pay.

SECTION 2

         Any employee who has a Leave Without Pay authorized, once he/she has
returned to his/her job, shall be bound to pay the Brotherhood the dues not paid
during the period of said Leave, in monthly installments equivalent to the
period of the Leave Without Salary granted, until the liquidation of the debt.
This deduction shall be in addition to his/her regular dues, and the Brotherhood
shall request it in writing from the Company.

SECTION 3

         The Leave Without Pay may be granted up to a maximum of six months on
the basis of the merits of the case and after a study carried out by the
Company.

SECTION 4

         It shall not be the purpose of this Leave to allow an employee to try
in another job to change jobs or to make profits.

SECTION 5

         One employee for each department in each work center may receive the
benefits of Leave Without Pay. One same employee may not request Leave Without
Pay in two consecutive years. If there are extraordinary circumstances and the
applicant shows the merits of his/her request, the Company may leave without
effect the limitations indicated in this section as long as the service is not
affected.

SECTION 6

         During the time that the Leave lasts, the Company shall guarantee the
employees the following benefits:

         a)       Contribution to Health Plan.

         b)       Maintaining his/her same position or an equivalent position,
                  with the same salary, benefits and employment conditions that
                  he/she had. The use of this Leave shall not result in the loss
                  of seniority or accrued benefits as of the date of
                  effectiveness of the same.

                                       33
<PAGE>   35

                                   ARTICLE 37
                                 MILITARY LEAVE

SECTION 1

         Any regular employee who joins the military service shall enjoy all the
rights provided by Public Act Number 756 of the United States Congress, as this
has been or may be subsequently amended.

SECTION 2

         When a regular employee renders temporary services in the Puerto Rico
National Guard in conformity with the relevant provisions of Act Number 62,
Military Code of June 23, 1969 (Military Code of Puerto Rico) or in the United
States Armed Forces Reserve, pursuant to the Military Code of the United States,
the employee will be entitled to a leave with pay up to a maximum of thirty (30)
days in one natural year to attend the annual exercises.

                                   ARTICLE 38
                                  FUNERAL LEAVE

SECTION 1

         All regular employees shall be entitled to enjoy a Funeral Leave with
pay consisting of three (3) working days from the date of the death of any of
his/her natural parents or foster parents (one excludes the other), of his/her
spouse, of children or of siblings and one day in the event of the death of
grandparents and in-laws.

SECTION 2

         In the event of the death of the natural or foster parents (one
excludes the other), of the spouse, of children and siblings and the burial took
place outside of Puerto Rico, the employee may enjoy a Leave with Salary of up
to five (5) working days from the date of the death to travel to the place of
the burial.

SECTION 3

         In the event that an employee needs additional time, the Company may
grant the same charging it to the Vacation Leave that the employee may have
accrued.

SECTION 4

         The Company may require evidence of the death, as well as of the burial
and trip abroad.

                                   ARTICLE 39
                           LEAVE FOR JUDICIAL PURPOSES

SECTION 1

         All regular employees will be entitled to enjoy a paid leave for the
time that may be required by a Court of Justice to serve as a member of a jury.

SECTION 2

         The Company shall pay the regular salary of an employee who is
officially subpoenaed by the district attorney's office or by a Court of Justice
to appear as a witness in a criminal case for all the regular working hours to

                                       34
<PAGE>   36

which said subpoena prevents the employee from being at his/her job. The
employee must inform his/her immediate Supervisor about said subpoena with at
least two (2) days of prior notice unless he/she has been subpoenaed within a
shorter period. The employee must return to his/her duties as soon as his/her
interview with the District Attorney ends or as soon as the employee is
dismissed by the Court. The employee must present written evidence of the
subpoena, as well as of his/her appearance before the District Attorney and/or
the Court.

SECTION 3

         Any employee officially subpoenaed to appear before any Court of
Justice, District Attorney, administrative entity or government agency which is
not covered by the two (2) preceding sections, shall be entitled to enjoy Leave
without Pay for the time which said official subpoenas prevent the employee from
showing up at his/her regular work schedule. The employee may, at his/her
option, charge this time to vacation leave.

SECTION 4

         When an employee is subpoenaed, indicted or accused for the alleged
commission of a crime allegedly committed during his/her work, the days utilized
to appear at Court or at the subpoenas, at the petition of the employee, will be
charged to his/her accrued regular vacation leave and not enjoyed or in their
defect Leave without Pay shall be granted, as long as evidence of the
appearances is presented. It being provided that if the employee is exonerated
or the crime for which the employee is being accused is filed, such days shall
be paid and the time shall be taken into consideration for all the purposes of
law and the Collective Bargaining Agreement as time that has been worked.

                                   ARTICLE 40
                                    PER DIEMS

SECTION 1

         Per diems shall be understood to mean the expenses for meals and
lodging in which the employees incur when they are required to work outside of
the municipality where their work center is normally located and/or during hours
outside of their regular work day where their work center is normally located.

SECTION 2

         When an employee is required to work in a place outside of the
municipality where his/her work center is normally located for a period not
greater than one day, the Company shall pay the expenses for meal and lodging up
to the amount and under the conditions specified below:

a.       If he/she leaves on or before 6:00 a.m. and returns on or after 8:00
         a.m. of the same day, $5.00 for breakfast for the first year and $5.50
         for the rest years of agreement.

b.       If he/she leaves on or after 8:00 a.m. and returns on or after 1:00
         p.m. of the same day, $8.75 for lunch for the first year and $9.50 for
         the rest years of agreement.

c.       If he/she leaves on or after 1:00 p.m. and returns on or after 6:30
         p.m. of the same day $10.25 for dinner and $10.50 for the rest years of
         agreement.

d.       If the employee were required to spend the night, the employee shall be
         entitled to $70.00 for lodging without receipt for the life of the
         agreement.

e.       The employees who travel to the Island of Vieques and/or Culebra shall
         receive for the concept of per diem the following amounts:

<TABLE>
<CAPTION>
                 Breakfast              Lunch                  Dinner

<S>              <C>                  <C>                    <C>
                   $5.50                $9.50                  $10.50
</TABLE>

                                       35
<PAGE>   37

SECTION 3

         In the event that an employee has to work in a place outside of the
municipality where his/her work center is normally located for a period greater
than one day, during which term of time the employee has to have his/her meals
and sleep in said place, the Company will pay the amount of $94.00 daily for the
first year and $95.00 for the rest years of the agreement, an amount which shall
cover all the expenses in which the employee incurs and for which amount the
employee will not have to present a receipt or vouchers. In addition, if he/she
were required to continue working up to after seven (7) hours after the end of
his/her daily work day, they will be paid a per diem for the amount of $9.00 for
the first year and $9.25 for the rest years of the agreement.

SECTION 4

         Expenses shall be reimbursed for the concept of per diems to employees
who are working in the municipality where their work center is normally located
under the following circumstances:

a.       To the employees who work exclusively in the dawn work shifts which are
         the work shifts that regularly end after 12:00 midnight, they shall be
         paid a snack for the amount of $5.00 for the first year and $5.50 for
         the rest years of the agreement.

b.       In the case of employees who work any work day (daily) of eight (8)
         hours and they are required to continue working for 1 1/2 hours, they
         will be paid a per diem for the amount of $8.50 for non-exempt
         employees and $9.00 for exempt employees and they will be paid a second
         per diem if they continue working until after seven (7) consecutive
         hours after the end of their daily work shift, for the amount of $
         15.50 for non-exempt employees and $17.50 for exempt employees.

c.       In the case of employees required to work the sixth, seventh or holiday
         in the municipality where his/her work center is normally located, they
         will be paid a per diem for the amount of $9.00 if he works 4 hours or
         more but less than 8 hours. If they continue working 8 hours or more
         they will be paid a per diem of $9.25. In addition they will be
         reimburse for the transportation expenses incurred from their work
         center and back.

         The time in which the employee incurs in the consumption of meals shall
not be considered as time worked and the employee shall not receive pay for said
time.

SECTION 5

         In the event that the employee is required to work outside the
municipality where his/her work center is normally located and during this
period of time holidays occur between two (2) working days, the Company shall
pay per diems and lodgings for said holidays.

         In those situations in which an employee is required to report to work
on Monday at 8:00 a.m. outside of the municipality where his/her work center is
normally located, the Company will pay the lodging of the previous Sunday in
accordance to the terms of this Article, as long as the employee is authorized
to spend the night in a lodging during the previous Sunday.

         In those cases where an employee is required to work outside of the
municipality where his/her work center is normally located and the he/she
becomes ill during this time, the Company will be obligated to pay the per diems
provided in this Article, as long as the employee spends the night in the
lodging in the municipality where he/she is required to work and complies with
the provisions of the Article regarding Sick Leave and never for a period
exceeding two (2) days.

                                       36
<PAGE>   38

SECTION 6

         Any employee assigned regularly to Bayamon, Levittown and Catano who is
required to work temporarily in Carolina, Isla Verde or Trujillo Alto, and in
like manner, any employee assigned regularly to Carolina, Isla Verde or Trujillo
Alto who is required to work temporarily in Bayamon, Levittown or Catano will be
entitle to the per diem as follows.

         In these cases a per diem of $8.00 for the first year and $8.50 for the
rest years of the agreement, each day that the employee works temporarily shall
be paid up to a maximum period of thirty (30) calendar days. Upon finishing the
temporary assignment, the aforementioned per diem for each day worked shall be
suspended and the employee shall be reassigned to his/her work center of origin
or shall be reassigned regularly to the work center where he/she is found
rendering his/her services temporarily. The Company may extend the temporary
period for an additional period in which case the employee will continue
receiving the per diems of $8.00 for the first year and $8.50 for the rest years
of the agreement until the Company determines that the work that the employee
had been assigned has ended.

SECTION 7

         Any employee who is required by the Company to attend to testify in its
favor at hearings of the Department of Consumer Affairs (DACO),
Telecommunications Regulatory Board and/or any other government, state or
federal agency and/or state or federal court, shall receive the per diems in
conformity to Section 2 of this Article.

SECTION 8

         The payment of per diems, lodging and mileage shall be determined by
the personnel approving it utilizing the following criteria:

         a.       The time that the employee reasonably needs to show up from
                  his residence to the new place of work and return to his/her
                  residence.

         b.       The distance between the employee's municipality or residence
                  to the new work place and return. The approving personnel
                  shall pass judgement when the distances are taken from the
                  employee's residence.

         c.       Need for the employee to show up in optimum conditions of
                  physical and mental rest by the nature of his/her functions.

         d.       The payment of traveling time incidental to the employee's
                  trip.

SECTION 9

         For purposes of this Article, the municipalities comprised in the
Telephone Metropolitan Area will be considered as only one work center, which
are the following: San Juan, Santurce, Hato Rey, Rio Piedras, Pueblo Viejo,
Puerto Nuevo, Caparra, Levittown, Catano, Bayamon, Carolina, Trujillo Alto, Isla
Verde and any other area within those limits.

SECTION 10

         The personnel from the areas of Marketing, Sales, or any personnel
under their supervision, assigned to work during conventions held at hotels for
a duration of more than four hours, may claim the actual expense of lunch and/or
dinner (including the tip) up to a maximum of $30.00 although it takes place in
their municipality of work. A requirement for the reimbursement shall be the
presentation of the receipts of the hotel where the activity is held. In the
cases in which lunch or dinner is provided free of charge the per diem cannot be
charged.

                                       37
<PAGE>   39

SECTION 11

         In the event that an employee is required to travel outside of Puerto
Rico, the Company pay the following:

         a.       Stipend of $45.00 daily, amount that will cover all expenses
                  of per diem incurred by the employee without receipt.

         b.       Reimbursement of lodging expense will be according to invoice
                  presented and previously approved.

         c.       Reimbursement of hotel tips and airport tips as follows:

                  o        Bell boy $1.00 per service

                  o        Maid service $2.00 per day

         d.       Reimbursement of the lease of a coat if the trip is during
                  winter time. Expenses for scarfs, gloves, socks cap, and
                  undergarments that are reasonably needed may be reimburse.

         e.       Reimbursement of the cost of a telephone all up to a maximum
                  of five minutes daily.

         f.       Reimbursement of transportation cost incurred from the house
                  to the airport and vice versa.

         g.       If public transportation is needed at the training or work
                  site, the cost of automobile rent will be reimbursement, if
                  the same is cheaper than public transportation.

                                   ARTICLE 41
                                 TRANSPORTATION

SECTION 1

         When an employee is required to work at a place outside of where
his/her work center is normally located, the Company, according to what the case
may be, will provide the transportation, will pay in advance or reimburse the
transportation expenses that he/she incurs in, as is provided further ahead.

SECTION 2

         The transportation expenses must be approved and paid by the Company
prior to their being incurred in or shall be reimbursed later on if they cannot
be paid in advance; it being provided that the transportation expenses which an
employee normally spends in going and/or coming (from his/her residence) to
his/her work center will not be considered reimbursable expenses. In addition,
transportation expenses shall not be paid when the transportation is provided by
the Company.

SECTION 3

         The employees authorized to utilize their private vehicles shall be
paid at the rate ($0.41) cents per mile for vehicles with public liability
insurance as included by the Compulsory Insurance and ($0.45) per mile for
vehicles with public liability insurance which includes the following minimum:

         o        Bodily Injury              $25,000 per person

         o        Bodily Injury              $50,000 per occurrence

         o        Private Property Damage    $25,000 per occurrence

         To determine the miles for purposes of claiming the payment, the
distance charts between the towns prepared by the Roads Authority and the one
for the Metropolitan Area prepared by the Company will be used. When the
distance charts cannot be used, the reimbursement system will be utilized and
the employee must report the distance traveled.

                                       38
<PAGE>   40

SECTION 4

         In all the cases in which an employee is required to use his/her
automobile in official endeavors of his/her job, due to the fact that there is
no fleet vehicle available or belonging to others and physical damages to third
parties that may have arisen as a result of an accident due to the utilization
of said automobile, if the vehicle is no insured. If the vehicle is insured, the
Company will only be liable for the excess of the damages to the property of
others and bodily damages to third parties not covered by the vehicle's
insurance.

SECTION 5

         The employee will have to notify the police immediately and his/her
immediate Supervisor as soon as possible (within 24 hours) and shall remain at
the site of the events until the Police arrives and renders the corresponding
report, except when it is not feasible. The employee will render an automobile
accident report (Revised form F-603) with the signature of his/her immediate
Supervisor indicating the grievance number and any other report that the Company
requires from the employee.

SECTION 6

         When the Company orders an employee to carry out an official trip due
to the needs of the service or when he/she is assigned to some temporary jobs
outside of his regular work center, it will provide said employee with the means
of transportation from his/her work center, or in its place, will pay in advance
for the transportation expenses for the miles that the employee has to travel on
said official trip or for the ones that the employee has to travel due to the
temporary assignment from his/her regular work center.

         This Section applies only when the employee shows up at his/her regular
work center and is sent to work to another place during the same day.

SECTION 7

         When the Company requires an employee to travel directly from his/her
house to another work center to which the employee has been temporarily
assigned, the Company will pay said employee for the miles of distance existing
between his/her regular work center and the center to which the employee has
been temporarily assigned. The assignments which have been requested by the
employee are excluded from the benefits of this Section.

SECTION 8

         When an employee is required to utilize public transportation, he/she
shall be reimbursed in accordance to the effective rate in the transportation
method utilized. The employee will not be reimbursed on the basis of the rate
for one means when the means utilized is another one. The use of a taxi shall be
authorized by the director of the department or the superior level by means of
written justification and shall be conditioned to the employee's presenting
together with the petition for reimbursement the following information: taxi
license, name of the line and taxi number.

SECTION 9

         To be entitled for payment or reimbursement of any expense provided in
this Article, the employee must complete the form established in the Company for
this purpose.

SECTION 10

         When the Company determines due to the need of service to permanently
transfer an employee from one municipality to another and as a result of said
transfer the employee changes his/her residence to the municipality to which
he/she has been transferred, the Company shall compensate for the following
expenses:

         a.       Moving expenses really incurred in which must be previously
                  approved and justified by a receipt signed by the moving
                  company.

                                       39
<PAGE>   41

         b.       Transportation, per diem and lodging expenses, in conformity
                  with the terms of this Agreement during the time that the
                  employee has to travel to the new work area until the employee
                  transfers his/her residence permanently for a period of up to
                  thirty (30) working days from the effective date of the
                  transfer onwards. If the employee has not moved within the
                  sixty (60) days following the transfer, the employee will only
                  be entitled to the benefits provided in Section 11 of this
                  Article and therefore must return what has been collected in
                  excess.

         The exclusions to the benefits of this Section are the permanent
transfers carried out within the limits of the boundaries of San Juan, Santurce,
Hato Rey, Rio Piedras, Pueblo Viejo, Puerto Nuevo and Caparra and any other area
within those boundaries, as well as the transfers carried out at the petition of
the employee.

SECTION 11

         When due to the service need the Company determines to permanently
transfer an employee from one municipality to another and the employee does not
move his/her residence, the employee shall be entitled to receive transportation
expenses and per diems for a period of thirty (30) working days for the miles of
distance in excess, if any, that the employee has to travel between his/her old
regular work center and his/her residence and his/her new regular work center
and his/her residence. This will be measured by road using the closest route.

SECTION 12

         For exclusive purposes of this Article, transfer shall be understood to
mean:

                  a.       Any permanent change from one municipality to another
                           as long as the employee continues in his/her same
                           occupational classification.

                  b.       Each one of the following areas shall be considered
                           as a municipality:

                           1)       San Juan- Santurce - Isla Verde

                           2)       Hato Rey - Rio Piedras

                           3)       Pueblo Viejo (includes Caparra and Puerto
                                    Nuevo)

                  c.       In addition, the Levittown area will be included in
                           the municipality of Catano.

SECTION 13

         For exclusive purposes of transfers motivated by relocation of work
center the metropolitan area telephone company shall be considered as one single
municipality including all of the following: San Juan, Santurce, Hato Rey, Rio
Piedras, Guaynabo, Pueblo Viejo, Levittown, Catano, Bayamon, Carolina, Trujillo
Alto, Isla Verde and any other area within these boundaries. However, all
employees regularly assigned to Bayamon, Levittown or Catano who are permanently
transferred to Carolina, Isla Verde or Trujillo Alto or vice versa, shall be
entitled to the mileage for the term provided in this Article.

SECTION 14

         The transfers which occur at the petition of the employee are excluded
from the benefits of this Article.

SECTION 15

         In the event that the Company adopts a mileage payment policy which is
superior to what is established in this Agreement to be applicable to
non-covered employees, said policy shall be applicable to the Bargaining Unit.

                                       40
<PAGE>   42

SECTION 16

                  a.       The employees who are assigned to work in a
                           municipality or place on the Island in which it is
                           proven that there is no adequate lodging and they are
                           authorized by the Company to lodge in another
                           municipality nearby where there is adequate lodging,
                           shall be entitled to receive the benefits considered
                           in this Article relating to the transportation from
                           the authorized lodging to the assigned work center.

                  b.       When the employees are assigned to temporarily work
                           outside of their regular work area in a municipality
                           or place of the Island where they are required to
                           spend the night in said place, the Company must
                           provide adequate transportation.

                                   ARTICLE 42
                   HOLIDAYS AND HOLIDAYS GRANTED OFF WITH PAY

SECTION 1

         The regular employees covered by this Collective Bargaining Agreement
shall receive pay for all the regular work hours and shall enjoy free time with
pay with the exceptions provided in this article on the following holidays:

1.       January 1st.                    New Year's Day
2.       January 6th                     Three Kings Day
3.       Second Monday in January*       Eugenio Maria de Hostos Day
4.       Third Monday in January         Martin Luther King Day
5.       Third Monday in February        President's Day
6.       March 22*                       Abolition of Slavery Day
7.       Movable                         Good Friday
8.       Third Monday in April*          Jose de Diego Day
9.       Last Monday in May              Memorial Day
10.      July 4                          U.S. Independence Day
11.      Third Monday in July*           Luis Munoz Rivera Day
12.      July 25                         Commonwealth of P.R. /Constitution Day
13.      July 27*                        Jose Celso Barbosa Day
14.      First Monday in September       Labor Day
15.      October 12                      Discovery of America Day
16.      First Tuesday in November       General Election Day (every 4 years)
17.      November 11                     Veterans Day
18.      November 19*                    Discovery of P.R. Day
19.      4th Thursday in November        Thanksgiving Day
20.      December 25                     Christmas Day
21.      Individual                      The Employee's birthday

         If any of the aforementioned days were to be changed by means of
legislation, this article shall be understood to have been amended to that
effect.

         If during the effective period of this Collective Bargaining Agreement,
the Legislature of Puerto Rico or the United States decrees a holiday by law,
which is applicable to PRT, the Company and the UIET shall meet to discuss the
importance of the event and convenience of considering the new holiday.

         Whenever the aforementioned days fall on a Sunday, the next day shall
be considered a holiday.

                                       41
<PAGE>   43

         When one of the holidays acknowledged in this article coincides with
another holiday, the following working day shall be considered as a holiday for
all purposes.

SECTION 2

         The regular personnel required by the Company to work on holidays,
shall receive, in addition to their basic pay, pay at time and a half for each
hour worked, with the exception of what is provided for in Section 5 of this
article.

         The provision contained in this Section shall apply only to those
employees of the Company covered by this agreement who are not exempt or may not
be exempt in the future by any law, regulation, decree or any other referring to
the payment of additional compensation for overtime work.

         Notwithstanding, the exempt employees covered by this Agreement may
receive payment under this Article on the basis of single time plus their basic
salary subject to the procedure of Supplementary Compensation for Exempt
Employees which is in effect (P-FI-011 June 30,1995). The Company will not make
changes to this departmental procedure during the duration of this agreement.

         Exempt employees covered by this agreement, to whom the supplementary
compensation for Exempt Employees does not apply, will have the option to enjoy
another day free with pay to be programmed in a period not to exceed ninety (90)
days from the holiday worked.

         It being provided that when the birthday coincides with another day
outside of this regular work schedule or with another holiday, his next working
day shall be considered, for all the purposes of this Agreement as his birthday.

SECTION 3

         To be able to be entitled to pay for the holiday, the employees will
have to have worked the last workday previously assigned, as well as the
assigned workday after a holiday. The employee who is absent during the previous
assigned, as well as the assigned workday after a holiday. The employee who is
absent during the previous assigned workday and/or after a holiday and does not
receive any pay whatsoever from the Company during said absence shall not
receive any pay for the holiday. A duly justified absence on such days, which
entitles him to receive pay during said absence, shall also receive pay for the
holiday.

SECTION 4

         The holidays with rights to pay as specified in Section 1 of this
Article are those which coincide with the regular assigned work day. When a
holiday of the ones listed in this article is celebrated during the days from
Monday through Friday of any week and said holiday coincides with the employee's
day off during irregular work shifts, the employee shall be compensated for said
holiday in harmony with this article.

SECTION 5

         Those non exempt employees who voluntarily are willing to work the
holidays marked with asterisks (*), and as a result of their regular shift does
not have to work on the holiday may request waiving the receipt of the payment
at one and a half times the hourly rate provided in Section 2 and substitute it
for the enjoyment of free time equal to that worked up to a maximum of eight (8)
hours, under the following criterion:

         1.       The employee shall request in writing, before the year begins,
                  the dates when he will enjoy the holidays off with pay marked
                  with an asterisk in Section 1.

         2.       Upon granting the employee holidays with pay, the Company will
                  take into consideration, principally, the service needs.

                                       42
<PAGE>   44

         3.       The holidays with pay shall be enjoyed and compensated in
                  accordance to the regular work schedule of each employee (8
                  hours).

         4.       The Company will schedule, in the same manner and criteria
                  which it establishes the regular vacation leave program, the
                  enjoyment calendar of the holidays granted off with pay which
                  the employee voluntarily requests.

         5.       The employee who works the holiday granted off with pay,
                  previously scheduled, shall have the option that the same be
                  paid in accordance to what is provided in Section 1 or shall
                  have the option of the enjoyment of said day off with pay to
                  be rescheduled within a period no larger than ninety (90) days
                  from the day when he worked it.

         6.       The holidays granted off with pay shall be enjoyed in
                  accordance to the annual program. These days may not be
                  postponed for enjoyment during the following year. A holiday
                  granted off with pay may be fractionated for its enjoyment
                  into two (2) periods of four (4) consecutive hours, at the
                  request of the employee.

         7.       At the request of the employee during the course of the year,
                  these days may be rescheduled on days which have not been
                  previously selected by other employees, as long as the service
                  needs so allow it. The employee must present a request for
                  change with at least forty eight (48) hours of advance notice
                  prior to the day originally scheduled.

SECTION 6

         Those exempt employees who voluntarily are willing to work the holidays
marked with asterisks (*), and as a result of their regular shift does not have
to work on the holiday and the Supplementary Compensation for Exempt Employees
does not apply, will have the option to enjoy another free day with pay up to a
maximum of eight (8) hours under the following criterion:

         1.       The employee shall request in writing, before the year begins,
                  the dates when he will enjoy the holidays off with pay marked
                  with an asterisk in Section 1.

         2.       Upon granting the employee holidays with pay, the Company will
                  take into consideration, principally, the service needs.

         3.       The holidays with pay shall be enjoyed and compensated in
                  accordance to the regular work schedule of each employee (8
                  hours).

         4.       The Company will schedule, in the same manner and criteria
                  which it establishes the regular vacation leave program, the
                  enjoyment calendar of the holidays granted off with pay which
                  the employee voluntarily requests.

         5.       The holidays granted off with pay shall be enjoyed in
                  accordance to the annual program. These days may not be
                  postponed for enjoyment during the following year. A holiday
                  granted off with pay may be fractionated for its enjoyment
                  into two (2) periods of four (4) consecutive hours, at the
                  request of the employee.

         6.       At the request of the employee during the course of the year,
                  these days may be rescheduled on days which have not been
                  previously selected by other employees, as long as the service
                  needs so allow it. The employee must present a request for
                  change with at least forty eight (48) hours of advance notice
                  prior to the day originally scheduled.

                                       43
<PAGE>   45

         7.       Exempt employees covered by this agreement, to whom the
                  Supplementary Compensation for Exempt Employees does not
                  apply, will have the option to enjoy another day free with
                  pay, to be programmed in a period not to exceed ninety (90)
                  days from the holiday worked.

SECTION 7

         Those exempt employees who voluntarily are willing to work the holidays
marked with asterisks (*), and as a result of their regular work shift does not
have to work on the holiday, and to whom the Supplementary Compensation
Procedure for Exempt employees apply, will have the option to be paid according
to the disposition in said procedure or will have the option to enjoy the time
free with pay, up to a maximum of eight (8) hours according to items one to five
of Section 6 of this article.

                                   ARTICLE 43
                                   HEALTH PLAN

SECTION 1

         During the effective period of this Collective Bargaining Agreement,
the Company binds itself to provide a Health Plan with the same benefits
provided by the Health Plan that was in effect as of the signature of this
Agreement for the employees represented by the Brotherhood. The employee will
select one of the following alternatives offered by the provider of medical
services and will contribute the amounts indicated below on a bi-weekly basis
according to his/her selection.

<TABLE>
<CAPTION>
                                                                           Contribution during the effective
                                                                           period of this Collective
                                                                           Bargaining Agreement
<S>      <C>      <C>      <C>                                            <C>

A.       Individual

                  1.       Basic (H-MQ-A) + Major                               $ 0.00
                           Medical (M-3) + Dental (D-34)
                           + Pharmacy

B.       Family

                  1.       Basic (H-MQ-A) + Major                               $16.39
                           Medical (M-3) +  Pharmacy

                  2.       Basic (H-MQ-A) + Major                               $24.77
                           Medical (M-3) +  Dental (D-34)
                           + Pharmacy
</TABLE>

         In all the aforementioned Pharmacy coverage, if bioequivalent generic
medications are utilized, a deductible of $1.00 shall be applied. If brand name
medications are utilized, these shall have a $3.00 deductible for each one. The
over the counter medications or medications without federal literature
prescribed shall have a deductible at the rate of $3.00 for each one of them.

SECTION 2

         The employee, upon subscribing the petition for application provided by
the company providing the medical services, shall accept the terms and
conditions that this Company has imposed. The Brotherhood and the employee
accept that the terms and conditions of the Health Plan selected are not
negotiable. The employee must remain in the alternative selected until the
anniversary of the Plan occurs, on which date he/she may change from one of the
two alternatives offered under the family coverage, in conformity to the
requirements of eligibility and coverage for dependents, except when any of the
exceptions considered in the Plan occurs.

                                       44
<PAGE>   46

SECTION 3

         The Company shall maintain in effect the coverage selected while the
employee remains actively employed with the Company. The Company shall cancel
the coverage when the employee, due to any reason, is fired, laid off, resign,
dies or is suspended for thirty (30) days or more. If an arbitrator, reinstall
the employee suspended with back pay and presents evidence of all the medical
expenses incurred, the Company will reimburse the cost of said expenses
according with the term of the Health Plan.

SECTION 4

         The Brotherhood authorizes the deduction for the corresponding
contribution according to the alternative selected by the employee and in
conformity to how it is provided in Section 1 of this Article for each employee
belonging to the Union. Said contribution shall not be altered during the
effective period of this Agreement.

SECTION 5

         To obtain the hospitalization services for conditions of mental health
which are related to the rehabilitation for the use of substances (drugs) and
alcohol through the Health Plan, the employees must request the services of the
Employee Aid Program (EAP) of the Company and obtain a pre-authorization from
them. If they do not request the services and do not obtain the EAP
pre-authorization, is not obtained, the benefits are not be covered and their
payment shall be the responsibility of the employee. This requirement applies to
the employee covered by the Health Plan.

         If the employee were hospitalized and it were determined that it is due
to the use or abuse of substances or alcohol, the subsequent hospitalizations
and ambulatory treatments must also be pre-authorized by the EAP.

SECTION 6

         The Company will concede the benefit of eyeglasses or contact lenses
for the employees and their direct dependents only, up to the maximum amount of
one hundred ($100.00) dollars every year. These services will be reimbursed
without the application of any amount whatsoever toward the cash deductible.

SECTION 7

         The Brotherhood and the employees who are union members agree and
commit themselves to the adequate use of the Health.

SECTION 8

         The Company may modify the effective Medical Health Plan at the
termination of the Collective Bargaining Agreement, in which case, if it were to
consider it necessary, it shall notify the Brotherhood about said intentions so
that the Brotherhood presents any suggestion that it deems relevant.

         During the contract renovation process to select the Health Plan
Provider, the Company will share with the Brotherhood the analysis that each
provider had submitted.

SECTION 9

         The selection of the Administrator of the Health Plan, the
administration of the Medical Plan and all the terms and conditions relating to
the aforementioned between the Company and the provider will not be subject to
the Grievance Procedure or to the arbitration process established in this
Collective Agreement.

                                       45
<PAGE>   47

         In exceptional cases, the employee may request revision to any denied
claim by the Health Plan Provider. The same will be evaluated according to the
procedure established by the Health Provider.

                                   ARTICLE 44
                                  SALARY SCALE

         The minimum, midpoints and maximum points of the actual Salary Scale
shall prevail except as follows:

                  o        Year 1999 - The salary scale remains as in the
                           previous Collective Agreement

                  o        Year 2000 - The maximum points of the Salary Scale,
                           increases in 5.5%

                  o        Year 2001 - The maximum points of the Salary Scale
                           increases in 4.5%

                  o        Year 2002 - The maximum points of the Salary Scales
                           increases to 4.5%

<TABLE>
<CAPTION>
                   2000

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

   LEVEL         MINIMUM          MAXIMUM
-----------------------------------------------
<S>            <C>              <C>
     6          $11,440.00       $20,066.00
-----------------------------------------------
     7          $11,900.00       $22,345.00
-----------------------------------------------
     8          $13,500.00       $25,004.00
-----------------------------------------------
     9          $15,400.00       $28,485.00
-----------------------------------------------
     10         $17,600.00       $32,389.00
-----------------------------------------------
     11         $20,000.00       $37,031.00
-----------------------------------------------
     12         $23,000.00       $42,517.00
-----------------------------------------------
     13         $26,000.00       $48,003.00
-----------------------------------------------
     14         $29,400.00       $54,333.00
-----------------------------------------------
     15         $33,200.00       $61,401.00
-----------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                    2001

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

    LEVEL         MINIMUM          MAXIMUM
------------------------------------------------
<S>             <C>              <C>
      6          $11,440.00       $20,969.00
------------------------------------------------
      7          $11,900.00       $23,350.00
------------------------------------------------
      8          $13,500.00       $26,129.00
------------------------------------------------
      9          $15,400.00       $29,767.00
------------------------------------------------
     10          $17,600.00       $33,846.00
------------------------------------------------
     11          $20,000.00       $38,697.00
------------------------------------------------
     12          $23,000.00       $44,430.00
------------------------------------------------
     13          $26,000.00       $50,163.00
------------------------------------------------
     14          $29,400.00       $56,777.00
------------------------------------------------
     15          $33,200.00       $64,164.00
------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                    2002

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

    LEVEL         MINIMUM          MINIMUM
------------------------------------------------
<S>             <C>              <C>
      6          $11,440.00       $21,913.00
------------------------------------------------
      7          $11,900.00       $24,401.00
------------------------------------------------
      8          $13,500.00       $27,304.00
------------------------------------------------
      9          $15,400.00       $31,106.00
------------------------------------------------
     10          $17,600.00       $35,369.00
------------------------------------------------
     11          $20,000.00       $40,438.00
------------------------------------------------
     12          $23,000.00       $46,429.00
------------------------------------------------
     13          $26,000.00       $52,420.00
------------------------------------------------
     14          $29,400.00       $59,332.00
------------------------------------------------
     15          $33,200.00       $67,051.00
------------------------------------------------
</TABLE>

                                       46
<PAGE>   48

                                   ARTICLE 45
                                    SALARIES

SECTION 1

         During the effective period of this Agreement, the following raises
shall be applied, effective upon the granting of the same and its successive
anniversaries.

<TABLE>
<CAPTION>
                   OCTOBER       OCTOBER        OCTOBER        OCTOBER
                     1999          2000           2001           2002

<S>                <C>           <C>            <C>            <C>
                     5.6%          5.5%           4.5%           4.5%
</TABLE>

         Those regular employees who find themselves at the top of the Salary
Scale at the moment of effectiveness of the aforementioned raises, will not be
entitled to said raise. Notwithstanding, the employee will be granted a bonus
equivalent to the amount not received in substitution of the raise. Said bonus
shall not form part of the salary base or be utilized for the retirement
calculations.

SECTION 3

         Those regular employees who, surpass the ceiling of the Salary Scale
with the raise shall be entitled to the proportional part of the same until
reaching the salary ceiling and with regard to the excess, if any, they shall be
granted the difference in a bonus, which shall not form part of their salary
base nor will it be utilized toward retirement calculations.

SECTION 4

         The employees who are on Probationary Period at the moment of the
granting of this Agreement, shall receive the agreed upon raise for the first
year of effectiveness, effective on the date when they become regular employees.
The employees who join after the signature of this Agreement shall be entitled
to the raises that shall be granted on the first, second and third anniversary,
as long as they are regular employees as of the date when these raises are
granted.

                                   ARTICLE 46
                            INCENTIVES FOR ATTENDANCE

         The Company shall grant an Incentive for Attendance, which shall
provide the employees with the opportunity to receive compensation based on the
criteria which is specified further on:

SECTION 1

         This raise due to attendance shall be granted to employees who have had
no less than six (6) days of absence during the year 2001 of the Agreement and
four (4) days of absence during the year 2002 of the Agreement, during the
twelve (12) months prior to the date when the salary raise is granted.

SECTION 2

         For the purpose of attendance, the following factors shall be
considered:

         o        Sick Leave (E)

         o        Leave without salary (S)*

         o        Unjustified absence (N)

              *Excludes Leave Without Pay for Union Affairs

                                       47
<PAGE>   49

SECTION 3

         Criteria for the granting of the salary raise due to attendance:

         o        Salary raise (October 23, 2001). 1% increase raise per hour
                  shall be granted for attendance to all regular employees who
                  have had no more than six (6) days of absences, during the
                  twelve (12) months prior to the date when said salary raise is
                  granted.

         o        Salary raise (October 23, 2002). 1% increase per hour shall be
                  granted as raise for attendance for those employees who have
                  had no more than four (4) days of absences, during the twelve
                  (12) months prior to the date when said salary raise is
                  granted.

                                   ARTICLE 47
                                  DIFFERENTIALS

SECTION 1

Temporary Work

         a.       When the Company requires an employee to carry out the duties
                  of another position with a higher salary level within the same
                  Unit on a temporary basis, for a period greater than five (5)
                  consecutive working days, the Company shall pay a differential
                  of $1.00 per hour. If applicable, this differential shall be
                  paid from the beginning of the temporary assignment and for
                  the total hours worked.

         b.       The employee who is absent during the temporary work
                  assignment for more than five (5) consecutive labor days, when
                  return to work, a new period of five (5) consecutive labor
                  days have to elapse to be entitle to receive said differential
                  per hour.

SECTION 2

Shift Differentials

         a.       The Company shall pay a differential to the employees who work
                  night shifts and dawn hour shifts, which are those work shifts
                  which regularly end between 9:00 p.m. and 7:00 a.m.

                  The Compensation of differential for the eligible employees
                  shall be equivalent to ten percent (10%) of the basic hourly
                  rate.

         b.       The payment of the differential for work shifts shall cease
                  when the employee is reassigned a work shift that ends between
                  9:00 p.m. and 7:00 a.m. to a regular day work shift.

SECTION 3

Technical Training

         a.       For the purpose of being able to utilize the knowledge, skills
                  and experience of the professionals and technicians affiliated
                  to the HIETEL, the Company and the Brotherhood agree with the
                  consent of the employee, that when it is necessary and
                  required by the Training and Development Department, this
                  personnel will temporarily

                                       48
<PAGE>   50

                  develop courses related to their specialty and or offer
                  training according to the request received from the different
                  areas of the Company.

         b.       It is established a supplementary compensation, in other
                  words, a differential as economic incentive to any employee
                  who devotes time to teach courses and/or specialized training
                  in Telecommunication. A differential payment shall be granted
                  consisting of fifteen percent (15%) of the basic salary per
                  hour for the amount of hours devoted, required by the Training
                  and Development Department.

                  The differential of fifteen (15%) of the basic salary per hour
                  shall also apply to the necessary hours before, during and
                  after the time that the training is offered for the purpose of
                  making it more effective: preparation of documents,
                  utilization of audio-visual equipment and other resources
                  necessary for the effectiveness of the training.

         c.       In those cases where it applies, the employee will receive the
                  per diem, mileage, lodging and all the benefits to which he is
                  entitled, in conformity to what I established in this
                  agreement.

         d.       The participation of the members of the HIETEL in these
                  training functions shall not be utilized by PRT to ask that
                  they be excluded from the bargaining unit. Neither will they
                  be performing tasks of personnel not belonging to the union
                  nor of personnel included in other bargaining units and they
                  will no supervise any personnel whatsoever.

                                   ARTICLE 48
                                 CHRISTMAS BONUS

         All regular employees covered by this Agreement who meet the
requirements provided by the Bonus Act shall be entitled to receive a Christmas
Bonus as provided by the Law, except that the same shall be 8.0% over the total
of salaries received during the bonus year. The bonus shall be payable between
the 1st. and the 15th. of December of each year of that this Agreement is in
effect. The term salary shall include exclusively the following:

                  1.       Basic Salary
                  2.       Overtime
                  3.       Differential per Work Shift
                  4.       Vacation Leave
                  5.       Liquidation of Sick Leave to Retired Employees
                  6.       Excess of Sick Leave
                  7.       Internships
                  8.       Payment of Incentives

                                   ARTICLE 49
                                 RETIREMENT PLAN

SECTION 1

         The Company agrees to maintain in effect the Retirement Plan known as
"Puerto Rico Telephone Company Retirement Plan for Salaried Employees", known
before as "ITT Telephone Retirement Plan for Salaried Employees", put into
effect on September 1, 1968 and agrees that the benefit shall be payable by the
Company in its entirety.

                                       49
<PAGE>   51

SECTION 2

         The employees who choose this benefit, during the effective period of
the Collective Bargaining Agreement, shall receive the following lump sum:

         5 to 15 years of service                    3 months of salary
         16 to 20 years of service                   4 months of salary
         21 to 25 years of service                   5 months of salary
         26 to 29 years of service                   6 months of salary
         30 or more years of service                 8 months of salary

SECTION 3

         The Company shall continue providing the employees represented by the
Brotherhood, the Long Term Disability Insurance free of cost.

SECTION 4

         All the employees from the bargaining unit who choose to receive the
retirement benefits after the signature of this Collective Bargaining Agreement,
shall be eligible to participate in a family medical plan which shall be similar
to the one provided to the employees covered by this Collective Bargaining
without dental coverage. Nevertheless, the retire may select to continue in the
Dental Plan offered by the Company, but must be totally paid by the retiree.

SECTION 5

         To be entitle to the Health Plan, the retired employee will have to
make the contributions as indicated in Article 43 (Health Plan) during the
effective period of this Collective Bargaining Agreement.

                                   ARTICLE 50
                           PUBLICATION OF WORK SHIFTS

SECTION 1

         The Company shall prepare and publish the work shifts for any group of
employees or for each employee with fifteen (15) days of advance notice. The
fixed work shifts that comprise the schedule from 8:00 A.M. to 12:00 noon and
from 1:00 P.M. to 5:00 P.M., from Monday to Friday, shall not be published.

SECTION 2

         The Company shall assign the work shifts abiding by the following
principle: the work shifts shall be assigned in accordance to seniority in the
Company. The employee with greater seniority may grant his/her work shift to
another employee with lesser seniority. To be able to grant a work shift, the
employee must notify his/her immediate Supervisor with at least fifteen (15)
days of advance notice and must obtain his/her written authorization.

SECTION 3

         A pregnant employee working a night or one in the dawn hours shall be
entitled to replace the employee of lesser seniority working in her work center
and in her same classification during the daytime work shift, as long as she is
qualified to perform the work, during her seventh and eighth month of pregnancy.
Upon her return, after her Maternity Leave, the employee shall return to her
corresponding work shift system.

                                       50
<PAGE>   52

                                   ARTICLE 51
                                  PROGRESSIONS

         In all positions included in the Bargaining Unit with levels of
progression, the employee may be promoted to the following level, if he/she has
obtained satisfactory evaluations, complied with the required time in the
previous level and if his/her supervisor recommends him/her.

         All employees who rise to the next level shall receive 4% salary
increase for each level of progression.

                                   ARTICLE 52
                         ECONOMIC AID FOR STUDY EXPENSES

SECTION 1

         All regular employees with a year or more of service with the Company,
who is interested in aid for studies relating to his/her job and is not
currently under a performance improvement plan and/or as absenteeism as a result
of the annual performance evaluation, or who is on a long term disability,
occupational sick leave or leave without pay at the time of requesting the
economic aid will submit a petition before been admitted to an educational
institution. If at the time of filing the economic aid for studies, the employee
is under a performance improvement program for absenteeism that is not as a
result of the annual performance evaluation, he would not be entitle to receive
the benefit conceded in this article until he completes said program.

SECTION 2

         Once said application has been approved and the studies have been
satisfactorily completed in the teaching institutions credited by the Council of
Higher Education or the Department of Education, the employee may request that
the Company reimburse him/her (90%) of the total cost of the tuition for an
associate degree, degree, certificate, courses for licensee examinations and
first bachelors degree. The Company may reimburse the 80% of the total cost of
the tuition for a second bachelor degree if it is the first paid by the company
and is directly related to the employee's working area. The employee may request
the reimbursement of 35% of studies expenses for a second bachelor, whenever it
is the first paid by the Company and is directly related to his working area but
the studies must be related to works within the appropriate unit a 40% may be
reimburse for masters degree. Incidental expenses such as construction fees,
membership association dues, etc. are excluded from the tuition's fees. The
costs of books required up to a maximum of $200.00 per academic year including
summer session will be reimbursed.

SECTION 3

         Upon completing each period of studies, the employee shall be entitled
to request reimbursement for the courses satisfactorily approved (C or higher).
This right shall expire within six (6) months after having finished the same.
The employee may not claim those expenses that have been paid by means of
another study aid program. For this purpose, the employee shall provide the
necessary authorizations to verify the existence or not of other sources of aid.

SECTION 4

         The employee will have to accompany with his/her petition for
reimbursement with the documents, in original or official copies, that evidence
the payment of the tuition and books, as well as the grade obtained.

                                       51
<PAGE>   53

SECTION 5

         The studies must be carried out during the employee's non-working hours
and they must be geared toward obtaining an academic degree, for the purpose of
expanding his/her opportunities and development on the job.

SECTION 6

         When the Company decides to put a Study Scholarship Program into
effect, it shall give consideration to the employees in the Bargaining Unit. The
applicant must comply with the requirements established by the Company for the
granting of said scholarships.

                                   ARTICLE 53
                          PROFESSIONAL MEMBERSHIP FEES

SECTION 1

         The Company will reimburse the membership fees to those employees on
the classifications where as a condition of work are required to be collegiate,
and those classifications which can be created during the life of the agreement,
which are required as a condition of work.

                                   ARTICLE 54
                                 LIFE INSURANCE

SECTION 1

         The Company agrees to provide the same existing life insurance to all
the regular employees of the Bargaining Unit, except that the coverage shall
increase $50,000 and other $50,000 for accidental death and dismemberment.

SECTION 2

         The cost of this life insurance shall be paid in its entirety by the
Company.

SECTION 3

         The Company shall maintain the coverage and contribution of the
employee in the optional life insurance's (option I and II) in effect, which are
paid by the employees in their entirety.

         The Brotherhood may select an alternate provider (National Life
Insurance), for the optional life insurance's (option I and II).

                                   ARTICLE 55
                            UNIFORMS AND SAFETY SHOES

SECTION 1

         In the event that the Company requires the use of uniforms as a
condition of employment, the Company shall provide five (5) uniforms upon the
employee's entry and five (5) additional uniforms as of the date of his/her
service anniversary or within the year of having handed over the previous ones
without any cost whatsoever to the employee. In those cases where the Company
understands that is necessary the use of overalls in addition to the uniforms,
the Company will provide the employees two (2) overalls as the moment of the
hiring and two (2) at his/her anniversary or within the year of having handed
over the previous ones.

                                       52
<PAGE>   54

The employees shall use these uniforms only while they are performing the
official functions of their job, with the employee having to make good use of
the same.

SECTION 2

         Beginning on the third year, the employee must hand over five (5) used
uniforms so that the Firm will hand over to him/her five (5) new uniforms. Loss
of uniforms must be notified at once to the immediate supervisor and the
employee must present documents explaining the loss.

SECTION 3

         If the Company does not hand out the uniforms on the scheduled date,
this will not have the effect that it is not obligated to hand over the same;
then, on the next delivery, they must supply the entirety of the uniforms owed
up to that moment.

SECTION 4

         In those situations where due to the provisions of the law applicable
to the Company or when the Company itself requires the use of safety shoes, the
same shall be provided without cost to the employee. These shoes shall be
utilized only while the employee is performing his/her functions, with the
employee having to make good use of the same.

                                   ARTICLE 56
                            NO-STRIKE AND NO LOCKOUT

SECTION 1

         The Brotherhood agrees that neither it, nor the employees of the
Company who are part of the Bargaining Unit covered by this Agreement, may,
collectively, in a concerted fashion or individually devote themselves to
participate directly or indirectly in strikes of any nature, reduction in the
production or slow-down, interruption and/or paralysis of work, picketing,
boycotts or any other type of interference and/or interruption of the Company's
operations and activities.

SECTION 2

         During the effective period of this Agreement, the Brotherhood commits
itself to going to the Grievance Procedure provided by this same Agreement
instead of going to strike.

         To honor the terms of this Article and guaranteeing a permanent and
constructive industrial peace, the Brotherhood shall utilize all the available
resources and the ones that are in agreement with this Article.

SECTION 3

         In like manner, the Company commits itself, during the effective period
of this Agreement, to not make use of the lockout in any way whatsoever.

         To honor the terms of this Article and guarantee a permanent and
constructive industrial peace, the Company shall utilize all the available
resources and the ones which are themselves in consonance with this Article.

SECTION 4

         The Company reserves to itself the right to separate any employee from
the Bargaining Unit who carries out any of the actions stipulated above.

                                       53
<PAGE>   55

                                   ARTICLE 57
                               GRIEVANCE PROCEDURE

SECTION 1

         The term grievance comprises all controversies which involve the
interest of one or more employee and/or offense, complaint or claim relating to
the interpretation, application, administration or alleged violation of this
Agreement.

SECTION 2

         The complaints of grievances may be presented by the Brotherhood or by
the Company.

SECTION 3

         Any complaint or grievance shall be dealt with exclusively in
accordance to the mechanisms established in this Article. The parties agree that
if controversies arise during the effective period of this agreement, these
wild be resolved exclusively through the procedure which is provided as follows:

FIRST STAGE

         a.       Any grievance which arises shall be presented in writing in
                  the first instance within the term of five (5) working days
                  from the time that this grievance arises or the employee has
                  knowledge of it and the same shall be presented by the
                  delegate of the Brotherhood and/or the employee to the
                  employee's immediate supervisor.

         b.       The Supervisor, the Delegate and the employee shall meet to
                  discuss and analyze the grievance and try to resolve the same.
                  The Supervisor will have up to five (5) working days, from the
                  time that the grievance is received, to answer the same.

SECOND STAGE

         If the Brotherhood or the employee are not in conformity with the
decision in the case, or after the term for answering has elapsed, the same
shall be appealed in writing within the seven (7) working days following the
receipt of the decision or determination of the period of the first step, to the
immediate boss of the corresponding Supervisor who shall have up to five (5)
working days in which to answer the grievance. The Brotherhood or the employee
must present in writing to the Supervisor's immediate boss a summary of what has
happened during the first stage.

THIRD STAGE

         a.       If the Brotherhood is not in conformity with the decision
                  issued in the case in the second stage or after the term for
                  answering has elapsed, any Officer from the Brotherhood may
                  appeal filing the same within the ten (10) working days
                  following the receipt of the decision or the termination of
                  the period to answer in the previous stage if it has not been
                  answered. The appeal shall be filed in writing before the
                  office of the Director of the Department of Labor and Employee
                  Affairs accompanied by a summary of the facts, as well as the
                  result of the previous stage.

         b.       The Director of the Department of Labor and Employee Affairs
                  or his/her Representative shall summon the President of the
                  Brotherhood or his/her Representative once the grievance has
                  been received within ten (10) working days following the
                  receipt of the

                                       54
<PAGE>   56

                  grievance indicating the time, place and date, which shall be
                  no later than ten (10) working days following the date of the
                  summons.

         c.       The Director of the Department of Labor and Employee Affairs
                  or his/her Representative, the President of the Brotherhood or
                  his/her representative, the person who took the action which
                  gave basis for the grievance when the allegations of the
                  grievance so require it, as well as the grievance, shall meet
                  to the effect of trying to resolve or conciliate the
                  grievance. It being provided that in this stage in those cases
                  of suspension or dismissal the Company shall supply the
                  employee or the Brotherhood, a copy of the documentary
                  evidence on which the disciplinary action is based.

         d.       Once the grievance has been discussed, the Director of the
                  Department of Labor and Employee Affairs, or his/her
                  Representative, will answer the same in writing, by means of
                  certified mail, within the next ten (10) working days. If the
                  Brotherhood is not in agreement with the answer from the
                  Director of the Department of Labor and Employee Affairs, it
                  may recur to Arbitration as is indicated further on.

         e.       The grievances regarding the claims of salary shall be filed
                  in writing in the first instance in the third stage within the
                  term of ten (10) working days from the time that the grievance
                  arises or that the employee has knowledge of it. The Director
                  of the Department of Labor and Employee Affairs or his/her
                  Representative shall summon the President of the Brotherhood
                  or his/her Representative once the grievance has been within
                  the ten (10) working days following the receipt of the
                  grievance, indicating the time, place and date, which shall
                  not be later than ten (10) working days following the date of
                  the summons. The Director of the Department of Labor and
                  Employee Affairs or his Representative, shall have a term of
                  fifteen (15) working days in which to answer the grievance
                  after the meeting has been held for the consideration of the
                  same.

ARBITRATION

         a.       When the grievance has not been resolved in the previous
                  stage, the same may be submitted to Arbitration within ten
                  (10) working days following the receipt of the decision of the
                  Director of the Department of Labor and Employee Affairs or
                  after the term in which the answer has elapsed, whatever
                  occurs first. The Arbitrators to be utilized shall be those
                  from the Conciliation and Arbitration of the Department of
                  Labor and Human Resources, except when another thing is agreed
                  upon between the parties and the same shall be selected in
                  conformity to three arbitrator choice selection procedure and
                  to the norms of said Bureau. The decision of the Arbitrator
                  shall be final and unappeasable, which shall be followed and
                  complied with by the parties, as long as it is in conformity
                  to law. The parties will submit to the Arbitrator the written
                  submission of the grievance to be resolved.

         b.       The salary claims of up to $1,200 shall be dealt with in
                  accordance to the Arbitration Procedure established herein.
                  Unless something else is agreed upon between the parties, the
                  cases of salary claims in excess of $1,200 shall be processed
                  in the Courts, as long as they comply with the procedural
                  terms provided herein. It is clarified that all the other
                  types of cases, such as but without limitation, petitions for
                  reclassification, per diems, raises and/or claims that they
                  are performing work from another classification, shall
                  continue being dealt with through arbitration.

SECTION  4 - CASES OF SUSPENSION AND DISMISSAL

         a.       If an employee considers his/her suspension or separation to
                  be unfair, he/she should present his/her grievance to the
                  Brotherhood.

                                       55
<PAGE>   57

         b.       In the event that the Brotherhood also considers the
                  employee's suspension or separation to be unfair, the
                  Brotherhood shall present a grievance in writing within ten
                  (10) working days following the suspension or notice of
                  separation of the employee before the Director of the
                  Department of Labor and Employee Affairs for the Company.

         c.       In those cases in which the suspension or dismissal of the
                  employee is based on a report from the Company's Safety
                  Department, at the petition of the employee or of the
                  Brotherhood, a copy of the report shall be supplied within the
                  following 48 hours.

         d.       And from here on the procedure it shall be proceeded with as
                  is as provided from clause b of the Third Stage of this
                  Article onwards.

SECTION 5 - CASES OF PUBLICATION AND ADJUDICATION OF POSITIONS, TRANSFERS AND
PROMOTIONS

         a.       The grievances which arise where an employee claims a right to
                  a vacant position or that the article from the "Publication
                  Adjudication of Positions and Appointments" has been violated
                  shall be filed in writing before the Director of the
                  Department of Labor and Employee Affairs, indicating the
                  position that is being claimed, the requisition number for the
                  position and the person with whom it was covered. The
                  grievance must be presented within the seven (7) working days
                  following the adjudication of the position or from the time
                  that the employee has knowledge of the adjudication of the
                  position.

         b.       And from here on it shall be proceeded with as provided from
                  clause b of the Third Stage of this Article onwards.

SECTION 6 - CASES OF RECLASSIFICATION OF POSITIONS

         The grievances which arise as a result as a result of a petition for
reclassification for a position shall be presented before the Director of the
Department of Labor and Employee Affairs for the Company.

         In the event that the Brotherhood is not in agreement with the
determination of the department in charge of the classification of positions
regarding the petition for reclassification of a position and that it determines
filing a grievance, the same shall be filed before the Director of the
Department of Labor and Employee Affairs within the seven (7) working days
following the receipt of the notice of the determination or seven (7) working
days after the time for informing the Brotherhood about the determination of the
petition has elapsed.

         And from here on it shall be dealt with as provided from clause b of
the Third Stage of this Article onwards.

         During the discussion of the grievance in this stage the Brotherhood
must establish that functions or duties of a superior position have been
assigned to the position or that duties and functions of the same have evolved
in a substantial and permanent manner toward a position of a superior level or
that functions or duties of greater complexity have been assigned to it.

SECTION 7 - GRIEVANCES BETWEEN THE PARTIES

         The grievances of the Company shall be initiated by means of the
sending of a letter by the Director of the Department of Labor and Employee
Affairs to the President of the Brotherhood. The grievances which the
Brotherhood has regarding to alleged violations to the rights of the Brotherhood
consigned in this Agreement, shall be initiated by means of the sending of a
letter on the part of the President of the Brotherhood to the Director of the
Department of Labor and Employee Affairs.

         In both cases, these grievances shall be commenced in the third stage.
When the grievance is a Company grievance, the President of the Brotherhood or
his/her representative shall meet with the Director

                                       56
<PAGE>   58

of the Department of Labor and Employee Affairs within ten (10) working days
from the receipt of the grievance on the part of the Brotherhood. When the
grievance is on the part of the Brotherhood, the Director of the Department of
Labor Affairs shall meet with the President of the Brotherhood within the ten
(10) working days following the receipt of the grievance on the part of the
Company. If the meeting is not held on the terms indicated herein, the injured
party may go directly to arbitration in the terms indicated in Section 3
(Arbitration) once the term has expired.

         The grievances of the Brotherhood and of the Company will have to be
presented within a period of ten (10) working days after the event which
motivated the grievances have occurred or from the time that the grievance had
knowledge of the facts that motivated the grievance.

         If no agreement is reached between the parties, it shall be proceeded
with in conformity to what is established in Section 3 (Arbitration) of this
Article.

SECTION 8 - GENERAL PROVISIONS

         a.       It is agreed that at no time whatsoever will the grievance
                  employee or the delegates or representatives of the
                  Brotherhood be accompanied by more than one employee although
                  the grievance covers more than one, except in the cases of
                  separation when the grievance are not working. The parties
                  may, by mutual agreement in cases that so require it, excuse
                  more than one employee as long as the services are not
                  affected.

         b.       The Department of Labor and Employee Affairs shall hold
                  meetings and shall have at its discretion authority to
                  investigate the cases referred to this Department, obtain
                  evidence and call witnesses one at a time.

         c.       The terms for beginning the different stages of this procedure
                  are of a jurisdictional nature.

         d.       In those cases in which the Company summons an employee for
                  the purpose of this Article, it must do so within his/her
                  working hours.

SECTION 9 - SUBSTANTIVE MATTERS

         a.       A typewritten transcript of the Arbitration Hearings shall be
                  prepared by the Reporter supplied by the Bureau of
                  Conciliation and Arbitration, if there is one available. In
                  the event that the Bureau cannot supply said Reporter, the
                  Arbitrator will notify the parties prior to the Arbitration
                  Hearing so that any of them, if they wish to obtain a
                  typewritten transcript, will supply the Reporter and pay the
                  cost of the same. If both parties wish a copy of the
                  typewritten transcript, they will pay for it in equal parts.
                  In the event that one of the parties decides to submit a
                  brief, the Arbitrator shall grant a term no greater then
                  thirty (30) working days in which to submit the same.

         b.       The Arbitrator will have no power or faculty to in any way
                  alter, amend, change, modify, add or subtract from any of the
                  provisions of this Agreement, including from any of the
                  provisions of the Article regarding "Management Rights". An
                  award in violation of what has been indicated above shall be
                  void and without effect.

         c.       The Arbitrator shall not have authority to grant damages.

                                       57
<PAGE>   59

                                   ARTICLE 58
                           STABILITY OF THE AGREEMENT

SECTION 1

         In the event of the merger of the Company or of any of its facilities
with a private or public entity or that the Company sells, transfers or leases
property where there are employees covered by this Agreement working, the
Brotherhood must be notified with no less than twenty (20) days of notice prior
to the merger, sale, closing, transfer, lease, or expropriation. In addition,
the Company is obligated to inform the aforementioned new entity about the
existence of this Agreement.

SECTION 2

         In the event that due to said merger, sale, transfer, lease, closing or
expropriation, employees from the Bargaining Unit are displaced, the affected
regular employees shall be considered for relocation in other activities of the
Firm pursuant to the provisions of this Agreement.

SECTION 3

         If during the effective period of this Agreement the Company were to
acquire any facility or service which at the present time is being administrated
by another Company and it were integrated to the Company's program, the new
positions that are created, as well as any vacant position at said new facility
or service, which corresponds to the Bargaining Unit shall be covered in
accordance to the provisions of this Agreement. The time of seniority for the
effects of this Agreement for all the personnel passing through the Company by
means of this procedure shall begin to count from the date of effectiveness of
their appointment as Company employees.

SECTION 4

         In the event that any transfer, sale, merger, lease of facilities or
expropriation were to take place, the Company, notwithstanding what is provided
in the Article relating to the effectiveness regarding the duration of this
Agreement, shall be released from there on from any obligation under the same,
except with regard to obligations which may have already been incurred in under
the Article of the grievance procedure.

         This Collective Bargaining Agreement shall obligate all employers
successors of the Company during its effective period even when the transfer,
sale, merger, lease or expropriation were a partial one.

                                   ARTICLE 59
                              SEPARABILITY CLAUSES

SECTION 1

         In the event that part of any of the provisions of this Agreement were
to turn out to be illegal by virtue of the effective laws or those approved in
the future or by means of a judicial decree or a final and firm judgement,
issued by a competent court of jurisdiction or by any other government entity,
such law, decree, decision, order or judgement shall affect only the part or
provision that is declared illegal, but the same will not invalidate the rest of
the Agreement, it being the express intention of the contracting parties that
all the portions not declared illegal shall remain in their full force and
effect during the effective period of this agreement and it is stated, in
addition, that nothing of what is agreed upon herein in any way whatsoever shall
prevent any of the contracting parties from exercising their rights to appeal
the judgement or judicial decision, order or judgement from the concerned
government entity.

                                       58
<PAGE>   60

SECTION 2

         In the event that any Article or Section were to be declared invalid or
the compliance or observation of such Article or Section would have been
declared in suspense, the parties affected by such action will enter into
immediate collective negotiations, for the purpose of reaching an agreement
about a mutually satisfactory substitute provision for such Article or Section.

SECTION 3

         In the event that in any matter or controversy more than one provision
of this Agreement can be applied or that more than one interpretation of the
same is possible, that provision or interpretation which turns out to be more
consistent with the Collective Bargaining Agreement construed in its entirety
shall be applied.

                                   ARTICLE 60
                                SPECIAL TRAINING

SECTION 1

         a.       When the introduction of new specialized equipment, which
                  requires special training to operate the same affects the work
                  of personnel from the Bargaining Unit, the Company shall
                  select the employees to be trained from among the affected
                  employees who meet the requirements of training for the
                  position and approve the written examinations and/or practical
                  tests which the Company designs for said training.

         b.       The requirements, examinations and tests shall be established
                  by the Company prior the selection of candidates for the
                  training. The Company will determine in its criterion the
                  number of persons to receive the special training, but when
                  choosing among the candidates that qualify the Company shall
                  apply the following criteria: seniority, evaluations that are
                  already written and prepared in the normal course of
                  employment for the last two (2) years, attendance and
                  timeliness records during the last two (2) years, disciplinary
                  records for the last two (2) years, related experience and
                  training.

                  Seniority shall prevail over the other factors if these were
                  to turn out to be equal among the employees to be trained.

         c.       If sufficient candidates which qualify from among the affected
                  employees do not arise, the Company shall publish the position
                  in conformity to Section 1 of Article 12 regarding
                  Publication, Adjudication of Positions and Appointments. If
                  there do not turn out to be sufficient internal candidates
                  which qualify, the Company will retain the right to include in
                  the training qualified personnel from external recruiting.

SECTION 2

         The Company shall extend to the candidates selected appointments
conditioned to the approval of the training. During the training period the
daily hour schedule and the weekly work program may vary in accordance to the
needs and conditions of the training to be offered and of the service being
rendered.

SECTION 3

         The employees who approve the training's in which they participate
shall be maintained in said positions. However, those employees who do not
approve their training's satisfactorily or who were not selected for the same
shall be reassigned to another position, as long as there exists another vacant
position and that they qualify for the same. If there is no vacant position or
if the employee does not qualify for the vacant positions which may exist, then
it shall be proceeded with in accordance to the Personnel Reduction and
Re-employment article.

                                       59
<PAGE>   61

                                   ARTICLE 61
                                  WELFARE FUND

SECTION 1

         The Company agrees to contribute $0.03 for each hour worked by each
employee covered by this Agreement during the first and second year and $0.04
during the third year of the Agreement for the Welfare Fund established in this
Article.

SECTION 2

         The Fund shall be ruled by a Trust which shall be created within the 30
days following the signature of this Agreement to administrate the funds in
which the Company and the Brotherhood shall have equal participation. The
parties, by mutual agreement, shall prepare a regulation which will establish
the controls and the use given to the funds, which shall be to provide benefits
and aid to the employee's represented by the Brotherhood. The ratification of
this regulation must not exceed 60 days from the signature of this Agreement,
unless the parties, extend this term, by mutual agreement.

SECTION 3

         Until the Trust is created and the regulation is ratified by the
parties, the Company's contributions shall be deposited in a separate savings
account. Once the Trust has been created and the regulation has been ratified,
the funds in the savings account shall be transferred to the Trust account which
must be separate from any other account of the Brotherhood. Later, the Company
will forward to the Fund's administrators, after the rendering of the required
bonds, the sum of the contribution indicated in Section 1 of this Article. The
same shall be made during the ten (10) calendar days following the payment that
is made every two weeks, except when there are extraordinary circumstances in
which case the term shall not exceed ten (10) additional calendar days.

SECTION 4

         When any audit reveals a pattern of violation to the regulation or that
the administration of the Fund has strayed away from the principles and purpose
for which this Fund was created, the Company may discontinue the contributions
to the Fund until the violations are corrected.

SECTION 5

         In the event that any Court, Agency or any other entity with
jurisdiction declares by means of an order, resolution and/or final judgment
that this Article or the Trust created under the same is illegal, the Company
may discontinue the contributions to the Fund until the illegality is corrected
and if it is not able to be corrected or if it were not to be corrected, the
existing Funds shall be returned to the Company.

                                   ARTICLE 62
                              SUPPLYING INFORMATION

SECTION 1

         The Company shall supply the Brotherhood, simultaneously, copy of all
communications, documents, notices, circulars, bulletins or brochures directed
for general distribution among the employees making up the Bargaining Unit. The
Vice-president of Human Resources will supply a copy to the Brotherhood of any
administrative Practice, Regulation and Procedure of Human Resources that
applies and/or covers the members of the Bargaining Unit.

                                       60
<PAGE>   62

                                   ARTICLE 63
                                LEGAL ASSISTANCE

SECTION 1

         The Company shall provide free of cost, services of attorneys selected
by the Company, to those employees who in the performance of their duties were
to suffer an accident while driving motor vehicles on official matters and were
subpoenaed and/or indicted for such events, or when while carrying official
endeavors, they are accused of a public crime for facts allegedly occurred while
they were rendering service to a client, except sexual crimes, murder and
controlled substances.

                                   ARTICLE 64
                              CHILD DAY CARE CENTER

SECTION 1

         During the effective period of this Collective Bargaining Agreement,
the Company will pay on a monthly basis to institutions dedicated to child day
care center which count with the corresponding permits required by the laws
applicable to it, under the conditions provided further on. Said payment shall
be for the concept of the day care of the children of employees covered by this
Agreement, which maximum age is up to five years or until the moment when they
begin in the school system, what occurs first.

SECTION 2

         The number of children that may benefit from the provisions of this
Article, as well as the maximum monthly contribution forwarded by the Company,
shall be in conformity to the following table:

<TABLE>
<CAPTION>
                           MAXIMUM NUMBER         MAXIMUM MONTHLY
            YEAR            OF CHILDREN               BENEFIT
            ----            -----------               -------

<S>                         <C>                  <C>
      Duration of the            30                   $100.00
         Agreement
</TABLE>

SECTION 3

         These amounts shall be paid directly to the Day Care Center by means of
the previous presentation of invoice by the corresponding Center or through the
employee and in such situation the Company will issue a check to the order of
said Center, on a monthly basis, within the fifteen (15) calendar days following
the receipt of the invoice.

         It shall be the responsibility of the employee to pay the Day Care
Center for any difference between the rate and the maximum benefit paid by the
Company, as provided in this Article.

         The payment corresponding to the first year shall have effect from the
beginning of the school year corresponding to the year 2000.

SECTION 4

         The children of employees of the Bargaining Unit, whose parents will
benefit from this help shall be chosen by means of a lottery to be held no later
than the month of June of each year, during the effective period of this
Agreement. Each employee may request this benefit for a son or daughter, so that
a greater number of employees can be benefited. In the lottery there will
participate the employees who have certified to the Company, prior to the
lottery, having young children, of up to five (5) years of age. Said lottery
shall be coordinated

                                       61
<PAGE>   63

between the Company and the Brotherhood. In the event that the total number of
children is not covered, a second lottery will be held, in which another child
of the employees who have turned out to be benefited in the first lottery may
participate.

SECTION 5

         The selected employee shall certify that he/she has his/her child in a
duly authorized Day Care Center, operating with all the necessary permits. The
Company reserves for itself the faculty to require any other relevant
information and evidence of the required permits.

                                   ARTICLE 65
                                   CONTRACTING

         The sub-contracting of work, tasks, services and functions shall not be
utilized to lay off employees covered by the Bargaining Unit.

                                   ARTICLE 66
                            CHAUFFEUR SOCIAL SECURITY

         The Company will pay in its entirety the contributions established by
to the Chauffeur Social Security Act (Act 428 of May 15, 1950, as amended).

                                   ARTICLE 67
                         NOTICE REGARDING ACCRUED LEAVE

         The Company shall inform each employee in writing every twelve (12)
months about the balance of the accrued regular vacation and sick leaves that
each employee has.

                                   ARTICLE 68
                              ACCIDENTAL DEATH AND
                             DISMEMBERMENT INSURANCE

SECTION 1

         The Company will continue providing the benefit for Accidental Death
and Dismemberment Insurance benefits which it is providing at the present time
free of cost to the employees of the Unit. The Company reserves for itself the
exclusive right of changing the insurance provider, as long as the benefits in
existence at the present time are not affected. It includes Accidental Insurance
during official trips.

SECTION 2

         With regard to the Voluntary Accidental Insurance, the employees that
so desire it may select to continue or be covered by this insurance at their own
cost. The Company does not guarantee that either the coverage or the cost of the
insurance will continue to be equal to or identical to the ones in effect as of
the signature of this Agreement.

                                   ARTICLE 69
                              INCENTIVES FOR SALES

         The Company in its sole discretion, may improve, modify, change,
condition and/or eliminate the incentives for existing sales, or create new
incentives in conformity to the economic condition of each profit center by
means of a written notice to the Brotherhood (HIETEL) with 30 days advance
notice.

                                       62
<PAGE>   64

                                   ARTICLE 70
                                 TOTAL AGREEMENT

         The contracting parties recognize that, during the negotiations that
culminated in this Agreement, each one of them had the right and the unlimited
opportunity to formulate demands and propositions with regard to all the matters
not excluded by law in the area of collective contracting and that all the
agreements and covenants reached by them by means of the exercise of such rights
and opportunities, appear stated in this Agreement.

         In like manner, the parties recognize that this Agreement contains all
the work conditions agreed upon by both of them and that from this date onwards
they shall be the only work conditions ruling between the parties.

         This Agreement may not be modified, amended, changed or considered to
be ended except by means of a written stipulation duly signed by the authorized
representatives of the parties and it is the intention of the contracting
parties to reserve for any future agreement which begins to rule after the
expiration of this Collective Bargaining Agreement any and all matters which are
not expressly covered by this Collective Bargaining Agreement.

                                   ARTICLE 71
                                    DURATION

         This Collective Bargaining Agreement shall be in effect during forty
eight (48) months and shall begin to rule from October 23, 1999 until midnight
of October 22, 2003.

         However, the terms and conditions of the Collective Bargaining
Agreement between October 23, 1999 and October 22, 2000, shall be limited to:

All regular employees shall be eligible to receive the salary increase
corresponding to year 1999 in a lump sum payment of $1,900.00. This amount
includes payment for overtime, per diems, and any other economic compensation
for these employees.

The regular employees who, as of October 23, 1999 were members of the
Brotherhood and at the date of the ratification of the Collective Bargaining
Agreement continues as active employees in the Company and members of the
Brotherhood shall be eligible.

The eligible employees will receive the lump sum of $1,900.00 not later than
December 8, 2000.

Those employees who were not members of the Brotherhood as of October 23, 1999
and at the date of notification were regular employees of the Brotherhood, shall
be entitle to receive the proportion of the lump sum payment which corresponds
for the time worked during said period.

The lump sum payment shall have the required legal deductions.

                                       63
<PAGE>   65

                              PUERTO RICO TELEPHONE

                                /s/ Jon E. Slater
                                -----------------
                                  Jon E. Slater
                                    President

NEGOTIATING COMMITTEE

Mrs. Georgia Scaife                               Mrs. Maximina Morales
Vice President Human Resources                    Labor Affairs Manager
and Spokesperson

Mrs. Nelida  Ruiz                                 Mrs. Ana C. Perez
Billing Manager                                   Sales Manager

Mr. Bernardino Rosado                             Mr. Ramon Gomez
Commercial Services                               Plant Extension Manager
Manager

Mrs. Annie Cadiz
Secretary

LEGAL ADVISOR

Esquire Greg Usera

                                       64
<PAGE>   66

                           INDEPENDENT BROTHERHOOD OF
                           TELEPHONE COMPANY EMPLOYEES

                                 /s/ Annie Cruz
                                 --------------
                                   Annie Cruz
                                    President

NEGOTIATING COMMITTEE AND BOARD OF DIRECTORS

Mrs. Annie Cruz                                   Eng. Jose E. Perez
President                                         Vice President

Mrs. Telizia R. Dolz                              Mr. Jose Kortright
Secretary of Act and                              Treasurer
Correspondence

Mr. Jose D. Diaz                                  Mr. Samuel Mejias
General Delegate                                  Public Relations and
                                                  Propaganda Secretary

Mr. Victor Ortiz
Secretary of Organization
and Formation

LEGAL ADVISOR

Esquire Jaime Cruz

                                       65<PAGE>   1

                                                                   EXHIBIT 10.25

                        COMMERCIAL PAPER DEALER AGREEMENT
                                  4(2) PROGRAM

                                      AMONG

               TELECOMUNICACIONES DE PUERTO RICO, INC., AS ISSUER;

          PUERTO RICO TELEPHONE COMPANY, INC. AND CELULARES TELEFONICA,
                              INC., AS GUARANTORS;

                                       AND

              Merrill Lynch Money Markets Inc., as Dealer for Notes
                         with maturities up to 270 days;

     MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, AS DEALER FOR NOTES
                  WITH MATURITIES OVER 270 DAYS UP TO 365 DAYS

            CONCERNING NOTES TO BE ISSUED PURSUANT TO AN ISSUING AND
          PAYING AGENCY AGREEMENT DATED AS OF NOVEMBER 9, 2000 BETWEEN
         THE ISSUER AND THE CHASE MANHATTAN BANK, AS ISSUING AND PAYING
                                      AGENT

                                   DATED AS OF

                                NOVEMBER 9, 2000

<PAGE>   2

                        COMMERCIAL PAPER DEALER AGREEMENT
                                  4(2) PROGRAM

         This agreement ("Agreement") sets forth the understandings among the
Issuer, the Guarantors and the Dealer in connection with the issuance and sale
by the Issuer of its short-term promissory notes through the Dealer (the
"Notes").

         Each of the Guarantors, jointly and severally, has agreed
unconditionally and irrevocably to guarantee payment in full of the principal
and interest (if any) on all such Notes of the Issuer, pursuant to guarantees,
dated the date hereof, in the form of Exhibit C hereto (the "Guarantee").

         Certain terms used in this Agreement are defined in Section 6 hereof.

         The Addendum to this Agreement, and any Annexes or Exhibits described
in this Agreement or such Addendum, are hereby incorporated into this Agreement
and made fully a part hereof.

Section 1. Offers, Sales and Resales of Notes

         1.1 While (i) the Issuer has and shall have no obligation to sell the
Notes to the Dealer or to permit the Dealer to arrange any sale of the Notes for
the account of the Issuer, and (ii) the Dealer has and shall have no obligation
to purchase the Notes from the Issuer or to arrange any sale of the Notes for
the account of the Issuer, the parties hereto agree that in any case where the
Dealer purchases Notes from the Issuer, or arranges for the sale of Notes by the
Issuer, such Notes will be purchased or sold by the Dealer in reliance on the
representations, warranties, covenants and agreements of the Issuer contained
herein or made pursuant hereto and on the terms and conditions and in the manner
provided herein.

         1.2 So long as this Agreement shall remain in effect, and in addition
to the limitations contained in Section 1.7 hereof, the Issuer shall not,
without the consent of the Dealer, offer, solicit or accept offers to purchase,
or sell, any Notes except (a) in transactions with one or more dealers which may
from time to time after the date hereof become dealers with respect to the Notes
by executing with the Issuer one or more agreements which contain provisions
substantially identical to Section 1 of this Agreement, of which the Issuer
hereby undertakes to provide the Dealer prompt notice or (b) in transactions
with the other dealers listed on the Addendum hereto, which are executing
agreements with the Issuer which contain provisions substantially identical to
Section 1 of this Agreement contemporaneously herewith. In no event shall the
Issuer offer, solicit or accept offers to purchase, or sell, any Notes directly
on its own behalf in transactions with persons other than broker-dealers as
specifically permitted in this Section 1.2.

         1.3 The Notes shall be in a minimum denomination or minimum amount,
whichever is applicable, of $250,000 or integral multiples of $1,000 in excess
thereof, will bear such interest rates, if interest bearing, or will be sold at
such discount from their face amounts, as shall be agreed upon by the Dealer and
the Issuer, shall have a maturity not exceeding 365 days from the date of
issuance (exclusive of days of grace) and shall not contain any provision for
extension, renewal or automatic "rollover."

         1.4 The authentication, delivery and payment of the Notes shall be
effected in accordance with the Issuing and Paying Agency Agreement and the
Notes shall be either individual bearer physical certificates or represented by
book-entry Notes registered in the name of DTC or its nominee in the form or
forms annexed to the Issuing and Paying Agency Agreement.

         1.5 If the Issuer and the Dealer shall agree on the terms of the
purchase of any Note by the Dealer or the sale of any Note arranged by the
Dealer (including, but not limited to, agreement with respect to the date of
issue, purchase price, principal amount, maturity and interest rate (in the case
of interest-bearing Notes) or discount thereof (in the case of Notes issued on a
discount basis), and appropriate

                                       1
<PAGE>   3

compensation for the Dealer's services hereunder) pursuant to this Agreement,
the Issuer shall cause such Note to be issued and delivered in accordance with
the terms of the Issuing and Paying Agency Agreement and payment for such Note
shall be made by the purchaser thereof, either directly or through the Dealer,
to the Issuer. Except as otherwise agreed, in the event that the Dealer is
acting as an agent and a purchaser shall either fail to accept delivery of or
make payment for a Note on the date fixed for settlement, the Dealer shall
promptly notify the Issuer, and if the Dealer has theretofore paid the Issuer
for the Note, the Issuer will promptly return such funds to the Dealer against
its return of the Note to the Issuer, in the case of a certificated Note, and
upon notice of such failure in the case of a book-entry Note. If such failure
occurred for any reason other than default by the Dealer, the Issuer shall
reimburse the Dealer on an equitable basis for the Dealer's loss of the use of
such funds for the period such funds were credited to the Issuer's account.

         1.6 The Dealer and the Issuer hereby establish and agree to observe the
following procedures in connection with offers, sales and subsequent resales or
other transfers of the Notes:

                  (a) Offers and sales of the Notes by or through the Dealer
         shall be made only to the following types of investors: (i) investors
         reasonably believed by the Dealer to be Institutional Accredited
         Investors, (ii) non-bank fiduciaries or agents that will be purchasing
         Notes for one or more accounts, each of which is an Institutional
         Accredited Investor, and (iii) Qualified Institutional Buyers.

                  (b) Resales and other transfers of the Notes by the holders
         thereof shall be made only in accordance with the restrictions in the
         legends described in clause (e) below.

                  (c) No general solicitation or general advertising shall be
         used in connection with the offering of the Notes. Without limiting the
         generality of the foregoing, without the prior written approval of
         Dealer, the Issuer shall not issue any press release or place or
         publish any "tombstone" or other advertisement relating to the Notes.

                  (d) No sale of Notes to any one purchaser shall be for less
         than $250,000 principal or face amount, and no Note shall be issued in
         a smaller principal or face amount. If the purchaser is a non-bank
         fiduciary acting on behalf of others, each person for whom such
         purchaser is acting must purchase at least $250,000 principal or face
         amount of Notes.

                  (e) Offers and sales of the Notes by the Issuer through the
         Dealer acting as agent for the Issuer shall be made in accordance with
         Rule 506 under the Securities Act, and shall be subject to the
         restrictions described in the legend appearing on Exhibit A hereto. A
         legend substantially to the effect of such Exhibit A shall appear as
         part of the Private Placement Memorandum used in connection with offers
         and sales of Notes hereunder, as well as on each Note offered and sold
         pursuant to this Agreement.

                  (f) Dealer shall furnish or shall have furnished to each
         purchaser of Notes being sold to an ultimate purchaser for the first
         time a copy of the then-current Private Placement Memorandum unless
         such purchaser has previously received a copy of the Private Placement
         Memorandum as then in effect. The Private Placement Memorandum shall
         expressly state that any person to whom Notes are offered shall have an
         opportunity to ask questions of, and receive information from, the
         Issuer and the Dealer and shall provide the names, addresses and
         telephone numbers of the persons from whom information regarding the
         Issuer may be obtained.

                  (g) The Issuer agrees, for the benefit of the Dealer and each
         of the holders and prospective purchasers from time to time of the
         Notes that, if at any time the Issuer shall not be subject to Section
         13 or 15(d) of the Exchange Act, the Issuer will furnish, upon request
         and at its expense, to the Dealer and to holders and prospective
         purchasers of Notes information required by Rule 144A(d)(4)(i) in
         compliance with Rule 144A(d).

                                       2
<PAGE>   4

                  (h) In the event that any Note offered or to be offered by
         Dealer would be ineligible for resale under Rule 144A, the Issuer shall
         immediately notify Dealer (by telephone, confirmed in writing) of such
         fact and shall promptly prepare and deliver to Dealer an amendment or
         supplement to the Private Placement Memorandum describing the Notes
         that are ineligible, the reason for such ineligibility and any other
         relevant information relating thereto.

                  (i) The Issuer represents that it is not currently issuing
         commercial paper in the United States market in reliance upon, and in
         compliance with, the exemption provided by Section 3(a)(3) of the
         Securities Act. In the event the issuer launches a 3(a)(3) commercial
         paper program, the Issuer agrees that (a) the proceeds from the sale of
         the Notes will be segregated from the proceeds of the sale of any such
         commercial paper by being placed in a separate account; (b) the Issuer
         will institute appropriate corporate procedures to ensure that the
         offers and sales of notes issued by the Issuer pursuant to the Section
         3(a)(3) exemption are not integrated with offerings and sales of Notes
         hereunder; and (c) the Issuer will comply with each of the requirements
         of Section 3(a)(3) of the Act in selling commercial paper or other
         short-term debt securities other than the Notes in the United States.

         1.7 The Issuer hereby represents and warrants to the Dealer, in
         connection with offers, sales and resales of Notes, as follows:

                  (a) Issuer hereby confirms to the Dealer that (except as
         permitted by Section 1.6(i)) within the preceding six months neither
         the Issuer nor any person other than the Dealer or the other dealers
         referred to in Section 1.2 hereof acting on behalf of the Issuer has
         offered or sold any Notes, or any substantially similar security of the
         Issuer (including, without limitation, medium-term notes issued by the
         Issuer), to, or solicited offers to buy any such security from, any
         person other than the Dealer or the other dealers referred to in
         Section 1.2 hereof. The Issuer also agrees that, as long as the Notes
         are being offered for sale by the Dealer and the other dealers referred
         to in Section 1.2 hereof as contemplated hereby and until at least six
         months after the offer of Notes hereunder has been terminated, neither
         the Issuer nor any person other than the Dealer or the other dealers
         referred to in Section 1.2 hereof (except as contemplated by Section
         1.2 hereof) will offer the Notes or any substantially similar security
         of the Issuer for sale to, or solicit offers to buy any such security
         from, any person other than the Dealer and the other dealers referred
         to in Section 1.2 hereof, it being understood that such agreement is
         made with a view to bringing the offer and sale of the Notes within the
         exemption provided by Section 4(2) of the Securities Act and Rule 506
         thereunder and shall survive any termination of this Agreement. The
         Issuer hereby represents and warrants that it has not taken or omitted
         to take, and will not take or omit to take, any action that would cause
         the offering and sale of Notes hereunder to be integrated with any
         other offering of securities, whether such offering is made by the
         Issuer or some other party or parties.

                  (b) The Issuer represents and agrees that the proceeds of the
         sale of the Notes are not currently contemplated to be used for the
         purpose of buying, carrying or trading securities within the meaning of
         Regulation T and the interpretations thereunder by the Board of
         Governors of the Federal Reserve System. In the event that the Issuer
         determines to use such proceeds for the purpose of buying, carrying or
         trading securities, whether in connection with an acquisition of
         another company or otherwise, the Issuer shall give the Dealer at least
         five business days' prior written notice to that effect. The Issuer
         shall also give the Dealer prompt notice of the actual date that it
         commences to purchase securities with the proceeds of the Notes.
         Thereafter, in the event that the Dealer purchases Notes as principal
         and does not resell such Notes on the day of such purchase, to the
         extent necessary to comply with Regulation T and the interpretations
         thereunder, the Dealer will sell such Notes only to offerees it
         reasonably believes to be QIBs or to QIBs it reasonably believes are
         acting for other QIBs, in each case in accordance with Rule 144A.

                                       3
<PAGE>   5

Section 2. Representations and Warranties of Issuer

The Issuer, with respect to Sections 2.1 through 2.10, and each of the
Guarantors, with respect to Sections 2.11 through 2.17, represents and warrants
that:

         2.1 The Issuer is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all the requisite power and authority to execute, deliver and perform its
obligations under the Notes, this Agreement and the Issuing and Paying Agency
Agreement.

         2.2 This Agreement and the Issuing and Paying Agency Agreement have
been duly authorized, executed and delivered by the Issuer and constitute legal,
valid and binding obligations of the Issuer enforceable against the Issuer in
accordance with their terms subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).

         2.3 The Notes have been duly authorized, and when issued and delivered
as provided in the Issuing and Paying Agency Agreement, will be duly and validly
issued and delivered and will constitute legal, valid and binding obligations of
the Issuer enforceable against the Issuer in accordance with their terms subject
to applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law).

         2.4 The offer and sale of Notes in the manner contemplated hereby do
not require registration of the Notes under the Securities Act, pursuant to the
exemption from registration contained in Section 4(2) thereof and Regulation D
thereunder, and no indenture in respect of the Notes is required to be qualified
under the Trust Indenture Act of 1939, as amended.

         2.5 The Notes will rank at least pari passu with all other unsecured
and unsubordinated indebtedness of the Issuer.

         2.6 No consent or action of, or filing or registration with, any
governmental or public regulatory body or authority, including the SEC, is
required to authorize, or is otherwise required in connection with the
execution, delivery or performance of, this Agreement, the Notes or the Issuing
and Paying Agency Agreement, except as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale of the
Notes.

         2.7 Neither the execution and delivery of this Agreement and the
Issuing and Paying Agency Agreement, nor the issuance and delivery of the Notes
in accordance with the Issuing and Paying Agency Agreement, nor the fulfillment
of or compliance with the terms and provisions hereof or thereof by the Issuer,
will (i) result in the creation or imposition of any mortgage, lien, charge or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Issuer, or (ii) violate or result in a breach or an event of default under any
of the terms of the Issuer's charter documents or by-laws, any contract or
instrument to which the Issuer is a party or by which it or its property is
bound, or any law or regulation, or any order, writ, injunction or decree of any
court or government instrumentality, to which the Issuer is subject or by which
it or its property is bound, which breach or event of default might have a
material adverse effect on the condition (financial or otherwise), operations or
business prospects of the Issuer or the ability of the Issuer to perform its
obligations under this Agreement, the Notes or the Issuing and Paying Agency
Agreement.

         2.8 There is no litigation or governmental proceeding pending, or to
the knowledge of the Issuer threatened, against or affecting the Issuer or any
of its subsidiaries which might result in a material adverse change in the
condition (financial or otherwise), operations or business prospects of the
Issuer or the ability of the Issuer to perform its obligations under this
Agreement, the Notes or the Issuing and Paying Agency Agreement.

                                       4
<PAGE>   6

         2.9 The Issuer is not an "investment company" or an entity "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended.

         2.10 Neither the Private Placement Memorandum nor the Company
Information contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

         2.11 Each of the Guarantors is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all the requisite power and authority to execute, deliver
and perform its respective obligations under the Guarantees, this Agreement and
the Issuing and Paying Agency Agreement.

         2.12 This Agreement, the Issuing and Paying Agency Agreement and the
Guarantees have been duly authorized, executed and delivered by each of the
Guarantors and constitute legal, valid and binding obligations of the Guarantors
enforceable against the Guarantors in accordance with their terms subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally, and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law) and except as enforceability of the indemnification provisions of this
Agreement may be limited by federal securities laws.

         2.13 No consent or action of, or filing or registration with, any
governmental or public regulatory body or authority, including the SEC, is
required to authorize, or is otherwise required in connection with the
execution, delivery or performance by the Guarantors of, this Agreement, the
Guarantees or the Issuing and Paying Agency Agreement, except as may be required
by the securities or Blue Sky laws of the various states in connection with the
offer and sale of the Notes.

         2.14 Neither the execution and delivery by the Guarantors of this
Agreement, the Issuing and Paying Agency Agreement and the Guarantees, nor the
fulfillment of or compliance with the terms and provisions hereof or thereof by
each of the Guarantors, will (i) result in the creation or imposition of any
mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Guarantors, or (ii) violate or result in a breach or
an event of default under any of the terms of the Guarantors' charter documents
or by-laws, any contract or instrument to which each of the Guarantors is a
party or by which it or its property is bound, or any law or regulation, or any
order, writ, injunction or decree of any court or government instrumentality, to
which each of the Guarantors is subject or by which it or its property is bound,
which breach or event of default might have a material adverse effect on the
condition (financial or otherwise), operations or business prospects of each of
the Guarantors or the ability of either Guarantor to perform its obligations
under this Agreement, the Guarantees or the Issuing and Paying Agency Agreement.

         2.15 Neither of the Guarantors is an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.

         2.16 The information concerning the Guarantors contained in the Private
Placement Memorandum does not contain any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

         2.17 The Guarantees do not require registration under the Securities
Act, pursuant to the exemption from registration contained in Section 4(2)
thereof.

         2.18 Each (a) issuance of Notes by the Issuer hereunder and (b)
amendment or supplement of the Private Placement Memorandum shall be deemed a
representation and warranty by each of the Issuer and the Guarantors (as to
itself) to the Dealer, as of the date thereof, that, both before and after
giving effect to such issuance and after giving effect to such amendment or
supplement, (i) the representations and

                                       5
<PAGE>   7

warranties given by the Issuer and the Guarantors set forth above in this
Section 2 remain true and correct on and as of such date as if made on and as of
such date, (ii) in the case of an issuance of Notes, the Notes being issued on
such date have been duly and validly issued and constitute legal, valid and
binding obligations of the Issuer, enforceable against the Issuer in accordance
with their terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law) and (iii) in the case of an issuance of Notes,
since the date of the most recent Private Placement Memorandum, there has been
no material adverse change in the condition (financial or otherwise), operations
or business prospects of the Issuer or the Guarantors which would impact the
ability of the Issuer or either of the Guarantors to perform its obligations
under the Notes or the Guarantees, as the case may be, and which has not been
disclosed to the Dealer in writing.

Section 3. Covenants and Agreements of Issuer

The Issuer covenants and agrees that:

         3.1 The Issuer will give the Dealer prompt notice (but in any event
prior to any subsequent issuance of Notes hereunder) of any amendment to,
modification of, or waiver with respect to, the Notes or the Issuing and Paying
Agency Agreement, including a complete copy of any such amendment, modification
or waiver.

         3.2 The Issuer shall, whenever there shall occur any change in the
Issuer's condition (financial or otherwise), operations or business prospects or
any development or occurrence in relation to the Issuer that would be material
to holders of the Notes or potential holder of the Notes (including any
downgrading or receipt of any notice of intended or potential downgrading or any
review for potential change in the rating accorded any of the Issuer's
securities by any nationally recognized statistical rating organization which
has published a rating of the Notes), promptly, and in any event prior to any
subsequent issuance of Notes hereunder, notify the Dealer (by telephone,
confirmed in writing) of such change, development, or occurrence.

         3.3 The Issuer shall from time to time furnish to the Dealer such
information as the Dealer may reasonably request, including, without limitation,
any press releases or material provided by the Issuer to any national securities
exchange or rating agency, regarding (i) the Issuer's operations and financial
condition, (ii) the due authorization and execution of the Notes, and (iii) the
Issuer's ability to pay the Notes as they mature.

         3.4 The Issuer will take all such action as the Dealer may reasonably
request to ensure that each offer and each sale of the Notes will comply with
any applicable state Blue Sky laws; provided, that the Issuer shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation in any jurisdiction in which it is not so qualified or
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject.

         3.5 The Issuer will not be in default of any of its obligations
hereunder, under the Notes or under the Issuing and Paying Agency Agreement, at
any time that any of the Notes are outstanding.

         3.6 The Issuer shall not issue Notes hereunder until the Dealer shall
have received (a) an opinion of counsel to the Issuer, addressed to the Dealer,
satisfactory in form and substance to the Dealer, (b) an opinion of counsel to
the Guarantors, addressed to the Dealer, satisfactory in form and substance to
the Dealer, (c) copies of the executed Guarantees, (d) a copy of the executed
Issuing and Paying Agency Agreement as then in effect, (e) a copy of resolutions
adopted by the Board of Directors of the Issuer, satisfactory in form and
substance to the Dealer and certified by the Secretary or similar officer of the
Issuer, authorizing execution and delivery by the Issuer of this Agreement the
Issuing and Paying Agency Agreement and the Notes and consummation by the Issuer
of the transactions contemplated hereby and thereby, (f) copies of resolutions
adopted by the Board of Directors of the Guarantors, satisfactory in form

                                       6
<PAGE>   8
and substance to the Dealer and certified by the Secretary or similar officer
of each of the Guarantors authorizing the execution and delivery by each of the
Guarantors of this Agreement and the Guarantees, and consummation by each of the
Guarantors of the transactions contemplated hereby and thereby, (g) prior to the
issuance of any Notes represented by a book-entry note registered in the name of
DTC or its nominee, a copy of the executed Letter of Representations among the
Issuer, the Issuing and Paying Agent and DTC and (h) such other certificates,
opinions, letters and documents as the Dealer shall have reasonably requested.

Section 4. Disclosure

         4.1 The Private Placement Memorandum and its contents (other than the
Dealer Information) shall be the sole responsibility of the Issuer. The Private
Placement Memorandum shall contain a statement expressly offering an opportunity
for each prospective purchaser to ask questions of, and receive answers from,
the Issuer concerning the offering of Notes and to obtain relevant additional
information which the Issuer possesses or can acquire without unreasonable
effort or expense.

         4.2 The Issuer agrees promptly to furnish the Dealer the Company
Information as it becomes available.

         4.3      (a) The Issuer further agrees to notify the Dealer promptly
upon the occurrence of any event relating to or affecting the Issuer that would
cause the Company Information then in existence to include an untrue statement
of material fact or to omit to state a material fact necessary in order to make
the statements contained therein, in light of the circumstances under which they
are made, not misleading.

                  (b) In the event that the Issuer gives the Dealer notice
pursuant to Section 4.3(a) and the Dealer notifies the Issuer that it then has
Notes it is holding in inventory, the Issuer agrees promptly to supplement or
amend the Private Placement Memorandum so that such Private Placement
Memorandum, as amended or supplemented, when taken together with the Company
Information, shall not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, and the
Issuer shall make such supplement or amendment available to the Dealer.

                  (c) In the event that (i) the Issuer gives the Dealer notice
pursuant to Section 4.3(a) and (ii) the Dealer does not notify the Issuer that
it is then holding Notes in inventory and (iii) the Issuer chooses not to
promptly amend or supplement the Private Placement Memorandum in the manner
described in clause (b) above, then all solicitations and sales of Notes shall
be suspended until such time as the Issuer has so amended or supplemented the
Private Placement Memorandum, and made such amendment or supplement available to
the Dealer.

         4.4 The Issuer agrees that it shall not have outstanding at any time
Notes issued in aggregate amount in excess of the authorized amount of the
Guarantees.

Section 5. Indemnification and Contribution

         5.1 The Issuer will indemnify and hold harmless the Dealer, each
individual, corporation, partnership, trust, association or other entity
controlling the Dealer, any affiliate of the Dealer or any such controlling
entity and their respective directors, officers, employees, partners,
incorporators, shareholders, servants, trustees and agents (hereinafter the
"Indemnitees") against any and all liabilities, penalties, suits, causes of
action, losses, damages, claims, costs and expenses (including, without
limitation, fees and disbursements of counsel) or judgments of whatever kind or
nature (each a "Claim"), imposed upon, incurred by or asserted against the
Indemnitees arising out of or based upon (i) any allegation that the Private
Placement Memorandum or the Company Information included (as of any relevant
time) or includes

                                       7
<PAGE>   9

an untrue statement of a material fact or omitted (as of any relevant time) or
omits to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. This
indemnification shall not apply to the extent that the Claim arises out of or is
based upon Dealer Information. In addition, this indemnification shall not inure
to the benefit of the Dealer (or to the benefit of any person controlling the
Dealer) on account of any losses, claims, damages or liabilities from the sale
any Notes by the Dealer to any investor if a copy of the Private Placement
Memorandum (as amended or supplemented, if prior to distribution of the Private
Placement Memorandum by the Dealer to such investor, the Issuer shall have made
any supplements or amendments which have been furnished to the Dealer) shall not
have been sent or given by or on behalf of the Dealer to such investor at or
prior to the written confirmation of the sale of the Notes to such investor and
such statement or omission is cured in the Private Placement Memorandum.

         5.2 Provisions relating to claims made for indemnification under this
Section 5 are set forth on Exhibit B to this Agreement.

         5.3 In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 5 is
held to be unavailable or insufficient to hold harmless the Indemnitees,
although applicable in accordance with the terms of this Section 5, the Issuer
shall contribute to the aggregate costs incurred by the Dealer in connection
with any Claim in the proportion of the respective economic interests of the
Issuer and the Dealer; provided, however, that such contribution by the Issuer
shall be in an amount such that the aggregate costs incurred by the Dealer do
not exceed the aggregate of the commissions and fees earned by the Dealer
hereunder with respect to the issue or issues of Notes to which such Claim
relates. The respective economic interests shall be calculated by reference to
the aggregate proceeds to the Issuer of the Notes issued hereunder and the
aggregate commissions and fees earned by the Dealer hereunder. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.

Section 6. Definitions

         6.1 "Claim" shall have the meaning set forth in Section 5.1.

         6.2 "Company Information" at any given time shall mean the Private
Placement Memorandum together with, to the extent applicable, (i) the Issuer's
most recent report on Form 10-K filed with the SEC and each report on Form 10-Q
or 8-K filed by the Issuer with the SEC since the most recent Form 10-K, (ii)
the Issuer's most recent annual audited financial statements and each interim
financial statement or report prepared subsequent thereto, if not included in
item (i) above, and (iii) the Issuer's and its affiliates' other publicly
available recent reports, including, but not limited to, any publicly available
filings or reports provided to their respective shareholders. For the purposes
of this Agreement, any statement contained in any Company Information shall be
deemed to be modified or superseded to the extent that a statement contained in
any then available Company Information subsequent to such statement modifies or
supersedes such statement; and such statement shall not be deemed to be Company
Information except as so modified or superseded.

         6.3 "Dealer" shall mean Merrill Lynch Money Markets Inc. for Notes with
maturities up to 270 days and Merrill Lynch, Pierce, Fenner & Smith Incorporated
for Notes with maturities over 270 days to 365 days.

         6.4 "Dealer Information" shall mean material concerning the Dealer and
provided by the Dealer in writing expressly for inclusion in the Private
Placement Memorandum.

         6.5 "DTC" shall mean The Depository Trust Company.

                                       8
<PAGE>   10

         6.6 "Exchange Act" shall mean the U.S. Securities Exchange Act of 1934,
as amended.

         6.7 "Indemnitee" shall have the meaning set forth in Section 5.1.

         6.8 "Institutional Accredited Investor" shall mean an institutional
investor that is an accredited investor within the meaning of Rule 501 under the
Securities Act and that has such knowledge and experience in financial and
business matters that it is capable of evaluating and bearing the economic risk
of an investment in the Notes, including, but not limited to, a bank, as defined
in Section 3(a)(2) of the Securities Act, or a savings and loan association or
other institution, as defined in Section 3(a)(5)(A) of the Securities Act,
whether acting in its individual or fiduciary capacity.

         6.9 "Issuing and Paying Agency Agreement" shall mean the issuing and
paying agency agreement described on the cover page of this Agreement, as such
agreement may be amended or supplemented from time to time.

         6.10 "Issuing and Paying Agent" shall mean the party designated as such
on the cover page of this Agreement, as issuing and paying agent under the
Issuing and Paying Agency Agreement.

         6.11 "Non-bank fiduciary or agent" shall mean a fiduciary or agent
other than (a) a bank, as defined in Section 3(a)(2) of the Securities Act, or
(b) a savings and loan association, as defined in Section 3(a)(5)(A) of the
Securities Act.

         6.12 "Private Placement Memorandum" shall mean offering materials
prepared in accordance with Section 4 (including materials referred to therein
or incorporated by reference therein) provided to purchasers and prospective
purchasers of the Notes, and shall include amendments and supplements thereto
which may be prepared from time to time in accordance with this Agreement (other
than any amendment or supplement that has been completely superseded by a later
amendment or supplement).

         6.13 "Qualified Institutional Buyer" shall have the meaning assigned to
that term in Rule 144A under the Securities Act.

         6.14 "Rule 144A" shall mean Rule 144A under the Securities Act.

         6.15 "SEC" shall mean the U.S. Securities and Exchange Commission.

         6.16 "Securities Act" shall mean the U.S. Securities Act of 1933, as
amended.

Section 7. General

         7.1 Unless otherwise expressly provided herein, all notices under this
Agreement to parties hereto shall be in writing and shall be effective when
received at the address of the respective party set forth in the Addendum to
this Agreement.

         7.2 This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to its conflict of laws
provisions.

         7.3 The Issuer and the Guarantors each agrees that any suit, action or
proceeding brought by the Issuer or the Guarantors against the Dealer in
connection with or arising out of this Agreement or the Notes or the offer and
sale of the Notes shall be brought solely in the United States federal courts
located in the borough of Manhattan or the courts of the State of New York
located in the Borough of Manhattan. EACH OF THE DEALER AND THE ISSUER AND THE
GUARANTORS WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

                                       9
<PAGE>   11

         7.4 This Agreement may be terminated, at any time, by the Issuer or the
Guarantors, upon one business day's prior notice to such effect to the Dealer,
or by the Dealer upon one business day's prior notice to such effect to the
Issuer or the Guarantors. Any such termination, however, shall not affect the
obligations of the Issuer or the Guarantors under Sections 5 and 7.3 hereof or
the respective representations, warranties, agreements, covenants, rights or
responsibilities of the parties made or arising prior to the termination of this
Agreement.

         7.5 This Agreement is not assignable by any party hereto without the
written consent of the other parties; provided, however, that the Dealer may
assign its rights and obligations under this Agreement to any affiliate.

         7.6 This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.

         7.7 This Agreement is for the exclusive benefit of the parties hereto,
and their respective permitted successors and assigns hereunder, and shall not
be deemed to give any equitable or legal right; remedy or claim to any other
person whatsoever.

         7.8 Any payments in respect of the Notes, the Guarantees or to the
Dealer hereunder, whether pursuant to Sections 5.1 or otherwise, shall be in US
dollars and shall be free of all withholding, stamp and other similar taxes and
of all other governmental charges of any nature whatsoever. In the event any
withholding is required by law, the Issuer and the Guarantors each agrees to (i)
pay the same and (ii) pay such additional amounts to the holders of the Notes or
to the Dealer which, after deduction of any such withholding, stamp or other
taxes or governmental charges of any nature whatsoever imposed with respect to
the payment of such additional amount, shall equal the amount withheld pursuant
to clause (i).

                                       10
<PAGE>   12

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.

                                    TELECOMUNICACIONES DE PUERTO RICO, INC.,
                                     AS ISSUER

                                    By:       /s/ Frank P. Gatto
                                       -----------------------------------------
                                    Name: Frank P. Gatto
                                    Title: Chief Financial Officer

                                    PUERTO RICO TELEPHONE COMPANY, INC.
                                     AS GUARANTOR

                                    By:      /s/ Frank P. Gatto
                                       -----------------------------------------
                                    Name: Frank P. Gatto
                                    Title: Chief Financial Officer

                                    CELULARES TELEFONICA, INC.,
                                     AS GUARANTOR

                                    By:        /s/ Frank P. Gatto
                                       -----------------------------------------
                                    Name: Frank P. Gatto
                                    Title: Chief Financial Officer

                                    MERRILL LYNCH MONEY MARKETS INC.,
                                     AS DEALER FOR NOTES WITH MATURITIES UP TO
                                     270 DAYS

                                    By:       /s/ K. Carter Harris
                                       -----------------------------------------
                                    Name: K. Carter Harris
                                    Title: Managing Director

                                    MERRILL LYNCH, PIERCE, FENNER & SMITH
                                     INCORPORATED,
                                     AS DEALER  FOR NOTES WITH  MATURITIES  OVER
                                     270 DAYS UP TO 365 DAYS

                                    By:        /s/ K. Carter Harris
                                       -----------------------------------------
                                    Name: K. Carter Harris
                                    Title: Managing Director

                                       11
<PAGE>   13

ADDENDUM

1.       The other dealers referred to in clause (b) of Section 1.2 of the
         Agreement are Salomon Smith Barney Inc., Bank of America Securities and
         Popular Securities, Inc.

2.       The following Section 3.8 is hereby added to the Agreement:

         3.8 Without limiting any obligation of the Issuer pursuant to this
         Agreement to provide the Dealer with credit and financial information,
         the Issuer hereby acknowledges and agrees that the Dealer may share the
         Company Information and any other information or matters relating to
         the Issuer or the transactions contemplated hereby with affiliates of
         the Dealer, including, but not limited to Merrill Lynch Money Markets
         Inc. and that such affiliates may likewise share information relating
         to the Issuer or such transactions with the Dealer.

3.       The addresses of the respective parties for purposes of notices under
         Section 7.1 are as follows:

         For the Issuer & the Guarantors:

                  Telecomunicaciones de Puerto Rico, Inc.
                  P.O. Box 360998
                  San Juan, Puerto Rico 00936-0998

                  Attention: Ms. Aurora M. Casablanca
                  Telephone number: (787) 792-2297
                  Fax number: (787) 792-8640

         For the Dealer:

                  Merrill Lynch Money Markets Inc.
                  250 Vesey Street, 11th Floor
                  New York, NY 10080
                  Attention: CP Product Management
                  Telephone number: (212) 449-7476
                  Fax number: (212) 449-2234

<PAGE>   14

EXHIBIT A

FORM OF LEGEND FOR
PRIVATE PLACEMENT MEMORANDUM AND NOTES

              THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
              1933, AS AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES
              LAW, AND OFFERS AND SALES THEREOF MAY BE MADE ONLY IN COMPLIANCE
              WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
              THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. BY ITS
              ACCEPTANCE OF A NOTE, THE PURCHASER WILL BE DEEMED TO REPRESENT
              THAT IT HAS BEEN AFFORDED AN OPPORTUNITY TO INVESTIGATE MATTERS
              RELATING TO THE ISSUER AND THE NOTES, THAT IT IS NOT ACQUIRING
              SUCH NOTE WITH A VIEW TO ANY DISTRIBUTION THEREOF AND THAT IT IS
              EITHER (A) AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED
              INVESTOR WITHIN THE MEANING OF RULE 501(a) UNDER THE ACT AND
              POSSESSES SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS
              MATTERS THAT IS CAPABLE OF EVALUATING AND BEARING THE ECONOMIC
              RISK OF AN INVESTMENT IN THE NOTES (AN "INSTITUTIONAL ACCREDITED
              INVESTOR" AND THAT EITHER IS PURCHASING NOTES FOR ITS OWN ACCOUNT,
              IS A U.S. BANK (AS DEFINED IN SECTION 3(a)(2) OF THE ACT) OR A
              SAVINGS AND LOAN ASSOCIATION OR OTHER INSTITUTION (AS DEFINED IN
              SECTION 3(a)(5)(A) OF THE ACT) ACTING IN ITS INDIVIDUAL OR
              FIDUCIARY CAPACITY OR IS A FIDUCIARY OR AGENT (OTHER THAN A U.S.
              BANK OR SAVINGS AND LOAN) PURCHASING NOTES FOR ONE OR MORE
              ACCOUNTS EACH OF WHICH IS SUCH AN INSTITUTIONAL ACCREDITED
              INVESTOR (i) WHICH ITSELF POSSESSES SUCH KNOWLEDGE AND EXPERIENCE
              OR (ii) WITH RESPECT TO WHICH SUCH PURCHASER HAS SOLE INVESTMENT
              DISCRETION; OR (B) A QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN
              THE MEANING OF RULE 144A UNDER THE ACT WHICH IS ACQUIRING NOTES
              FOR ITS OWN ACCOUNT OR FOR ONE OR MORE ACCOUNTS, EACH OF WHICH IS
              A QIB AND WITH RESPECT TO EACH OF WHICH THE PURCHASER HAS SOLE
              INVESTMENT DISCRETION; AND THE PURCHASER ACKNOWLEDGES THAT IT IS
              AWARE THAT THE SELLER MAY RELY UPON THE EXEMPTION FROM THE
              REGISTRATION PROVISIONS OF SECTION 5 OF THE ACT PROVIDED BY RULE
              144A. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER THEREOF SHALL
              ALSO BE DEEMED TO AGREE THAT ANY RESALE OR OTHER TRANSFER THEREOF
              WILL BE MADE ONLY (A) IN A TRANSACTION EXEMPT FROM REGISTRATION
              UNDER THE ACT, EITHER (1) TO THE ISSUER OR TO MERRILL LYNCH MONEY
              MARKETS INC. OR ANOTHER PERSON DESIGNATED BY THE ISSUER AS A
              PLACEMENT AGENT FOR THE NOTES (COLLECTIVELY, THE "PLACEMENT
              AGENTS"), NONE OF WHICH SHALL HAVE ANY OBLIGATION TO ACQUIRE SUCH
              NOTE, (2) THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL ACCREDITED
              INVESTOR OR A QIB BY A PLACEMENT AGENT, OR (3) TO A QIB IN A
              TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144A AND (B) IN
              MINIMUM AMOUNTS OF $250,000.

<PAGE>   15

EXHIBIT B

FURTHER PROVISIONS RELATING
TO INDEMNIFICATION

         (a) The Issuer agrees to reimburse each Indemnitee for all expenses
(including reasonable fees and disbursements of internal and external counsel)
as they are incurred by it in connection with investigating or defending any
loss, claim, damage, liability or action in respect of which indemnification may
be sought under Section 5 of the Agreement (whether or not it is a party to any
such proceedings).

         (b) Promptly after receipt by an Indemnitee of notice of the existence
of a Claim, such Indemnitee will, if a claim in respect thereof is to be made
against the Issuer, notify the Issuer in writing of the existence thereof;
provided that (i) the omission so to notify the Issuer will not relieve it from
any liability which it may have hereunder unless and except to the extent it did
not otherwise learn of such Claim and such failure results in the forfeiture by
the Issuer of substantial rights and defenses, and (ii) the omission so to
notify the Issuer will not relieve it from liability which it may have to an
Indemnitee otherwise than on account of this indemnity agreement. In case any
such Claim is made against any Indemnitee and it notifies the Issuer of the
existence thereof, the Issuer will be entitled to participate therein, and to
the extent that it may elect by written notice delivered to the Indemnitee, to
assume the defense thereof, with counsel reasonably satisfactory to such
Indemnitee; provided that if the defendants in any such Claim include both the
Indemnitee and the Issuer, and the Indemnitee shall have concluded that there
may be legal defenses available to it which are different from or additional to
those available to the Issuer, the Issuer shall not have the right to direct the
defense of such Claim on behalf of such Indemnitee, and the Indemnitee shall
have the right to select separate counsel to assert such legal defenses on
behalf of such Indemnitee. Upon receipt of notice from the Issuer to such
Indemnitee of the Issuer's election so to assume the defense of such Claim and
approval by the Indemnitee of counsel, the Issuer will not be liable to such
Indemnitee for expenses incurred thereafter by the Indemnitee in connection with
the defense thereof (other than reasonable costs of investigation) unless (i)
the Indemnitee shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next preceding
sentence (it being understood, however, that the Issuer shall not be liable for
the expenses of more than one separate counsel (in addition to any local counsel
in the jurisdiction in which any Claim is brought), approved by the Dealer,
representing the Indemnitee who is party to such Claim), (ii) the Issuer shall
not have employed counsel reasonably satisfactory to the Indemnitee to represent
the Indemnitee within a reasonable time after notice of existence of the Claim
or (iii) the Issuer has authorized in writing the employment of counsel for the
Indemnitee. The indemnity, reimbursement and contribution obligations of the
Issuer hereunder shall be in addition to any other liability the Issuer may
otherwise have to an Indemnitee and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Issuer and any Indemnitee. The Issuer agrees that without the Dealer's prior
written consent, it will not settle, compromise or consent to the entry of any
judgment in any Claim in respect of which indemnification may be sought under
the indemnification provision of the Agreement (whether or not the Dealer or any
other Indemnitee is an actual or potential party to such Claim), unless such
settlement, compromise or consent includes an unconditional release of each
Indemnitee from all liability arising out of such Claim. The Dealer agrees that
without the Issuer's prior written consent, which consent will not be
unreasonably withheld, it will not settle, compromise or consent to the entry of
any judgment in any Claim in respect of which indemnification may be sought
under the indemnification provision of the Agreement (whether or not the Issuer
is an actual or potential party to such Claim).

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