TELEHUB COMMUNICATIONS CORP
424B3, 1998-12-21
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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<PAGE>   1
 
PROSPECTUS
                       TELEHUB COMMUNICATIONS CORPORATION
                               OFFER TO EXCHANGE
          ALL OUTSTANDING 13.875% SENIOR NOTES DUE 2005 ("OLD NOTES")
                FOR 13.875% SENIOR NOTES DUE 2005 ("NEW NOTES")
                             ---------------------
 
   
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JANUARY 22,
                             1999, UNLESS EXTENDED.
    
                             ---------------------
 
     TeleHub Communications Corporation, a Nevada corporation (the "Issuer"),
hereby offers (the "Exchange Offer"), upon the terms and conditions set forth in
this Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal") to exchange up to $125,000,000 aggregate principal amount of its
13.875% Senior Notes Due 2005 (the "Series B Notes" or "New Notes") for an equal
principal amount of the issued and outstanding 13.875% Senior Notes Due 2005
(the "Series A Notes" or "Old Notes"), of which an aggregate of $125,000,000 in
principal amount remains outstanding on the date of this Prospectus. THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION.
HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE RELATED LETTER OF
TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR OLD NOTES PURSUANT
TO THE EXCHANGE OFFER.
 
     The Old Notes were originally issued and sold (the "Initial Note Offering")
to BancBoston Securities, Inc. (the "Initial Purchaser") pursuant to a Purchase
Agreement dated July 27, 1998 (the "Note Purchase Agreement"), among the Issuer
and the Initial Purchaser, pursuant to which the Issuer sold 125,000 Units
consisting of the Old Notes and warrants to purchase 16.662 Issuer common shares
per Unit. The Initial Purchaser subsequently resold the Old Notes in reliance on
Rule 144A of the Securities Act. The Issuer and the Initial Purchaser also
entered into a Registration Rights Agreement, dated July 30, 1998 (the "Note
Registration Rights Agreement"), pursuant to which the Issuer granted certain
registration rights for the benefit of the holders of the Old Notes. This
Exchange Offer satisfies certain Issuer obligations under the Note Registration
Rights Agreement. The New Notes will be obligations of the Issuer evidencing the
same indebtedness as the Old Notes and will be issued under and entitled to the
benefits of the Indenture, dated as of July 30, 1998 (the "Indenture"), between
the Issuer and State Street Bank, as trustee (in such capacity, the "Trustee").
The form and terms of the New Notes are identical in all material respects to
the Old Notes, except that the offer and exchange of the New Notes will not be
subject to certain transfer restrictions and registration rights provisions
applicable to the Old Notes. See "The Exchange Offer -- Purpose and Effect."
 
     The form and terms of the New Notes will be the same as the form and terms
of the Old Notes except that the New Notes will not bear transfer restriction
legends. The New Notes will be obligations of the Issuer, guaranteed by Issuer's
subsidiaries (the "Subsidiaries") and entitled to the benefits of the Indenture,
dated as of July 30, 1998 (the "Indenture"), relating to the Old Notes and the
New Notes (collectively, "Notes"). See "Description of the Notes." Following the
completion of the Exchange Offer, none of the Old Notes will be entitled to any
rights under the Note Registration Rights Agreement, including, but not limited
to, any contingent increase in the interest rate. See "The Exchange Offer".
 
     PROSPECTIVE INVESTORS SHOULD CONSIDER THE "RISK FACTORS" DISCUSSION,
BEGINNING ON PAGE 10, FOR A DESCRIPTION OF CERTAIN SIGNIFICANT RISKS RELEVANT TO
AN INVESTMENT IN THE NOTES.
 
   
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
                               CRIMINAL OFFENSE.
    
                             ---------------------
 
   
                The date of this Prospectus is December 18, 1998
    
<PAGE>   2
 
   
     The Issuer will accept for exchange any and all Old Notes which are
properly tendered in the Exchange Offer and not withdrawn on or prior to 5:00
p.m., New York City time, on January 22, 1999, unless the Exchange Offer is
extended by the Issuer (the "Expiration Date"). Tenders of Old Notes may be
withdrawn at any time before 5:00 p.m., New York City time, on the Expiration
Date. The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange. However, the Exchange Offer is subject to
certain customary conditions which may be waived by the Issuer. The Issuer
agreed to pay the expenses of the Exchange Offer. See "The Exchange Offer."
Issuer will not receive cash proceeds from the Exchange Offer. See "Use of
Proceeds."
    
 
     Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "The Exchange Offer -- Resales
of the New Notes" and "Plan of Distribution." The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Issuer has agreed
that, starting on the Expiration Date and ending on the close of business on the
180th day following the Expiration Date, it will make this Prospectus available
to any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
 
     The New Notes will mature on July 31, 2005. Cash interest on the New Notes
will not accrue on the Notes prior to July 31, 2001. The Notes will accrete at a
rate of 13.875%, compounded semi-annually to an aggregate principal amount of
$125.0 million by July 31, 2001. Thereafter, interest on the New Notes will be
payable semi-annually on January 31 and July 31 of each year commencing January
31, 2002. The New Notes will be redeemable at the option of the Issuer, in whole
or in part, at any time on or after July 31, 2002, at the redemption prices set
forth herein, plus accrued and unpaid interest and liquidated damages, if any,
to the date of redemption. See "Description of the New Notes -- Redemption."
 
     The Notes are senior unsecured obligations of the Issuer, ranking pari
passu in right of payment with all existing and future unsecured and
unsubordinated indebtedness of the Issuer and senior in right of payment to all
existing and future subordinated indebtedness of the Issuer. The Notes are
effectively subordinated to all indebtedness of the Issuer to the extent of the
value of the assets securing such indebtedness and to all indebtedness of
subsidiaries of the Issuer. As of September 30, 1998, after giving effect to the
Initial Note Offering, holders of Notes are effectively subordinated in right of
payment to approximately $11.8 million of outstanding secured indebtedness.
 
     The Issuer is making the Exchange Offer in reliance on the position of the
Staff of the Securities and Exchange Commission (the "Commission") as set forth
in certain interpretive letters issued to third parties in other transactions.
However, the Issuer has not sought its own interpretive letter, and there can be
no assurance that the Commission would make a similar determination with respect
to the Exchange Offer. Based on the Commission's interpretations, the Issuer
believes that New Notes issued pursuant to the Exchange Offer to any holder of
Old Notes in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by such holder (other than a broker-dealer who purchased
Old Notes directly from the Issuer for resale pursuant to Rule 144A under the
Securities Act or any other available exemption under the Securities Act)
without further compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such holder is not an
"affiliate" of the Issuer (within the meaning of Rule 405 under the Securities
Act), is acquiring the New Notes in the ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of the New Notes. Holders wishing to accept the
Exchange Offer must represent to the Issuer that such conditions have been met.
In addition, if such holder is not a broker-dealer, it must represent that it is
not engaged in, and does not intend to engage in, a distribution of the New
Notes. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of a market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "The Exchange Offer --
                                        i
<PAGE>   3
 
Resales of the New Notes" and "Plan of Distribution." This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
or other trading activities.
 
     There has previously been only a limited secondary market, and no public
market, for the Old Notes. The Old Notes are eligible for trading in the Private
Offering, Resales and Trading through Automatic Linkages ("PORTAL") market. In
addition, the Initial Purchaser has advised the Issuer that it currently intends
to make a market in the New Notes; however, the Initial Purchaser is not
obligated to do so and any market making activities may be discontinued by the
Initial Purchaser at any time. Therefore, there can be no assurance that an
active market for the New Notes will develop. If such a trading market develops
for the New Notes, future trading prices will depend on many factors, including,
among other things, prevailing interest rates, the Issuer's results of
operations and the market for similar securities. Depending on such factors, the
New Notes may trade at a discount from their face value. See "Risk
Factors -- Lack of Public Market."
 
     Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the same rights and will be subject to
the same limitations applicable thereto under the Indenture (except for those
rights which terminate upon consummation of the Exchange Offer). Following
consummation of the Exchange Offer, the holders of the Old Notes will continue
to be subject to existing restrictions upon transfer thereof and the Issuer will
have no further obligation to such holders (other than to the Initial Purchaser
under certain limited circumstances) concerning registration of the Old Notes
under the Securities Act. To the extent that Old Notes are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered Old Notes could be
adversely affected. See "Risk Factors -- Consequences of Failure to Exchange."
 
     THE EXCHANGE OFFER ARE NOT BEING MADE TO, NOR WILL THE ISSUER ACCEPT
TENDERS FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE
OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES
OR BLUE SKY LAWS OF SUCH JURISDICTION.
 
     The Old Notes were each issued originally in global form (the "Global
Series A Notes"). The Global Series A Notes, were deposited with, or on behalf
of, The Depository Trust Company ("DTC"), as the initial depository with respect
to the Old Notes (in such capacity, the "Depository"). The Global Series A Notes
are registered in the name of Cede & Co. ("Cede"), as DTC's nominee, and
beneficial interests in the Global Series A Notes are shown on, and transfers
effected only through, records maintained by the Depository and its
participants. The use of the Global Series A Notes to represent certain of the
Old Notes permits the Depository's participant, and anyone holding a beneficial
interest in an Old Note registered in the name of such a participant, to
transfer interests in the Old Notes electronically in accordance with the
Depository's established procedures without transferring a physical certificate.
New Notes issued in exchange for the Global Series A Notes will also be issued
initially as a note in global form (the "Global New Notes," and, together with
the Global Series A Notes, the "Global Notes") and deposited with, or on behalf
of, the Depository. After the initial issuance of the Global New Notes, New
Notes in certificated form will be issued in exchange for a holder's
proportionate interest in the appropriate Global New Notes only as set forth in
the Indenture.
 
FORWARD-LOOKING STATEMENTS. This Prospectus contains certain forward-looking
statements that are based on the beliefs of management as well as assumptions
made by, and information currently available to, management. In particular,
certain statements under the caption "Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and elsewhere in this Prospectus constitute "forward-looking
statements". Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, the
Company's limited operating history and uncertainty as to the Company's future
profitability; uncertainty as to
 
                                       ii
<PAGE>   4
 
the Company's ability to meet business targets and budgets and to develop and
implement operational, sales and marketing and financial systems to manage
rapidly growing operations; competition from other participants in the highly
competitive telecommunications industry; uncertainty as to the Company's ability
to obtain financing on acceptable terms to finance its business strategy;
uncertainty as to the Company's ability to obtain and protect intellectual
property rights or to develop proprietary products that will receive
intellectual property protection; the possibility that technological
developments may adversely affect the commercial viability of VASP(TM) (as
defined) and the Company's other products; and unanticipated regulatory changes
that may change the competitive environment to the Company's detriment.
 
                                       iii
<PAGE>   5
 
                                    SUMMARY
 
     The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
Unless the context suggests otherwise, references in this Prospectus to
"TeleHub" or the "Company" mean TeleHub Communications Corporation and its
subsidiaries. See "Glossary" for the definition of certain terms used in this
Prospectus.
 
                                  THE COMPANY
 
     TeleHub believes it has the only universal Asynchronous Transfer Mode
("ATM")-based telecommunications network in commercial operation that is capable
of seamlessly interconnecting with the Public Switched Telephone Network
("PSTN"). TeleHub has developed first-to-market proprietary software, Virtual
Access Services Platform ("VASP(TM)"), that will enable telecommunications
service providers to (i) integrate the delivery of voice, video and data over a
single platform; (ii) seamlessly interconnect with the PSTN; (iii) provide
real-time monitoring of telecommunications traffic; and (iv) facilitate local
exchange competition. The Company believes the VASP(TM) platform addresses
significant needs throughout the telecommunications industry for improved
systems and less reliance on legacy hardware. VASP(TM) creates virtual switching
capabilities, permits real-time network supervision and facilitates the
introduction of new service offerings. When fully deployed, VASP(TM) will
integrate voice, video and data on a single switched network and enable the
provisioning of bandwidth-on-demand services. The Company's VASP(TM)-managed ATM
network, which began carrying commercial traffic in December 1997, both acts as
a "proof of concept" for VASP(TM) and generates revenues to support the
Company's growth.
 
     TeleHub believes that VASP(TM) addresses the demand for advanced network
features and capabilities resulting from the telecommunications industry's
changing competitive and regulatory environment. Recent regulatory changes have
introduced competition in local and long distance telephone services. To compete
effectively in this new environment and to meet growing demand for high speed
data and video transmission services, telecommunications carriers seek to enter
new markets rapidly and to introduce differentiated services in a cost-effective
manner. In addition, carriers must develop new Operational Support Systems
("OSS") that are interoperable with legacy systems, both to comply with
interconnection and unbundling mandates of the Telecommunications Act of 1996
and associated regulations (collectively, the "Telecommunications Act"), and to
enhance their competitiveness. As carriers expand the scope of their services,
original equipment manufacturers ("OEMs") also must enter new markets to address
their carrier customers' expanded needs. The Company believes that its VASP(TM)
technology will enable Incumbent Local Exchange Carriers ("ILECs"), Competitive
Local Exchange Carriers ("CLECs"), Interexchange Carriers ("IXCs") and OEMs to
accelerate the introduction of new products and services, to reduce costs and to
enter new markets rapidly. Management believes that integrating its VASP(TM)
technology on an ATM backbone offers the following competitive advantages:
 
          - A VASP(TM)-enhanced ATM network allows for increased capacity and
            efficiencies, thereby lowering costs as compared to networks
            utilizing legacy technologies. Further, the VASP(TM) enhanced ATM
            network is seamlessly interconnected to the PSTN, therefore allowing
            connectivity to nearly anywhere in the United States.
 
          - When fully deployed, VASP(TM) will allow for dynamic bandwidth
            allocation and thereby permit carriers to offer variable capacity so
            customers only pay for capacity actually used.
 
          - VASP(TM) enables certain call-processing instructions to be moved
            out of the LECs' central office, thereby enabling delivery of local
            and long distance telecommunications services on a virtual basis
            without the need for an extensive switching network.
 
          - VASP(TM) offers electronic provisioning and real-time monitoring of
            telecommunications traffic, which can reduce network downtime,
            provisioning delays, maintenance costs and operating expenses, and
            improve customer service.
 
                                        1
<PAGE>   6
 
          - VASP(TM)'s distinct data analysis capabilities and open architecture
            will allow carriers to develop and implement new products and
            services through software upgrades rather than requiring time-
            consuming and expensive hardware modifications.
 
     TeleHub operates through two principal subsidiaries: TeleHub Technologies
Corporation ("TTC"), which develops the commercial applications of VASP(TM), and
TeleHub Network Services Corporation ("TNS"), which operates the Company's ATM
network. TTC is marketing VASP(TM)-based voice and data products to potential
customers in the OEM segment, like Newbridge Networks Corporation ("Newbridge"),
Northern Telecommunications Ltd. ("Nortel") and Cisco Systems, Inc. ("Cisco"),
as well as in the carrier market, including ILECs, CLECs and IXCs. TNS's ATM
network, which utilizes VASP(TM) technology, is interconnected via leased lines
from WorldCom, Inc. ("WorldCom") and reaches approximately 64% of the telephone
exchanges in the United States directly and the remaining 36% through
contractual relationships with other carriers. With the inherent efficiencies in
carrying voice traffic over an ATM backbone and VASP(TM)'s ability to seamlessly
interconnect that traffic into the PSTN, TNS can offer switched wholesale voice
services to switchless resellers at rates generally lower than those currently
offered by competing wholesale service providers. TNS also expects to offer
wholesale long distance services to ILECs, CLECs, Independent Telephone
Companies ("ITCs") and international carriers terminating traffic in the United
States.
 
     The Company is still developing and enhancing both VASP(TM) and the ATM
network, so unexpected difficulties could delay or prevent implementation of
VASP(TM) or the TNS ATM network. The Company also has incurred approximately $65
million of net losses since inception, primarily for development of VASP,
implementation of the ATM network and operations. TeleHub expects to continue
incurring significant losses while completing development activities,
commercially deploying its products and services and funding operations. Since
it is still in the development stage, the Company has generated only minimal
revenue from VASP licensing or wholesale long distance services. The Company
therefore must raise substantial debt and equity financing to fund such
continuing losses, which raises doubts about the Company's ability to continue
as a going concern.
 
     The Company intends to become a leading provider of next generation
services and software solutions to the telecommunications industry. The
first-to-market position of VASP(TM) and the ATM network gives the Company an
opportunity to set industry standards, build market share and develop innovative
packaging and pricing plans. Management believes that TNS can offer wholesale
services that give its carrier customers generally lower rates and additional
revenue opportunities. Further enhancements of VASP(TM) are directed toward
offering a broader range of products and services to carriers and OEMs as well
as the continued integration of the Company's long distance ATM network with the
local services market. Because TNS is currently utilizing VASP(TM), potential
TTC customers can witness the benefits of a VASP(TM)-based platform in actual
operation, as well as utilize the TNS network for developing and testing new
products.
 
                                  RISK FACTORS
 
     The Company was recently formed and faces the substantial risks inherent to
a new technology business. Its business strategy is based upon the VASP platform
and demonstrating its viability through its VASP-managed ATM network. Since VASP
is not yet fully deployed and the TNS network is the first publicly-switched ATM
network, the Company's future depends on a product still being enhanced and a
network configuration not yet widely utilized in the telecommunications
industry. Also, unforeseen problems with the VASP platform, including the
Company's inability to protect or defend its proprietary rights or the ATM
network, could emerge and prevent realization of the Company's business plan.
The Company has generated only minimal VASP licensing or wholesale long distance
revenue and has a very limited operating history with which investors can
evaluate TeleHub's future performance.
 
     The Company has reported substantial net losses since inception, primarily
expenses for development of VASP, implementation of the ATM network and
operations. TeleHub's cumulative net losses from inception until September 30,
1998, were approximately $65 million. TeleHub expects to continue incurring
significant losses while completing development activities, commercially
deploying its products and services and funding
                                        2
<PAGE>   7
 
operations until such time, if at all, as the Company begins to generate
positive cash flow. The Company currently does not anticipate that sufficient
traffic will be carried on its network to cover its operating expenses before
1999 at the earliest based on certain assumptions as to the growth of traffic on
TNS's network and the control of its operating expenses. Also TTC has yet to
achieve OEM or custom platform licensing revenues sufficient to sustain the
entity as a self-supporting, independent business unit. The Company must raise
substantial debt and equity financing to fund such continuing losses. Based on
these factors, the independent accountants expressed doubts about the Company's
ability to continue as a going concern. While the Company believes that its
proceeds from the Initial Note Offering should diminish such doubts, there is no
assurance that the Company can continue as a going concern.
 
     The Company's ability to service and repay the Notes depends on achievement
of its business plan and generating adequate cash flow. Achievement of TeleHub's
business plan is subject to economic, financial, competitive and other risks
(especially those described in this Prospectus), some of which are beyond the
Company's control. The Company's high degree of leverage and its ability to
incur significant additional indebtedness magnifies these risks. Also, the
Company must pay substantial amounts to service this debt, which reduces the
funds available to the Company for business purposes. Since the Issuer conducts
substantially all of its business through subsidiaries, its cash flow will
depend upon the cash flow of its subsidiaries and payments to the Issuer. As a
result of these factors, the Company might not develop and maintain cash flow
from operations sufficient to permit it to service and repay the Notes. Also,
the Company may lack sufficient funds to redeem the Notes in the event of a
Change of Control. Since there is no public market for the Notes, holders might
be unable to liquidate their investment in the Notes.
 
     The telecommunications industry is highly competitive, and subject to rapid
and significant changes in technology and regulation. At the same time, many of
the major IXCs and ILECs, which are potential customers of the VASP platform and
ancillary services, have demonstrated a tendency to be risk averse and slow to
accept technological innovations. These attributes would impede market
acceptance of the VASP platform. Many of the Company's competitors have strong
brand recognition, substantially greater financial and personnel resources, and
greater access to existing and potential customers, also new competitors are
continually entering the market. The long distance transmission market has been
characterized by over-capacity and declining prices. The telecommunications
industry is subject to significant regulation at the federal, state, local and
international levels which greatly effects the operations of the Company and the
position of competitors. Changes in regulation or interpretation of legislation
affecting the Company's operations could create competitive advantages for some
competitors.
 
     The "Risk Factors" section of this Prospectus more extensively discusses
certain factors that prospective purchasers should consider when evaluating an
investment in the Notes.
 
                                        3
<PAGE>   8
 
                         SUMMARY OF THE EXCHANGE OFFER
 
ISSUER.....................  TeleHub Communications Corporation (the "Issuer").
 
SECURITIES OFFERED.........  The Company is offering to exchange $1,000 in
                             principal amount (and any integral multiple
                             thereof) of New Notes for each $1,000 in principal
                             amount (and any integral multiple thereof) of Old
                             Notes that are validly tendered pursuant to the
                             Exchange Offer. The Company will issue the New
                             Notes promptly after the Expiration Date. On the
                             date of this Prospectus, $125,000,000 in aggregate
                             principal amount of Old Notes are outstanding. The
                             Company has not entered into any arrangement or
                             understanding to distribute the New Notes issued in
                             the Exchange Offer.
 
RESALE OF NEW NOTES........  The Company believes that the New Notes issued
                             pursuant to the Exchange Offer generally will be
                             freely transferable by their holders without
                             registration or any prospectus delivery requirement
                             under the Securities Act, except that a "dealer" or
                             any Company "affiliate" (as such terms are defined
                             under the Securities Act) that exchanges Old Notes
                             held for its own account may be required to deliver
                             copies of this Prospectus when reselling the
                             corresponding New Notes. See "The Exchange
                             Offer -- General" and "Plan of Distribution."
 
   
EXPIRATION DATE............  The Exchange Offer will expire at 5:00 p.m., New
                             York City time, on January 22, 1999, unless
                             extended, in which case the term Expiration Date
                             means the latest date and time to which the
                             Exchange Offer is extended. The Company will accept
                             for exchange any and all Old Notes that are validly
                             tendered in the Exchange Offer prior to 5:00 p.m.,
                             New York City time, on the Expiration Date.
    
 
INTEREST ON THE NEW
NOTES......................  Cash interest on the New Notes will not accrue on
                             the Notes prior to July 31, 2001. The New Notes
                             will accrete at a rate of 13.875% from July 30,
                             1998, compounded semi-annually to an aggregate
                             principal amount of $125.0 million by July 31,
                             2001. Thereafter, interest on the New Notes will be
                             payable semi-annually on January 31 and July 31 of
                             each year commencing January 31, 2002.
 
TERMINATION................  The Company may terminate the Exchange Offer if it
                             determines that its ability to proceed with the
                             Exchange Offer could be materially impaired due to
                             any legal or governmental action, any new law,
                             statute, rule or regulation or any interpretation
                             by the staff of the Commission of any existing law,
                             statute, rule or regulation. Holders of Old Notes
                             will have certain rights against the Company under
                             the Registration Rights Agreement should the
                             Company fail to consummate the Exchange Offer. See
                             "The Exchange Offer -- Termination." No federal or
                             state regulatory requirements or approvals are
                             needed in connection with the Exchange Offer, other
                             than applicable requirements under federal and
                             state securities laws.
 
PROCEDURES FOR TENDERING
OLD NOTES..................  Each beneficial owner owning interests in Old Notes
                             ("Beneficial Owner") through a DTC Participant (as
                             defined) must instruct such DTC Participant to
                             cause Old Notes to be tendered in accordance with
                             the procedures set forth in this Prospectus and in
                             the Letter of Transmittal. See "The Exchange
                             Offer -- Procedures for Tendering Old Notes". Each
                             participant (a "DTC Participant") in the Depository
                             Trust Company ("DTC") holding Old Notes through DTC
                             must (i) electronically
 
                                        4
<PAGE>   9
 
                             transmit its acceptance to DTC through the DTC
                             Automated Tender Offer Program ("ATOP"), for which
                             the transaction will be eligible, and DTC will then
                             verify the acceptance, execute a book-entry
                             delivery to the Exchange Agent (as defined herein)
                             account at DTC and send an Agent's Message (as
                             defined herein) to the Exchange Agent for its
                             acceptance, or (ii) comply with the guaranteed
                             delivery procedures set forth in this Prospectus
                             and in the Letter of Transmittal. By tendering
                             through ATOP, DTC Participants will expressly
                             acknowledge receipt of the accompanying Letter of
                             Transmittal and agree to be bound by its terms and
                             the Company can enforce such agreement against such
                             DTC Participants. See "The Exchange
                             Offer -- Procedures for Tendering Old Notes".
 
                             Each holder of Old Notes must (i) complete and sign
                             a Letter of Transmittal, and mail or deliver such
                             Letter of Transmittal, and all other documents
                             required by the Letter of Transmittal, together
                             with certificate(s) representing all tendered Old
                             Notes, to the Exchange Agent at its address set
                             forth in this Prospectus and in the Letter of
                             Transmittal, or (ii) comply with the guaranteed
                             delivery procedures set forth in this Prospectus.
                             See "The Exchange Offer -- Procedures for Tendering
                             Old Notes".
 
                             By tendering, each holder of Old Notes will
                             represent to the Company that, among other things,
                             (i) it is not an affiliate of the Company, (ii) it
                             is not a broker-dealer tendering Old Notes acquired
                             directly from the Company for its own account,
                             (iii) the New Notes acquired pursuant to the
                             Exchange Offer are being obtained in the ordinary
                             course of business of such holder and (iv) it has
                             no arrangements or understandings with any person
                             to participate in the Exchange Offer for the
                             purpose of distributing the New Notes. See "The
                             Exchange Offer -- General."
 
GUARANTEED DELIVERY
  PROCEDURES...............  DTC Participants holding Old Notes through DTC who
                             wish to cause their Old Notes to be tendered, but
                             who cannot transmit their acceptance through ATOP
                             prior to the Expiration Date, may effect a tender
                             in accordance with the procedures set forth in this
                             Prospectus and in the Letter of Transmittal. See
                             "The Exchange Offer -- Guaranteed Delivery
                             Procedures." Holders who wish to tender their Old
                             Notes but (i) whose Old Notes are not immediately
                             available and will not be available for tendering
                             prior to the Expiration Date, or (ii) who cannot
                             deliver their Old Notes, the Letter of Transmittal
                             or any other required documents to the Exchange
                             Agent prior to the Expiration Date, may effect a
                             tender in accordance with the procedures set forth
                             in this Prospectus. See "The Exchange
                             Offer -- Guaranteed Delivery Procedures."
 
WITHDRAWAL RIGHTS..........  Tenders of Old Notes may be withdrawn at any time
                             prior to 5:00 p.m., New York City time, on the
                             Expiration Date, in accordance with the procedures
                             set forth in "the Exchange Offer -- Withdrawal of
                             Tenders".
 
ACCEPTANCE OF OLD NOTES AND
  DELIVERY OF NEW NOTES....  Subject to certain conditions as summarized above
                             in "Termination" and described more fully in "The
                             Exchange Offer -- Termination", the Company will
                             accept for exchange any and all Old Notes that are
                             validly tendered in the Exchange Offer prior to
                             5:00 p.m., New York City time, on the Expiration
                             Date. The New Notes issued pursuant to the Exchange
 
                                        5
<PAGE>   10
 
                             Offer will be delivered promptly following the
                             Expiration Date. See "The Exchange
                             Offer -- General."
 
FEDERAL INCOME TAX
  CONSIDERATIONS...........  Since the New Notes should not be considered as
                             materially differing from the Old Notes, the
                             exchange of Old for New Notes will not result in
                             any material federal income tax consequences to
                             holders exchanging Old Notes for New Notes. See
                             "Certain Federal Income Tax Considerations".
 
EXCHANGE AGENT.............  The Trustee is also the Exchange Agent. The office
                             address of the Exchange Agent is: State Street
                             Bank, Two International Place -- 4th Floor, Boston,
                             Massachusetts 02110, Attention: Corporate Trust
                             Division: TeleHub Communications
                             Corporation -- 13.875% Senior Discount Notes due
                             2005. For information with respect to the Exchange
                             Offer, the telephone number for the Exchange Agent
                             is (617) 664-5587 and the facsimile number for the
                             Exchange Agent is (617) 664-5371.
 
USE OF PROCEEDS............  There will be no cash proceeds payable to the
                             Company from the issuance of the New Notes pursuant
                             to the Exchange Offer. The Company received net
                             proceeds from the Initial Note Offering of
                             approximately $78.7 million, after deducting the
                             Initial Purchaser's discount and estimated fees and
                             expenses from the Initial Offering. With those net
                             proceeds, the Company repaid a $11.4 million Bridge
                             Loan (the "Bridge Loan") from Comdisco, Inc.
                             ("Comdisco"), and intends to use the remainder to
                             fund operating losses, to expand the TeleHub
                             network, for additional working capital and for
                             other general corporate purposes. See "Use of
                             Proceeds".
 
     The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the New Notes will
not bear transfer restriction legends. The New Notes will be obligations of the
Company entitled to the benefits of the Indenture. The Subsidiaries' guarantee
of repayment of the New Notes will be full, unconditional, joint and several.
See "Description of the Notes." Following the completion of the Exchange Offer,
the Old Notes will not be entitled to any rights under the Note Registration
Rights Agreement including, but not limited to, any contingent increase in the
interest rate. See "the Exchange Offer".
 
                                        6
<PAGE>   11
 
                      SUMMARY CONSOLIDATED FINANCIAL DATA
 
     The following summary consolidated financial data for the period from
inception (January 18, 1996) to December 31, 1996 and for the year ended
December 31, 1997 have been derived from the Company's consolidated financial
statements (the "Consolidated Financial Statements") which have been audited by
PricewaterhouseCoopers LLP., independent accountants. The summary data as of and
for the nine months ended September 30, 1997 and 1998, respectively, have been
derived from unaudited consolidated financial statements of the Company and, in
the opinion of the Company, include all adjustments, consisting of normal
recurring accruals necessary for a fair presentation of such information.
Operating results for the nine months ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the entire year.
The following summary consolidated financial data should be read in conjunction
with "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and the related notes thereto included elsewhere in this Prospectus.
 
<TABLE>
<CAPTION>
                                                                           NINE MONTHS ENDED
                                        INCEPTION TO    YEAR ENDED           SEPTEMBER 30,
                                        DECEMBER 31,   DECEMBER 31,   ---------------------------
                                            1996           1997           1997           1998
                                        ------------   ------------   ------------   ------------
                                                                      (UNAUDITED)    (UNAUDITED)
<S>                                     <C>            <C>            <C>            <C>
STATEMENT OF OPERATIONS DATA:
Revenues..............................  $        --    $  2,901,280   $         --   $  4,613,368
Operating expenses other than
  depreciation and amortization(1)....    3,667,319      19,483,912     11,388,663     38,467,746
Depreciation and amortization.........       68,556         784,548        263,418      3,270,855
                                        -----------    ------------   ------------   ------------
            Total operating
               expenses...............    3,735,875      20,268,460     11,652,081     41,738,601
            Operating loss............   (3,735,875)    (17,367,180)   (11,652,081)   (37,125,233)
Amortization of debt discount.........      (85,375)       (546,875)      (546,875)    (1,999,137)
Interest expense, net(2)..............      (66,973)       (213,658)        38,169     (3,222,719)
Other income (expense)(3).............     (599,950)         34,889            114         16,889
                                        -----------    ------------   ------------   ------------
            Net loss(4)...............  $(4,488,173)   $(18,092,824)  $(12,160,673)  $(42,330,200)
                                        ===========    ============   ============   ============
Basic and diluted loss per share(5)...  $     (0.52)   $      (1.70)  $      (1.20)  $      (3.35)
Weighted average shares outstanding
  used in per share calculations --
  basic and diluted...................    8,614,815      10,624,251     10,153,442     12,651,034
OTHER FINANCIAL DATA:
EBITDA(6).............................  $(4,267,269)   $(16,547,743)  $(11,388,549)  $(33,837,489)
Capital expenditures..................    3,028,715      18,221,327     16,272,826      5,275,936
Ratio of earnings to fixed charges....           --              --             --             --
Deficiency between earnings and fixed
  charges(7)..........................    4,488,173      18,092,824     12,160,673     42,330,200
CASH FLOW DATA:
Net cash used in operating
  activities..........................  $ 2,070,928    $ 16,624,763   $  9,619,902   $ 28,570,149
Net cash used in investing
  activities..........................      572,672       9,629,035      7,984,760      2,029,562
Net cash provided from financing
  activities..........................    2,828,536      35,449,182     22,364,179     76,635,519
</TABLE>
 
<TABLE>
<CAPTION>
                                                              AS OF SEPTEMBER 30,
                                                                     1998
                                                              -------------------
                                                                  (UNAUDITED)
<S>                                                           <C>
BALANCE SHEET DATA:
Cash, cash equivalents and restricted cash..................      $56,009,012
Total assets................................................       87,062,802
Total debt, including current portions(8)...................       75,581,035
Stockholders' equity........................................        1,669,023
</TABLE>
 
- ---------------
 
See footnotes on following page.
 
                                        7
<PAGE>   12
 
 (1) Operating expenses consist of total operating expenses less depreciation
     and amortization.
 
 (2) Interest expense, net consists of the sum of interest expense and interest
     income.
 
 (3) Other income (expense) consists of the sum of indemnification expense and
     other income.
 
 (4) The Company has not recorded any benefit for income taxes due to the
     uncertainty surrounding the realization of the favorable tax attributes in
     future tax returns. Accordingly, the Company has recorded a valuation
     allowance against its total net deferred tax assets.
 
 (5) The Company computes loss per share pursuant to Statement of Financial
     Accounting Standard No. 128, Earnings Per Share. The dilutive effect of
     options, warrants, and the Preferred Stock have not been considered as
     their effect would have been antidilutive for all periods presented. See
     Note 15 to the Consolidated Financial Statements.
 
 (6) EBITDA consists of earnings before interest, taxes, depreciation and
     amortization. More specifically, the following balances were excluded from
     EBITDA as defined: depreciation and amortization, amortization of debt
     discount and interest expense. The Company believes EBITDA can provide
     additional information about the Company's ability to meet debt service,
     capital expenditures and other financing requirements. EBITDA is a measure
     of financial performance commonly used in the telecommunications industry.
     The Company is presenting EBITDA to enhance an understanding of the
     Company's operating results and assist investors in their comparison of the
     Company's financial statements with those of other development stage
     telecommunications companies. EBITDA should not be construed as
     representing cash flow or results of operations in accordance with
     generally accepted accounting principles for the periods indicated and may
     be calculated differently than similarly titled measures for other
     companies. Management's discretionary use of earnings depicted by EBITDA is
     principally limited by the Indenture covenants, see "Description of Notes
     -- Certain Covenants" and by the need to conserve funds for capital
     expenditures, software development, debt service and other uncertainties.
 
 (7) The Company's earnings were insufficient to cover its fixed charges. For
     purposes of calculating ratio of earnings to fixed charges, earnings
     consist of earnings (losses) before fixed charges. Fixed charges consist of
     interest on debt, amortization of deferred financing costs, operating lease
     expense, and that portion of rental expense the Company believes to be
     representative of interest (i.e., one third rent expense). On a pro forma
     basis, after giving effect to the Initial Note offering, the Company's
     earnings would have been insufficient to cover fixed charges by $39.3
     million and $58.3 million for the year ended December 31, 1997 and for the
     nine-month period ended September 30, 1998, respectively.
 
 (8) Total debt, including current portions, consists of capital lease
     obligations and other long-term debt, including current portions. The Notes
     are presented net of the Debt Discount and will accrete in value through
     July 31, 2001 at a rate of 13 7/8% per annum compounded semi-annually. No
     interest will be payable in cash on the Notes prior to January 31, 2002.
 
                                        8
<PAGE>   13
 
                                  RISK FACTORS
 
     An investment in the New Notes involves substantial risks. Prospective
purchasers should consider carefully the specific factors set forth below as
well as the other information contained in this Prospectus in evaluating whether
to invest in the New Notes.
 
SUBSTANTIAL OPERATING LOSSES AND EXPECTED LOSSES
 
     The Company has generated minimal VASP(TM) licensing or wholesale long
distance revenues and has a very limited operating history with which investors
can evaluate TeleHub's future performance. TeleHub has reported substantial net
losses since inception, primarily as a result of expenses associated with the
development of VASP(TM), implementation of the ATM network and operational
expenses. The Company's cumulative losses from inception until September 30,
1998, were approximately $65 million. TeleHub's profitability depends on the
demand for its VASP(TM) software and its wholesale long distance services. There
can be no assurance that TeleHub will attain profitability in the future.
Failure to be profitable could impair TeleHub's ability to expand its long
distance business, continue additional technology development and raise
additional equity or debt financing. Such events could have a material adverse
effect on TeleHub, the value of the Securities and the Company's ability to
repay the Notes.
 
EARLY COMMERCIAL STAGE OF THE COMPANY
 
     The success of TNS in the wholesale long distance business depends upon
TNS's ability to generate significant customer traffic and to manage an
efficient long distance network and related customer service. The Company has
not previously managed a long distance network and there can be no assurance
that its wholesale long distance services can be sold at a profit. The failure
of TNS to generate significant customer traffic, implement VASP(TM) enhancements
in a timely manner, effectively manage the ATM network and related customer
services, or operate its business at a profit could have a material adverse
effect on the Company's business, operating results and financial condition.
 
     TNS is a recent entrant into the long distance business and its three
switch locations and national ATM network became commercially operational only
in December 1997. The Company expects that it will incur substantial operating
losses and generate negative cash flow unless and until its customers route
sufficient traffic over the ATM network. The Company currently does not
anticipate that sufficient traffic will be carried on its network to cover its
cost of operations before 1999 at the earliest based on certain assumptions as
to the growth of traffic on TNS's network and the control of its operating
expenses. Such assumptions may prove to be inaccurate due to changes in the
businesses of TNS's wholesale customers, TNS's ability to attract new customers,
technical and/or logistical problems in the operation of the ATM network, TNS's
limited experience with wholesale long distance services, unanticipated
increases in operating expenses or other factors affecting TNS's revenues or
expenses.
 
     TTC has yet to achieve OEM or custom platform licensing revenues sufficient
to sustain the entity as a self-supporting, independent business unit. Until
that occurs, its development efforts will continue to exert a negative impact on
the Company's overall financial performance. The Company has not previously
entered into OEM or custom platform licensing relationships. There can be no
assurance that it will successfully enter into such relationships in the future
or that it will be able to license its technology at a profit. The failure of
TTC to generate sufficient OEM or custom platform licensing revenues in a timely
manner, develop subsequent releases of its technology, or operate its business
at a profit could have a material adverse effect on the Company's business,
operating results and financial condition.
 
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
 
     As a result of the Initial Note Offering, the Company is highly leveraged.
After the Initial Note Offering and the use of proceeds therefrom (including
repayment of the Bridge Loan), the Company had approximately $75.6 million of
total consolidated indebtedness outstanding at September 30, 1998 (including
current portion but net of Debt Discount). In addition, the Indenture permits
the Company and its subsidiaries to incur substantial additional indebtedness
subject to certain restrictions. See "Description of Notes -- Certain
                                        9
<PAGE>   14
 
Covenants." Although the Company expects the proceeds from the Initial Note
Offering to provide sufficient funds to take the Company to positive cash flow,
the Company may need to incur substantial additional indebtedness to finance the
continued development, commercial deployment and expansion of its network and to
fund operating losses. The degree to which the Company is leveraged could have
important consequences to the holders of the Notes, including, but not limited
to, the following: (i) the Company's ability to obtain additional financing or
refinancing in the future for working capital, capital expenditures, service
development and enhancement, acquisitions, general corporate purposes and other
purposes may be materially limited or impaired; (ii) the Company's cash flow, if
any, may be unavailable for the Company's business since a substantial portion
of the Company's cash flow must be dedicated to the payment of principal and
interest on its indebtedness, including the Notes; (iii) the terms of future
permitted indebtedness may limit the Company's ability to redeem the Notes in
the event of a Change of Control; and (iv) the Company's high degree of leverage
may make it more vulnerable to economic downturns, may limit its ability to
withstand competitive pressures and may reduce its flexibility in responding to
changing business and economic conditions. No assurance can be given that the
Company will be successful in developing and maintaining a level of cash flow
from operations sufficient to permit it to pay the principal, premium, if any,
and interest on its indebtedness, including the Notes. The ability of the
Company to make scheduled payments with respect to indebtedness (including the
Notes) will depend upon, among other things: (i) the Company's ability to
achieve significant and sustained growth in cash flow; (ii) the rate of success
of the commercial deployment of its network; (iii) the market acceptance of,
customer demand for, rate of utilization of and pricing for the Company's
products and services; (iv) the future operating performance of the Company and
the extent to which the Company's products and services are subject to
performance problems; (v) the Company's ability to successfully complete
development, upgrades and enhancements of its technology products and its
network and (vi) the Company's ability to complete additional financings, as
necessary. Each of these factors is, to a large extent, subject to economic,
financial, competitive and other factors, many of which are beyond the Company's
control. If the Company is unable to generate sufficient cash flow to service
its indebtedness, including the Notes, it may have to reduce or delay network
deployments or product development, restructure or refinance its indebtedness or
seek additional equity capital. There can be no assurance that any of these
strategies could be effected on satisfactory terms, if at all, in light of the
Company's high leverage, or that any such strategy would yield sufficient
proceeds to service and repay the Company's indebtedness, including the Notes.
 
     Any failure by the Company to satisfy its obligations with respect to the
Notes at maturity or prior thereto would constitute a default under the
Indenture and could cause a default under agreements governing other
indebtedness of the Company. In the event of such default, the holders of such
indebtedness would have enforcement rights, including the right to accelerate
such debt and the right to commence an involuntary bankruptcy proceeding against
the Company. Absent successful commercial introduction of VASP(TM), ongoing
technical development of the ATM network to achieve scalability and reduced
costs and significant growth of its cash flow, the Company will not be able to
service or repay its indebtedness, including the Notes.
 
HOLDING COMPANY STRUCTURE; RESTRICTIONS ON ACCESS TO SUBSIDIARY CASH FLOW
 
     The Issuer is a holding company that conducts substantially all of its
operations through its subsidiaries. Because the Issuer conducts operations
through subsidiaries, the Issuer's cash flow and its ability to service its
indebtedness, including the Notes, will depend upon the cash flow of its
subsidiaries and payments of funds by those subsidiaries to the Issuer in the
form of repayment of loans, dividends or otherwise. In addition, the Indenture
will permit these subsidiaries to incur indebtedness or become parties to
financing arrangements, which may contain limitations on the ability of such
subsidiaries to pay dividends or to make loans or advances to the Issuer.
Further, any holders of secured indebtedness (including trade payables) of the
Issuer's subsidiaries would be entitled to repayment of such indebtedness from
the assets of the affected subsidiaries before such assets were made available
for distribution to the Issuer. See "Description of Notes -- Certain Covenants."
 
                                       10
<PAGE>   15
 
ABILITY TO CONTINUE AS A GOING CONCERN
 
     The independent accountants' audit report on the Company's consolidated
balance sheets as of December 31, 1996 and 1997 and the consolidated statements
of operations, stockholders equity (deficit) and cash flows for the period from
January 18, 1996 (date of inception) to December 31, 1996 and for the year ended
December 31, 1997, expressed substantial doubts about the Company's ability to
continue as a going concern. These doubts were based on the Company's
accumulation of losses from development of its products and services and the
Company's need for substantial additional debt and equity financing to execute
its business plan. The Company believes that its proceeds from the Initial Note
Offering should diminish doubts about the Company's ability to continue as a
going concern. However, there is no assurance that the Company can continue as a
going concern.
 
TECHNOLOGICAL UNCERTAINTY
 
     TeleHub's business strategy is based upon the VASP(TM) platform and
demonstrating its viability through the VASP(TM)-managed ATM network.
Enhancements to the VASP(TM) platform are continually under development. The
chosen ATM technology for the TeleHub network is not yet widely utilized in
publicly switched voice or data networks. ATM technical standards are still
being developed and the projected savings from increased transmission
capabilities have yet to be validated in actual performance. Unforeseen problems
could emerge with respect to the VASP(TM) platform or the ATM network. The
results of TNS's operations, to date, do not necessarily prove the viability or
efficacy of the network when fully deployed under a load of heavy
telecommunications traffic transmission. The telecommunications industry is
subject to rapid and significant changes in technology; for example, other
competitive techniques for implementing ATM could be developed. There can be no
assurance that TNS will maintain competitive services or that TTC will develop
new technologies on a timely basis or on satisfactory terms. Such an increase in
supply or failure by TNS to maintain competitive services or TTC to develop new
technologies could have a material adverse effect on the Company's business,
operating results and financial condition.
 
RISKS INHERENT IN RAPID GROWTH
 
     TeleHub's strategy envisions rapid growth through entering the wholesale
long distance business through TNS and the technology market through TTC. That
expected growth will place a significant strain on TeleHub's management and
operational and financial resources. To manage its growth effectively, TeleHub
must continuously improve its operational and financial systems, forecasting and
controls. Any substantial inaccuracies in the forecasts of product usage and
growth could produce a shortage or excess of personnel and facilities that would
adversely affect TeleHub's financial and service performance. If growth is not
effectively managed and the quality of service or support is not maintained at
acceptable levels, the business may be negatively impacted. Rapid growth will
require: (i) training and retaining of new personnel; (ii) satisfactory
performance of TeleHub's customer interface and billing systems; (iii)
development and introduction of new products; and (iv) control of TeleHub's
expenses related to the expansion into the wholesale long distance business. The
Company's failure to satisfy these requirements, or otherwise to manage its
growth effectively, would have a material adverse effect on the Company's
business, operating results and financial condition.
 
PATENTS, PROPRIETARY RIGHTS AND THE RISK OF LITIGATION
 
     The Company relies on a combination of patent, copyright and trademark
laws, trade secrets, confidentiality and non-disclosure agreements and other
contractual provisions to protect its proprietary rights, measures that provide
only limited protection. The Company currently has several pending patent
applications. There can be no assurances that the Company's means of protecting
its proprietary rights in the United States or abroad will be adequate or that
competitors will not independently develop similar technologies. The Company's
future success will depend in part on its ability to protect its proprietary
rights to the technologies used by VASP(TM). Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy aspects
of the Company's products or obtain and use information that the Company regards
as proprietary. The Company has applied to register certain of its trademarks in
the United States and other countries. There can be no assurances that the
Company will obtain registrations of principle marks in key
                                       11
<PAGE>   16
 
markets. Failure to obtain registrations could compromise the Company's ability
to fully protect its trademarks and brands and could increase the risk of
challenge from third parties to its use of its trademarks and brands. In
addition, the laws of some foreign countries do not protect proprietary rights
as fully as do the laws of the United States. There can be no assurance that any
issued patent will preserve the Company's proprietary position, or that others
will not be able to develop technologies similar to or superior to the Company's
technology. The Company licenses from third parties certain technology used in
and for its products and services. There can be no assurances that such
technology will remain available to the Company on terms beneficial to the
Company. Failure of the Company to enforce and protect its intellectual property
rights or obtain from third parties the right to use necessary technology could
have a material adverse effect on the Company's business, operating results and
financial condition.
 
     From time to time, third parties, including competitors of the Company,
have asserted patent, copyright or other intellectual property rights to
technologies that are important to the Company or that are relevant to products
that might be of interest to the Company. From time to time, the Company
receives notice from such third parties of the intellectual property rights such
parties have obtained. The Company expects that it will increasingly receive
such notices and may, at times, be subject to infringement claims as the number
of products and competitors in the telecommunications industry grows and the
functionality of products overlaps. Any infringement claim or other litigation
against or by the Company could cause the Company to incur substantial costs and
diversion of management resources, and could have a material adverse effect on
the Company's business, financial condition and results of operations.
Furthermore, parties making such claims could secure a judgment awarding
substantial damages, as well as injunctive or other equitable relief that could
effectively block the Company's ability to license its products in the United
States or abroad. Such a judgment would have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the Company is obligated under certain agreements to indemnify the other party
in connection with infringement by the Company of the proprietary rights of
third parties. In the event the Company is required to indemnify parties under
these agreements, it could have a material adverse effect on the business,
financial condition and results of operations of the Company. In the event a
claim relating to proprietary technology or information is asserted against the
Company, the Company may seek licenses to such intellectual property. There can
be no assurance, however, that licenses could be obtained on commercially
reasonable terms, if at all, or that the terms of any offered licenses would be
acceptable to the Company. If forced to cease using such technology, there can
be no assurance that the Company would be able to develop or obtain alternate
technology. Accordingly, an adverse determination in a judicial or
administrative proceeding or failure to obtain necessary licenses could prevent
the Company from manufacturing, using or selling certain of its products and
services, which could have a material adverse effect on the Company's business,
financial condition, competitive position and results of operations and its
ability to pay the interest on and principal of the Notes.
 
RISK OF MARKET ACCEPTANCE
 
     The software-based VASP(TM) technology is new and a dramatic departure from
the embedded network switching and control components used by the major IXCs and
ILECs that are potential consumers of the VASP(TM) platform and ancillary
services. As a class, they have demonstrated a tendency to be risk averse and
are unaccepting of change or technological innovation without cautious,
time-consuming testing and evaluation. They also tend to purchase from major
hardware and software vendors that they have utilized previously and with whom
they have ongoing business relationships. This phenomenon, sometimes referred to
as "the inertia of capital commitment" is a barrier to market acceptance of
VASP(TM). Without some level of market acceptance, the probability of TeleHub's
long-term success is greatly diminished.
 
LONG DISTANCE PRICING PRESSURES AND RISKS OF INDUSTRY OVERCAPACITY
 
     The long distance transmission industry generally has been characterized by
over-capacity and declining prices since shortly after the 1984 divestiture by
AT&T of its Regional Bell Operating Companies ("RBOCs"). The Company believes
that, in the last several years, increasing demand has reduced the over-
capacity and downward pricing pressure. However, the Company anticipates that
prices for TNS's services
 
                                       12
<PAGE>   17
 
may decline over the next several years. The Company is aware that certain long
distance carriers are expanding their capacity and believes that other long
distance carriers, as well as other potential new entrants to the industry, are
constructing and installing switches and new fiber optic cable, and other long
distance transmission networks. Further, recent technological advances, such as
ATM and wave division multiplexing, have shown the potential to greatly expand
the capacity of existing and new fiber optic cable. If industry expansion
results in capacity that exceeds demand overall or along any of TNS's routes,
additional downward pricing pressure could develop. In addition, strategic
alliances or strategic transactions, such as the recently announced long
distance capacity purchasing alliance among certain RBOCs, could result in
additional price competition among long distance carriers. Such pricing pressure
could have a material adverse effect on the Company's business, operating
results and financial condition.
 
COMPETITION
 
     Overview.  The communications services industry is highly competitive,
rapidly evolving and subject to constant technological change. In particular,
there are numerous companies offering long distance services, and the Company
expects competition to increase in the future. The Company believes that
existing competitors are likely to continue to expand their service offerings to
appeal to existing or potential customers of the Company. Many of the Company's
existing competitors have financial, personnel and other resources, including
brand name recognition, substantially greater than that of the Company. New
competitors are likely to enter the communications market, some of whom may have
financial, personnel and other resources, including brand name recognition,
substantially greater than that of the Company.
 
     In addition, the regulatory environment in which the Company operates is
undergoing significant change. As this regulatory environment evolves, changes
may occur which could create greater or unique competitive advantages for all or
some of the Company's current or potential competitors, or could make it easier
for additional parties to provide services. Many communications companies
operate generally in the long distance market in which the Company operates, and
there are numerous companies that offer wholesale long distance services, which
are offered by the Company. As a service provider in the long distance industry,
the Company competes with several well-established providers, as well as many
other long distance providers with less significant market shares. Moreover,
certain of the Company's competitors may be better situated to negotiate more
favorable contracts with suppliers.
 
     Domestic and International Long Distance.  The long distance communications
industry is intensely competitive and significantly influenced by the marketing
and pricing decisions of the larger industry participants such as AT&T, MCI
Communications Corp. ("MCI"), Sprint and WorldCom. Moreover, the industry is
undergoing significant consolidation that has created and will continue to
create numerous other entities with substantial resources to compete for long
distance business. In addition, as a result of the Telecommunications Act, RBOCs
are able or will be able in the future to enter the long distance market. New
technologies could also give rise to new regulation or new competitors. The
Company's larger competitors have significantly greater name recognition,
financial, technical, network and marketing resources. They may also offer a
broader portfolio of services and have long standing relationships with
customers targeted by the Company and long standing relationships with
regulators.
 
     The Company has entered into telecommunications services agreements with
its wholesale long distance customers which do not contain minimum usage
commitments and which are cancellable upon short notice without penalties. If
these service agreements are cancelled, or are not renewed upon expiration, the
loss of customers could have a material adverse effect on the Company's
business, operating results and financial condition. Although the Company
believes that TNS offers switched wholesale services at rates generally lower
than those offered by other competing wholesale service providers, prices for
domestic and international long distance calls have decreased in recent years
and are likely to continue to decrease. There can be no assurance that the
Company will be able to compete effectively in the domestic or international
long distance markets.
 
     Networks.  The Company believes that its VASP(TM)-managed ATM network is
unique in that it allows for the first ATM service in commercial operation that
can be switched into the PSTN. Other telecommunications
 
                                       13
<PAGE>   18
 
providers can provide their own networks and can provide those networks to other
carriers. Numerous established and start-up national and regional fiber optic
networks are owned by IXCs, ILECs and CLECs, including AT&T, MCI and Sprint,
each of whom has greater name recognition and financial, personnel, technical
and marketing resources than the Company. Other established companies including
AT&T Corporation ("AT&T"), Sprint Corp. ("Sprint") and Bell Atlantic Corp.
("Bell Atlantic") have announced or may be planning the construction of ATM
networks that can be switched into the PSTN.
 
     TTC faces competition from some of the most experienced companies engaged
in the development of telecommunications equipment and related software.
Examples include switch vendors (Lucent, Nortel and Siemens Corporation
("Siemens")), ATM vendors (Nortel, Siemens, Alcatel (as defined), Cisco and
Ascend Communications, Inc. ("Ascend")), signaling products vendors (Nortel and
Tekelec (as defined)), and OSS providers (Hewlett-Packard Inc. and Applied
Digital Access Inc.). The Company believes that existing competitors are likely
to continue to expand their product offerings to appeal to existing or potential
customers of the Company. Many of the Company's existing competitors have
financial, personnel and other resources, including brand name recognition,
substantially greater than the Company.
 
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
 
     The Company currently anticipates that its available cash resources
combined with the net proceeds of the Initial Note Offering and funds from
operations will be sufficient to meet its anticipated working capital and
capital expenditure requirements for at least the next twelve months. However,
there can be no assurance that such resources will be sufficient for its
anticipated working capital and capital expenditure requirements. The Company
may need to raise additional funds through public or private debt or equity
financings in order to take advantage of opportunities, including more rapid
expansion or acquisitions of complementary business or technologies, or to
develop new products or otherwise respond to unanticipated competitive
pressures. The Company may also raise additional funds through public or private
debt or equity financings if such financings become available on favorable
terms. If it is necessary to raise additional funds, there can be no assurance
that additional financing will be available on terms favorable to the Company,
or at all. If adequate funds are not available on acceptable terms, the Company
may not be able to take advantage of opportunities, develop new products or
otherwise respond to competitive pressures. Such inability could have a material
adverse effect on the Company's business, results of operations and financial
condition. The Company's forecast of the period of time through which its
financial resources will be adequate to support its operations is a forward
looking statement that involves risks and uncertainties, and actual results
could vary materially as a result of a number of factors, including those set
forth above in this paragraph. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
 
SUBSTANTIAL FUTURE CAPITAL REQUIREMENTS
 
     The Company will require substantial additional funds for the continued
development, commercial deployment and expansion of its network. As of September
30, 1998, the Company had $56 million in cash, cash equivalents and restricted
cash. From inception until September 30, 1998, the Company incurred operating
expenses of approximately $65.7 million in the development of its business,
development of technology and operating support systems, deployment of sales and
marketing activities and establishment of its management team. In addition, the
Company has made and expects to continue to make significant capital outlays in
order to continue required development activities, commercially deploy its
products and services and fund operations until such time, if at all, as the
Company begins to generate positive EBITDA. The Company believes the proceeds
from the Initial Note Offering will be sufficient to fund the Company's
aggregate capital expenditures and working capital requirements, including
operating losses, associated with the rollout of its products and services.
While the Company believes that the net proceeds from the Initial Note Offering,
together with cash on hand, will be sufficient to finance its rollout, it may
need to secure additional financing to enter new markets for its products and
services. If demand for the Company's products and services is less than
expected, the Company may require additional financing at an earlier date. There
can be no assurance that the Company will be able to implement its rollout
strategy in a timely fashion, if at all. There can be no
 
                                       14
<PAGE>   19
 
assurance that the Company's current estimates of EBITDA, which will depend on
numerous future factors and conditions described elsewhere in "Risk Factors,"
many of which are outside of the Company's control, will be accurate, and it is
likely that actual results will vary materially from such estimates. The Company
has no present commitments or arrangements assuring it of any future equity or
debt financing, and there can be no assurance that any such equity or debt
financing will be available to the Company on favorable terms or at all. In
addition, the Indenture contains certain covenants restricting the Company's
ability to incur further indebtedness, and future borrowing instruments such as
credit facilities are likely to contain similar or more restrictive covenants
and could require the Company to pledge assets as security for borrowings
thereunder. In the event that the Company is unable to obtain such additional
capital or is required to obtain it on unsatisfactory terms, the Company will be
required to delay the expansion of its business or take or forego actions that
could materially adversely affect the Company's business, prospects, operating
results, financial condition and its ability to service and repay its
indebtedness, including the Notes. In the event that the Company is unable to
generate sufficient cash flow and is otherwise unable to obtain funds necessary
to meet required payments on its indebtedness, the Company could be in default
under the terms of the agreements governing its indebtedness, including the
Notes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
 
CHANGE OF CONTROL
 
     Upon the occurrence of a Change of Control, each holder of Notes will be
entitled to require the Company to repurchase any or all of the Notes held by
such holder at a premium of 101% of the aggregate principal amount plus accrued
and unpaid interest (101% if the Accreted Value if the Change of Control occurs
before July 31, 2002). However, the Company's ability to repurchase the Notes
upon a Change of Control may be limited by the terms of then-existing
contractual obligations of the Issuer and its subsidiaries. In addition, the
Company may not have adequate financial resources to effect such a repurchase,
and there can be no assurance that the Company would be able to obtain such
resources through a refinancing of the Notes to be repurchased or otherwise. If
the Company fails to repurchase all of the Notes tendered for repurchase upon
the occurrence of a Change of Control, such failure will constitute an Event of
Default under the Indenture.
 
     With respect to the sale of assets referred to in the definition of Change
of Control, the phrase "all or substantially all" as used in such definition
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under the relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of a Person (as defined)
and therefore it may be unclear whether a Change of Control has occurred and
whether the Notes are subject to an offer to repurchase.
 
     The Change of Control provisions may not necessarily afford the holders
protection in the event of a highly leveraged transaction, including a
reorganization, restructuring, merger or other similar transaction involving the
Company that may adversely affect the holders, because such transactions may not
involve a shift in voting power or beneficial ownership or, even if they do, may
not involve a shift of the magnitude required under the definition of Change of
Control to trigger such provisions. Except as described under "Description of
Notes -- Repurchase at the Option of Holders -- Change of Control," the
Indenture does not contain provisions that permit the holders of the Notes to
require the Company to repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
 
CONSEQUENCES OF ORIGINAL ISSUE DISCOUNT ON NOTES
 
     The Notes will be issued at a substantial discount and a portion of the
issue price of the Old Notes was allocated to the warrants resulting in the
Notes having a deemed issue price less than their principal amount. U.S. federal
income tax laws will therefore treat the Notes as having original issue discount
("OID"). Consequently, U.S. purchasers of the Notes generally must recognize OID
amounts as gross income for U.S. federal tax purposes and pay taxes on such
deemed income before receiving the cash payments representing that income. If
the Notes are treated as "applicable high yield discount obligations," the
Company's
                                       15
<PAGE>   20
 
deductions with respect to the OID on the Notes will be either deferred until
the Company makes the related payments or possibly, in part, disallowed.
 
     If a bankruptcy proceeding is commenced by or against the Company under the
United States Bankruptcy Code after the issuance of the Notes, the claim of a
holder of Notes may be limited to an amount equal to the sum of (i) the initial
offering price for the Notes and (ii) that portion of the OID that is not deemed
to constitute "unmatured interest" for purposes of the United States Bankruptcy
Code. Any OID that was not amortized as of the commencement of any such
bankruptcy proceeding would constitute "unmatured interest."
 
DEPENDENCE ON KEY PERSONNEL
 
     TeleHub is managed by a small number of key executive officers, the loss of
whose services could have a material adverse effect on the Company. TeleHub
believes that its growth and future success will depend in large part on its
continued ability to attract and retain highly skilled and qualified personnel
and consultants. The loss of senior management or the failure to recruit
additional qualified personnel and consultants in the future could significantly
impede TeleHub's ability to achieve its financial, expansion, marketing and
other objectives. TeleHub has employment contracts with certain key executives.
See "Management."
 
RECENT LEGISLATION AND REGULATORY UNCERTAINTY
 
     Certain of TeleHub's operations are subject to regulation by the FCC and
state public utility commissions. The FCC is restructuring access rates and
universal service mechanisms which will affect TNS's costs and rates. Changes in
the regulation or interpretation of legislation affecting TeleHub's operations
could have a material adverse effect on the Company's business, operating
results and financial condition.
 
REGULATION
 
     Telecommunications services are subject to significant regulation at the
federal, state, local and international levels, affecting the Company and its
existing and potential competitors. Delays in receiving the required regulatory
approvals or the enactment of new and adverse legislation, regulations or
regulatory requirements may have a material adverse effect on the Company's
business, operating results and financial condition. In addition, future
legislative, judicial and regulatory agency actions could alter competitive
conditions in the markets in which the Company intends to operate, in ways
disadvantageous to the Company.
 
     The Company currently is subject to federal and state regulation of its
wholesale long distance telephone services, and may be subject to regulation of
any future services that are deemed local exchange services. To provide
international services, carriers must obtain a certificate from the FCC which
TNS has obtained. At the federal level, the Company is regulated by the FCC and
must maintain both interstate and international tariffs containing the currently
effective rates, terms and conditions for those services. Although the FCC
eliminated the tariffing requirements for interstate non-dominant carriers, such
carriers must continue to file interstate tariffs until a federal court
completes reviewing such detariffing and declares that the detariffing order is
lawful. TNS has filed interstate and international tariffs with the FCC.
Intrastate long distance services and local exchange services are subject to
various state laws and regulations, including certification, notification,
registration and tariffing requirements. The FCC and numerous state agencies
also impose prior approval requirements on transfers of control of certificated
carriers and assignments of regulatory authorizations. States also often require
prior approvals or notifications for the issuance of stock, bonds or other forms
of indebtedness. As a result, in certain states, TNS requested approvals, made
notifications of or took other actions relating to its issuance of a Guarantee
pursuant to the Initial Note Offering. While TNS expects to obtain all necessary
approvals for the Exchange, there can be no assurance that such approvals will
be obtained, or that they will be obtained on a timely basis. The FCC and state
regulatory agencies generally retain the right to sanction a carrier, impose
forfeitures, mandate refunds or impose other penalties in the event of
regulatory non-compliance by a carrier. There can be no assurance that future
regulatory, judicial or legislative activities will not have a material adverse
effect on the business, operating results and financial
 
                                       16
<PAGE>   21
 
condition of the Company or that domestic or international regulators or third
parties will not raise material issues with regard to the Company's compliance
or non-compliance with applicable laws and regulations.
 
CONCENTRATION OF STOCK OWNERSHIP
 
     As of September 30, 1998, assuming the exercise of all options and warrants
and conversion of Preferred Stock, the key executives and major stockholders
beneficially owned approximately 70% of the outstanding voting power of the
Company. As a result, these stockholders, if they act together, could elect all
Directors and exercise control over TeleHub's business, policies and affairs,
and could approve or disapprove all actions requiring shareholder approval,
including amendments to the Issuer's Articles of Incorporation (the "Articles")
and Bylaws, certain mergers or similar transactions. This concentration of stock
ownership could delay, prevent or discourage a change in control of TeleHub or
the removal of existing management. See "Security Ownership of Certain
Beneficial Owners and Management."
 
ABSENCE OF PUBLIC MARKET
 
     There has not been any public market for the Old Notes. The Company does
not intend to list the New Notes on any securities exchange or to seek approval
for quotation through any automated quotation system. There can be no assurance
that an active trading market will develop or be sustained in the New Notes. If
a market for the New Notes does develop, the market value of the New Notes will
depend on market conditions (such as yields on alternative investments, general
economic conditions, the Company's financial condition and other conditions).
Such conditions might cause the New Notes, to the extent they are actively
traded, to trade at a significant discount from face value.
 
CONSEQUENCE OF FAILURE TO EXCHANGE
 
     Untendered Old Notes that are not exchanged for New Notes pursuant to the
Exchange Offer will remain subject to the existing restrictions on transfer of
such Old Notes. Additionally, holders of any Old Notes not tendered in the
Exchange Offer will not have any rights under the Note Registration Rights
Agreement to cause the Company to register the Old Notes, and the interest rate
on the Old Notes will remain at its initial rate of 13.875% per annum.
 
ANTI-TAKEOVER PROVISIONS
 
     Certain provisions of the Articles, the Bylaws and Nevada law could
discourage, delay or prevent a change in control of management of TeleHub. Those
provisions limit the ability of shareholders to remove incumbent directors or to
change the composition of the Board of Directors (the "Board"). Consequently,
incumbent directors may be able to retain their positions even after a change in
control. The Articles and Bylaws also limit the ability of the shareholders to
act independently from the Board. The Articles authorize the issuance of
preferred shares with such designations, rights and preferences as the Board may
determine without further shareholder approval (See "Description of Capital
Stock -- Preferred Stock"); the issuance of preferred shares could adversely
affect the voting power or other rights of holders of shares of Common Stock and
could be used to discourage, delay or prevent a change in control. The General
Corporation Law of Nevada (the "Nevada Act") prohibits a Nevada corporation from
engaging in any of a broad range of business combinations with any interested
shareholder (10% or more voting power) without Board approval for a period of
three years after the shareholder became an interested shareholder. The Nevada
Act also requires Board or shareholder approval to acquire a controlling
interest in TeleHub. See "Description of Capital Stock -- Special Provisions of
the Company's Articles, Bylaws and Nevada Corporate Law."
 
YEAR 2000 INCOMPATIBILITY
 
     The term "Year 2000 Issue" generally describes the various problems that
might result from improper processing of dates and date-sensitive calculations
involving dates in the Year 2000 and beyond. The "Year 2000 issue" results from
computer programs using two digits rather than four digits to define the
applicable year, so that all dates are interpreted as being between 1900 and
1999. Computers and other equipment using
 
                                       17
<PAGE>   22
 
such programs will incorrectly interpret dates after the year 1999. Such
misinterpretation might cause system failures or miscalculations and thereby
disrupt operations, for example; temporary inability to process transactions, to
send invoices, to operate computer systems and equipment or to engage in other
normal business activities. The Company believes that its computer systems,
including VASP(TM), are Year 2000 compatible; however, the Company has not
completed assessing the Year 2000 compatibility of its equipment or of third
parties. The Company has established a task force to evaluate Year 2000
compatibility of its computer systems and of third party computer products which
the Company uses in its network, VASP, or other business applications and the
potential impact of non-compatibility. The Company believes that adequate
resources have been allocated for this purpose and does not expect to incur
significant expenditures to address this issue. However, there can be no
assurance that the Company will identify all Year 2000 problems in its systems
in advance of their occurrence or that the Company can successfully remedy any
problems that are discovered. The expenses of the Company's efforts to address
such problems, or the expenses or liabilities to which the Company may become
subject as a result of such problems, could materially adversely affect the
Company's business, prospects, operating results, financial condition and its
ability to service and repay indebtedness, including the Notes. In addition, the
revenue stream and financial stability of existing customers may be adversely
impacted by Year 2000 problems, which could cause fluctuations in the Company's
revenues and operating profitability. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Year 2000 Readiness."
 
                                       18
<PAGE>   23
 
                               THE EXCHANGE OFFER
 
     While the following discussion summarizes material provisions of the Note
Registration Rights Agreement Noteholders may wish to read the actual provisions
of the Note Registration Rights Agreement, which was filed as an exhibit to the
Registration Statement ("Registration Statement") of which this Prospectus
constitutes a part and copies of the Note Registration Rights Agreement are
available upon request to the Company.
 
PURPOSE AND EFFECT
 
     The Old Notes were sold by the Issuer to the Initial Purchaser on July 30,
1998. The Initial Purchaser subsequently resold the Old Notes in reliance on
Rule 144A under the Securities Act. The Issuer and the Initial Purchaser entered
into the Note Registration Rights Agreement, pursuant to which the Issuer
agreed, with respect to the Old Notes and subject to the Issuer's determination
that the Exchange Offer is permitted under applicable law, to (i) file, on or
before September 28, 1998, a registration statement with the Commission under
the Securities Act concerning the Exchange Offer, and (ii) use its best efforts
(a) to cause such registration statement to be declared effective by the
Commission on or before December 12, 1998, and (b) to commence the Exchange
Offer on or before January 11, 1999. The Issuer will keep the Exchange Offer
open for at least 30 days (or longer if required by applicable law) after the
date the notice of the Exchange Offer is mailed to the holders of the Old Notes.
This Exchange Offer is intended to satisfy the Issuer's exchange offer
obligations under the Note Registration Rights Agreement.
 
     If applicable interpretations of the Commission staff would not permit the
Company to effectuate the Exchange Offer or, if for any other reason the
Exchange Offer is not commenced prior to January 11, 1999, the Company will
register the resale of the Old Notes and use its best efforts to have such
resale registration statement become effective within 90 days after filing. The
Company would keep this resale registration effective until July 30, 2000, or
until all Old Notes have been resold pursuant to such resale registration
statement.
 
TERMS OF THE EXCHANGE OFFER
 
   
     The Issuer hereby offers, upon the terms and subject to the conditions set
forth herein and in the accompanying Letter of Transmittal, to exchange up to
$125.0 million aggregate principal amount of New Notes for up to $125.00 million
aggregate principal amount of outstanding Old Notes. The Issuer will accept for
exchange any and all Old Notes that are validly tendered on or prior to 5:00
p.m., New York City time, on the Expiration Date. The Issuer will issue $1,000
principal amount of New Notes in exchange for each $1,000 principal amount of
outstanding Old Notes accepted in the Exchange Offer. Holders may tender some or
all of their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in integral multiples of $1,000. Tenders of the Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date with respect to the Exchange Offer applicable to such Old Notes. The
Exchange Offer is not conditioned upon any minimum principal amount of Old Notes
being tendered for exchange. However, the Exchange Offer is subject to the terms
and provisions of the Note Registration Rights Agreement. See "-- Conditions of
the Exchange Offer."
    
 
   
     As of the date of this Prospectus, $125.0 million in aggregate principal
amount of the Old Notes is outstanding. As of December 14, 1998, there were two
registered holders of the Old Notes, and thirteen DTC participants. Only a
holder of the Old Notes (or such holder's legal representative or
attorney-in-fact) may participate in the applicable Exchange Offer. The record
date for determining holders of the Old Note entitled to participate in the
applicable Exchange Offer will be the day before the notice of the Exchange
Offer is sent to Noteholders. The Issuer believes that, as of the date of this
Prospectus, no holder of an Old Note is an affiliate (as defined in Rule 405
under the Securities Act) of the Issuer.
    
 
     The Issuer shall be deemed to have accepted validly tendered Old Notes
when, as and if the Issuer has notified the Exchange Agent. The Exchange Agent
will act as agent for the tendering holders of Old Notes and for the purposes of
receiving the New Notes from the Issuer. If any tendered Old Notes are not
accepted for exchange because of an invalid tender, the occurrence of certain
other events set forth herein or otherwise,
 
                                       19
<PAGE>   24
 
certificates for any such unaccepted Old Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
 
EXPIRATION DATES; EXTENSIONS; AMENDMENTS
 
   
     The Expiration Date shall be January 22, 1999, at 5:00 p.m., New York City
time, unless the Issuer, in its sole discretion, extends the Exchange Offer, in
which case the Expiration Date shall be the latest date and time to which the
Exchange Offer is extended. In order to extend the Exchange Offer, the Issuer
will notify the Exchange Agent of any extension by oral or written notice and
will make a public announcement thereof, each prior to 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
    
 
     The Issuer reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, (ii) to extend the Exchange Offer and (iii) to amend
the terms of the Exchange Offer in any manner. If the Exchange Offer is amended
in a manner determined by the Issuer to constitute a material change, the Issuer
will promptly disclose such amendments by means of a prospectus supplement that
will be distributed to the registered holders of the Old Notes subject to the
Exchange Offer. Modifications of the Exchange Offer, including but not limited
to extension of the period during which the Exchange Offer is open, may require
that at least five business days remain in the Exchange Offer.
 
     Without limiting the manner in which the Company may choose to publicly
announce any delay in acceptance, extension, termination or amendment of the
Exchange Offer, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by timely release
to the Dow Jones News Service.
 
CONDITIONS OF THE EXCHANGE OFFER
 
     The Exchange Offer is not conditioned upon any minimum principal amount of
the Old Notes being tendered for exchange. However, the Exchange Offer is
conditioned upon the Commission's declaring the effectiveness of the
Registration Statement of which this Prospectus constitutes a part.
 
ACCRUED INTEREST
 
     Cash interest on the New Notes will not accrue on the Notes prior to July
31, 2001. The Notes will accrete at a rate of 13.875%, compounded semi-annually
to an aggregate principal amount of $125.0 million by July 31, 2001. Thereafter,
interest on the New Notes will be payable semi-annually on January 31 and July
31 of each year commencing January 31, 2002. See "Description of the
Notes -- Maturity, Interest and Principal."
 
PROCEDURES FOR TENDERING OLD NOTES
 
     The tender of a holder's Old Notes as set forth below and the Issuer's
acceptance will constitute a binding agreement between the tendering holder and
the Issuer upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal. Except as set forth
below, a holder who wishes to tender Old Notes for exchange pursuant to the
applicable Exchange Offer must transmit such Old Notes, together with a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to the Exchange Agent at the address set
forth on the back cover page of this Prospectus prior to 5:00 p.m., New York
City time, on the Expiration Date. THE METHOD OF DELIVERY OF SERIES A NOTES,
LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND
RISK OF THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED.
INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT
OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
 
                                       20
<PAGE>   25
 
     Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may use book-entry delivery of the Old Notes by
directing DTC to transfer such Old Notes into the Exchange Agent's account in
accordance with DTC's procedures for such transfer. In connection with a
book-entry transfer, a Letter of Transmittal need not be transmitted to the
Exchange Agent, provided that the book-entry transfer procedure is made in
accordance with DTC's ATOP (as defined below) procedures for transfer and such
procedures are complied with prior to 5:00 a.m., New York City time, on the
Expiration Date.
 
     DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the applicable Exchange Offer
through ATOP, participants in DTC must send electronic instructions to DTC
through DTC's communication system, prior to 5:00 p.m., New York City time, on
the Expiration Date (in place of sending an executed Letter of Transmittal). DTC
is obligated to communicate those electronic instructions sent to DTC and
transmitted by DTC to the Exchange Agent by an "Agent's Message." To tender Old
Notes through ATOP, the electronic instructions sent to DTC and forwarded to the
Exchange Agent must contain the participant's acknowledgment of its receipt of
and agreement to be bound by the Letter of Transmittal for such Old Notes.
 
     Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant hereto are tendered (i) by a registered holder of the Old Notes who has
not completed either the box entitled "Special Exchange Instructions" in the
Letter of Transmittal, or (ii) by an Eligible Institution (as defined below). In
the event that a signature on a Letter of Transmittal or a notice of withdrawal,
as the case may be, is required to be guaranteed, such guarantee must be by a
firm which is a member of a registered national securities exchange or the
National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States or otherwise be
an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (collectively, "Eligible Institutions"). If the Letter of
Transmittal is signed by a person other than the registered holder of the Old
Notes, the Old Notes surrendered for exchange must either (i) be endorsed by the
registered holder, with the signature thereon guaranteed by an Eligible
Institution or (ii) be accompanied by a bond power, in satisfactory form as
determined by the Issuer in its sole discretion, duly executed by the registered
holder, with the signature thereon guaranteed by an Eligible Institution. The
term "registered holder" as used herein with respect to the Old Notes means any
person in whose name the Old Notes are registered on the books of the Registrar.
 
     All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will be
determined by the Issuer in its sole discretion, which determination shall be
final and binding. The Issuer reserves the absolute right to reject any and all
Old Notes not properly tendered and to reject any Old Notes the Issuer's
acceptance of which might, in the judgment of the Issuer or its counsel, be
unlawful. The Issuer also reserves the absolute right to waive any defects or
irregularities or conditions of the applicable Exchange Offer as to particular
Old Notes either before or after the Expiration Date (including the right to
waive the ineligibility of any holder who seeks to tender Old Note in such
Exchange Offer). The interpretation of the terms and conditions of the Exchange
Offer (including the Letter of Transmittal and the instructions thereto) by the
Issuer shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes for exchange must be
cured within such period of time as the Issuer shall determine. The Issuer will
use reasonable efforts to give notification of defects or irregularities with
respect to tenders of Old Notes for exchange but shall not incur any liability
for failure to give such notification. Tenders of the Old Notes will not be
deemed to have been made until such irregularities have been cured or waived.
 
     If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by the
Issuer, proper evidence satisfactory to the Issuer, in its sole discretion, of
such person's authority to so act must be submitted.
 
     Any beneficial owner of the Old Notes (a "Beneficial Owner") whose Old
Notes are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender Old Notes in the applicable
Exchange Offer should contact such registered holder promptly and instruct such
 
                                       21
<PAGE>   26
 
registered holder to tender on such Beneficial Owner's behalf. If such
Beneficial Owner wishes to tender directly, such Beneficial Owner must, prior to
completing and executing the Letter of Transmittal and tendering Old Notes, make
appropriate arrangement to register ownership of the Old Notes in such
Beneficial Owner's name. Beneficial Owners should be aware that the transfer of
registered ownership may take considerable time.
 
     By tendering, each registered holder will represent to the Issuer that,
among other things, (i) the New Notes to be acquired in connection with the
applicable Exchange Offer by the holder and each Beneficial Owner of the Old
Notes are being acquired by the holder and each Beneficial Owner in the ordinary
course of business of the holder and each Beneficial Owner, (ii) the holder and
each Beneficial Owner are not participating, do not intend to participate, and
have no arrangement or understanding with any person to participate, in the
distribution of the New Notes, (iii) the holder and each Beneficial Owner
acknowledge and agree that any person participating in such Exchange Offer for
the purpose of distributing the New Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Notes acquired by such person and cannot
rely on the position of the staff of the Commission set forth in non-action
letters that are discussed herein under "Resales of New Notes," (iv) that if the
holder is a broker-dealer that acquired Old Notes as a result of market making
or other trading activities, it will deliver a prospectus in connection with any
resale of New Notes acquired in such Exchange Offer, (v) the holder and each
Beneficial Owner understand that a secondary resale transaction described in
clause (iii) above should be covered by an effective registration statement
containing the selling security holder information required by item 507 of
Regulation S-K of the Commission, and (vi) neither the holder nor any Beneficial
Owner is an "affiliate," as defined under Rule 405 of the Securities Act, of the
Issuer except as otherwise disclosed to the Issuer in writing. In connection
with a book-entry transfer, each participant will confirm that it makes the
representations and warranties contained in the Letter of Transmittal.
 
     LETTERS OF TRANSMITTAL AND OLD NOTES MUST BE SENT ONLY TO THE EXCHANGE
AGENT. DO NOT SEND LETTERS OF TRANSMITTAL OR OLD NOTES TO THE COMPANY OR TO THE
DTC.
 
GUARANTEED DELIVERY PROCEDURES
 
     Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes or any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date (or complete the procedure for book-entry transfer on a
timely basis), may tender their Old Notes according to the guaranteed delivery
procedures set forth in the Letter of Transmittal. Pursuant to such procedures:
(i) such tender must be made by or through an eligible Institution and a Notice
of Guaranteed Delivery (as defined in the Letter of Transmittal) must be signed
by such Holder, (ii) on or prior to the Expiration Date, the Exchange Agent must
have received from the Holder and the Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail
or hand delivery) setting forth the name and address of the Holder, the
certificate number or numbers of the tendered Old Notes, and the principal
amount of tendered Old Notes, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
date of delivery of the Notice of Guaranteed Delivery, the tendered Old Notes, a
duly executed Letter of Transmittal and any other required documents will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) such
properly completed and executed documents required by the Letter of Transmittal
and the tendered Old Notes in proper form for transfer (or confirmation of a
book-entry transfer of such Old Notes into the Exchange Agent's account at DTC)
must be received by the Exchange Agent within five New York Stock Exchange
trading days after the Expiation Date. Any Holder who wishes to tender Old Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery and letter of
Transmittal relating to such Old Notes prior to 5:00 p.m., New York City time,
on the Expiration Date. DTC participants may also submit the Notice of
Guaranteed Delivery through ATOP.
 
                                       22
<PAGE>   27
 
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
 
     Upon satisfaction or waiver of all the conditions to an Exchange Offer, the
Issuer will accept any and all Old Notes that are properly tendered in such
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date.
The New Notes issued pursuant to the Exchange Offer will be delivered promptly
after acceptance of the Old Notes. For purposes of the Exchange Offer, the
Issuer shall be deemed to have accepted validly tendered Old Notes when, as, and
if the Issuer has given oral or written notice thereof to the Exchange Agent.
 
     In all cases, issuances of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents (or of confirmation of a
book-entry transfer of such Old Notes into the Exchange Agent's account at DTC);
provided, however, that the Issuer reserves the absolute right to waive any
defects or irregularities in the tender or conditions of the Exchange Offer. If
any tendered Old Notes are not accepted for any reason, such unaccepted Old
Notes will be returned without expense to the tendering Holder thereof as
promptly as practicable after the expiration or termination of the Exchange
Offer.
 
WITHDRAWAL RIGHTS
 
     Tenders of the Old Notes may be withdrawn by delivery of a written notice
(or for DTC participants, transmission of notice through ATOP) to the Exchange
Agent, at its address set forth on the back cover page of this Prospectus, at
any time prior to 5:00 p.m., New York City time, on the applicable Expiration
Date. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Note to be withdrawn (the "Depositor"), (ii) identify
the Old Notes to be withdrawn (including the certificate number or numbers and
principal amount of such Old Notes, as applicable); (iii) be signed by the
Holder in the same manner as the original signature on the Letter of Transmittal
by which such Old Notes were tendered (including any required signature
guarantees) or be accompanied by a bond power in the name of the person
withdrawing the tender, in satisfactory form as determined by the Issuer in its
sole discretion, duly executed by the registered holder, with the signature
thereon guaranteed by an Eligible Institution together with the other documents
required upon transfer by the Indenture; and (iv) specify the name in which such
Old Notes are to be re-registered, if different from the Depositor, pursuant to
such documents of transfer. Any questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Issuer, in its sole discretion. The Old Notes so withdrawn will be deemed
not to have been validly tendered for exchange for purposes of the applicable
Exchange Offer. Any Series A Notes which have been tendered for exchange but
which are withdrawn will be returned to the Holder thereof without cost to such
Holder as soon as practicable after withdrawal. Properly withdrawn Old Notes may
be re-tendered by following one of the procedures described under "-- Procedure
for Tendering Old Notes" at any time on or prior to the Expiration Date.
 
TERMINATION
 
     Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange New Notes for any Old Notes not
theretofore accepted for exchange, and may terminate or amend the Exchange Offer
as provided herein before the acceptance of such Old Notes if: (i) any action or
proceeding is instituted or threatened in any court of by or before any
governmental agency with respect to the Exchange Offer, which, in the Company's
judgment, might materially impair the Company's ability to proceed with the
Exchange Offer or (ii) any law, statute, rule or regulation is proposed, adopted
or enacted, or any existing law, statute, rule or regulation is interpreted by
the staff of the commission in a manner, which, in the Company's judgment, might
materially impair the Company's ability to proceed with the Exchange Offer.
 
     If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
 
                                       23
<PAGE>   28
 
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes, or (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn. If such waiver constitutes a material change in the
Exchange Offer, the Company will disclose such change by means of a supplement
to this Prospectus that will be distributed to each registered holder of Old
Notes, and the Company will extend the Exchange Offer for a period of five
business days, depending upon the significance of the waiver and the manner of
disclosure to the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period.
 
THE EXCHANGE AGENT; ASSISTANCE
 
     State Street Bank is the Exchange Agent. All tendered Old Notes, executed
Letters of Transmittal and other related documents should be directed to the
Exchange Agent. Questions and requests for assistance and requests for
additional copies of the Prospectus, the Letter of Transmittal and other related
documents should be addressed to the Exchange Agent as follows:
 
                         By Overnight Mail or Courier:
 
               STATE STREET BANK & TRUST COMPANY, EXCHANGE AGENT
                            Two International Place
                          Boston, Massachusetts 02110
                        Attn: Corporate Trust Department
                                 Kellie Martin
 
                             ---------------------
 
                To confirm by telephone or for information call:
                                 (617) 664-5587
 
                                    By Mail:
 
               STATE STREET BANK & TRUST COMPANY, EXCHANGE AGENT
                                  P.O. Box 778
                          Boston, Massachusetts 02110
                        Attn: Corporate Trust Department
                                 Kellie Martin
 
FEES AND EXPENSES
 
     All expenses incident to the Issuer's consummation of the Exchange Offer
and compliance with the Registration Rights Agreement will be borne by the
Issuer, including, without limitation: (i) all applicable Securities and
Exchange Commission, stock exchange or National Association of Securities
Dealers, Inc. ("NASD") registration and filing fees; (ii) all fees and expenses
incurred in connection with compliance with state securities or blue sky laws
(including reasonable fees and disbursements of one counsel for holders that are
Initial Purchasers in connection with blue sky qualifications of any of the New
Notes) and compliance with the rules of the NASD; (iii) all applicable expenses
incurred by the Issuer in preparing or assisting in preparing, word processing,
printing and distributing any registration statement, any prospectus and any
amendments or supplements thereto, and in preparing or assisting in preparing
any other documents relating to the performance of and compliance with the
Registration Rights Agreement; (iv) all rating agency fees, if any; and (v) the
fees and disbursements of counsel for the Issuer.
 
     The Issuer has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers of others
soliciting acceptance of the Exchange Offer. The Issuer, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
 
                                       24
<PAGE>   29
 
     The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
 
ACCOUNTING TREATMENT
 
     The New Notes will be recorded at the same carrying value as the Old Notes,
as reflected in the Issuer's accounting records on the date of the exchange.
Accordingly, no gain or loss will be recognized by the Issuer for accounting
purposes. The expenses of the Exchange Offer will be amortized over the term of
the respective New Notes.
 
RESALES OF THE NEW NOTES
 
     Based on the position of the staff of the Commission as set forth in
certain interpretive letters issued to third parties in other transactions, the
Issuer believes that the New Notes issued pursuant to the Exchange Offer to any
holder of Old Notes in exchange for New Notes may be offered for resale, resold
and otherwise transferred by such holder (other than (i) a broker-dealer who
purchased Old Notes directly from the Issuer for resale pursuant to Rule 144A
under the Securities Act or any other available exemption under the Securities
Act, or (ii) a person that is an affiliate of the Issuer within the meaning of
Rule 405 under the Securities Act) without further compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such holder is acquiring the New Notes in the ordinary course of business
and is not participating and has no arrangement or understanding with any person
to participate, in the distribution of the New Notes. However, the Issuer has
not sought its own interpretive letter and there can be no assurance that the
Commission would make a similar determination with respect to the Exchange
Offer. The Issuer and holders of Old Notes are not entitled to rely on
interpretive advice provided by the staff of other persons, which advice was
based on the facts and conditions represented in such letters. However, the
Exchange Offer is being conducted in a manner intended to be consistent with the
facts and conditions represented in such letters. If any holder acquires New
Notes in an Exchange Offer for the purpose of distributing or participating in a
distribution of the New Notes, such holder cannot rely on the position of the
staff of the Commission enunciated in Morgan Stanley & Co. Incorporated
(available June 5, 1991) and Exxon Capital Holdings Corporation (available May
13, 1989) or interpreted in the Commission's letter to Shearman and Sterling
(available July 2, 1993), or similar no-action or interpretive letters and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction, unless an
exemption from registration is otherwise available. Each broker-dealer that
receives New Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market making or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution."
 
     It is expected that the New Notes will be freely transferable by the
holders thereof, subject to the limitations described in the immediately
preceding paragraph. Sales of New Notes acquired in the Exchange Offer by
holders who are "affiliates" of the Issue within the meaning of the Securities
Act will be subject to certain limitations on resale under Rule 144 of the
Securities Act (if applicable). Such persons will only be entitled to sell New
Notes in compliance with the volume limitations set forth in Rule 144, and sales
of New Notes by affiliates will be subject to certain Rule 144 requirements as
to the manner of sale, notice and the availability of current public information
regarding the Issuer. The foregoing is a summary only of Rule 144 as it may
apply to affiliates of the Issuer. Any such persons must consult their own legal
counsel for advice as to any restrictions that might apply to the resale of
their New Notes.
 
                                       25
<PAGE>   30
 
                                USE OF PROCEEDS
 
     There will be no cash proceeds payable to the Company from the issuance of
the New Notes pursuant to the Exchange Offer. The Company received net proceeds
from the Initial Note Offering of approximately $78.7 million, after deducting
the Initial Purchaser's discount and estimated fees and expenses. With those net
proceeds, the Company repaid a $11.4 million Bridge Loan from Comdisco, Inc.,
and intends to use the remainder to fund future operations, to expand the
TeleHub network, for additional working capital and for other general corporate
purposes. The amounts actually expended by the Company will depend upon several
factors, including future revenue growth, the amount of cash generated by the
Company's operations and the progress of the Company's product development
efforts. The Company may also use a portion of such net proceeds to acquire or
invest in businesses, products and technologies that are complementary to those
of the Company; however, no specific acquisitions are planned at this time and
no portion of the net proceeds has been allocated for any particular
acquisition. Pending these uses, the Company intends to invest those net
proceeds in short-term, interest-bearing, U.S. investment-grade and government
securities.
 
     The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Note Registration Rights Agreement. In consideration for
issuing the New Notes as contemplated in this Prospectus, the Issuer will
receive in exchange Old Notes in like principal amount, the form and terms of
which are the same in all material respects as the form and terms of the New
Notes except that the New Notes will be registered under the Securities Act and
hence do not include certain rights to registration thereunder. The Old Notes
surrendered in exchange for New Notes will be retired and canceled and cannot be
reissued. Accordingly, issuance of the New Notes will not result in any increase
in the indebtedness of the Company.
 
                                DIVIDEND POLICY
 
     The Company has not paid dividends on its Common Stock and Preferred Stock,
and the Board intends to continue a policy of retaining earnings to finance its
growth and for general corporate purposes. The Indenture limits the Company's
ability to pay cash dividends. In addition, the Company's future loan agreements
could limit the Company's ability to pay cash dividends. The Company does not
anticipate paying any dividends in the foreseeable future.
 
                                       26
<PAGE>   31
 
                                 CAPITALIZATION
 
     The following table sets forth the capitalization of the Company as of
September 30, 1998. This table should be read in conjunction with the "Selected
Consolidated Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Consolidated Financial Statements and
the related notes thereto contained elsewhere herein.
 
<TABLE>
<CAPTION>
                                                              SEPTEMBER 30,
                                                                  1998
                                                              -------------
                                                               (UNAUDITED)
<S>                                                           <C>
Cash, cash equivalents and restricted cash..................  $ 56,009,012
                                                              ============
Current portions of long-term debt and capital leases.......  $  2,591,781
Long-term debt..............................................     9,192,883
13 7/8% Senior Discount Notes due 2005(1)...................    85,518,199
Debt discount...............................................   (21,721,828)
                                                              ------------
          Total debt........................................    75,581,035
                                                              ------------
Stockholders' equity:
  Preferred stock...........................................         3,500
  Common stock..............................................        12,703
  Common stock warrants.....................................    27,246,651
  Additional paid-in capital................................    40,100,733
  Note receivable--employee.................................      (635,340)
  Deferred compensation.....................................      (148,027)
  Deficit accumulated during development stage..............   (64,911,197)
                                                              ------------
          Total stockholders' equity........................     1,669,023
                                                              ------------
          Total capitalization..............................  $ 77,250,058
                                                              ============
</TABLE>
 
- ---------------
 
(1) The Notes are presented net of Debt Discount and will accrete in value
    through July 31, 2001 at a rate of 13 7/8% per annum compounded
    semi-annually. No interest will be payable in cash on the Notes prior to
    January 31, 2002.
 
                                       27
<PAGE>   32
 
                      SELECTED CONSOLIDATED FINANCIAL DATA
 
     The following selected consolidated financial data for the period from
inception (January 18, 1996) to December 31, 1996 and for the year ended
December 31, 1997 have been derived from the Consolidated Financial Statements
which have been audited by PricewaterhouseCoopers LLP., independent accountants.
The selected data as of and for the nine months ended September 30, 1997, and
1998, respectively, have been derived from unaudited consolidated financial
statements of the Company and, in the opinion of the Company, include all
adjustments, consisting of normal recurring accruals necessary for a fair
presentation of such information. Operating results for the nine months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the entire year. The following selected consolidated financial data
should be read in conjunction with "Use of Proceeds," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and the related notes thereto included
elsewhere in this Prospectus.
 
<TABLE>
<CAPTION>
                                                                              NINE MONTHS ENDED
                                           INCEPTION TO    YEAR ENDED           SEPTEMBER 30,
                                           DECEMBER 31,   DECEMBER 31,   ---------------------------
                                               1996           1997           1997           1998
                                           ------------   ------------   ------------   ------------
                                                                         (UNAUDITED)    (UNAUDITED)
<S>                                        <C>            <C>            <C>            <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................  $        --    $  2,901,280   $         --   $  4,613,368
Operating expenses other than
  depreciation and amortization(1).......    3,667,319      19,483,912     11,388,663     38,467,746
Depreciation and amortization............       68,556         784,548        263,418      3,270,855
                                           -----------    ------------   ------------   ------------
            Total operating expenses.....    3,735,875      20,268,460     11,652,081     41,738,601
            Operating loss...............   (3,735,875)    (17,367,180)   (11,652,081)   (37,125,233)
Amortization of debt discount............      (85,375)       (546,875)      (546,875)    (1,999,137)
Interest expense, net(2).................      (66,973)       (213,658)        38,169     (3,222,719)
Other income (expense)(3)................     (599,950)         34,889            114         16,889
                                           -----------    ------------   ------------   ------------
            Net loss(4)..................  $(4,488,173)   $(18,092,824)  $(12,160,673)  $(42,330,200)
                                           ===========    ============   ============   ============
Basic and diluted loss per share(5)......  $     (0.52)   $      (1.70)  $      (1.20)  $      (3.35)
Weighted average shares outstanding used
  in per share calculations -- basic and
  diluted................................    8,614,815      10,624,251     10,153,442     12,651,034
OTHER FINANCIAL DATA:
EBITDA(6)................................  $(4,267,269)   $(16,547,743)  $(11,388,549)  $(33,837,489)
Capital expenditures.....................    3,028,715      18,221,327     16,272,826      5,275,936
Ratio of earnings to fixed charges.......           --              --             --             --
Deficiency between earnings and fixed
  charges(7).............................    4,488,173      18,092,824     12,160,673     42,330,200
CASH FLOW DATA:
Net cash used in operating activities....  $ 2,070,928    $ 16,624,763   $  9,619,902   $ 28,570,149
Net cash used in investing activities....      572,672       9,629,035      7,984,760      2,029,562
Net cash provided from financing
  activities.............................    2,828,536      35,449,182     22,364,179     76,635,519
</TABLE>
 
<TABLE>
<CAPTION>
                                                              AS OF SEPTEMBER 30,
                                                                     1998,
                                                              --------------------
                                                                  (UNAUDITED)
<S>                                                           <C>
BALANCE SHEET DATA:
Cash, cash equivalents and restricted cash..................      $ 56,009,012
Total assets................................................        87,062,802
Total debt, including current portions(8)...................        75,581,035
Stockholders' equity........................................         1,669,023
</TABLE>
 
- ---------------
 
See footnotes on following page.
 
                                       28
<PAGE>   33
 
 (1) Operating expenses consist of total operating expenses less depreciation
     and amortization.
 
 (2) Interest expense, net consists of the sum of interest expense and interest
     income.
 
 (3) Other income (expense) consists of the sum of indemnification expense and
     other income.
 
 (4) The Company has not recorded any benefit for income taxes due to the
     uncertainty surrounding the realization of the favorable tax attributes in
     future tax returns. Accordingly, the Company has recorded a valuation
     allowance against its total net deferred tax assets.
 
 (5) The Company computes loss per share pursuant to Statement of Financial
     Accounting Standard No. 128, Earnings Per Share. The dilutive effect of
     options, warrants, and the Preferred Stock have not been considered as
     their effect would have been antidilutive for all periods presented. See
     Note 15 to the Consolidated Financial Statements.
 
 (6) EBITDA consists of earnings before interest, taxes, depreciation and
     amortization. More specifically, the following balances were excluded from
     EBITDA as defined: depreciation and amortization, amortization of debt
     discount, and interest expense. The Company believes EBITDA can provide
     additional information about the Company's ability to meet debt service,
     capital expenditures and other financing requirements. EBITDA is a measure
     of financial performance commonly used in the telecommunications industry.
     The Company is presenting EBITDA to enhance an understanding of the
     Company's operating results and assist investors in their comparison of the
     Company's financial statements with those of other development stage
     telecommunications companies. EBITDA should not be construed as
     representing cash flow or results of operations in accordance with
     generally accepted accounting principles for the periods indicated and may
     be calculated differently than similarly titled measures for other
     companies. Management's discretionary use of earnings depicted by EBITDA is
     principally limited by the Indenture covenants, see "Description of
     Notes -- Certain Covenants" and by the need to conserve funds for capital
     expenditures, software development and debt service.
 
 (7) The Company's earnings were insufficient to cover its fixed charges. For
     purposes of calculating ratio of earnings to fixed charges, earnings
     consist of earnings (losses) before fixed charges. Fixed charges consist of
     interest on debt, amortization of deferred financing costs, operating lease
     expense, and that portion of rental expense the Company believes to be
     representative of interest (ie., one third rent expense). On a pro forma
     basis, after giving effect to the Initial Note offering, the Company's
     earnings would have been insufficient to cover fixed charges by $39.3
     million and $58.3 million for the year ended December 31, 1997 and for the
     nine-month period ended September 30, 1998, respectively.
 
 (8) Total debt, including current portions, consists of capital lease
     obligations and other long-term debt, including current portions. The Notes
     are presented net of Debt Discount and will accrete in value through July
     31, 2001 at a rate of 13 7/8% per annum compounded semi-annually. No
     interest will be payable in cash on the Notes prior to January 31, 2002.
 
                                       29
<PAGE>   34
 
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion should be read in conjunction with the
Consolidated Financial Statements and related notes thereto included elsewhere
in this Prospectus. The results shown herein are not necessarily indicative of
the results to be expected in any future periods. This discussion contains
forward-looking statements based on current expectations which involve risks and
uncertainties. Actual results and timing of certain events may differ
significantly from those projected in such forward-looking statements due to a
number of factors, including those set forth in the section entitled "Risk
Factors" and elsewhere in this Prospectus.
 
OVERVIEW
 
     After three years of research and development, the Company was formed in
January 1996. The Company has developed what it believes is the first universal
ATM-based network with the potential to integrate the delivery of voice, data
and video on one network. The Company launched commercial voice services on its
network in December 1997 and since then has entered into nineteen contracts,
ranging from one to three year terms, to provide interstate and intrastate long
distance services to switchless resellers. As customers transition their traffic
onto TeleHub's network, the Company expects significant growth in revenues. The
Company expects that as revenues increase, the variable costs associated with
operating the TeleHub network should decline as a percentage of total revenues,
and accordingly margins will improve. The Company believes that the TeleHub
network should have positive EBITDA at approximately $15 million a month in
revenues, although there is no assurance that the Company will be able to
achieve such revenues. Additionally, the Company has signed several memoranda of
understanding and has distributed several proposals to license its VASP(TM)
services. The Company expects to license its technology to multiple carriers and
OEMs by the end of 1998. The Company expects significant growth in revenues from
the licensing of VASP(TM) over the next two years. The foregoing expectations
are forward-looking statements that involve risks and uncertainties, and actual
results could vary as a result of a number of factors including the Company's
operating results, the results and timing of the Company's launch of new
products and services, governmental, legislative or regulatory changes, the
ability of the Company to meet product and project demands, the success of the
Company's marketing efforts, competition and acquisitions of complementary
businesses, technologies or products.
 
     Since inception, the Company has incurred net losses and experienced
negative cash flow from operations and expects to continue to operate at a net
loss and to experience negative cash flow at least through 1998. However, the
Company's ability to achieve profitability and positive cash flow from
operations is dependent upon the Company's ability to substantially grow its
revenues and achieve other operating efficiencies. The Company experienced net
losses of approximately $4.5 million and $18.1 million for the period from
January 18, 1996 through December 31, 1996 and for the year ended December 31,
1997, respectively. At December 31, 1997, the Company had approximately $9.2
million of net deferred tax assets comprised primarily of start up costs which
are capitalized for tax purposes and net operating loss carry-forwards. Due to
uncertainty of realization, a valuation allowance has been provided to eliminate
the net deferred tax asset at both December 31, 1997 and 1996. Pursuant to the
provisions of the Tax Reform Act of 1986 (the "Tax Reform Act"), utilization of
the net operating loss carryforwards may be subject to an annual limitation as
defined in the Tax Reform Act. Furthermore, the Company believes that it is more
likely than not that it will not generate taxable income through 1998, and
possibly beyond, and accordingly will not realize the Company's deferred tax
assets through 1998, and possibly beyond. The Company will continue to assess
the realizability of the deferred tax assets based on actual and forecasted
operating results. See Note 5 to the Consolidated Financial Statements.
 
     To fund its operations, the Company has raised gross proceeds of
approximately $43.5 million of equity capital through two private placements
(the "Spring 1997 Offering" and the "Fall 1997 Offering") and an equity
investment from an affiliate of the Initial Purchaser. In addition, the Company
has incurred debt financing through both operating and capital leases relating
to the purchase of network equipment and, further
 
                                       30
<PAGE>   35
 
the Company obtained a $12 million Bridge Loan from an affiliate. See "Certain
Relationships and Related Transactions." A portion of the proceeds from the
Initial Note Offering were used to repay this Bridge Loan.
 
  NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1997
 
  Revenues
 
     Revenues totaled $4.6 million for the nine months ended September 30, 1998.
There was no revenue for the nine months ended September 30, 1997. TTC licensed
VASP(TM) to Newbridge for $5.0 million, $3.0 million of which was recorded
during the nine months ended September 30, 1998, and TNS generated $1.6 million
of revenue from network operations during the nine months ended September 30,
1998.
 
  Operating expenses
 
     Operating expenses increased $30.0 million to $41.7 million from $11.7
million for the nine months ended September 30, 1998 and 1997, respectively.
Personnel costs, monthly recurring network circuit costs, network equipment
lease payments, depreciation expense, and facility costs increased by
$9,719,000, $9,056,000, $5,896,000, $3,007,000 and $1,134,000, respectively.
Higher personnel costs reflect an increase in employees from 68 as of September
30, 1997 to 207 as of September 30, 1998. Increased operating costs were
necessary to expand the network to efficiently handle anticipated subscriber
traffic, and to manage the financial and administrative aspects of the business.
All operating expenses are primarily variable and are expected to increase in
future periods as revenue increases. Research and development expenses increased
by $2,534,000 to $5,985,000 from $3,451,000 for the nine month period ended
September 30, 1998 and 1997, respectively. Research and development costs will
increase in future periods to continue the development of the Company's product
and service offerings.
 
  Amortization of debt discount
 
     Amortization of debt discount for the nine months ended September 30, 1998
amounted to $1,999,000. Warrants issued in connection with the Comdisco loan
accounted for $1,460,000. The remaining $539,000 related to the amortization of
warrants associated with the debt offering. For the nine months ended September
30, 1998, amortization of debt discount was $547,000 which related to premiums
paid to Hartford Holdings, Ltd. ("HHL") in connection with the settlement of all
outstanding bridge loans and notes issued to the Company.
 
  Interest expense, net
 
     Net interest expense for the nine months ended September 30, 1998 was
$3,223,000 as compared to interest income of $38,000 for the nine months ended
September 30, 1997. Gross interest expense increased approximately $3,893,000 as
a result of the Initial Note Offering and Bridge Loan agreement. The total
interest and debt discount amortization expense relating to the Comdisco loan,
which originated in early May 1998 and was repaid in late July 1998, amounted to
approximately $2,550,000. This interest and debt discount amortization expense
resulted in an annualized effective interest rate of 85%. Interest income
increased $632,000 as a result of increased cash and equivalent balances
available for short term investments.
 
  Net loss
 
     The Company reported a net loss of $42.3 million and $12.2 million for the
nine months ended September 30, 1998 and September 30, 1997, respectively. The
Company has not recorded any benefit for income taxes due to the uncertainty
surrounding the realization of the favorable tax attributes in future tax
returns. Accordingly, the Company has recorded a valuation allowance against its
total net deferred tax assets.
 
                                       31
<PAGE>   36
 
  YEAR ENDED DECEMBER 31, 1997 COMPARED TO PERIOD FROM JANUARY 18, 1996
  (INCEPTION)
  TO DECEMBER 31, 1996
 
  Revenues
 
     The Company commercially introduced its services in December 1997. Revenues
were first recognized in 1997 for licensing fees, consulting services and
network services. Revenues for the year ended December 31, 1997 were $2.9
million. TTC recorded $2.0 million in November 1997 under a licensing agreement
with Newbridge. TNS recognized $900,000 for consulting services and generated
$1,300 of network revenues in December 1997. No revenues were generated during
the period from January 18, 1996 (inception) to December 31, 1996.
 
  Operating expenses
 
     Total operating expenses increased approximately $16.6 million to $20.3
million from $3.7 million for the year ended December 31, 1997 and the period
from January 18, 1996 (inception) to December 31, 1996, respectively. Personnel
costs, consulting services, network equipment lease payments, monthly recurring
network circuit costs, facility costs, and depreciation expense increased by
$5,616,000, $2,216,000, $2,193,000, $2,164,000, $1,087,000, and $716,000,
respectively. The significant increase reflects the implementation of the
Company's business plan which resulted in accelerated development efforts and
network expansion and build-out, as well as infrastructure growth of the
Company. Research and development expenses increased $2,638,000 to $4,245,000
from $1,607,000 for the year ended December 31, 1997 and 1996, respectively.
Research and development costs will increase in future periods reflecting the
continuing development of the Company's product and service offerings.
 
     Total TNS operating expenses increased approximately $11.7 million to $13.8
million from $2.1 million for the year ended December 31, 1997 and the period
from January 18, 1996 (inception) to December 31, 1996, respectively. This
increase was due to the network expansion, as well as infrastructure growth for
the segment. Total TTC operating expenses increased approximately $4.9 million
to $6.5 million from $1.6 million for the year ended December 31, 1997 and the
period from January 18, 1996 (inception) to December 31, 1996, respectively.
This increase related primarily to the accelerated research and development
efforts discussed previously.
 
  Amortization of debt discount
 
     Amortization of debt discount increased approximately $462,000 to $547,000
from $85,000 for the year ended December 31, 1997 and the period from January
18, 1996 (inception) to December 31, 1996, respectively. Amortization of debt
discount is related to premiums paid to HHL in connection with the settlement of
all outstanding bridge loans and notes issued to the Company. The Company began
amortizing the total premiums of $632,000 during the fourth quarter of 1996. The
remaining unamortized balance of the debt discount was paid during the first
quarter of 1997 when these obligations were settled.
 
  Interest expense, net
 
     Net interest expense increased approximately $147,000 to $214,000 from
$67,000 for the year ended December 31, 1997 and the period from January 18,
1996 (inception) to December 31, 1996, respectively. Gross interest expense
increased approximately $453,000 primarily due to increased capital lease
balances associated with the purchase of three switching platforms. This
increase was partially offset by interest income during the year ended December
31, 1997 of $306,000 related to higher cash and equivalents balances.
 
  Other income (expense)
 
     Other income was $35,000 for the year ended December 31, 1997 as compared
to other expense of $600,000 for the period from January 18, 1996 (inception) to
December 31, 1996. In 1996, other expense related to the termination of a
proposed merger whereby the Company indemnified HHL from certain claims
 
                                       32
<PAGE>   37
 
and liabilities. The Company issued a note payable to HHL for $600,000 which was
later settled through the issuance of Preferred Stock. See "Certain
Relationships and Related Transactions."
 
  Net loss
 
     Net loss increased approximately $13.6 million to $18.1 million from $4.5
million for the year ended December 31, 1997 and the period from January 18,
1996 (inception) to December 31, 1996, respectively.
 
     The TNS net loss increased approximately $10.8 million to $13.7 million
from $2.9 million for the year ended December 31, 1997 and the period from
January 18, 1996 (inception) to December 31, 1996, respectively. The TTC net
loss increased approximately $2.8 million to $4.4 million from $1.6 million for
the year ended December 31, 1997 and the period from January 18, 1996,
respectively.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     To date the Company has satisfied its cash requirements primarily through
lease financing, the sale of capital stock, loans from affiliates and the
Initial Note Offering. The Company's principal uses of cash are to fund working
capital requirements and capital expenditures and to service its lease financing
obligations.
 
     For the nine months ended September 30, 1998, net cash used in operations
was $28,570,000 primarily related to net losses, offset by increases in accounts
payable and accrued expenses. Net cash used for investment activities was
$2,030,000 for the nine month period ended September 30, 1998. This related to
capital expenditures for network equipment, offset by proceeds from the sale and
lease-back of equipment and a decrease in restricted cash. Net cash provided by
financing activities was $76,636,000 for the nine months period ended September
30, 1998 and related primarily to proceeds from Initial Note Offering offset by
payments on capital leases and debt obligations. The Company obtained additional
capital lease financing of $892,000 during the nine months ended September 30,
1998. Total payments on capital lease obligations and long-term debt were
approximately $1,706,000 during the nine months ended September 30, 1998. The
Company is committed to make payments under various operating leases. See Note 6
to the Consolidated Financial Statements.
 
     On July 30, 1998, the Company completed the Initial Note Offering yielding
approximately $66,300,000 in net proceeds after offering expenses and repaying
the Bridge Loan. Additionally, BancBoston Securities Inc. made a $1 million
equity investment in the Company.
 
     For the twelve month period ended December 31, 1997, net cash used for
operating activities was $16,625,000 primarily related to net losses, offset by
increases in accounts payable and accrued liabilities. Net cash used for
investing activities was $9,629,000. This related to capital expenditures for
network equipment, leasehold improvements and an increase in restricted cash.
Net cash provided by financing activities was $35,449,000 relating to proceeds
received from two private placements of equity securities during 1997.
Approximately 80% of the cash requirements were utilized by TNS as compared to
20% by TTC in 1997. The cash requirements related to funding working capital
needs as well as capital expenditures.
 
     The Company anticipates funding most of its future capital expenditures
through operating leases. Projected operating lease expenditures and capital
expenditures over the next twelve months are $17 million and $4 million,
respectively. The Company's research and development activities are expected to
be approximately $10 million over the next twelve months. The Company employs a
"smart-build" strategy whereby deployment and expansion of the company's network
will be predicated upon volume and related traffic patterns. These costs are
primarily semi-variable circuit costs for both the backbone and feature group D
access into the local exchange carriers' networks.
 
     The Company expects to incur additional operating losses through 1998 and
during 1999. The Company believes that the net proceeds from Initial Note
Offering will be sufficient to meet anticipated cash needs for working capital
and for the acquisition of capital equipment for at least the next twelve
months. The terms of the Initial Note Offering require the Company to complete
an initial public offering for gross proceeds of at least $25 million
("Qualified IPO") before August 1, 1999, otherwise the Company must issue
warrants which entitle the Noteholders to purchase an additional 4% of the
outstanding capital stock. The Company therefore plans to conduct a Qualified
IPO prior to August 1, 1999. Based upon anticipated sales terms and
                                       33
<PAGE>   38
 
projections, the Company estimates that the proceeds from the Qualified IPO and
a standard bank revolving line of credit secured against receivables will be
sufficient to complete product development and achieve profitable operations.
However, there can be no assurance that the Company will not require additional
financing within this time frame. The Company's forecast of the period of time
through which its financial resources will be adequate to support its operations
is a forward-looking statement that involves risks and uncertainties, and actual
results could vary materially as a result of a number of factors, including
those set forth below under the caption "Risk Factors -- Future Capital Needs;
Uncertainty of Additional Financing." The Company may be required to raise
additional funds through a public or private financing, strategic relationships
or other arrangements. There can be no assurance that such additional funding,
if needed, will be available on terms attractive to the Company, or at all.
 
YEAR 2000 READINESS
 
     The term "Year 2000 Issue" generally describes the various problems that
might result from improper processing of dates and date-sensitive calculations
involving dates in the Year 2000 and beyond. The "Year 2000 issue" results from
computer programs using two digits rather than four digits to define the
applicable year, so that all dates are interpreted as being between 1900 and
1999. Computers and other equipment using such programs will incorrectly
interpret dates after the year 1999. Such misinterpretation might cause system
failures or miscalculations and thereby disrupt operations, for example,
temporary inability to process transactions, to send invoices, to operate
computer systems and other equipment or to engage in other normal business
activities. Year 2000 issues could affect the Company through the Year 2000
incompatibility of its own computer systems and equipment as well as that of
third parties with whom the Company conducts business.
 
  READINESS TASK FORCE
 
     Since the Company's formation, management has been aware of Year 2000
issues and has sought Year 2000 compatibility in the development of VASP(TM) and
the TNS network. The Company has created a task force to evaluate its Year 2000
readiness as it may affect the Company's operations. The task force has
established a five-step process in order to achieve Year 2000 readiness. These
steps are (1) identification, (2) assessment, (3) remediation, (4)
implementation and (5) maintenance.
 
     Identification. The task force is inventorying of all technologies used in
its business. These technologies including hardware, software and embedded
microchips. The task force is reviewing both internal systems (including
VASP(TM), information technology assets, equipment and other systems); and
external systems (i.e., third-party manufactured products used by the Company,
and issues with customers, vendors and suppliers).
 
     The task force has identified eight major areas (involving 71 different
products) in which VASP(TM) utilizes third party hardware and software but has
not completed such identification for the TNS network or its administrative and
management systems.
 
     Assessment. As the inventory discloses different technologies used by the
Company, the task force is assessing the Year 2000 compatibility of each
inventoried item. The task force will verify Year 2000 compatibility through
testing or from the manufacturer's documentation. To obtain such manufacturer
documentation, the task force is searching the manufacturer's web site or
soliciting an official Year 2000 compatibility certificate. Of particular
importance in this assessment step is monitoring the Year 2000 readiness efforts
of the Company's critical vendors and customers. The Company does not yet have
enough information to evaluate whether potential Year 2000 issues with
third-parties might have a material adverse effect on operations.
 
     The task force assessed the Year 2000 compliance of third party hardware
and software utilized in VASP(TM). Such assessment included contacting the
vendors' representatives and examining technical document for the products. The
task force has determined that, of the 71 different third party products, 43
products (60.6%) are Year 2000 compliant, 17 products (22.5%) are non-compliant,
7 products (9.9%) do not use date-sensitive data, and 4 products (5.6%) are
still being assessed. More recent Year 2000 compliant versions are available for
15 of the non-compliant products, and compliant versions are under development
for the
                                       34
<PAGE>   39
 
other two non-compliant products. The task force estimates the cost for
acquiring the Year 2000 compliant versions of such products could be up to
$100,000. The task force has not yet tested VASP(TM) under Year 2000 scenarios,
has not identified the extent of any non-compliance and has not assessed the
possible financial consequences.
 
     Remediation. When finding systems that are Year 2000 incompatible, the task
force will then determine the appropriate remedial action for that system; this
determination will be performed on a case-by-case basis. Remedial actions could
involve replacement, upgrading, software patches, and substitution with other
products. The Company anticipates that remedial actions will require use of the
Company's internal resources, third-party manufacturers, suppliers and vendors
and potentially additional third-party consultants, as necessary. The
remediation will then be performed and thoroughly tested. The task force has not
yet encountered any items requiring a major remediation effort.
 
     Implementation. After successfully completing remediation and testing, the
Company will implement the Year 2000 ready technology. The Company expects to
complete all implementations and be fully Year 2000 ready by March 31, 1999.
However, the Company could encounter a significant internal or external Year
2000 issue which, if not remediated in a timely manner, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
 
     Maintenance. To maintain Year 2000 compatibility after completion of the
compliance plan, the task force is drafting Year 2000 business rules. These
rules will cover both internally created applications and purchases of
technologies. Company employees will be required to ensure the applications they
create are Year 2000 compatible, with the assistance of the Company's
information systems department. All future purchases of hardware, software and
other technologies will require Year 2000 compatibility certification or similar
documentation. The Company expects to circulate these rules internally during
the fourth quarter of 1998.
 
  CONTINGENCY PLANNING
 
     The Company will address contingency planning in the second quarter of
1999. The Company currently does not foresee extensive contingency planning
efforts. Principal activities will include backing up all data bases, keeping
the information systems department's docket clear in January 2000, and
increasing working capital.
 
  COSTS
 
     Other than time spent by the task force personnel which could be spent on
other matters, the Company has not yet incurred any significant costs in
identifying Year 2000 issues. The Company does not anticipate any significant
further costs in the Identification or Assessment stages by the task force. The
Company believes that total costs for becoming 100% Year 2000 compatible will
not be significant. Hardware upgrades will come out of the normal capital budget
and software changes should not involve material amounts. However, since no
material Year 2000 issues have yet been identified or assessed and therefore no
contingency plans have been finalized, the costs for remediation of any Year
2000 issues might be significant. As the Company continues to gather information
on its Year 2000 issues, the Company will re-evaluate its ability to estimate
costs associated with the Year 2000. There can be no assurance that as
additional Year 2000 issues are addressed, the Company's costs to correct such
issues will be consistent with historical costs.
 
     The Company believes that adequate resources have been allocated for this
purpose and does not expect to incur significant expenditures to resolve Year
2000 issues. However, there can be no assurance that the Company will identify
all Year 2000 problems in its systems in advance of their occurrence or that the
Company can successfully remedy any problems that are discovered. Failure to
achieve Year 2000 compatibility could disrupt operation of the network, or
impact the Company's ability to bill or collect revenues. The expenses of the
Company's efforts to address such problems, or the expenses or liabilities to
which the Company may become subject as a result of such problems, could
materially adversely affect the Company's business, prospects, operating
results, financial condition and its ability to service and repay indebtedness,
including the Notes. The revenue stream and financial stability of existing
customers may be adversely impacted by Year 2000 issues, which could cause
fluctuations in the Company's revenues and operating profitability.
                                       35
<PAGE>   40
 
                                    BUSINESS
 
GENERAL
 
     TeleHub believes it has the only universal ATM-based telecommunications
network in commercial operation that is capable of seamlessly interconnecting
with the PSTN. The Company's first-to-market proprietary software, VASP(TM),
will enable telecommunications service providers to (i) integrate the delivery
of voice, video and data over a single platform; (ii) seamlessly interconnect
with the PSTN; (iii) provide real-time monitoring of telecommunications traffic;
and (iv) facilitate the unbundling of the local loop. The Company's
VASP(TM)-managed ATM network, which began carrying commercial traffic in
December 1997, acts as a "proof of concept" for VASP(TM) and generates revenues
to support the Company's growth.
 
     The Company believes the VASP(TM) platform addresses significant needs
throughout the telecommunications industry for improved systems and less
reliance on legacy hardware. While the legacy network evolved principally for
voice transmission, demand for data, video and advanced voice services has grown
rapidly over the past ten years. The legacy network, designed to handle the
lower bandwidth requirements of voice traffic, has inherent service and cost
inefficiencies when carrying data and video transmissions. Incumbent Local
Exchange Carriers ("ILEC") granted access to the local loop only on a "bundled"
basis (where carriers must purchase an entire package of local service
elements), rather than offering access to individual local exchange service
elements. Recent regulatory changes have introduced competition in both local
and long distance telephone services. In particular, requirements that ILECs
"unbundle" the local loop and permit other carriers to purchase individual local
exchange elements should facilitate market entry. To be competitive in this new
environment and to meet growing demand for high speed data and video
transmission services, telecommunications carriers are seeking to enter new
markets rapidly and to introduce differentiated services in a cost-effective
manner. Three major carriers, Sprint, AT&T and Bell Atlantic, have recently
announced plans to deploy, over the next two years, voice-over-ATM services that
will interconnect with the PSTN, a service which TeleHub already offers. While
such networks would compete directly with the Telehub ATM network, those
networks are potential customers for VASP(TM). In addition, OEMs such as Lucent
Technologies Inc. and Nortel have recently announced major acquisitions
attempting to provide network solutions needed for transporting carrier-class
voice transmissions over more efficient data networks. The Company believes that
its VASP(TM) technology provides ILECs, CLECs, IXCs and OEMs with the ability to
accelerate the introduction of new products and services, to reduce costs and to
enter into new markets rapidly.
 
     TeleHub operates two principal subsidiaries: TTC, which develops the
commercial applications of VASP(TM), and TNS, which operates the Company's ATM
network. TTC is marketing VASP(TM)-based voice and data products to potential
customers in the OEM segment, like Newbridge, Nortel and Cisco, as well as in
the carrier market, including ILECs, CLECs and IXCs. The ability to carry voice
quality transmissions over an ATM backbone, and VASP(TM)'s ability to offer toll
and certain central office switching capabilities on a software basis, open the
multi-billion dollar voice switch market to ATM switch manufacturers. For
example, Newbridge has purchased a "right-to-use" perpetual license for a trial
system of VASP(TM) for $5.0 million. In addition, pilot programs for a
VASP(TM)-based virtual local exchange network are expected to commence with two
North American CLECs. Moreover, with future enhancements, the Company expects
VASP(TM) to allow LECs to unbundle the local loop and offer local number
portability ("LNP") using existing facilities, while protecting LECs'
proprietary customer databases, an issue which management believes has
significantly delayed the implementation of local exchange competition.
 
     TNS, which utilizes VASP(TM) technology, currently offers wholesale long
distance services to the switchless reseller market. Because of the inherent
efficiencies in carrying voice traffic over an ATM backbone and VASP(TM)'s
ability to seamlessly interconnect that traffic into the PSTN, TNS is able to
offer switched wholesale voice services at rates generally 10%-40% lower than
those currently offered by competing wholesale service providers. As a result,
TeleHub's wholesale customer base has been expanding and, as of September 30,
1998, includes nineteen switchless resellers who have transitioned approximately
200,000 pre-subscribed lines to TNS's network. The Company estimates that these
reseller customers will transition approximately 1.5 million presubscribed long
distance lines onto TNS's network during 1999. TNS also expects to offer
wholesale long distance services to ILECs, CLECs, ITCs and international
carriers
                                       36
<PAGE>   41
 
terminating traffic in the United States. TeleHub's network, interconnected via
leased lines from WorldCom, reaches approximately 64% of the telephone exchanges
in the United States directly and the remaining 36% through contractual
relationships with other carriers.
 
     Management believes that the integration of the VASP(TM) technology on an
ATM backbone provides the following competitive advantages:
 
     - The Company believes that TeleHub's VASP(TM)-enhanced network is the only
       publicly-switched ATM network in commercial operation which allows for
       seamless interconnection with the PSTN without requiring additional
       telephone equipment or modified dialing procedures. A VASP(TM)-enhanced
       ATM network allows for increased capacity and efficiencies, thereby
       lowering costs as compared to networks utilizing legacy technology.
 
     - When fully deployed, VASP(TM) will allow for dynamic bandwidth
       allocation. VASP(TM) will enable TeleHub to replace a customer's fixed
       leased-line data network with one which (i) is variable, where the
       customer only pays for capacity used, and (ii) can be publicly switched,
       and therefore connected nearly anywhere in the United States, which
       management believes is an improvement over competitors' existing service
       offerings.
 
     - VASP(TM) enables certain call-processing instructions to be moved out of
       the LECs' central office, thereby reducing the traditional dependence on
       the local exchange switch. The synergy between an ATM-based network and
       VASP(TM) enables the delivery of expanded telecommunications services on
       a virtual basis without the need for an extensive switching network.
 
     - VASP(TM) provides real-time monitoring of telecommunications traffic, a
       feature which the Company believes no other carrier offers. VASP(TM)
       allows real-time access to billing information and customer calling
       patterns and also provides for electronic order entry and trouble
       ticketing. Management believes these capabilities reduce network
       downtime, provisioning delays, maintenance costs and operating expenses,
       and improve customer service.
 
     - VASP(TM)'s distinct data analysis capabilities and open architecture will
       enable carriers to develop and implement new products and services such
       as millisecond billing. The open architecture design of the VASP(TM)
       software allows carriers to program and deploy these new services more
       quickly than legacy systems, which are dependent on time-consuming
       hardware vendor modifications.
 
INDUSTRY OVERVIEW
 
     According to 1996 industry data released by the FCC, the U.S.
telecommunications industry served more than 90 million households and 25
million businesses (approximately 158 million access lines), and generated
revenues approaching $196.3 billion. Telecommunications wireline services are
provided in three principal markets: long distance, local exchange and data
products and services. While VASP(TM)'s technology is applicable to nearly all
aspects of telecommunications services, as well as OEMs who sell their products
to carriers, TNS markets its products and services to customers principally in
the wholesale long distance services market.
 
     The Long Distance Market. The FCC's Statistics of Common Carriers reports
that the domestic long distance industry generated revenue of approximately
$88.6 billion in 1997. The long distance market is comprised of three tiers. The
first tier consists of facilities-based long distance carriers, such as AT&T,
MCI, WorldCom and Sprint, who provide long distance communications services
using their own equipment to transmit telephone calls. These carriers
collectively accounted for approximately 80% of all toll revenues in 1997.
"Second tier" carriers, consisting primarily of switched resellers such as Excel
Communications Inc., Cable and Wireless, plc., LCI International Inc. and
Frontier Corporation ("Frontier"), accounted for approximately 6.0% of toll
revenue in 1997. The remaining market share, or "third tier," is held by smaller
companies primarily consisting of switchless resellers.
 
     TNS is marketing wholesale long distance services, which consist of
providing bulk transmission capacity to resellers. According to the Yankee
Group, wholesale long distance services constitute a market with estimated 1997
revenues of $5.4 billion, growing at a rate approximately between 10% and 15%
annually. The
                                       37
<PAGE>   42
 
Company estimates that the market for the wholesale "switchless" resale segment
of the wholesale long distance resale market was approximately $2.4 billion in
1997 and continues to grow at a rate of 10% to 12% annually.
 
     The Local Exchange Market. According to FCC data, total revenue from local
telecommunications services in 1997 was approximately $103.0 billion. The
Telecommunications Act was enacted in large part to increase competition in the
local telecommunications industry and provide a framework for other carriers to
compete with LECs by reselling local telephone service, leasing unbundled
elements of the ILECs' networks or building new local service facilities. The
Telecommunications Act has created many opportunities for alternative providers
in the local services market. The Company believes that large telecommunications
users will increasingly demand diversity in local telecommunications providers,
as has been the case in long distance and private-line telecommunications
services, and that VASP(TM) will facilitate other carriers' entrance into the
local exchange market and their utilization of unbundled network elements.
 
     The Data Products and Services Market. Data products and services has been
the highest growth segment of the telecommunications industry in the 1990s.
According to Data Communications, data-related products and services accounted
for revenues of almost $79.0 billion in 1997 -- a growth rate of approximately
17% from 1996. According to the Yankee Group, current trends suggest that data
revenues will double over the next three years and will grow five times faster
than voice revenues. TNS is targeting the data market through both private line
and bandwidth-on-demand products, which will be integrated on TeleHub's
VASP(TM)-managed ATM network.
 
  TECHNOLOGY
 
  Circuit, Packet and Cell Switching Technologies
 
     There are three switching technologies used in communications networks:
circuit-switched systems, packet-switched systems and cell-switched systems.
Circuit-switched systems establish a dedicated channel for each communication
(such as a telephone call for voice or facsimile), maintain the channel for the
duration of the call, and disconnect the channel at the conclusion of the call.
Packet-switched communications systems, including voice-over-Internet Protocol
networks, format the information to be transmitted (such as e-mail, voice,
facsimile or data) into a series of shorter digital messages called "packets."
Packet-switched systems offer several advantages over circuit-switched systems,
particularly the ability to commingle packets from several communications
sources simultaneously onto a single channel. Cell-switched technology, which
includes ATM, combines elements of both circuit and packet switching. ATM
closely resembles packet switching in that it breaks a communication
transmission into cells, which are packets of a fixed size, which are then
placed on channels that are shared by several data streams. ATM resembles
circuit switching in that it provides connection-oriented service. Each
connection has a set-up phase, during which a "virtual circuit" is created.
 
     There are many Internet Protocol ("IP") networks currently in operation.
While generally adequate for data transmission needs, these networks usually are
not configured to provide the voice quality of a traditional telephone call.
With current technology, this quality can only be achieved by a combination of a
substantial cushion of communications capacity, customized end-user equipment,
dial-up "access codes," and/or other special procedures to initiate a call.
 
     There are also concerns about the quality, reliability and security of
packet-switched systems. Packets are transported on a first-come, first-served
basis with no guarantee of success. Some packets may experience severe delays,
while others may be dropped and never arrive. Certain data communications, such
as e-mail and file transfers, require 100% accuracy, but can easily tolerate
delay. Real-time voice transmissions can tolerate only minor delays, but can
tolerate some distortion. Real-time video broadcasts have very low tolerance for
both delay and distortion.
 
     Cell switching can resolve most of the problems inherent in packet-switched
networks: (i) a cell will not be delayed behind an unusually large packet and
(ii) the addressing information contained in the cell can
 
                                       38
<PAGE>   43
 
include prioritizing and sequencing data, which eliminates delays and
distortion. Thus, an ATM carrier can offer quality of service performance
guarantees.
 
     The fact that the ATM circuit is virtual, not physical, provides two major
advantages. First, it is not necessary to reserve exclusive network resources
for a given connection, and thus the economic efficiencies of statistical
multiplexing of several simultaneous data transmissions can be realized. Second,
once a virtual circuit path is established, switching time is minimized,
allowing much higher network throughput. TeleHub decided to deploy VASP(TM) over
an ATM network because of ATM's superior capabilities as compared to alternative
circuit and packet switching systems.
 
  Voice Switching Over ATM
 
     With the development of voice switching over ATM, efficiencies can be
achieved through integrated, consolidated networks for voice, data and video
connected via leased lines or public networks. ATM delivers operational
simplicity equivalent to that of the virtual private network ("VPN") and adds
the superior bandwidth economics of multiplexing. Voice calls may be efficiently
transported via virtual circuits, with voice quality assured due to
sophisticated voice adaptation techniques and quality of service support. The
Company believes the communications industry is moving rapidly towards
consolidated networks based on ATM switching because these networks offer the
advantages of speed, economy, and interoperability for the spectrum of
networking applications.
 
  Signaling System Number 7
 
     Technology has changed the architecture of telephone switching systems. The
Signaling System Number 7 ("SS7") is the current telecommunications
industry-accepted system of protocols and procedures used to control telephone
communication and provide routing information. SS7 is also used to provide
vertical calling features such as calling card validation, 800 number
portability (i.e., the routing of 800 numbers to a new location) and calling
name delivery. By storing information, such as routing data, billing information
and technical system data and controls at the Signal Control Point ("SCP"), an
SS7 network allows call set-up and routing to be accomplished independent of the
voice circuits.
 
     SS7 is characterized by high-speed packet data and out-of-band signaling
(signaling that does not take place over the same path as the transmission
itself, such as a voice conversation). Traditional telephony was in-band, where
the signals to set up a call between one switch and another always took place
over the same trunk that would eventually carry the call. Out-of-band signaling
establishes a separate digital channel for the exchange of signaling
information. This channel is called a signaling link. When a call is placed, the
dialed digits, trunk selected and other pertinent information are sent between
switches using their signaling links, rather than the trunks.
 
     Out-of-band signaling has several advantages over traditional in-band
signaling: (i) it allows for the transport of more data at higher speeds; (ii)
it allows for signaling at any time during the call, not only at the beginning;
(iii) it enables signaling to network elements to which there is no direct trunk
connection; and (iv) it provides both error correction and retransmission
capabilities to allow continued service in the event of signaling point or link
failures. However, under traditional circuit-switched systems, SS7 signaling
identifies the trunk to which a call must be routed to and that trunk must be
present and available at all times. Therefore, the bandwidth is reserved and
paid for whether it is used or not. Moreover, that leased line is engineered for
the busy hour model, so that little or no call blocking occurs. In contrast,
VASP(TM) has features of SS7 imbedded within it and, therefore, transactions
which are sent over a VASP(TM)-managed network can be switched directly into the
PSTN. TeleHub improves upon the traditional SS7 call model because VASP(TM)
interprets the SS7 messages on a dynamic basis, so that ATM connections are
created "on-demand." On the ATM backbone, only a portion of the busy hour
capacity is permanently connected.
 
  Operational Support Systems
 
     OSS encompass a broad array of software and systems that perform critical
functions for telecommunications carriers, including ordering, provisioning,
service assurance and billing. Ordering systems allow carriers to

                                       39
<PAGE>   44
 
collect customer information, retrieve current service information, capture and
validate new service requests, verify the availability of selected services and
transmit completed orders to one or more provisioning operational supporting
systems. Carriers use provisioning systems to install services for new customers
and to change or add services for existing customers. Service assurance systems
allow carriers to perform the testing, monitoring and reporting necessary to
maintain network availability and feed operational data to other business
systems. Billing systems are used by carriers to collect, collate, manage and
report billing information.
 
     Historically, as carriers have added new services, such as wireless or
Internet-based services, they have developed multiple, distinct operational
supporting systems. These legacy, proprietary OSS have typically been
mainframe-based systems that in many cases utilize incompatible software and
technologies, making communication among systems difficult. These OSS are
further strained by the many incremental changes that have been made in order to
accommodate new technologies, such as client/server technology and advancements
in data networking, and the proliferation of value-added services, such as call
waiting, call forwarding and voice mail. Despite these difficulties, carriers
are unable to replace completely existing OSS due to the large investments and
vast amounts of historical data contained in these systems. As a result,
carriers continue to make incremental modifications to these OSS, further
increasing their complexity and interoperability difficulties.
 
     In contrast to the current telecommunications environment in which carriers
use disparate OSS systems for each aspect of a call transaction (e.g., call
processing, billing, traffic monitoring and decision support systems), TeleHub's
VASP(TM) integrates all of these functions into one system that is compatible
with legacy systems. VASP(TM) is capable of processing all information regarding
a call in real-time, is scalable to a carrier-class level, and has the
flexibility to integrate new services and products quickly and seamlessly.
 
THE TELEHUB SOLUTION
 
     TeleHub was formed to capitalize on the demand for advanced network
features and capabilities resulting from the telecommunications industry's
changing competitive and regulatory environment. Existing carriers must develop
new OSS that are interoperable with their legacy systems, not only to support
initiatives like LNP and the unbundling requirements of the Telecommunications
Act, but also to enable carriers to respond to increasing competitive
challenges.
 
     VASP(TM) addresses several shortcomings of legacy networks including: (i)
the inability to switch packet-and cell-based traffic into the PSTN; (ii) the
lack of real-time management, billing and monitoring capabilities; (iii) the
inflexibility of hardware-based network architectures; and (iv) the lack of
integrated OSS capabilities. VASP(TM) creates virtual switching capabilities,
permits real-time network supervision and facilitates the introduction of new
service offerings. When fully deployed, VASP(TM) will integrate voice, video and
data on a single switched network and enable the provisioning of
bandwidth-on-demand services.
 
     Key benefits of the Company's solution include:
 
     New Market Opportunities. VASP(TM) allows customers to overcome some of the
traditional barriers to entry in the telecommunications service markets such as
hardware limitations and the high cost of facilities. Management expects
VASP(TM)-enhanced carriers to be able to enter the local, long distance, voice,
video and data transmission markets using one integrated network. Utilizing
TeleHub's ATM network, switchless resellers soon will be able to offer video and
data services in addition to their customary voice services. Similarly, by
incorporating VASP(TM) into their products, ATM switch manufacturers can enter
the voice switch market.
 
     Flexible and Scalable Architecture. VASP(TM) is a software solution in
contrast to the hardware-based configuration of legacy networks. The Company
believes that VASP(TM)'s open architecture and integrated OSS capabilities can
be adapted to most existing vendor hardware and are easily and readily scalable,
so that carriers, both small and large, can quickly and inexpensively develop
and implement new products and services. Existing switching platforms do not
have this flexibility and often require costly and time consuming hardware
modifications to add or change services.
 
                                       40
<PAGE>   45
 
     Rapid Market Entry and Cost Avoidance. Management believes that VASP(TM)
offers the capabilities of a facilities-based network on a virtual basis and
therefore will allow carriers to enter markets quickly and avoid the time and
expense associated with procuring and installing costly central office, tandem
and distribution facilities. Also, OEMs could readily adapt their existing
products for multiple markets rather than incur significant expense to develop
separate products for each market.
 
     Improved Time-to-Market for New Products and Services. Historically, new
product and service offerings required extensive testing to insure compatibility
with existing network configurations. VASP(TM) allows such testing to be
completed in less time than with the legacy-based systems and allows new
products and services to be rolled out electronically to the entire network from
one central location.
 
     Improved Network Management. VASP(TM) allows real-time access to billing
information and customer calling patterns, and also provides for electronic
order entry and trouble ticketing. With real-time supervision of network
activity, VASP(TM)-managed networks can monitor customer traffic, and the
specific network elements involved in carrying a particular call while the call
is in-process. Such networks can also recover from line errors, transmission
faults and even catastrophic failures much more quickly than legacy systems
allow currently. Network maintenance and repair personnel can use this data to
build more efficient routing and restoration functions. These capabilities
should reduce network downtime, provisioning delays, maintenance costs and
operating expenses, as well as enable carriers to improve the quality of their
services and to offer more responsive customer care.
 
     Increased Revenue from Existing Customers. VASP(TM)-equipped carriers are
able to store, maintain and access relevant information about customers and
their calling patterns on-line. The Company believes that such real-time market
research could be harnessed to generate additional revenues or identify new
marketing opportunities.
 
     Increased Value to Resellers. VASP(TM) enhances the competitive position of
resellers. TNS offers voice-over-ATM services at rates generally lower than
traditional circuit-based voice rates or other point-to-point advanced voice
services. TNS's reseller customers will also soon be able to expand their
service offerings to include video and data services without the need to procure
high cost private data networks. With bandwidth-on-demand pricing, end-user
customers are charged only for actual bandwidth used, which makes video and data
services affordable for small end-user customers (a reseller's principal
market). Using VASP(TM)'s advanced information management capabilities, TNS can
electronically provision new customers and diagnose delays much more quickly
than legacy systems, so new customers can quickly start generating revenue for
the reseller.
 
BUSINESS STRATEGY
 
     The Company's objective is to become a leading provider of next generation
services and software solutions to the telecommunications industry. Key elements
of the Company's strategy include:
 
     Leverage its First-to-Market Advantage. The Company will continue
leveraging its proprietary technology to influence industry standards, build
market share quickly and develop innovative packaging and pricing plans.
 
     Build Market Share on the TNS Network. The Company will continue to build
TNS's customer base by leveraging the competitive advantages of its
VASP(TM)-managed ATM network. TNS expects to continue offering its enhanced
services at rates generally lower than competing carriers while also providing
superior services, including real-time access to billing and customer
information, electronic provisioning and trouble ticketing, and soon, the
ability to offer switched video and data services.
 
     Expand Strategic Alliances. The Company will continue to enhance its joint
marketing and technology development efforts through strategic alliances with
leading equipment manufacturers and carriers. The Company has formed strategic
alliances with manufacturers, such as Newbridge, to assist the Company in
introducing its VASP(TM) technology into the next generation of
telecommunications equipment. In addition, the Company has formed a strategic
relationship with Comdisco, a network services provider, to accelerate entry
 
                                       41
<PAGE>   46
 
into targeted corporate markets and to stimulate growth of the Company's
customer base. The Company continues to pursue additional relationships with
other telecommunications industry participants.
 
     Operate and Enhance the Next Generation Platform. The Company will continue
to enhance VASP(TM) to offer a broader range of products and services to
carriers and OEMs. Further enhancements of VASP(TM) are also directed toward the
continued integration of the Company's long distance ATM network with the local
services market. Because TNS is currently utilizing VASP(TM), potential TTC
customers can witness the benefits of a VASP(TM)-based platform in operation, as
well as utilize the TNS network for developing and testing new products.
 
     Attract Experienced Management. The Company will continue to attract highly
qualified individuals with proven expertise from various segments of the
telecommunications and related industries. The Company's management team has
extensive and diverse experience. Management has demonstrated its expertise by
deploying and operating TeleHub's ATM network and by developing a growing
customer base for its wholesale services, as well as by developing, enhancing
and licensing the VASP(TM) technology.
 
PRODUCTS AND SERVICES
 
  TELEHUB TECHNOLOGIES CORPORATION
 
  VASP(TM)
 
     VASP(TM)'s applications are designed to administer, operate, control and
manage switching devices and network elements in the public carrier services
market. The Company believes that VASP(TM) provides telecommunications carriers
with superior billing, management and control capabilities. VASP(TM) has been
designed to be integrated with any carrier's customer care, billing,
provisioning and network management applications. VASP(TM) accumulates
information about network events for each phone call and generates a Transaction
Detail Record ("TDR"). The TDR can be converted into the standard industry call
detail record or into customized information that allows service providers to
bill innovatively (e.g., millisecond billing). In addition, service providers
can access their databases containing customer information and individual call
records in real-time to trouble shoot problems and identify customer calling
patterns. This information can be obtained by simple dial-up access from a
personal computer, as opposed to the current network process of downloading
information from each switch in the network, which can take more than a day to
complete. The carrier can use such information as a strategic advantage for
pricing and offering targeted products based upon real-time market feedback. The
Company's software can also be used as a network surveillance monitoring device.
The software has the ability to track phone calls from end-to-end and,
therefore, can locate the specific network element that may be causing a
problem. These advantages, coupled with the capability to provision circuits
electronically, will significantly reduce carriers' operating costs.
 
     The Company expects that future releases of VASP(TM) will allow for the
replacement of the Class 4/tandem switch and Class 5/end-office switch. Based
upon engineering studies, the Company believes that by using ATM and VASP(TM) in
place of traditional switch fabrics, the reduction in tandem switching
investment will lower the overall cost of multi-city interconnections by 45% to
60%. The VASP(TM) open system architecture is scalable from small sizes up to
hundreds of phone calls per second, and its underlying hardware platforms and
control center designs are selected to meet the operating objectives by
accumulating no more than one hour of downtime during each twenty year period of
service (99.999% uptime service level objective). VASP(TM) is also adaptable to
other transmission mediums such as IP, cable and wireless.
 
     TTC's products and services include the following:
 
     Virtual Class 4/Tandem Switching (expected to be available in the third
quarter of 1998). The Company expects that its software, combined with an ATM
switching platform, will be capable of replacing the traditional Class 4/tandem
switch. This capability will enable data service providers to offer voice
products over their existing networks. VASP(TM), running on a Sun Microsystems
server and controlling ATM switches, offers a 30% to 40% savings over the cost
of purchasing and installing traditional tandem switches. In addition,
 
                                       42
<PAGE>   47
 
TeleHub's VASP(TM)-based software solution offers other benefits, including cost
effective scalability, customization to specific customer requirements and
applications, and faster introduction of new products.
 
     Local Switch Bypass (expected to be available in the third quarter of
1998). TTC is engineering solutions to identify Internet data and other
long-holding time calls (e.g., voice mail) and route them directly to called
parties, thereby bypassing end-office and tandem switches. The Company expects
this technology to address carriers' growing problem of congestion at end-office
and tandem switches caused by Internet traffic. TTC's solution allows carriers
to manage existing traffic levels and flow without purchasing additional switch
capacity.
 
     Virtual Class 5/End-Office Switching (expected to be available in
1999). TeleHub is in the process of enhancing its VASP(TM) solution to duplicate
the basic functionality of a Class 5/end-office switch. TeleHub expects its
virtual Class 5 solution to provide carriers with the capability to enter the
local market with a voice product at a fraction of the cost of buying and
installing a conventional Class 5/end-office switch. The same advantages offered
by TeleHub's Class 4/tandem switch solution apply here -- reduced capital
expenditures, customization and faster time-to-market for new products. As an
example, many CLECs have data Points of Presence ("POPs") which currently
utilize ATM switches. TeleHub expects its solution to allow CLECs to carry and
switch voice traffic using their existing ATM networks without purchasing Class
5/end-office switches.
 
     Virtual STP/SCP Signaling (available today). Signal Transfer Points
("STPs") and SCPs are key elements of the underlying SS7 network. Messages, such
as telephone number, calling card validation, 800 number routing, and calling
name delivery are transmitted to STPs that route the messages to the proper SCPs
where call processing information is stored. Embodied within the VASP(TM) design
today are both SCP and STP functionality, thereby allowing carriers to perform
their own SS7 signaling, without purchasing signaling services or expensive
equipment. VASP(TM) contains translation and routing instructions needed to
deliver advanced network services and can be further enhanced as new services or
requirements are identified. The necessary STP functions are also incorporated
in the VASP(TM) design to handle the signaling and management of "on-net"
traffic. The conventional STP is deployed in the TeleHub design as an interface
to the other carriers in the PSTN and to act as a firewall to protect both
parties proprietary information from compromise.
 
     Mediated Access Services ("MAS") (expected to be available in 1999). The
Telecommunications Act and subsequent FCC mandates will require service
inter-operability between the various proprietary systems of existing
telecommunications carriers. Local and long distance carriers and their current
software vendors are therefore expending significant design and software
development resources trying to create the inter-operability solutions that can
be achieved through VASP(TM). TeleHub expects many carriers to select TeleHub as
a service supplier and VASP(TM) as a standard product to integrate the various
operating overlays.
 
     TeleHub expects its MAS capability to provide neutral "third-party" access
to service management system and OSS databases throughout the industry. Any
service provider (virtual or facilities-based) will be able to obtain the key
call treatment information necessary to process customer calls, while the
proprietary information of the database owner is protected from compromise. The
first requirement for mediation results from the FCC's mandated LNP that
requires the RBOCs and GTE Corporation ("GTE") to permit their customers to
switch to another competing LEC and still retain their same telephone number.
The Company believes its MAS will encourage the LECs to offer unbundled local
service elements to other carriers as required by the Telecommunications Act.
Management believes this is currently the greatest hurdle for the RBOCs to
overcome in achieving their long standing goal of entry into the long distance
business within their regions.
 
     Switched Virtual Circuit ("SVC") (expected to be available in 1999). The
Company is in the process of developing an SVC product expected to provide
carriers with a cheaper alternative to permanent virtual circuit (i.e.,
point-to-point) products offered today. The advantage of an SVC is that when the
circuit is not utilized, the capacity can be allocated for another use. A
permanent virtual circuit must allocate bandwidth to the user regardless of
whether there is traffic flowing over the circuit.
 
                                       43
<PAGE>   48
 
     The following tables summarize the manner in which the Company expects
VASP(TM), when fully deployed, to meet industry needs:
 
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
CUSTOM PLATFORM SEGMENT       CURRENT INDUSTRY ENVIRONMENT                      TTC OFFERING
- ----------------------------------------------------------------------------------------------------------------
<S>                       <C>                                      <C>                                  
  CLECs                   - Local focus -- out-source wide area    - Provide WAN/long distance transport
                            networking ("WAN") and long distance   - Switch voice and data into PSTN
                            services                               - Provide software to integrate voice
                          - Inability to switch packet-based         and data on one network
                            traffic                                - One integrated platform for all OSS
                          - Different networks for voice and         functions with real-time billing,
                            data                                     management and control
                          - Multiple OSS                           - Local switch bypass for Internet (and
                          - Bottleneck at end-office due to          other long-holding time) traffic
                            impact of Internet traffic on          - Greatly accelerates time to market
                            switch/port capacity                   - 30-40% cost savings for Class 4
                          - Time to market critical                  functionality
                          - Capital intensive                      - Significant cost savings for Class 5
                          - LNP difficulties                         functionality
                          - Proprietary switch architecture        - MAS facilitates unbundling of the
                                                                     local loop, including LNP
                                                                   - Open architecture
- ----------------------------------------------------------------------------------------------------------------
  ILECs                   - Inability to switch packet-based       - Switch voice and data into PSTN
                            traffic                                - Provide software to integrate voice
                          - Different networks for voice and         and data on one network
                            data                                   - One integrated platform for all OSS
                          - Multiple OSS                             functions with real-time billing,
                          - Bottle neck at end-office due to         management and control
                            impact of Internet traffic on          - Local switch bypass for Internet (and
                            switch/port capacity                     other long-holding time) traffic
                          - Regulatory pressure to meet the        - MAS facilitates unbundling of the
                            FCC's 14 point checklist                 local loop, including LNP
                          - LNP not widely implemented             - Open architecture
                          - Proprietary switch architecture
- ----------------------------------------------------------------------------------------------------------------
  IXCs                    - Inability to switch packet-based       - Switch voice and data into PSTN
                            traffic                                - Provide software to integrate voice
                          - Different networks for voice and         and data on one network
                            data                                   - Better management of network
                          - Intense price competition                correlates to lower network costs
                          - Multiple OSS                           - One integrated platform for all OSS
                          - Expensive to penetrate the local         functions with real-time billing,
                            loop                                     management and control
                          - Proprietary switch architecture        - Virtual STP/SCP signaling
                                                                   - MAS provides cheaper alternative to
                                                                     entering the local loop
                                                                   - Open architecture
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
 
                                       44
<PAGE>   49
 
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
      OEM SEGMENT             CURRENT INDUSTRY ENVIRONMENT                      TTC OFFERING
- ----------------------------------------------------------------------------------------------------------------
<S>                       <C>                                      <C>                                      <C>
  ATM Switch              - Developed to transmit data only        - Ability to integrate, bill, manage
    Manufacturers         - Inability to integrate, bill,            and switch voice traffic
                            manage and switch voice traffic        - Virtual Class 4 and Class 5 switching
                          - Extremely expensive and time             opens multi-billion dollar voice
                            consuming to integrate new products      switch market to ATM switch
                            into the switching platform              manufacturers
                                                                   - 30-40% cost savings for Class 4
                                                                     functionality
                                                                   - Significant cost savings for virtual
                                                                     Class 5 functionality
                                                                   - Object oriented software
                                                                     significantly improves time to market
                                                                     for new products
                                                                   - Provides ATM switches with virtual
                                                                     STP/SCP signaling and service logic
                                                                     for multi-media transactions
- ----------------------------------------------------------------------------------------------------------------
  Digital Loop Carrier    - Bottleneck at end office due to        - Local switch bypass for Internet (and
    Manufacturers           impact of Internet traffic on            other long-holding time) traffic
                            switch/port capacity                   - Software based solution to provide
                          - Hardware based environment with          hardware manufacturers with the
                            limited intelligence                     intelligence to route, analyze and
                          - Treats all traffic the same --           bill based upon the type of traffic
                            cannot differentiate
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
 
  TTC CUSTOMER RELATIONSHIPS
 
     Since the initial release of VASP(TM), the Company has actively pursued
OEMs, CLECs and other network service providers to license its proprietary
technology. As of September 30, 1998, the Company had signed memoranda of
understanding with a digital loop carrier manufacturer, an ATM switch
manufacturer, and a network service provider. In addition, TTC has submitted
proposals to two CLECs. TTC anticipates entering definitive contracts during
1998. For example, in the OEM market, TeleHub and Newbridge have signed an
agreement whereby Newbridge has purchased a "right-to-use" license for a trial
system of VASP(TM) for $5.0 million for use in its laboratory and has proposed a
VASP(TM)-enhanced solution to an RBOC.
 
     The Company has formed a joint venture that will use VASP(TM) to manage
satellite telecommunications delivery in the Australasian region (Australia, New
Zealand, Southeast Asia, India, and the Philippines). The Company contributed a
non-exclusive VASP(TM) license and associated technical support and received a
49% interest, while the joint venture partner will contribute $5.0 million for
operating funds and is initially managing the joint venture. The Company
believes that the joint venture will introduce the VASP(TM) technology into a
new geographic market and demonstrate VASP(TM)'s benefit for satellite networks
just as TNS demonstrates VASP(TM)'s ability for wireline networks.
 
                                       45
<PAGE>   50
 
  TELEHUB NETWORK SERVICES CORPORATION
 
     Network. TeleHub's VASP(TM) solution has been developed to converge voice,
data and video on its single network (depicted below).
 
                               [Picture of U.S.]
 
     TNS's backbone is centered on three ATM switching platforms located in
Chicago, New York and Los Angeles. The three sites are connected via DS-3
(growing to OC-12) fiber optic lines leased from WorldCom. TNS's network,
utilizing WorldCom's backbone circuits to connect TNS's planned POPs, is
designed to ultimately reach over 90% of U.S. telephone exchanges (currently at
64%). The use of TNS's ATM backbone between its switches, as compared to
conventional legacy technologies, is estimated to yield a 3:1 (or more) increase
in traffic carrying capacity and significant savings. TeleHub believes that its
savings on the backbone are achieved via an ability to use available contracted
permanent bandwidth in an "on-demand" fashion. TeleHub's backbone bandwidth
allocation strategy assumes that only a portion of the busy hour bandwidth needs
to be permanently connected, an assumption based upon standard industry traffic
engineering models. The rest of the bandwidth can be used to handle busy hour
traffic between other signaling service providers. It is VASP(TM)'s ability to
create or tear down network connections remotely "on-demand" that enables
TeleHub to most efficiently utilize available bandwidth. For example, in a
network with cross-country switches, busy hour bandwidth would be allocated on
the East Coast at a different time than it would be required on the West Coast.
Available bandwidth could be shifted to follow the traffic peaks, resulting in a
lower overall bandwidth requirement than would be necessary in a fixed facility
network.
 
     Long Distance. TNS provides wholesale long distance services to ILECs,
CLECs and international telephone companies that terminate telephone calls in
the United States. TNS offers its customers competitive pricing yet maintains
margins higher than its competitors because of the efficiencies of its ATM
 
                                       46
<PAGE>   51
 
backbone. The inherent advantages of ATM coupled with VASP(TM) enables TNS to
better manage and control its network, therefore further enhancing its cost
advantage. In addition, TNS provides its carrier customers with real-time access
to end user billing information and calling patterns, thereby allowing them to
market enhanced services to their customer bases.
 
     Bandwidth-on-Demand (expected to be available in 1999). TNS expects to
provide a bandwidth-on-demand product utilizing a VASP(TM) SVC product. With
bandwidth-on-demand, end-user customers are charged only for actual bandwidth
used, which makes video and data services affordable for small end-user
customers (resellers' principal market).
 
     The following table summarizes the manner in which the Company expects
TNS's services to meet industry needs:
 
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
    SERVICES SEGMENT          CURRENT INDUSTRY ENVIRONMENT                      TNS OFFERING
- ----------------------------------------------------------------------------------------------------------------
<S>                       <C>                                      <C>                                      
  Wholesale Long          - Predominately voice offering           - Integrated voice, video and data
    Distance              - Fixed capacity pricing                 - Bandwidth-on-demand pricing
                          - Limited and delayed access to          - Real-time access to customer
                            customer information (including          information (calling patterns and
                            calling patterns)                        billing)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
 
  TNS CUSTOMER RELATIONSHIPS
 
     TNS has targeted the switchless reseller segment, which in 1997, consisted
of approximately 500 service providers with annual revenues estimated at $2.1
billion. Additionally, TNS is targeting ILECs, CLECs and international telephone
companies that terminate traffic in the United States. TNS is also marketing its
data services to large Fortune 1000 companies. TNS has entered into a memorandum
of understanding with Comdisco, whereby the companies will jointly market long
distance services to Comdisco's existing customer base.
 
     As of September 30, 1998, the Company had entered into nineteen contracts
to provide long distance services to switchless resellers who have transitioned
approximately 200,000 end-user lines onto TNS's network. The Company estimates
that these reseller customers will transition approximately 1.5 million end-user
telephone lines to TNS's network during 1999. In addition, the Company is
currently in active contract negotiations with multiple other service carriers.
 
SALES AND MARKETING
 
  TELEHUB TECHNOLOGIES CORPORATION
 
     TTC utilizes a small and experienced internal sales force, strategic
alliances, and co-marketing agreements to market its VASP(TM) software. In
addition, TeleHub leverages the sales forces of its strategic partners and OEM
vendors to further penetrate its targeted markets. The TeleHub sales force
focuses its selling efforts on potential customers in the OEM segment, such as
Newbridge, Ascend, General Datacom Industries Inc., World Access, Fore Systems
Inc., Coyote Network Systems Inc., Lucent, Siemens, Telefonekitieboleset LM
Ericsson ("Tekelec"), Nortel and Cisco. TTC markets custom platform services to
RBOCs and CLECs, and to network service providers such as Comdisco.
 
  TELEHUB NETWORK SERVICES CORPORATION
 
     TNS has an experienced internal sales department that works with several
experienced external sales agents. TNS's sales effort is directed at many of the
same carrier customers as TTC, but offers transport and switching services as
opposed to software solutions. TNS markets the capability of its
VASP(TM)-enhanced ATM network, thereby allowing its customers to offer a broader
range of services than current product offerings encompass. For example, TNS has
been able to market voice services to Comdisco's existing customers, to whom it
previously only offered data services.
 
                                       47
<PAGE>   52
 
COMPETITION
 
     The telecommunications industry is highly competitive, rapidly evolving and
subject to constant technological change. In particular, there are numerous
companies offering long distance products and services, and the Company expects
competition to increase in the future. The Company believes that existing
competitors are likely to continue to expand their product and service offerings
to appeal to existing or potential customers of the Company. Moreover, the
Company expects that new competitors are likely to enter the communications
market and some of these new competitors may market communications services
similar to the Company's products and services, which would result in greater
competition. However, increased competition also creates additional
opportunities for the Company to market its VASP(TM)-based products to current
and future participants in the local exchange, long distance, data and video
markets.
 
     Many competitors (such as AT&T, MCI, Sprint, WorldCom, Qwest Communications
International Inc. and others) and potential competitors have substantially
greater financial, personnel, technical, marketing and other resources than the
Company. The Telecommunications Act allows the RBOCs and others (such as
electric utilities and cable television companies) to enter the long distance
market. A continuing trend toward consolidation, mergers, acquisitions and
strategic alliances in the telecommunications industry could give rise to
significant new competitors to TeleHub or its customers. TeleHub anticipates
that certain entrants will be strong competitors because, among other reasons,
they may (i) be well capitalized; (ii) already have substantial end-user
customer bases and brand name recognition; and/or (iii) enjoy cost advantages
relating to local loops and access charges. The introduction of additional
strong competitors into the switched long distance business could mean that
TeleHub and its customers would face substantially increased competition. As a
new entrant, TeleHub will compete primarily by providing superior service and
support and on price.
 
     In addition, the regulatory environment in which the Company operates is
undergoing significant change. As this regulatory environment evolves, changes
may occur which could create greater or unique competitive advantages for all or
some of the Company's current or potential competitors, or could make it easier
for additional parties to provide services.
 
     In the United States, price competition in the long distance business has
generally been intensive. AT&T, the leading long distance carrier, was
reclassified as a non-dominant carrier, which allows AT&T substantial pricing
flexibility. Long distance carriers, including AT&T as well as other
non-dominant carriers such as TNS, currently must file tariffs at the FCC for
domestic interstate services and for international services. However, such
tariffs can be amended on one day's notice; therefore, price changes by one
carrier can be matched readily by the others. The long distance communications
industry is significantly influenced by the marketing and pricing decisions of
larger industry participants such as AT&T, MCI, Sprint and WorldCom. TNS
believes that its wholesale customers generally price their service offerings at
or below the prices charged by AT&T for its long distance reseller services.
Rate reductions by AT&T and other first-tier carriers may necessitate similar
price decreases by the Company.
 
     Under the Telecommunications Act, RBOCs have the opportunity to provide
out-of-region long distance services immediately and in-region long distance
services if certain conditions are met. RBOC entry into the domestic and
international long distance business and the emergence of other new local
competitors could result in substantial competition to the Company and may have
a material adverse effect on the financial condition, results of operations or
cash flow of the Company. In December 1997, a federal court ruled that the
Telecommunications Act's pre-conditions to the RBOCs' entry into the in-region
long distance telecommunications services are unconstitutional (the "SBC
Decision"). Other federal courts have reached contrary decisions, and the SBC
Decision has been stayed pending appellate review. The result of the appellate
review cannot be predicted. If the SBC Decision were upheld on appeal, it could
have an adverse effect on the Company and other carriers because it would speed
the entry of the RBOCs into the in-region long distance market and would reduce
the primary incentive for RBOCs to open their local markets to competition.
 
     The long distance industry is undergoing significant consolidation that has
created and will continue to create numerous other entities with substantial
resources to compete for long distance business. New technologies could also
give rise to new regulation or new competition. The Company's larger competitors
have significantly greater name recognition, financial, technical, network and
marketing resources. They also
                                       48
<PAGE>   53
 
may offer a broader portfolio of services and have long standing relationships
with customers targeted by the Company.
 
     The Company has entered into telecommunications services agreements with
its wholesale long distance customers which do not contain minimum usage
commitments and which are cancellable upon short notice without penalties. If
these services agreements are canceled or are not renewed upon expiration, the
loss of customers could have a material adverse effect on the Company's
business, operating results and financial condition. Prices for domestic and
international long distance calls have decreased in recent years and are likely
to continue to decrease. There can be no assurance that the Company will be able
to compete effectively in the domestic or international long distance markets.
 
     TTC faces competition from some of the most experienced companies engaged
in the development of telecommunications equipment and related software.
Examples include switch vendors (Lucent, Nortel and Siemens), ATM vendors
(Nortel, Siemens, Alcatel NA Cable Systems Inc. ("Alcatel"), Cisco and Ascend),
signaling products vendors (Nortel and Tekelec), and OSS providers
(Hewlett-Packard Inc. and Applied Digital Access Inc.). The Company believes
that existing competitors are likely to continue to expand their product
offerings to appeal to existing or potential customers of the Company. Many of
the Company's existing competitors have financial, personnel and other
resources, including brand name recognition, substantially greater than the
Company. TTC may well find itself both a strategic partner and a competitor with
some of these companies.
 
     In the future, the Company may be subject to intense competition due to the
development of new technologies, such as ATM and wave division multiplexing,
resulting in an increased supply of domestic and international transmission
capacity. The telecommunications industry is experiencing a period of rapid and
significant technological evolution marked by the introduction of new product
and service offerings. The introduction of new products or emergence of new
technologies may cause capacity to greatly exceed the demand, reducing the
pricing of certain services to be provided by the Company. The effect on the
Company's operations of technological changes cannot be predicted, and if the
Company is unable to keep pace with advances, it could have a material adverse
effect on the financial condition, results of operations and cash flow of the
Company.
 
     The Company believes that its proprietary software is unique in that it
provides for the only ATM service in commercial operation that can be switched
into the PSTN. Other telecommunications carriers can provide their own networks
and can provide those networks to other carriers. Numerous established and
start-up national and regional fiber optic networks are owned by IXCs, ILECs and
CLECs, including AT&T, MCI and Sprint, each of whom has greater name
recognition, financial, personnel, technical and marketing resources than the
Company. Other companies have announced or may be planning the construction of
additional networks.
 
REGULATION
 
     The following summary of regulatory developments and legislation does not
purport to describe all present and proposed federal, state and local
regulations and legislation affecting the telecommunications industry. Other
existing federal, state and local legislation and regulations are currently the
subject of judicial proceedings, legislative hearings and administrative
proposals which could change, in varying degrees, the manner in which this
industry operates. Neither the outcome of these proceedings, nor their impact
upon the telecommunications industry or the Company, can be predicted at this
time. This section also sets forth a brief description of regulatory and tariff
issues pertaining to the operation of the Company.
 
     TeleHub's services are subject to federal, state, and local regulation. The
Company's business strategy is to continue to operate TNS as a wholesale
telecommunications service provider. To the extent the Company's business
strategy changes, the Company could become subject to additional regulatory
requirements. Pursuant to the Communications Act of 1934, as amended (the
"Communications Act") including as amended by the Telecommunications Act, the
FCC exercises jurisdiction over all of TNS's facilities and services used to
provide, originate, or terminate interstate or international communications.
State regulatory agencies have jurisdiction over all of TNS's facilities and
services used for intrastate communications. Local governments

                                       49
<PAGE>   54
 
often require communications carriers to obtain licenses or franchises to
utilize public rights-of-way necessary to install and to operate networks,
equipment, and other facilities. In addition to regulation by multiple
government agencies, different regulatory requirements apply to long distance
services than apply to local exchange services. For example, long distance
carriers must pay regulatorily determined access charges to LECs. Communications
carriers must also contribute to universal service support mechanisms, which are
being developed by federal and state agencies. The jurisdictional reach of
federal, state and local regulatory authorities is subject to continuous change,
controversy and judicial review. TNS is unable to predict the effect or outcome
of such changes, controversy or judicial review.
 
     The Telecommunications Act eliminates many of the pre-existing barriers to
competition in telecommunications markets, preempts state and local barriers to
entry into the local exchange and other telecommunications markets, and
establishes relationships between and among telecommunications carriers and
providers. The Telecommunications Act delegates to the FCC and state regulatory
agencies broad authority to implement the law.
 
     The Company is subject to the authority of the FCC and the state regulatory
agencies to enforce applicable regulatory requirements. The FCC and state
regulatory agencies may address regulatory non-compliance with a variety of
enforcement mechanisms, including monetary forfeitures, refund orders,
injunctive relief, license conditions and/or license revocation.
 
     The regulation of the telecommunications industry is changing rapidly and
the regulatory environment varies substantially from state to state. There can
be no assurance that future regulatory, judicial or legislative activities will
not have a material adverse effect on the financial condition, results of
operation, or cash flow of the Company or that domestic or international
regulators or third parties will not raise material issues with regard to the
Company's compliance or non-compliance with applicable laws and regulations.
 
     Long Distance Services. TNS's wholesale long distance services are subject
to federal regulation governing interstate and international telecommunications
services. As a communications common carrier, TNS must comply with the
requirements of the Communications Act, as well as the FCC's regulations
promulgated under the Communications Act.
 
     Pursuant to the Communications Act, among other things, common carriers
such as TNS must offer service on a non-discriminatory basis at just and
reasonable rates. Such carriers are also subject to the FCC's complaint
jurisdiction. IXCs providing international services are required to obtain
authority under Section 214 of the Communications Act and to file a tariff
containing the rates, terms and conditions applicable to their services prior to
initiating their international telecommunications services. The Company holds a
Section 214 certificate from the FCC for global facilities-based and global
resale authority. The Company is a non-dominant international carrier and also
must comply with the federal statutory and regulatory requirements of common
carriage in the offering of its international services. International
telecommunications service providers are also required to file copies of their
contracts with other carriers, including foreign carrier agreements, and a
variety of reports regarding their international revenue, traffic flows and use
of international facilities. Carriers holding Section 214 authority are subject
to FCC rules requiring, among other things, prior approval for transfers of
control and assignments, and notifications or approvals of certain foreign
carrier investments.
 
     Because the interstate long distance services market has become
sufficiently competitive, the FCC has streamlined the regulation of interstate
carriers. Thus, the FCC has ordered that non-dominant IXCs do not need to file
tariffs offering their services. While the Order is being reviewed by a Federal
appeals court, the court has stayed the FCC's de-tariffing decision. As a
result, IXCs must continue to file interstate tariffs (as well as international
tariffs). TNS has filed tariffs with the FCC. In addition, TNS can install and
operate non-radio facilities for the transmission of interstate communications
without prior FCC authorization.
 
     TNS's intrastate long-distance services are also subject to state
regulations. TNS has obtained or applied for authority to provide intrastate
services from various state regulatory agencies and has filed and is in the
process of filing tariffs specifying the rates, terms and conditions for its
wholesale intrastate services.
 
     Local Exchange Services. Although TeleHub does not intend to provide local
exchange services directly to end users, certain of TNS's proposed services will
make local exchange features and capabilities available to

                                       50
<PAGE>   55
 
other carriers. To offer its local exchange-related services, TNS may need to
obtain certifications to provide local exchange services from and file tariffs
with state regulatory agencies, and negotiate agreements with the ILECs for
interconnection, co-location and unbundled access.
 
     State Requirements. Most states require a certification or other
authorization to offer local exchange and long distance intrastate services.
These certifications generally require a showing that the carrier has adequate
financial, managerial and technical resources to offer the proposed services in
a manner consistent with the public interest. In addition to tariff
requirements, most states require that common carriers charge just and
reasonable rates and not discriminate among similarly situated customers. Some
states also require the filing of periodic reports, the payment of various
regulatory fees and surcharges, and compliance with service standards and
consumer protection rules. States also often require prior approvals or
notifications for certain transfers of assets, customers or ownership and for
the issuance of stock, bonds or other forms of indebtedness. As a result, in
certain states TNS requested approvals, made notifications or took other actions
relating to its issuance of a guarantee pursuant to the Initial Note Offering.
While TNS expects to obtain all necessary approvals for the Exchange Offer,
there can be no assurance that such approvals will be obtained, or that they
will be obtained on a timely basis. States generally retain the right to
sanction a carrier or to revoke certifications if a carrier violates relevant
laws and/or regulations. If any state regulatory agency were to conclude that
the Company is or was providing intrastate service without the appropriate
authority, the agency could initiate enforcement actions, which could include
the imposition of fines, the disgorging of revenues, or the refusal to grant the
regulatory authority necessary for the future provision of intrastate
telecommunications services.
 
     State regulatory agencies also regulate access charges and other pricing
for telecommunications services within each state. If regulations are changed to
allow variable pricing of access charges based on volume, the Company could be
placed at a competitive disadvantage over larger long distance carriers.
 
     The Communications Act was substantially amended by the Telecommunications
Act, which provides for comprehensive reform of the United States'
telecommunications laws. The Telecommunications Act may have potentially
significant effects on the financial condition, results of operations or cash
flow of the Company. The Telecommunications Act is designed to enhance
competition in, among other markets, the local telecommunications marketplace
by, among other things: (i) removing state and local entry barriers, (ii)
requiring ILECs to provide interconnection to their facilities, (iii)
facilitating the end users' choice to switch service providers from ILECs to
CLECs, and (iv) requiring access to rights-of-way. The legislation is also
designed to increase local competition by newer competitors such as long
distance carriers, cable companies and public utility companies. In addition,
the Telecommunications Act imposes certain conditions upon all LECs, including
CLECs. To the extent the Company is required to obtain certifications as a CLEC,
these obligations would apply to the Company. Among these requirements are the
duties to establish number portability, dialing parity and reciprocal
compensation arrangements. These requirements may cause the Company to incur
additional administrative and regulatory expenses.
 
     On August 8, 1996, the FCC released the Interconnection Decision, which
established a framework of minimum, national rules enabling state commissions
and the FCC to begin implementing many of the local competition provisions of
the Telecommunications Act. Among other things, the Interconnection Decision
prescribed certain minimum points of interconnection, adopted a minimum list of
unbundled network elements that ILECs must make available to competitors, and
adopted a methodology for states to use when setting wholesale prices for retail
services. The U.S. Court of Appeals for the Eighth Circuit issued a decision
vacating certain portions of the Interconnection Decision and the United States
Supreme Court has agreed to consider the challenges to the Eighth Circuit's
decision filed by the FCC and interested carriers. Whether the Eighth Circuit's
decision will stand, or what further actions the FCC may or may not take in
response to these decisions cannot be predicted.
 
     Local Government Authorizations. Because TNS is selling wholesale services
to other carriers, permitting and franchising requirements are usually handled
by those carriers. However, TNS has obtained necessary local government
authorizations for the installation and operation of facilities that it owns.
The termination of the existing local government authorizations prior to their
expiration dates or failure to renew such authorizations where applicable could
have a material adverse effect on the financial condition, results of operations
and cash flow of the Company. In some municipalities, carriers must pay license
or franchise fees.
 
                                       51
<PAGE>   56
 
     Universal Service Charges. In 1997, the FCC released an order establishing
a significantly expanded federal universal service subsidy regime to be funded
by interstate carriers and certain other entities. The FCC established new
universal service funds to support telecommunications and information service
provided to qualifying schools, libraries and rural health care providers, and
expanded the federal subsidies for local telephone service provided to
low-income consumers. In accordance with the Telecommunications Act, the FCC
adopted plans to implement the recommendations of a Federal-State Joint Board to
preserve universal service, including a definition of services to be supported,
and defining carriers eligible for contributing to and receiving from universal
service subsidies. The FCC plans to revise its rules of subsidizing service
provided to consumers in high cost areas, which may result in further
substantial increase in the overall cost of the subsidy program. The FCC issued
a public notice in April 1998 seeking comment on proposals to revise the
methodology for determining universal service support. The outcome of the FCC's
pending and future proceedings relating to universal service or their effect on
the Company cannot be predicted. Several parties have appealed the FCC's order
and those appeals are pending before a federal appeals court. The outcome of the
further FCC proceedings or of the pending judicial appeals or petitions for FCC
reconsideration on the Company's operations cannot be predicted.
 
EMPLOYEES
 
     The Company employed 207 full time personnel as of September 30, 1998.
TeleHub has an employment contract with its Chief Executive Officer ("CEO") and
President, key executives denoted under "Management -- Executive Employment
Agreements" and other executives. For employees without employment contracts,
the Company has arranged for a third party contractor to hire those employees
and handle payroll and benefits. None of TeleHub's employees are members of any
labor unions. TeleHub also utilizes independent contractors and consultants.
 
INTELLECTUAL PROPERTY
 
     The VASP(TM) software is one of the Company's primary assets. Management is
seeking to protect the Company's intellectual property rights in the VASP(TM)
software under applicable law including using, when and as appropriate, trade
secret and patent protections. Specifically the Company has several patents
pending relating to the VASP(TM) technology. There can be no assurances that the
Company's means of protecting its proprietary rights in the United States or
abroad will be adequate or that competitors will not independently develop
similar technologies. The Company's future success will depend in part on its
ability to protect its proprietary rights to the technologies used by VASP(TM).
 
PROPERTIES
 
     The Company leases 4,771 square feet of office space in Walnut Creek,
California for its corporate office pursuant to a lease expiring in 2002. The
Company leases 34,920 square feet of office space in Gurnee, Illinois, for its
TNS and TTC offices, technology development and network operations center
pursuant to a lease expiring in 2003. TNS leases 15,341 square feet in downtown
Chicago for its Chicago telecommunications switches, pursuant to a lease
expiring in 2001, another 14,705 square feet in downtown Los Angeles, California
for its Los Angeles telecommunications switch pursuant to a lease expiring in
2007, and conduit and co-location space in downtown Los Angeles pursuant to a
lease agreement expiring in 2007. TNS leases 15,217 square feet in downtown New
York City for its New York telecommunications switches, pursuant to a lease
expiring in 2007. TeleHub Leasing Corporation leases office space in Bedford,
New Hampshire on a month-to-month lease.
 
LITIGATION
 
     The Company is not currently engaged in any legal proceedings. The Company
is, however, subject to state commission, FCC and court decisions as they relate
to the interpretation and implementation of the applicable federal and state
laws and regulations, such as the Communications Act, as amended, including the
Telecommunications Act. In some cases, the Company may be deemed to be bound by
the results of ongoing proceedings before these bodies.
 
                                       52
<PAGE>   57
 
                                   MANAGEMENT
 
DIRECTORS AND KEY EXECUTIVE OFFICERS
 
     Each Director holds office until the next meeting of shareholders for
election of such Director's class and until successors have been elected and
qualified or until such Director's death, resignation or removal. The Company's
officers are appointed by, and serve at the discretion of, the Board. Set forth
in the table below are the names, ages, and current positions of the Directors
and executive officers of the Company.
 
<TABLE>
<CAPTION>
                  NAME                    AGE                          POSITIONS
                  ----                    ---                          ---------
<S>                                       <C>    <C>
William W. Becker(1)....................  69     Chairman of the Board
Donald H. Sledge(2).....................  58     President, Vice Chairman, Chief Executive Officer and
                                                 Director
Michael G. McLaughlin(3)................  36     Chief Technology Officer and Director
Herbert H. Swinburne....................  57     President of TNS
John A. Strand III......................  53     Acting President of TTC
Richard M. Harmon(2)....................  48     Chief Financial Officer, Treasurer, Corporate
                                                 Secretary and Director
Barry C. Lescher(2).....................  43     Assistant Secretary and Director
John F. Slevin(3).......................  62     Director
Oz Pedde(1).............................  56     Director
John R. Snedegar(3).....................  49     Director
Martin R. Walsh(1)......................  46     Director
</TABLE>
 
- ---------------
 
(1) Class C Director -- term expires 1999.
 
(2) Class A Director -- term expires 2000.
 
(3) Class B Director -- term expires 2001.
 
     WILLIAM W. BECKER joined TeleHub in March 1996 and serves as Chairman of
the Board. Mr. Becker is a principal of HHL, the Company's largest shareholder.
He also serves as Chairman of SkyConnect Inc., AirCell Communications, Inc.,
Trans Digital Inc., VR-1 Inc., E-Star Inc. and Northern Cable Inc. Prior to
joining TeleHub, Mr. Becker founded a number of companies involved in
telecommunications, cable TV, oil and gas, real estate development, and other
industries. From 1993 to 1995, Mr. Becker was a principal of WWB Oil & Gas Ltd.
Mr. Becker was a significant investor in IntelCom Group, Inc. (now, ICG
Communications, Inc.) for which he served as chairman and CEO from 1987 to June
1995.
 
     DONALD H. SLEDGE joined the Company in January 1996 as President, Vice
Chairman, CEO and Director and is the CEO and a Director of TTC and TNS. From
1994 to 1995, Mr. Sledge served as President and Chief Operating Officer ("COO")
of West Coast Telecommunications, Inc., a NASDAQ listed long distance company
purchased by Frontier. From 1993 to 1994, Mr. Sledge served as Head of
Operations for New T&T, a Hong Kong-based start-up company. Mr. Sledge was
Chairman and CEO of Telecom New Zealand International from 1991 to 1992. Mr.
Sledge was a member of the board of advisors of Calex and is currently a
director of DataProse, CyWorld Talk, which currently trades on the Alberta Stock
Exchange, AirCell Communications Inc. and Executive Telecard, Inc., a
telecommunications company traded on NASDAQ, and serves as an advisor and board
member to several small technology-based start-up companies. In addition, Mr.
Sledge serves as the Chairman of United Digital Network Inc. ("United Digital"),
a long distance switch based reseller, which is under an agreement to be
acquired by Star Telecommunications, Inc.
 
     MICHAEL G. MCLAUGHLIN founded TeleHub in January 1996 and serves as Chief
Technology Officer ("CTO") and a Director of TeleHub, TTC and TNS. From 1994 to
1995, Mr. McLaughlin served as President and a director of Access Point
Communications Corporation. In 1992, he formed The McLaughlin Group, Inc. (now
"T.M.G.I., Inc.") which provided consulting services to large corporate clients
involving cost reduction and analysis, network configuration strategies and
negotiation of communication carrier contracts. From 1983 to 1991, Mr.
McLaughlin worked for ROLM, a business unit of IBM Corporation
 
                                       53
<PAGE>   58
 
("ROLM"), where he was a communications engineer responsible for the design,
development and implementation of communications networks for ROLM's largest
accounts, including The Sears Network, General Electric Company, IBM and Baxter
Laboratories Inc.
 
     HERBERT H. SWINBURNE joined TeleHub in January 1998 and serves as President
of TNS. From 1991 until he joined TeleHub, Mr. Swinburne was the Director and
General Manager of Major Account Network Design for AT&T Canada, which provides
long distance services. From 1989 to 1991, Mr. Swinburne was Director of
Proposal Engineering at Sprint, and from 1988 to 1989, Mr. Swinburne was
Director of the Technical Advisory Center at Sprint. Prior to joining Sprint,
Mr. Swinburne was a Program Manager for Telenet Communications Corporation where
he was responsible for managing the nationwide packet services for the
Department of Agriculture.
 
     JOHN A. STRAND III joined TeleHub as TTC's Acting President in June 1998.
From 1991 to 1998, Mr. Strand was the Director of Technology Planning and
Integration for Sprint. Prior to his position with Sprint, he was a regional
manager for SRI International, an international research institute.
 
     RICHARD M. HARMON joined TeleHub in March 1997 as the Chief Financial
Officer ("CFO"), Treasurer and Corporate Secretary and became a Director in
March 1998. Mr. Harmon is the Treasurer and Corporate Secretary of TNS. From
1992 to 1996, Mr. Harmon was the CEO of Education Finance Corporation, a company
he founded to provide student loans to vocational trade students. From 1990 to
1992, Mr. Harmon served as President of Clean Air Transit. From 1985 to 1990,
Mr. Harmon founded and was President of Network Media Corporation, a cable
network advertising sales group. Between 1980 and 1985, Mr. Harmon was a
principal with Network Development Corporation, a consulting and investment
company emphasizing telecommunications and cable television. Prior to that, Mr.
Harmon served as CFO and COO for Franklin Supply. Mr. Harmon also worked for
Allstate Insurance Company, where he made private equity investments in early
stage companies.
 
     BARRY C. LESCHER joined TeleHub as a Director in 1996 and serves as
Executive Vice President of TTC, a Director of TNS and Assistant Secretary. From
1994 to 1997, Mr. Lescher held engineering positions at telecommunications
companies which included American Teletronics, TMGI and Access Point
Communications Corporation. From 1989 to 1994, Mr. Lescher was a communications
engineer with ROLM. Prior to that, Mr. Lescher worked for a family-owned
business that was involved in the installation and operation of communication
systems.
 
     JOHN (JACK) F. SLEVIN is Chairman, President, and CEO of Comdisco, a New
York Stock Exchange ("NYSE") listed company and was appointed to the TeleHub
Board in July 1997. He has been Comdisco's Chairman of the Board since January
1996 and was named Comdisco's President and CEO in July 1994. Mr. Slevin served
as Comdisco's COO from 1993 through 1994 and was executive vice president of
Comdisco's North American Sales since 1992. He has been a member of Comdisco's
board of directors since 1979. Mr. Slevin is also a director of Media One, a
NYSE listed company, and Interworld Corp.
 
     OZ (OSWALD) PEDDE, a Director of TeleHub since March 1998, has been
President and CEO of Watson & Associates, a Toronto based telecommunications
service and consulting firm since January 1, 1998. From 1995 to 1998, Mr. Pedde
was self-employed as a consultant. From 1991 to 1995, Mr. Pedde was President
and CEO of Manitoba Telephone Systems, a diversified Canadian telecommunications
company and was one of the founding members of the Council of CEOs that created
the "Stentor Alliance," an association of Canada's major telephone companies.
During such period, Mr. Pedde was also a director of Telesat, Canada's satellite
carrier.
 
                                       54
<PAGE>   59
 
     JOHN R. SNEDEGAR joined TeleHub's Board in March 1998. He has been
President and CEO of United Digital, which trades on the Vancouver Stock
Exchange since 1990. He was also the President and CEO of AmeriTel Management,
Inc. ("AmeriTel"), a California based provider of long distance
telecommunications and management services from 1980 to 1992. In 1992, Mr.
Snedegar led AmeriTel through the acquisition of West Coast Telecommunications,
Inc., forming WCT Communications, Inc. Mr. Snedegar served on the board of
directors of this carrier until its sale to Frontier in early 1995. He is also a
director for StarBase Corporation, a California-based software development
company which trades on NASDAQ, Star Telecommunications, Inc., a long distance
carrier specializing in international services which trades on NASDAQ. Mr.
Snedegar also serves as President of Kendall Venture Funding, Ltd., a reporting
company based in Alberta, Canada.
 
     MARTIN R. WALSH has been the President of Walsh & Associates, an Illinois
high technology consulting firm since January 1, 1998 and joined TeleHub's Board
in March 1998. Previously, Mr. Walsh had been a Comdisco executive, serving as
Executive Vice President of Marketing and a member of the Office of the
President of Comdisco since 1996, President of the Large Systems Division from
1993 to 1996, and Senior Vice President -- Trading between 1985 and 1993, and a
Vice President from 1982 to 1985. Mr. Walsh originally joined Comdisco in 1978.
 
EXECUTIVE COMPENSATION
 
     The following table provides certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries to or on behalf
of Donald H. Sledge, President and CEO of the Company, and the four most highly
compensated executive officers of the Company (the "Named Officers") for the
fiscal year ended December 31, 1997 and for the period from January 18, 1996
(inception) to December 31, 1996. The Company has not granted stock appreciation
rights.
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                                         LONG-TERM              ALL OTHER
                                              ANNUAL COMPENSATION                       COMPENSATION         COMPENSATION($)
                                -----------------------------------------------   ------------------------   ---------------
                                FISCAL                           OTHER ANNUAL
NAME AND PRINCIPAL POSITION      YEAR     SALARY      BONUS     COMPENSATION($)   WARRANTS(#)   OPTIONS(#)
- ---------------------------     ------   --------    -------    ---------------   -----------   ----------
<S>                             <C>      <C>         <C>        <C>               <C>           <C>          <C>
Donald H. Sledge..............   1997    $175,000    $87,500(1)     $10,800(2)           --      150,000        $  9,804(3)
  President and Chief            1996      70,000         --             --              --           --         110,500(4)
  Executive Officer of TeleHub
Michael G. McLaughlin.........   1997     175,000     87,500(1)      17,645(2)           --      150,000              --
  Chief Technology Officer of    1996          --         --             --              --           --              --
  TeleHub
Timothy Carey Chandler........   1997     150,000(5)  75,000(1)         333(6)           --       50,000              --
  Senior Vice President --       1996      68,750         --             --              --           --              --
  Software Development of TTC
Barry C. Lescher..............   1997     136,320(5)  68,268(1)         701(2)           --      100,000              --
  Executive Vice President       1996          --         --             --              --           --              --
  of TTC
Richard M. Harmon.............   1997     106,250(5)  62,466(1)          --         150,000      100,000          61,859(7)
  Chief Financial Officer and    1996          --         --             --              --           --              --
  Secretary of TeleHub
</TABLE>
 
- ---------------
 
(1) Related to 1997 accrued bonus with an option to be paid either in cash or by
    a combination of cash and stock options in 1998.
(2) Car allowance.
(3) Consists of $5,000 set aside in a 401(k) plan by the Company and $4,804 paid
    for life insurance premium.
(4) Consulting fees for services prior to commencement of employment on August
    1, 1996.
(5) Consists of pro rated annual base salary for the portion of the year
    actually worked.
(6) Allowance in lieu of certain employee benefits.
(7) Consists of $29,359 for relocation expenses and $32,500 consulting fees for
    services prior to executing Mr. Harmon's employment agreement.
 
                                       55
<PAGE>   60
 
                      OPTIONS GRANTED IN LAST FISCAL YEAR
 
                               INDIVIDUAL GRANTS
 
<TABLE>
<CAPTION>
                                                                                                     POTENTIAL REALIZABLE
                                                                                                       VALUE AT ASSUMED
                                                                                                         ANNUAL RATES
                                                % OF TOTAL                                              OF STOCK PRICE
                                                 OPTIONS                      MARKET                     APPRECIATION
                                                GRANTED TO      EXERCISE      PRICE                   FOR OPTION TERM(2)
                                   OPTIONS     EMPLOYEES IN     OR BASE      ON DATE    EXPIRATION   --------------------
NAME                              GRANTED(#)   FISCAL YEAR    PRICE ($/SH)   OF GRANT      DATE             10%($)
- ----                              ----------   ------------   ------------   --------   ----------   --------------------
<S>                               <C>          <C>            <C>            <C>        <C>          <C>
Donald H. Sledge................    70,000          4.7           5.00       2.50(1)     5/1/2007          103,900
                                    80,000          5.5           5.50       2.50(1)     5/1/2007           78,700
Michael G. McLaughlin...........   150,000         10.2           5.00       2.50(1)     5/1/2007          222,700
Timothy C. Chandler.............    50,000          3.4           5.00       2.50(1)     5/1/2007           74,200
Barry C. Lescher................   100,000          6.8           5.00       2.50(1)     5/1/2007          148,400
Richard M. Harmon...............   100,000          6.8           5.00       2.50(1)     5/1/2007          148,400
</TABLE>
 
- ---------------
 
(1) Valued at one half of the $5.00 per share offering price of Preferred Stock
    in the Spring 1997 Offering, which closed on April 30, 1997.
 
(2) The 5% column has been excluded since the potential realizable value would
    be negative for executive grants at a 5% annual appreciation rate.
 
  AGGREGATED OPTIONS EXERCISABLE IN LAST FISCAL YEAR AND FY-END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                                                                  VALUE OF UNEXERCISED
                                                                                                 IN-THE-MONEY OPTIONS AT
                                                                                                 FY-END (MARKET PRICE OF
                                               VALUE REALIZED       NUMBER OF UNEXERCISED       SHARES AT FY-END ($8.83)
                                              (MARKET PRICE AT      OPTIONS AT FY-END(#)         LESS EXERCISE PRICE)(1)
                            SHARES ACQUIRED    EXERCISE LESS     ---------------------------   ---------------------------
NAME                        ON EXERCISE(#)    EXERCISE PRICE)    EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
- ----                        ---------------   ----------------   -----------   -------------   -----------   -------------
<S>                         <C>               <C>                <C>           <C>             <C>           <C>
Donald H. Sledge...........     --                 --              37,500         112,500       $133,625       $400,875
Michael G. McLaughlin......     --                 --              37,500         112,500       $143,625       $430,875
Timothy C. Chandler........     --                 --              12,500          37,500       $ 47,875       $143,625
Barry C. Lescher...........     --                 --              25,000          75,000       $ 95,750       $287,250
Richard M. Harmon..........     --                 --              25,000          75,000       $ 95,750       $287,250
</TABLE>
 
- ---------------
 
(1) Based on the common stock offering price in the Fall 1997 Offering which
    closed on December 8, 1997.
 
COMPENSATION PLAN
 
     1997 STOCK OPTION PLAN. The Company's 1997 Stock Option Plan (the "Plan")
was adopted by the Board and approved by the stockholders in May 1997. A total
of 4,600,000 shares of Common Stock have been reserved for issuance under the
Plan, as amended on March 18, 1998 by the Board. As of September 30, 1998,
options to purchase 3,665,878 shares of Common Stock were outstanding under the
Plan, and no shares had been issued upon exercise of previously granted options.
The Plan provides for grants to employees of the Company (including officers and
employee directors) of "incentive stock options" ("ISOs") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
for grants of nonstatutory stock options to employees (including officers and
employee directors and non-employee directors) of the Company or any subsidiary
of the Company. The Plan is administered by the Board or a committee of the
Board (the "Administrator"). The Plan is currently being administered by the
Board. The Administrator may determine the terms of the options granted,
including the exercise price, the number of shares subject to each option and
the exercisability of the option. The Administrator also has the full power to
select the individuals to whom options will be granted and to make any
combination of grants to any participants.
 
     Options granted generally vest immediately as to 25% of the shares subject
to the option and then at a rate of 25% of the shares subject to the option on
January 1(st) of the subsequent 3 years following the grant
 
                                       56
<PAGE>   61
 
date. The term of an option is determined by the specific option agreement. No
option may be exercised by any person after its term or the Plan expires.
 
MANAGEMENT INCENTIVE PLAN
 
   
     In June 1998, the Board directed the Compensation Committee to develop a
Management Incentive Plan that provides stock option awards to senior
management. If the Company achieves specified market valuations based upon the
value of its Common Stock from June 1998 to June 2000, eligible participants may
receive stock options exercisable at $14.58 per share (the estimated fair market
value of the Company's Common Stock in June 1998). The aggregate number of stock
options that may be awarded under the Management Incentive Plan increases from
approximately 500,000 shares if the Company's Common Stock value is $20.00 per
share to a maximum of approximately two million shares if the Company's Common
Stock value increases to $60.00 per share.
    
 
EXECUTIVE EMPLOYMENT AGREEMENTS
 
     The Company has entered into employment agreements with Messrs. Sledge and
McLaughlin, commencing January 2, 1997, Mr. Lescher commencing on January 1,
1997, Mr. Harmon commencing on May 4, 1998, Mr. Swinburne commencing January 1,
1998, Mr. Chandler commencing April 17, 1997 and Mr. Strand commencing October
1, 1998. The Company also has employment agreements with certain other
executives.
 
     The Company's employment agreements with Messrs. Sledge and McLaughlin
provide for an initial five year term and Mr. Lescher's employment agreement
provides for an initial two year term. After the initial term each agreement is
automatically renewed for an additional one-year term until either party
provides 30 days notice of termination prior to the end of a term. The
agreements provide for an annual base salary and an incentive bonus determined
by the Board. Messrs. Sledge and McLaughlin also receive stock options under the
Company's Plan. If the Company terminates any of the employment agreements
without cause or if the Company or the employee terminates the respective
employment agreement upon the occurrence of a major transaction involving the
Company, then Messrs. Sledge and McLaughlin will receive a termination fee equal
to 200% of their annual salaries plus benefits and specified bonuses and Mr.
Lescher will receive 100% of his annual salary plus benefits plus a specified
bonus. Each of Messrs. Lescher, Sledge and McLaughlin is subject to a
confidentiality covenant and Messrs. Sledge and McLaughlin are each subject to a
one-year non-competition commitment following the termination of his employment.
Mr. McLaughlin may also be reimbursed for the annual premiums that he incurs for
his disability and $5,000,000 term life insurance policies.
 
     The Company has employment agreements with Messrs. Harmon and Swinburne
which provide for an initial four-year term and thereafter one-year terms until
either party provides 30 days notice of termination prior to the end of a term.
The agreements provide for an annual base salary and an incentive bonus
determined by the Board. Messrs. Swinburne and Harmon also receive stock options
under the Company's Plan. Mr. Swinburne receives performance options if certain
criteria are met. If the Company terminates the employment agreement without
cause or if the Company or the employee terminates the employment agreement upon
the occurrence of a major transaction involving the Company, then Messrs.
Swinburne and Harmon shall each receive a termination fee equal to 100% of his
annual salary plus benefits plus a specified bonus. Payments shall only be made
upon the employee's execution of a standard release waiving all claims against
the Company. Messrs. Swinburne and Harmon are each subject to a confidentiality
covenant. In addition, Mr. Harmon is subject to a one year non-competition
commitment following termination of his employment. The Company's employment
agreement with Mr. Harmon also provides that the Company would loan Mr. Harmon
up to $400,000 for the purchase of a home upon his permanent relocation to
Illinois. This loan, made in August 1998, is evidenced by a seven year
promissory note at 7% interest, collateralized by a second mortgage on Mr.
Harmon's home.
 
     The Company's employment agreement with Mr. Chandler provides for an
initial two-year term and thereafter one-year terms until either party provides
30 days notice of termination prior to the end of a term.
 
                                       57
<PAGE>   62
 
The agreement provides for an annual base salary and an incentive bonus
determined by the Board. If the Company terminates the employment agreement
without cause, or if the Company or Mr. Chandler terminates the employment
agreement upon the occurrence of a major transaction involving the Company, then
Mr. Chandler shall receive a termination fee equal to 50% of his annual salary
plus benefits plus a specified bonus. Payments shall only be made upon Mr.
Chandler's execution of a standard release waiving all claims against the
Company. Mr. Chandler is subject to a confidentiality covenant.
 
     The Company has an employment agreement with John A. Strand with an initial
four-year term and thereafter one-year terms until either party provides 30 days
notice of termination prior to the end of a term. The agreement provides for an
annual base salary and an incentive bonus determined by the Board. Mr. Strand
also receives stock options under the Company's Plan. If the Company terminates
the employment agreement without cause, or if the Company or Mr. Strand
terminates the employment agreement upon the occurrence of a major transaction
involving the Company, then Mr. Strand shall receive a termination fee equal to
100% of his annual salary plus benefits plus a specified bonus. Termination
payments shall only be made upon Mr. Strand's execution of a standard release
waiving all claims against the Company. Mr. Strand is subject to a
confidentiality agreement.
 
     The Company has employment agreements with certain other executives. These
agreements generally have a two-year initial term and thereafter one-year
renewal terms until either party provides 30 day notice of termination prior to
the end of a term. The agreements provide for an annual base salary and an
incentive bonus determined by the Board, plus eligibility for awards under the
Company's Plan. If the Company terminates the employment without cause or if the
employment is terminated upon the occurrence of a major transaction involving
the Company, then the executive shall receive a termination fee equal to 50% to
100% of his annual salary plus benefits plus a specified bonus. Payments shall
only be made upon execution of a standard release waiving all claims against the
Company. The agreements also contain a confidentiality covenant. Certain of
these employment agreements contain a one year non-competition covenant
 
DIRECTOR COMPENSATION
 
     TeleHub currently does not provide cash compensation to its Directors who
are not also employees for attendance at Board or committee meetings, but does
reimburse expenses related to such attendance (e.g., airfare or telephone
charges). Directors annually receive options to purchase 20,000 shares of Common
Stock under the stock option plan; the exercise price is market price at the
time of grant and the options vest at the start of the next fiscal year.
 
COMPENSATION COMMITTEE INTERLOCKS; AUDIT COMMITTEE
 
     During 1997 and until May 31, 1998, the entire Board served as the
Compensation Committee, which determines the compensation of the Company's
executive officers. Two executive officers, Messrs. Sledge and McLaughlin served
on the Board and therefore also the Compensation Committee during 1997, while
Messr. Harmon, the Company's CFO, joined the Board (and the Compensation
Committee) in March 1998. Since June 1998, Messrs. Slevin and Pedde have been
the only members of the Compensation Committee. Since February 1996, Mr. Sledge
has served as the Chairman of United Digital and as a member of its compensation
committee. Mr. Snedegar has served as the President and a director of United
Digital since 1990. The Board has also established an Audit Committee composed
of Messrs. Walsh, Snedegar and Slevin, which recommends to the Board the
selection of independent accountants, and reviews the scope and results of the
audit and other services provided by the independent accountants.
 
                                       58
<PAGE>   63
 
                             SECURITY OWNERSHIP OF
                    CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The following table sets forth as of September 30, 1998 the number of
shares of Common Stock and Preferred Stock owned by (i) each executive officer
and Director and each person who owned of record, or was known to own
beneficially, more than five percent of the Company's outstanding Common Stock
or Preferred Stock, and (ii) executive officers and Directors as a group. Unless
otherwise indicated, the address for each of the following persons or entities
is c/o TeleHub Communications Corporation, 2033 North Main Street, Suite 340,
Walnut Creek, California 94596.
 
<TABLE>
<CAPTION>
                                                                                   PERCENT OF
                                                               NUMBER OF SHARES    OUTSTANDING
                            NAME                              BENEFICIALLY OWNED    SHARES(1)
                            ----                              ------------------   -----------
<S>                                                           <C>                  <C>
5% STOCKHOLDERS:
Hartford Holdings, Ltd......................................      5,191,950(2)        31.5%
  Box 143, Cayman Islands
  British West Indies
Roseville Computer Projects Limited.........................      4,100,000           25.4%
  P.O. Box 556, Charleston, Nevis
  West Indies
Sledge Family Trust.........................................      1,494,167(3)         9.3%
  27 Cherry Hill Court
  Alamo, California
EXECUTIVE OFFICERS AND DIRECTORS(4):
William W. Becker...........................................      5,266,950(5)        31.8%
  Chairman of the Board of Directors
Donald H. Sledge............................................      1,577,917(6)         9.7%
  Vice-Chairman of the Board, Chief Executive Officer and
  President
Michael G. McLaughlin.......................................        583,750(7)         3.5%
  Chief Technology Officer and Director
Herbert H. Swinburne........................................         25,000(8)         0.2%
  President of TNS
Richard M. Harmon...........................................        506,246(9)         3.0%
  Chief Financial Officer, Treasurer, Secretary and Director
Barry C. Lescher............................................         50,000(10)        0.3%
  Assistant Secretary and Director
John F. Slevin..............................................        670,500(11)        4.0%
  Director
EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP (7 BENEFICIAL
  OWNERS)...................................................      8,680,363(12)       47.6%
</TABLE>
 
- ---------------
 
 (1) Based on 16,203,037 shares of Common Stock outstanding as of September 30,
     1998 (which includes full conversion of the 3,500,000 shares of Preferred
     Stock outstanding as of September 30, 1998 at the rate of 1 for 1) plus
     shares of Common Stock that may be acquired by the indicated person
     pursuant to any options and warrants exercisable within 60 days. Beneficial
     ownership is determined in accordance with the rules of the SEC. Such
     shares, however, are not deemed outstanding for purposes of computing the
     percentage ownership of the other stockholders or groups of stockholders.
 
 (2) Includes 4,384,450 shares of Common Stock, 480,000 shares of Preferred
     Stock and 327,500 shares of Common Stock issuable upon the exercise of
     warrants.
 
 (3) Includes 1,479,167 shares of Common Stock, 10,000 shares of Preferred Stock
     and 5,000 shares of Common Stock issuable upon exercise of warrants.
 
 (4) Oz Pedde, John Snedegar, Martin Walsh and John Strand are Directors or
     executive officers of TeleHub, however, as of September 30, 1998, they did
     not beneficially own any interests in TeleHub.
 
 (5) Includes 75,000 shares of Common Stock issuable pursuant to stock options
     exercisable within 60 days and all shares owned by HHL, of which Mr.
     Becker, the Company's Chairman, is the principal shareholder.
 
 (6) Includes 83,750 shares of Common Stock issuable pursuant to stock options
     exercisable within 60 days and all shares owned by the Sledge Family Trust,
     of which Mr. Sledge is trustee and a beneficiary.
 
                                       59
<PAGE>   64
 
 (7) Includes 83,750 shares of Common Stock issuable pursuant to stock options
     exercisable within 60 days and 500,000 shares of Common Stock issuable upon
     exercise of warrants.
 
 (8) Includes 25,000 shares of Common Stock issuable pursuant to stock options
     exercisable within 60 days.
 
 (9) Includes 450,000 shares of Common Stock issuable upon exercise of warrants
     and 56,246 shares of Common Stock issuable pursuant to stock options
     exercisable within 60 days.
 
(10) Includes 50,000 shares of Common Stock issuable pursuant to stock options
     exercisable within 60 days.
 
(11) Includes 10,000 shares of Common Stock, 30,000 shares of Preferred Stock,
     165,000 shares of Common Stock issuable upon exercise of warrants, 20,000
     shares of Common Stock issuable pursuant to stock options exercisable
     within 60 days, all personally owned by Mr. Slevin. Also includes 200,000
     shares of Common Stock and 245,500 shares of Common Stock issuable pursuant
     to warrants that are owned by Comdisco, for which Mr. Slevin serves as
     Chairman and CEO.
 
(12) Includes 6,073,617 shares of Common Stock, 520,000 shares of Preferred
     Stock, 1,693,000 shares issuable upon the exercise of warrants and 393,746
     shares issuable pursuant to options exercisable within 60 days.
 
                                       60
<PAGE>   65
 
                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     In August 1998, the Company loaned $400,000 to Mr. Harmon for the purchase
of a home upon his permanent relocation to Illinois, in accordance with Mr.
Harmon's employment agreement. Mr. Harmon gave the Company a seven year
promissory note at 7% interest, collateralized by a second mortgage on Mr.
Harmon's home.
 
     In August 1998, the Company also loaned $235,340 to Mr. McLaughlin, who
gave the Company a six month promissory note at 18% interest. Mr. McLaughlin
repaid this note in November 1998.
 
     On June 2, 1998, the Company issued to Mr. Slevin, a Director of TeleHub
and President and CEO of Comdisco, a warrant to purchase 100,000 shares of
Common Stock for $12.50 per share, exercisable until the later of ten years
after issuance or five years after an initial public offering.
 
     On May 13, 1998, Mr. Harmon sold warrants to purchase 150,000 shares of
Common Stock, with an exercise price of $7.50, for $4.91 per warrant to three
individuals, including Mr. Slevin who purchased warrants for 50,000 shares of
Common Stock.
 
     In May 1998, the Company received a $12 million Bridge Loan from Comdisco.
The Bridge Loan was collateralized by all of the Company's intangible property,
including VASP(TM). Comdisco also received a warrant to purchase 240,000 shares
of Common Stock for $10.00 per share, exercisable until May 5, 2005. The Company
repaid this Bridge Loan, including approximately $98,600 of accrued interest,
from the proceeds of the Initial Note Offering.
 
     In March 1998, the Company granted to Mr. Martin Walsh, a Director, a
warrant to purchase 15,000 shares of Common Stock for $10.00 per share,
exercisable until March 4, 2001. Later in March 1998, Mr. Walsh joined TeleHub's
Board.
 
     In February 1998, the Company loaned $112,029 to Mr. Swinburne, TNS's
President. Mr. Swinburne gave the Company an unsecured, non-interest bearing
promissory note in exchange for the loan. In May 1998 Mr. Swinburne repaid this
loan.
 
     In December 1997, Comdisco received a warrant to purchase 5,500 shares of
Common Stock at a price of $10.00 per share, exercisable at the earlier of seven
years after issuance or two years after an initial public offering of the
Company's capital stock. Mr. Wheatley, a Comdisco executive, also received a
warrant to purchase 1,750 shares of Common Stock at a price of $7.50 per share.
 
     In the Fall 1997 Offering, Mr. Slevin purchased one unit (10,000 shares of
Common Stock and warrants to purchase 3,500 shares of Common Stock) and Comdisco
purchased 20 units (200,000 shares of Common Stock and 70,000 warrants to
purchase Common Stock).
 
     In November 1997, the Company loaned $250,000 to Mr. Harmon, its CFO and a
Director. Mr. Harmon gave the Company a promissory note bearing interest at 1%
over the prime rate, secured by warrants to purchase 150,000 shares of Common
Stock at $7.50 per share. Mr. Harmon repaid this loan in May 1998.
 
     In the Spring 1997 Offering, Mr. Slevin purchased 1.5 units (30,000 shares
of Preferred Stock and warrants to purchase 5,000 shares of Common Stock). See
"Security Ownership of Certain Beneficial Owners and Management."
 
     In April 1997, the Company entered into an equipment lease financing
facility with Comdisco. As of March 31, 1998, the Company had utilized four
installments of this facility for a total of $6,156,407. These installments have
quarterly lease rate factors ranging from 8 1/2% to 9 1/2%, have terms of 3 to 4
years, have aggregate quarterly payments of approximately $460,000 and a
repurchase option for fair market value at the end of the term.
 
     In December 1996, HHL agreed to provide a bridge loan of up to $1.0 million
to the Company with an interest rate of 17% per annum. The Company repaid the
principal and accrued interest on this loan in
 
                                       61
<PAGE>   66
 
March 1997 from the net proceeds of the Spring 1997 Offering. Concurrently, the
Company issued to HHL 134,450 additional shares of Common Stock pursuant to the
terms of obligations owed by the Company to HHL, including the bridge loan and
the Indemnification Obligation (as defined). In connection with the issuance of
these shares, the Company accepted a note from HHL for $40,000 which was
subsequently paid.
 
     During 1996, HHL provided consulting services to the Company with a value
of $169,000, which the Company paid through the Spring 1997 Offering issuance of
33,800 shares of Preferred Stock. HHL is the Company's largest shareholder and
Mr. William Becker, the Company's Chairman, is a principal and the primary
shareholder of HHL. The Company also has a consulting agreement with
International Telecommunications Consultants, an affiliate of HHL. This
agreement provides for a $175,000 annual consulting fee. The Company has been
informed that HHL is in preliminary negotiations for a business transaction
involving the Australasian joint venture partner. See "Business -- TTC Customer
Relationships." HHL is also a client of Watson & Associates, an affiliate of
Director Oz Pedde.
 
     During 1996, the Company agreed to indemnify HHL (the "Indemnification
Obligation") from any claims and liabilities that might be incurred by HHL
through its efforts to assist in the placement of $3.0 million of securities of
Cam-Net Communications Network Inc. ("Cam-Net"), a Canadian company which
proposed merging with the Company. Parties unrelated to HHL had advanced
$600,000 on a private placement of securities of Cam-Net. When the proposed
merger was terminated, the securities offering by Cam-Net was also canceled, and
HHL was required to repay $600,000 pursuant to its arrangement with the
advancing party. The Company fulfilled its Indemnification Obligation to HHL by
issuing 120,000 shares of Preferred Stock and 60,000 warrants to purchase Common
Stock at $7.50 per share in the Spring 1997 Offering.
 
     In January 1996, Roseville Computer Projects Ltd. ("Roseville") contributed
software to the Company in exchange for 151 shares of capital stock of TNS. In
March 1996, Roseville assigned all right, title and interest in the VASP(TM)
software to TNS in exchange for an additional 274 shares of capital stock of
TNS. In January 1997, Roseville exchanged all of its TNS shares for 4,250,000
shares of TeleHub Common Stock. In July 1997, Roseville sold its network
databases and libraries and assigned all associated right, title and interest to
the Company for $485,000, of which $200,000 was paid in August 1997 and the
$285,000 balance of which, plus interest at the rate of 12% per annum, was paid
in January 1998. A Roseville subsidiary provided consulting services (primarily
maintenance of the network data bases and libraries) to the Company for a
$20,000 monthly fee. The Roseville subsidiary received a total of $325,000 under
this consulting arrangement, which was terminated on January 1, 1998.
 
     During 1996, the Company contracted for software development services with
Access Point Communications Corporation ("APCC"), an entity controlled by Mr.
McLaughlin, a Director and the CTO of TTC. The Company paid APCC $974,915 for
these services during 1996, and also reimbursed APCC $36,309 for operating
expenses advanced by APCC. The Company also incurred $550,000 in management fees
to APCC for services provided by Messrs. McLaughlin and Lescher and other TNS
principals and for network library maintenance fees. Of the $974,915 paid to
APCC, a subsidiary of Roseville received $300,000 as a subcontractor to APCC.
The Company's relationship with APCC terminated at the end of 1996, at which
time Messrs. McLaughlin and Lescher became full-time Company employees.
 
     HHL and the Sledge Family Trust (the "Trust"), significant Company
shareholders, advanced initial funding for development of the Company's
business. Mr. Donald Sledge, the Company's Vice Chairman, CEO and President, is
a trustee and beneficiary of the Trust. During 1996, HHL loaned the Company
$1,350,000, evidenced by two 7.5% promissory notes, and $411,243, evidenced by a
12% promissory note, and the Trust made a $50,000 loan to the Company, evidenced
by a 7.5% promissory note. Concurrently with the Spring 1997 Offering, HHL
exchanged the promissory notes, related accrued interest, the Indemnification
Obligation and accounts payable balances totaling $2.4 million for 480,000
shares of Preferred Stock and the Trust exchanged its $50,000 promissory note
for 10,000 shares of Preferred Stock. In conjunction with the exchange, HHL and
the Trust also received warrants to purchase, respectively, 240,000 and 5,000
shares of Common Stock at $7.50 per share.
 
     The Company believes that each of these transactions was on terms no less
favorable to the Company than it could have obtained in transactions with
unrelated third parties.
 
                                       62
<PAGE>   67
 
                            DESCRIPTION OF THE NOTES
 
     The following discussion summarizes certain provisions of the Notes; except
where otherwise indicated, this summary applies to both the Old Notes and the
New Notes. The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the Exchange Offer
will be registered under the Securities Act, and therefore the New Notes will
not be subject to certain transfer restrictions and registration rights
applicable to the Old Notes. See "The Exchange Offer."
 
     The Notes are issued under the Indenture, which is subject to and governed
by the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
While the following discussion summarizes material provisions of the Indenture,
Noteholders may wish to read the actual provisions of the Indenture, which was
filed as an exhibit to the Registration Statement. This summary is subject to,
and is qualified in its entirety by reference to, the Trust Indenture Act, and
to all of the provisions of the Indenture, including the definitions of certain
terms therein and those terms made a part of the Indenture by reference to the
Trust Indenture Act, as in effect on the date of the Indenture. The definitions
of certain capitalized terms used in the following summary are set forth below
under "Certain Definitions." A copy of the Indenture may be obtained upon
request from the Issuer, 1375 Tri-State Parkway, Suite 250, Gurnee, Illinois,
60031; (847) 782-2000.
 
EXCHANGE OFFER
 
     The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not be treated as an exchange or other taxable event for U.S. Federal income tax
purposes because, under the Regulations, the New Notes do not differ materially
in kind or extent from the Old Notes. Rather, the New Notes received by a holder
will be treated as a continuation of the Old Notes in the hands of such holder.
As a result, there should not be any U.S. Federal income tax consequences to
holders from the exchange of Old Notes for New Notes pursuant to the Exchange
Offer and any such holder will have the same tax basis and holding period in the
New Notes as it had in the Old Notes immediately before the exchange.
 
GENERAL
 
     The Old Notes were issued pursuant to the Indenture among the Company, the
Guarantors and State Street Bank and Trust Company, as trustee (the "Trustee"),
in a private transaction that was not subject to the registration requirements
of the Securities Act. The New Notes will be issued pursuant to the Indenture in
the Exchange Offer, which will be registered under the Securities Act. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of certain provisions of the Notes, the Indenture
and the Note Registration Rights Agreement does not purport to be complete and
is qualified in its entirety by reference to the Notes, the Indenture and the
Note Registration Rights Agreement, including the definitions therein of certain
terms used below. A copy of the proposed forms of Notes, the Indenture and the
Note Registration Rights Agreement is available as set forth below under
"-- Additional Information." The definitions of certain terms used in the
following summary are set forth below under "-- Certain Definitions." For
purposes of this "Description of Notes," the term "Company" refers only to
TeleHub Communications Corporation and not to any of its Subsidiaries.
 
     The Notes are general unsecured obligations of the Company ranking senior
to all existing and future subordinated Indebtedness of the Company and pari
passu in right of payment with all other existing and future Debt of the
Company. As of September 30, 1998, the Company had approximately $75.6 million
of total indebtedness outstanding ($11.8 million of secured indebtedness) and
none of which would have constituted subordinated indebtedness. The Indenture
permits the Company and its Subsidiaries to incur additional indebtedness,
including additional Senior Debt, subject to certain restrictions. See
"-- Certain Covenants -- Limitations on Incurrence of Indebtedness." A
significant portion of the consolidated operations of the Company are conducted
through its Subsidiaries and, therefore, the Company is dependent upon the cash
flow of its Subsidiaries to meet its obligations, including its obligations
under the Notes.
 
                                       63
<PAGE>   68
 
     The Company's payment obligations under the Notes are fully, jointly and
severally guaranteed, on a senior unsecured basis, by all of the Company's
existing Subsidiaries and all Subsidiaries created or acquired by the Company in
the future. The guarantee of each of the Guarantors ranks senior in right and
priority of payment to all subordinated indebtedness of such Guarantor and ranks
pari passu in right and priority of payment with all other indebtedness of such
Guarantor that is not expressly so subordinated to such guarantee, except to the
extent of any collateral securing such other indebtedness. See "-- Guarantees."
 
PRINCIPAL, MATURITY AND INTEREST
 
     The Notes are limited in aggregate principal amount at maturity to $125
million and mature on July 31, 2005. The Notes were issued at a substantial
discount from their principal amount at maturity, to generate gross proceeds of
approximately $83.6 million. Cash interest on the Notes will not accrue prior to
July 31, 2001. Through July 31, 2001, the Notes will accrete at a rate of
13 7/8% compounded semi-annually. Thereafter, interest on the Notes will accrue
at a rate of 13 7/8% per annum and will be payable semi-annually, in cash, on
January 31 and July 31 of each year, commencing on January 31, 2002, to Holders
of record on the immediately preceding January 15 and July 15. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal or Accreted Value of and premium, interest and Liquidated Damages, if
any, on the Notes will be payable at the office or agency of the Company
maintained for such purpose or, at the option of the Company, payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
Holders of the Notes at their respective addresses set forth in the register of
Holders of Notes; provided that all payments with respect to Notes, the Holders
of which have given wire transfer instructions to the Company, will be required
to be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof. Until otherwise designated by the Company, the
Company's office or agency will be the office of the Trustee maintained for such
purpose. The Notes were issued in denominations of $1,000 and integral multiples
thereof.
 
GUARANTEES
 
     The obligations of the Company under the Notes are guaranteed, fully,
jointly and severally, by its Subsidiaries and such other Persons that become
Subsidiaries after the Issue Date and each of their respective successors. The
Guarantee issued by each Guarantor ranks senior in right and priority of payment
to all other Indebtedness of such Guarantor that is expressly subordinated to
the guarantee of the Notes and ranks pari passu in right and priority of payment
with all other Indebtedness of such Guarantor that is not expressly so
subordinated to such Guarantee, except to the extent of any collateral securing
such other Indebtedness.
 
     The Indenture contains provisions the intent of which is to provide that
the obligations of each Subsidiary with respect to its Guarantee will be limited
to the maximum amount that will, after giving effect to all other contingent and
fixed liabilities of such Subsidiary and after giving effect to any collections
from, rights to receive contribution from, or payments made by or on behalf of
any other Subsidiary in respect of the obligations of such other Subsidiary
under its Guarantee or pursuant to its contribution obligations under the
Indenture, result in the obligations of such Subsidiary under its Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under any applicable
federal or state law. Each Subsidiary that makes a payment or distribution under
a Guarantee is entitled to contribution from each other Subsidiary so long as
the exercise of such right does not impair the rights of the Holders of the
Notes under the Guarantees.
 
     The Indenture provides that in the event of: (i) a sale or other
disposition of all or substantially all of the assets of any Subsidiary or the
sale of a Subsidiary, by way of merger, consolidation or otherwise or (ii) a
sale or other disposition of all of the Capital Stock of any Subsidiary, then
such Subsidiary or the entity acquiring the assets, as applicable, shall be
released and relieved of any obligations under its guarantee, provided that the
Company complies with the provisions of the covenant entitled "-- Asset Sales."
 
     This Prospectus does not include separate financial statements of the
Subsidiaries because management has determined that such separate financial
statements would not be material to investors. This determination is based on
the fact that (i) the parent Company has no operations or significant assets
other than its investments in its subsidiaries, (ii) the guarantor subsidiaries
are wholly owned, (iii) the subsidiaries' guarantee of the parent Company's debt
are full, unconditional, joint and several, (iv) the operations of the sole
non-guarantor in which the Company holds a minority interest are immaterial to
the consolidated
 
                                       64
<PAGE>   69
 
financial statements; and (v) segment information is presented in note 16 to the
consolidated financial statements contained in this Prospectus.
 
OPTIONAL REDEMPTION
 
     The Notes are not redeemable at the Company's option before July 31, 2002.
Thereafter, the Notes are subject to redemption at the option of the Company, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount at maturity) set
forth below, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on July 31 of the years indicated below:
 
<TABLE>
<CAPTION>
YEAR                                                          PERCENTAGE
- ----                                                          ----------
<S>                                                           <C>
2002........................................................   106.9375%
2003........................................................  103.46889%
2004 and thereafter.........................................   100.0000%
</TABLE>
 
     Notwithstanding the foregoing, upon the occurrence of a TNS/TTC
Transaction, the Company may, at its option, by giving notice of redemption at
any time not less than 30 nor more than 60 days prior to such transaction,
redeem all, but not less than all, of the outstanding Notes concurrently with
the consummation of such transaction at a redemption price equal to, at any time
on or prior to July 31, 2002, 100% of the Accreted Value thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon, and the applicable
Make-Whole Premium and after such date at the amount that would be payable to
the holders if the Company on such date were to redeem the Notes. On the date
fixed for redemption in connection with a TNS/TTC Transaction, the Company will
deposit with the Trustee sufficient monies to redeem in full the Notes and
deliver to the Trustee a solvency opinion (from a nationally recognized
investment bank with expertise in giving solvency opinions) dated the date of
the consummation of such transaction and stating that after giving effect to the
redemption of the Notes the Company will be solvent.
 
SELECTION AND NOTICE
 
     If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount at
maturity thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
shall cease to accrue on Notes or portions thereof called for redemption.
 
MANDATORY REDEMPTION
 
     Except as set forth below under "-- Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
 
REPURCHASE AT THE OPTION OF HOLDERS
 
  Change of Control or a TNS/TTC Transaction
 
     Upon the occurrence of a Change of Control, the Company will be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 face amount or an integral multiple thereof) of each Holder's Notes at
an offer price in cash equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of repurchase (or, in the case of repurchase of Notes prior to July 31,
2002, at a purchase price equal to 101% of the Accreted Value thereof, plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of repurchase) (the "Change of Control Payment").
 
                                       65
<PAGE>   70
 
     Upon the occurrence of a TNS/TTC Transaction, if the Company has not
exercise its right to redeem the Notes concurrently with the consummation of the
TNS/TTC Transaction or has not made an offer to each Holder of Notes to
repurchase the Notes concurrently with the consummation of such transaction in a
manner that otherwise complies with the notice requirements and clauses (a) and
(b) of this provision, the Company will be required to (a) deposit with the
Trustee upon consummation of such transaction sufficient monies to redeem in
full the Notes, (b) deliver to the Trustee a solvency opinion (from a nationally
recognized investment bank with expertise in giving solvency opinions) dated the
date of the consummation of such transaction and stating that after giving
effect to the redemption of the Notes the Company will be solvent and (c) within
ten days of the consummation of such transaction make an offer (a "TNS/TTC Put
Option Offer") to each Holder to repurchase all or any part (equal to $1,000
face amount or an integral multiple thereof) of each Holder's Notes at an offer
price in cash equal to, at any time on or prior to July 1, 2002, the Accreted
Value thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon, and the applicable Make-Whole Premium and after such date an amount
that would be payable to the Holders for each Note to be purchased if the
Company on such date were to redeem the Notes (the "TNS/TTC Put Option
Payment").
 
     Within ten days following any Change of Control the Company will mail a
notice to each Holder describing the transaction that constitutes the Change of
Control and offering to repurchase the Notes on the date specified in such
notice, which date shall be no earlier than 30 days and no later than 60 ways
from the date such notice is mailed (the "Change of Control Payment Date"). At
any time within 60 days prior to or within 10 days after a TNS/TTC Transaction,
the Company may and in certain circumstances will mail a notice to each Holder
describing the transaction that constitutes the TNS/TTC Transaction and offering
to repurchase the Notes on the date specified in such notice, which date shall
be no earlier than 30 days and no later than 60 days from the date such notice
is mailed (the "TNS/TTC Put Option Payment Date"). The Company will comply with
the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control or TNS/TTC Transaction, as the case may be.
 
     On the Change of Control Payment Date or the TNS/TTC Put Option Payment
Date, as the case may be, the Company will, to the extent lawful, (i) accept for
payment all Notes or portions thereof properly tendered pursuant to the Change
of Control Offer or TNS/TTC Put Option Offer, as the case may be, (ii) deposit
with the paying agent appointed by the Company as contemplated by the Indenture
(the "Paying Agent"), unless previously deposited, an amount equal to the Change
of Control Payment or TNS/TTC Put Option Payment, as the case may be, in respect
of all Notes or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions thereof
being purchased by the Company. The Paying Agent will promptly mail to each
Holder of Notes so tendered the Change of Control Payment or TNS/TTC Put Option
Payment, as the case may be, for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount at maturity of $1,000 or an integral multiple thereof. The Indenture
provides that, prior to complying with the provisions of this covenant, but in
any event within 90 days following a Change of Control, the Company will either
repay all outstanding Senior Debt or obtain the requisite consents, if any,
under all agreements governing outstanding Senior Debt to permit the repurchase
of Notes required by this covenant. The Company will publicly announce the
results of the Change of Control Offer or TNS/TTC Put Option Offer, as the case
may be, on or as soon as practicable after the Change of Control Payment Date or
the TNS/TTC Put Option Payment Date, as the case may be.
 
     Except as described above with respect to a Change of Control or a TNS/TTC
Transaction, the Indenture does not contain provisions that permit the Holders
of the Notes to require that the Company repurchase or redeem the Notes in the
event of a takeover, recapitalization or similar transaction.
 
     Due to the leveraged structure of the Company and the effective
subordination of the Notes to secured Indebtedness of the Company and of the
Company's Subsidiaries, the Company may not have sufficient funds available to
purchase the Notes tendered in response to a Change of Control Offer. In
addition, agreements
                                       66
<PAGE>   71
 
relating to Indebtedness of the Company or the Company's Subsidiaries may
contain prohibitions or restrictions on the Company's ability to effect a Change
of Control Payment.
 
     The Company will not be required to make a Change of Control Offer or
TNS/TTC Put Option Offer, as the case may be, upon a Change of Control or a
TNS/TTC Transaction if a third party makes the Change of Control Offer or
TNS/TTC Put Option Offer, as the case may be, in the manner, at the times and
otherwise in compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer or TNS/TTC Put Option Offer, as the case
may be, made by the Company and purchases all Notes validly tendered and not
withdrawn under such Change of Control Offer or TNS/TTC Put Option Offer, as the
case may be.
 
  Asset Sales
 
     The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, engage in an Asset Sale unless (i) the Company or such
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests issued or sold or otherwise disposed
of and (ii) at least 80% of the consideration therefor received by the Company
or such Subsidiary is in the form of Cash Equivalents; provided that the amount
of (a) any liabilities (as shown on the Company's or such Subsidiary's most
recent balance sheet) of the Company or any Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes)
that are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Subsidiary from further
liability and (b) any notes or other obligations received by the Company or such
Subsidiary from such transferee that are immediately converted by the Company or
such Subsidiary into Cash Equivalents (to the extent of the cash received) shall
be deemed to be Cash Equivalents for purposes of this provision.
 
     Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or such Subsidiary may apply such Net Proceeds (i) to permanently
reduce borrowings under the Bank Credit Facility (and to correspondingly reduce
commitments with respect thereto) or (ii) to make capital expenditures or
acquire long-term assets in the same line of business as the Company was engaged
immediately prior to such Asset Sale or, in the case of a sale of accounts
receivable in connection with any accounts receivable financing, for working
capital purposes. Pending the final application of any such Net Proceeds, the
Company may temporarily reduce senior indebtedness or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $2.0 million, the Company will
be required to make an offer to all Holders of Notes (an "Asset Sale Offer") to
purchase the maximum principal amount at maturity of Notes that may be purchased
out of the Excess Proceeds, at an offer price in cash in an amount equal to 101%
of the Accreted Value thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon and if such purchase occurs after July 31, 2001,
accrued and unpaid interest to the date of purchase, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate Accreted
Value of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes (subject to the restrictions of the Indenture). If the
Accreted Value of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
 
CERTAIN COVENANTS
 
  Limitations on Restricted Payments
 
     The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, (i) declare or pay any dividend
or make any other payment or distribution on account of the Company's or any of
its Subsidiaries' Equity Interests (including, without limitation, any payment
in
 
                                       67
<PAGE>   72
 
connection with any merger or consolidation involving the Company), other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or dividends or distributions payable to the Company or
any Wholly Owned Subsidiary of the Company; (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, any payment in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any Subsidiary or other Affiliate of the Company
(other than any such Equity Interests owned by the Company or any Wholly Owned
Subsidiary of the Company); (iii) make any principal payment on, or purchase,
redeem, defease or otherwise acquire or retire for value, prior to a scheduled
mandatory sinking fund payment date or final maturity date, any Indebtedness
that is subordinated to the Notes or any Guarantee; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to such Restricted Payment:
 
          (a) no Default or Event of Default shall have occurred and be
     continuing or would occur as a consequence thereof;
 
          (b) the Company would, at the time of such Restricted Payment and
     after giving pro forma effect thereto as if such Restricted Payment had
     been made at the beginning of the applicable four-quarter measurement
     period, have been permitted by virtue of the Company's Consolidated
     Leverage Ratio, to incur at least $1.00 of additional Indebtedness pursuant
     to the Consolidated Leverage Ratio test set forth in the covenant described
     below under the caption "--Limitations on Incurrence of Indebtedness"; and
 
          (c) such Restricted Payment, together with the aggregate of all other
     Restricted Payments made by the Company and its Subsidiaries on or after
     the Issue Date (excluding Restricted Payments permitted by clauses (ii),
     (iii) and (iv) of the next succeeding paragraph), is less than the sum of
     (1) 50% of the Consolidated Net Income of the Company for the period (taken
     as one accounting period) from the beginning of the first fiscal quarter
     commencing after the Issue Date to the end of the Company's most recently
     ended fiscal quarter for which financial statements are available at the
     time of such Restricted Payment (or, if such Consolidated Net Income for
     such period is a deficit, less 100% of such deficit), plus (2) 100% of the
     aggregate net cash proceeds received by the Company as capital
     contributions or from the issue or sale since the Issue Date of Equity
     Interests of the Company or of debt securities of the Company that have
     been converted into such Equity Interests (other than (A) Equity Interests
     (or convertible debt securities) sold to a Subsidiary of the Company,(B)
     Disqualified Stock or debt securities that have been converted into
     Disqualified Stock and (C) any such net cash proceeds utilized as the basis
     to incur Indebtedness under clause (viii) of the covenant "-- Limitations
     on Incurrence of Indebtedness"), plus (3) to the extent that any Restricted
     Investment that was made after the Issue Date is sold for cash or otherwise
     liquidated or repaid for cash, the lesser of (A) the cash return of capital
     with respect to such Restricted Investment (less the cost of disposition,
     if any) and (B) the initial amount of such Restricted Investments (but, in
     either case, only to the extent not included in subclause (1) of this
     clause (c)).
 
     The foregoing provisions will not prohibit: (i) the payment of any dividend
or other distribution within 60 days after the date of declaration thereof, if
at said date of declaration such payment would have complied with the provisions
of the Indenture; (ii) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a Subsidiary
of the Company) of other Equity Interests of the Company (other than any
Disqualified Stock); provided that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c) of the preceding paragraph; (iii)
the defeasance, redemption or repurchase of subordinated Indebtedness with the
net cash proceeds from an incurrence of Permitted Refinancing Debt or the
substantially concurrent sale (other than to a Subsidiary of the Company) of
Equity Interests of the Company (other than Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded from
clause (c) of the preceding paragraph; (iv) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests held by any member
of the Company's (or any of its Subsidiaries') management pursuant to any
management equity
                                       68
<PAGE>   73
 
subscription agreement, stock option or similar employee incentive arrangement;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $1.0 million in any
twelve-month period; and provided, further, that such repurchase, redemption or
other acquisition or retirement may not include any Equity Interests owned,
directly or indirectly, by the Principals; and (v) any dividend or distribution
in the form of all of the capital stock of TNS or TTC or all or substantially
all of the assets comprising TNS's ATM Network or TTC's business, provided that
no assets of the Company or any of its other Subsidiaries shall have been or
will be transferred or licensed to the Subsidiary being divested by the Company
other than on an arm's-length basis and in the ordinary course and provided,
further, that concurrently with the consummation of such transaction (i) the
Company deposits with the Trustee sufficient monies to redeem in full the Notes
and concurrently therewith redeems the Notes as set forth under "-- Optional
Redemption" or if the Company has prior to such transaction given holders of the
Notes the right to put the Notes to the Company concurrently with the
consummation of such transaction, then the Company will only be obligated to
deposit with the Trustee sufficient monies to redeem in full those Notes as to
which Holders have demanded redemption and (ii) the Company delivers to the
Trustee a solvency opinion (from a nationally recognized investment bank with
expertise in giving solvency opinions), dated the date of the consummation of
such transaction and stating that after giving effect to the redemption of the
Notes as described above the Company will be solvent, provided, that any such
dividend or distribution shall nonetheless be treated as a Restricted Payment
for all other purposes including without limitation under clause (c).
 
     The amount of all Restricted Payments other than cash shall be the fair
market value (evidenced by an Officers' Certificate delivered to the Trustee) on
the date of the Restricted Payment of the asset(s) or securities proposed to be
transferred by the Company or such Subsidiary, as the case may be, pursuant to
the Restricted Payment. The fair market value of any non-cash Restricted Payment
in excess of $2.5 million shall be determined by the Board of Directors of the
Company whose resolution with respect thereto shall be delivered to the Trustee,
such determination to be based upon an opinion or appraisal issued by an
unaffiliated accounting, appraisal or investment banking firm of national
standing. Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed, which
calculations may be based upon the Company's latest available financial
statements.
 
LIMITATIONS ON INCURRENCE OF INDEBTEDNESS
 
     The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt); provided, however, that, so long as no Default or Event of
Default has occurred and is continuing, the Company and any Guarantor may incur
Indebtedness (including Acquired Debt) if the Consolidated Leverage Ratio is
less than or equal to 5.50 to 1.00.
 
     The foregoing provisions will not apply to:
 
          (i) the incurrence by the Company and the Guarantors of Indebtedness
     pursuant to the Bank Credit Facility in an aggregate principal amount not
     to exceed 80% percent of the Company's receivables that are less than 60
     days past due at any one time outstanding less any Net Proceeds of Asset
     Sales applied to permanently reduce the Bank Credit Facility pursuant to
     the provisions of the Indenture described under "Repurchase at the Option
     of Holders -- Asset Sales;"
 
          (ii) the incurrence by the Company and its Subsidiaries of Existing
     Indebtedness;
 
          (iii) the incurrence by the Company and its Subsidiaries of
     Indebtedness represented by the Notes, the Guarantees, the Exchange Notes
     and the Guarantees thereunder, and the Indenture;
 
          (iv) the incurrence by the Company or any of its Subsidiaries of
     Indebtedness (A) represented by Capital Lease Obligations, mortgage
     financings or purchase money obligations, in each case incurred for
 
                                       69
<PAGE>   74
 
     the purpose of financing all or any part of the purchase price or cost of
     construction or improvement of property, plant or equipment used in the
     business of the Company or such Subsidiary or (B) in connection with the
     acquisition of assets or a new Subsidiary; provided, that the aggregate
     principal amount (or accreted value, as applicable) of Indebtedness
     incurred pursuant to clause (A) and (B) of this clause (iv), together with
     any other outstanding Indebtedness incurred pursuant to this clause (iv),
     does not exceed $10 million at any one time outstanding;
 
          (v) the incurrence of intercompany Indebtedness between or among the
     Company and any of its Wholly Owned Subsidiaries; provided that any
     subsequent issuance or transfer of Equity Interests that results in any
     such Indebtedness being held by a Person other than the Company or a Wholly
     Owned Subsidiary of the Company, or any sale or other transfer of any such
     Indebtedness to a Person that is neither the Company nor a Wholly Owned
     Subsidiary of the Company, shall be deemed to constitute an incurrence of
     such Indebtedness by the Company or such Subsidiary, as the case may be;
 
          (vi) the incurrence by the Company or any of its Subsidiaries of
     Permitted Refinancing Debt in exchange for, or the net proceeds of which
     are used to extend, refinance, renew, replace, defease or refund
     Indebtedness that was permitted by the Indenture to be incurred (other than
     Indebtedness incurred under clause (i) above);
 
          (vii) the incurrence by the Company or any of its Subsidiaries of
     Hedging Obligations that are incurred for the purpose of fixing or hedging
     interest rate risk with respect to any floating rate indebtedness that is
     permitted by the terms of the Indenture to be outstanding; and
 
          (viii) the incurrence by the Company of Indebtedness (other than
     secured Acquired Debt) in an aggregate principal amount not to exceed 1.0
     times the sum of the net cash proceeds received by the Company after the
     date of the Indenture (other than in respect of Disqualified Stock) in
     connection with any Public Offerings; provided that such Indebtedness (i)
     does not mature prior to the maturity of the Notes , (ii) has a Weighted
     Average Life to Maturity greater than the Notes, and (iii) is made
     expressly subordinated to the Notes.
 
LIMITATIONS ON LIENS
 
     The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom, or assign or convey any right to receive income therefrom,
unless the Notes are directly secured equally and ratably with the obligation or
liability secured by such Lien and except Permitted Liens.
 
LIMITATIONS ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
 
     The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries on its (1) Capital Stock
or (2) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to the Company or any of its
Subsidiaries or (iii) transfer any of its properties or assets to the Company or
any of its Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the Indenture, the Notes and the Guarantees, (c) applicable law,
(d) any instrument governing Indebtedness or Capital Stock of a Person acquired
by the Company or any of its Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted to
be incurred by the terms of the Indenture, (e) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (f) purchase money obligations for property
acquired in the ordinary course of
                                       70
<PAGE>   75
 
business that impose restrictions of the nature described in clause (iii) above
on the property so acquired, or (g) Permitted Refinancing Debt, provided that
the restrictions contained in the agreements governing such Permitted
Refinancing Debt are no more restrictive taken as a whole than those contained
in the agreements governing the Indebtedness being refinanced.
 
LIMITATIONS ON MERGER, CONSOLIDATION OR SALE OF ASSETS
 
     The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving entity), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity, unless (i) the Company is the surviving entity or
the entity or the Person formed by or surviving any such consolidation or merger
(if other than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation organized
or existing under the laws of the United States, any state thereof or the
District of Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Notes,
the Guarantees and the Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately after such
transaction, no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company with or into a Wholly Owned Subsidiary of the
Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (a) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (b) at the time of such transaction and
immediately after giving effect to such transaction, would be able to incur at
least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage
Ratio test set forth in the first paragraph of the covenant described above
under the caption "-- Limitations on Incurrence of Indebtedness." The Company
will not be obligated to comply with provisions of this covenant in connection
with a TNS/TTC Transaction so long as concurrently with the consummation of such
transaction (i) the Company deposits with the Trustee sufficient monies to
redeem in full the Notes and concurrently therewith redeems the Notes as set
forth under "-- Optional Redemption" or if the Company has prior to such
transaction given holders of the Notes the right to put the Notes to the Company
concurrently with the consummation of such transaction, then the Company will
only be obligated to deposit with the Trustee sufficient monies to redeem in
full those Notes as to which Holders have demanded redemption and (ii) the
Company delivers to the Trustee a solvency opinion (from a nationally recognized
investment bank with expertise in giving solvency opinions) dated the date of
the consummation of such transaction and stating that after giving effect to the
redemption of the Notes as described above the Company will be solvent.
 
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES
 
     The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary than those that would
have been obtained in a comparable transaction (as determined in good faith by
the Board of Directors) with an unrelated Person and (ii) the Company delivers
to the Trustee (a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an unaffiliated accounting,
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<PAGE>   76
 
appraisal or investment banking firm of national standing. Notwithstanding the
foregoing, transactions between or among the Company and its Subsidiaries and
Restricted Payments and Permitted Investments that are permitted by the
provisions of the Indenture described under the caption "Restricted Payments,"
in each case shall not be deemed Affiliate Transactions.
 
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF SUBSIDIARIES
 
     The Indenture provides that the Company (i) will not, and will not permit
any of its Subsidiaries to, transfer, convey, sell or otherwise dispose of any
Capital Stock of any Subsidiary of the Company to any Person (other than the
Company or a Wholly Owned Subsidiary of the Company), unless (a) such transfer,
conveyance, sale or other disposition is of all of the Capital Stock of such
Subsidiary owned by the Company and its Subsidiaries and (b) such transaction is
conducted in accordance with the covenant described above under the caption
"-- Asset Sales" and (ii) will not permit any Subsidiary of the Company to issue
any of its Equity Interests (other than, if required by law, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to the Company or a Wholly Owned Subsidiary of the Company. The Company
will not be obligated to comply with the provisions of this covenant in
connection with the sale, assignment, transfer, lease, conveyance or other
disposition of up to 50% of the capital stock of TNS provided that no assets of
the Company or any of its other Subsidiaries shall have been or will be
transferred or licensed to TNS other than on an arm's-length basis and in the
ordinary course and immediately after giving effect to such transaction and any
Restricted Payment made from the Net Proceeds of such transaction (assuming for
purposes of such definition that such transaction was an Asset Sale) the Notes
are rated investment grade by Moody's or Standard & Poor's and the Company
otherwise complies with the covenant "-- Asset Sales."
 
BUSINESS ACTIVITIES
 
     The Indenture provides that the Company may not, directly or indirectly,
engage in any business other than the Telecommunications Business.
 
PAYMENTS FOR CONSENT
 
     The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries or Affiliates to, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
Holder of any Notes for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of the Indenture or the Notes unless such
consideration is offered to be paid or is paid to all Holders of the Notes that
consent, waive or agree to an amendment in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
 
REPORTS
 
     The Indenture provides that, whether or not required by the rules and
regulations of the SEC, so long as any Notes are outstanding, the Company will
furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
the Company and its Subsidiaries and, with respect to the annual information
only, a report thereon by the Company's certified independent accountants and
(ii) all current reports that would be required to be filed with the SEC on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the SEC, the Company will file a
copy of all such information and reports with the SEC for public availability
(unless the SEC will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, the Company has agreed that, for so long as any Notes remain
outstanding, it will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
 
                                       72
<PAGE>   77
 
EVENTS OF DEFAULT AND REMEDIES
 
     The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to the Notes; (ii) default in payment
when due of the principal of or premium on the Notes; (iii) failure by the
Company or a Guarantor, if applicable, to comply with the provisions described
under the captions "-- Change of Control," "-- Asset Sales," "-- Limitations on
Restricted Payments," "-- Limitations on Issuances and Sales of Capital Stock of
Subsidiaries," or "Limitations on Merger, Consolidation or Sale of Assets;" (iv)
failure by the Company or a Guarantor, if applicable, for 30 days after notice
to comply with any of its other agreements in the Indenture or the Notes; (v)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Subsidiaries), whether such Indebtedness
or guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay the principal of or premium, if any,
or interest on such Indebtedness prior to the expiration of the grace period
provided in respect of such Indebtedness (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $2.0
million or more; (vi) failure by the Company or any of its Subsidiaries to pay
final judgments aggregating in excess of $2.0 million and either (a) any
creditor commences enforcement proceedings upon any such judgment or (b) such
judgments are not paid, discharged or stayed for a period of 60 days; (vii) any
of the Guarantees of the Guarantors ceases to be in full force and effect or any
of such Guarantees is declared to be null and void and unenforceable or any of
such Guarantees is found to be invalid or any Guarantor, or any Person acting on
behalf of a Guarantor, denies such Guarantor's liability under its Guarantee
(other than by reason of release of a Guarantor in accordance with the terms of
the Indenture); and (viii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Subsidiaries.
 
     If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount at maturity of the then outstanding
Notes may declare the Notes to be due and payable immediately. Upon such
declaration, the principal of (or, if prior to July 31, 2001, the Accreted Value
of), and Liquidated Damages and accrued and unpaid interest on the Notes, if
any, shall be due and payable immediately. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to the Company or any Subsidiary of the Company, the
foregoing amount shall ipso facto become due and payable without further action
or notice. Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. Subject to certain limitations, Holders of
a majority in principal amount at maturity of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
 
     In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company or the
Guarantors with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to the optional redemption provisions of the Indenture, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Notes. If an Event of
Default occurs prior to July 31, 2004 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company or the Guarantors
with the intention of avoiding the prohibition on redemption of the Notes prior
to such date, then the premium specified in the Indenture shall also become
immediately due and payable to the extent permitted by law upon the acceleration
of the Notes.
 
     The Holders of a majority in aggregate principal amount at maturity of the
Notes then outstanding by notice to the Trustee may on behalf of the Holders of
all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of the principal amount (or on or prior to July 31, 2001 the
Accreted Value) of or premium, interest or Liquidated Damages, if any, on the
Notes.
                                       73
<PAGE>   78
 
     The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
 
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
 
     No director, officer, employee, incorporator or stockholder of the Company
or any Subsidiary (other than the Company and its Subsidiaries), as such, shall
have any liability for any Obligations of the Company or the Guarantors under
the Notes, the Guarantees or the Indenture or for any claim based on, in respect
of, or by reason of, such Obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws, and it is the
view of the SEC that such a waiver is against public policy.
 
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
 
     The Company may, at its option and at any time, elect to have all of its
obligations and the obligations of the Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance") except for (i) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of and
premium, interest and Liquidated Damages, if any, on the Notes when such
payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee and the Company's obligations in connection therewith and (iv) the Legal
Defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company released
with respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership and insolvency events) described under "Events of
Default and Remedies" will no longer constitute an Event of Default with respect
to the Notes.
 
     In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of and premium, interest and Liquidated
Damages, if any, on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that (a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance will not result in a breach or
 
                                       74
<PAGE>   79
 
violation of, or constitute a default under any material agreement or instrument
(other than the Indenture) to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound; (vi) the
Company shall have delivered to the Trustee an opinion of counsel to the effect
that after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally; (vii) the Company shall
have delivered to the Trustee an Officers' Certificate stating that the deposit
was not made by the Company with the intent of preferring the Holders of Notes
or any Guarantee over the other creditors of the Company or any Guarantor with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or any Guarantor or others; and (viii) the Company shall have delivered
to the Trustee an Officers' Certificate and an opinion of counsel, each stating
that all conditions precedent provided for relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
 
TRANSFER AND EXCHANGE
 
     A Holder may transfer or exchange Notes and the Guarantees in accordance
with the Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Note selected for redemption. Also, the Company is not required to transfer
or exchange any Note for a period of 15 days before a selection of Notes to be
redeemed. The registered Holder of a Note will be treated as the owner of it for
all purposes.
 
AMENDMENT, SUPPLEMENT AND WAIVER
 
     Except as provided in the next two succeeding paragraphs, the Indenture,
the Notes or the Guarantees may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount at maturity of the Notes
then outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Notes), and any
existing default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
at maturity of the then outstanding Notes (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for Notes).
 
     Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount at maturity of Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes (other than provisions relating to the covenants
described above under the caption "-- Repurchase at the Option of Holders"),
(iii) reduce the rate of or change the time for payment of interest or
Liquidated Damages on any Note, or change or have the effect of changing the
definition of Accreted Value, (iv) waive a Default or Event of Default in the
payment of principal or Accreted Value of or premium, interest or Liquidated
Damages, if any, on the Notes (except a rescission of acceleration of the Notes
by the Holders of at least a majority in aggregate principal amount at maturity
of the Notes and a waiver of the payment default that resulted from such
acceleration), (v) make any Note payable in money other than that stated in the
Notes, (vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal or Accreted Value of or premium, interest or Liquidated Damages, if
any, on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "-- Repurchase at the Option of Holders"), (viii) release any Guarantor
from any of its obligations under its Guarantee or the Indenture otherwise than
in accordance with the terms of the Indenture, or (ix) make any change in the
foregoing amendment and waiver provisions.
 
     Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company, the Guarantors and the Trustee may amend or supplement the
Indenture or the Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's and the Guarantors'
obligations to Holders of Notes in the case of a merger or consolidation, to
make any change that would provide any additional rights or benefits to the

                                       75
<PAGE>   80
 
Holders of Notes or that does not adversely affect the legal rights under the
Indenture of any such Holder, or to comply with requirements of the SEC in order
to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
 
CONCERNING THE TRUSTEE
 
     The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company or any Guarantor, to obtain payment
of claims in certain cases, or to realize on certain property received in
respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the SEC for permission to continue or resign.
 
     The Holders of a majority in principal amount at maturity of the then
outstanding Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
 
ADDITIONAL INFORMATION
 
     Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to TeleHub Communications Corporation, 1375 Tri-State
Parkway, Suite 250, Gurnee, Illinois 60031; attention: Richard Harmon, Chief
Financial Officer.
 
CERTAIN DEFINITIONS
 
     Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
 
     "Accreted Value" means as of any date of determination prior to July 31,
2001, an amount per $1,000 principal amount at maturity of any Note that is
equal to the sum of (a) the initial offering price of such Note and (b) the
portion of the excess of the principal amount at maturity of such Note over such
initial offering price which shall have been accreted thereon through such date,
such amount to be so accreted on a daily basis at the rate of 13 7/8% per annum
on the initial offering price of such Note, compounded semi-annually on each
January 31 and July 31 from the Issue Date through the date of determination,
computed on the basis of a 360-day year of twelve 30-day months.
 
     "Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
 
     "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
 
     "Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback),
other than sales of inventory in the ordinary course of business

                                       76
<PAGE>   81
 
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "Repurchase at the Option of
Holders -- Change of Control" and/or the provisions described above under the
caption "Certain Covenants -- Limitations on Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Company or any of its Subsidiaries of Equity Interests of
any of the Company's Subsidiaries, whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of $1.0
million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the
foregoing: (i) a transfer of assets by the Company to a Wholly Owned Subsidiary
or by a Wholly Owned Subsidiary to the Company or to another Wholly Owned
Subsidiary, (ii) a Restricted Payment that is permitted by the covenant
described above under the caption "-- Limitations on Restricted Payments" and
(iii) a TNS/TTC Transaction will not be deemed to be an Asset Sale.
 
     "Bank Credit Facility" means (i) one or more revolving credit facilities
entered into by the Company and/or its Subsidiaries, (ii) each instrument
pursuant to which the Obligations under the agreement described in clause (i)
above are amended, deferred, extended, renewed, replaced, refunded or
refinanced, in whole or in part, and (iii) each instrument now or hereafter
evidencing, governing, guaranteeing or securing any Indebtedness under any
agreements described in clause (i) or (ii) above, in each case, as modified,
amended, restated or supplemented from time to time.
 
     "Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
 
     "Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
 
     "Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
Eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million, and whose short-term debt has a
rating at the time of any such investment of at least "A-1" or the equivalent
thereof by Standard & Poor's or at least "P-1" or the equivalent thereof by
Moody's, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having the highest rating obtainable
from Moody's or Standard'& Poor's and in each case maturing within one year
after the date of acquisition and (vi) securities that are registered under the
Securities Act and are sold within forty-five (45) days of any acquisition by
the Company or any of its Subsidiary for cash (to the extent of the cash
received by the Company or such Subsidiary net of all transaction costs and
taxes).
 
     "Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries, taken as a
whole, to any "person" or "group" (as such terms are used in Section 13(d)(3)
and Section 14(d)(2) of the Exchange Act) other than the Principals, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company,
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any person or group (as
defined above), other than the Principals, becomes the "beneficial owner" (as
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of more of the voting power of the voting stock of the Company than
at that time is beneficially owned by the Principals, (iv) after the
consummation of any Public Offering, any person or group (as defined above),
other
 
                                       77
<PAGE>   82
 
than the Principals, becomes the "beneficial owner" of 35% or more of the voting
power of the voting stock of the Company; or (v) the first day on which more
than a majority of the members of the board of directors of the Company are not
Continuing Directors. For purposes of this definition, any transfer of an equity
interest of an entity that was formed for the purpose of acquiring voting stock
of the Company will be deemed to be a transfer of such portion of such voting
stock as corresponds to the portion of the equity of such entity that has been
so transferred. "Change of Control" shall not mean a TNS/TTC Transaction.
 
     "Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person and its Subsidiaries for such period
plus, without duplication, to the extent deducted in computing Consolidated Net
Income, (i) an amount equal to any extraordinary loss plus any net loss realized
in connection with an Asset Sale, (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, (iii) consolidated
interest expense of such Person and its Subsidiaries for such period, whether
paid or accrued (including, without limitation and without duplication,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (iv) depreciation and amortization (including amortization of
goodwill and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) of such Person and its Subsidiaries
for such period, in each case, on a consolidated basis and determined in
accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on
the income or profits of, and the depreciation and amortization of, a Subsidiary
of the referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in same proportion) that the Net
Income of such Subsidiary was included in calculating the Consolidated Net
Income of such Person and only if a corresponding amount would be permitted at
the date of determination to be dividended, directly or indirectly, to the
Company by such Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Subsidiary or
its stockholders.
 
     "Consolidated Debt" means, with respect to any Person as of any date of
determination, the sum, without duplication of (i) the total amount of Debt of
such Person and its Subsidiaries, plus (ii) the total amount of Debt of any
other Person, to the extent that such Debt has been guaranteed by the referent
Person or one or more of its Subsidiaries, plus (iii) the aggregate liquidation
value of all preferred stock of Subsidiaries of such Person, in each case,
determined on a consolidated basis in accordance with GAAP.
 
     "Consolidated Leverage Ratio" means, as of any date of determination, the
ratio of (a) the Consolidated Debt of the Company as of such date to (b) two
times the Consolidated Cash Flow of the Company for the two most recent full
fiscal quarters ending immediately prior to such date for which internal
financial statements are available but in no event ending more than 135 days
prior to the date of such determination (the "Measurement Period"), determined
on a pro forma basis after giving effect to all acquisitions or dispositions of
assets made by the Company and its Subsidiaries from the beginning of such
two-quarter period through and including such date of determination (including
any related financing transactions) as if such acquisitions and dispositions had
occurred at the beginning of such two-quarter period. In addition, for purposes
of making the computation referred to above, (i) acquisitions that have been
made by the Company or any of its Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
two-quarter Measurement Period or subsequent to such Measurement Period and on
or prior to the date of calculation (the "Calculation Date") shall be deemed to
have occurred on the first day of the two-quarter Measurement Period and
Consolidated Cash Flow for such Measurement Period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, (iii) if the transaction giving rise to the need to calculate the
Consolidated Leverage Ratio is an incurrence of Indebtedness, the amount of
Indebtedness outstanding at the end of the Measurement Period shall be
calculated after giving effect on a pro forma basis to the incurrence of such
Indebtedness as if such
 
                                       78
<PAGE>   83
 
Indebtedness had been outstanding as of the end of the Measurement Period and to
the discharge of any other Indebtedness to the extent it was outstanding as of
the end of the Measurement Period and is to be repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
Indebtedness had been discharged as of the end of the Measurement Period, and
(iv) if the Company or any Subsidiary has repaid, repurchased, defeased or
otherwise discharged any Indebtedness that was outstanding as of the end of the
Measurement Period or if any Indebtedness that was outstanding as of the end of
the Measurement Period is to be repaid, repurchase, defeased or otherwise
discharged on the date of the transaction giving rise to the need to calculate
the Consolidated Leverage Ratio, the aggregate amount of Indebtedness
outstanding as of the end of the Measurement Period shall be calculated on a pro
forma basis as if such discharge had occurred as of the end of the Measurement
Period and the Consolidated Cash Flow shall be calculated as if the Company or
such Subsidiary had not earned the interest income, if any, actually earned
during the period of the most recent two consecutive fiscal quarters for which
financial statements have been made publicly available but in no event ending
more than 135 days prior to the date of such determination in respect of cash or
Cash Equivalents (excluding clause (vi) thereof) used to repay, repurchase,
defease or otherwise discharge such Indebtedness.
 
     "Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) that is accounted for by the equity
method of accounting shall be included only to the extent of the amount of
dividends or distributions paid in cash to the referent Person or a Wholly Owned
Subsidiary thereof, (ii) the Net Income of any Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar distributions
by that Subsidiary of such Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
 
     "Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common equity holders of such
Person and without duplication its Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (a) all write-ups (other than
write-ups resulting from foreign currency transactions and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (b)
all Investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (c)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
 
     "Continuing Directors" means, as of any date of determination, any member
of the board of directors of the Company who (i) was a member of the board of
directors on the date of the Indenture or (ii) was nominated for election to the
board of directors with the approval of at least a majority of the Continuing
Directors who were members of the board of directors at the time of such
nomination or election.
 
     "Debt" means, with respect to any Person, any indebtedness of such Person,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or bankers' acceptances or representing the
balance deferred and unpaid of the purchase price of any property or
representing Hedging Obligations.
 
     "Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
 
                                       79
<PAGE>   84
 
     "Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
 
     "Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
 
     "Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence on the date of the Indenture, until such amounts are
repaid.
 
     "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
 
     "Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
 
     "Guarantors" means any Subsidiary that executes a Guarantee in accordance
with the provisions of the Indenture, and their respective successors and
assigns.
 
     "Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest and currency rate swap agreements, interest rate
cap agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest or
currency exchange rates (except that if any agreement relating to such
obligation provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount thereof).
 
     "Indebtedness" means, with respect to any Person, (i) any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or bankers' acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, (ii) all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) in which case the amount of such Indebtedness shall
be deemed to be the lesser of (a) the amount of such Indebtedness and (b) the
fair market value of the asset that secures such Indebtedness, (iii)
Disqualified Stock of such Person, (iv) preferred stock of any Subsidiary of
such Person (other than Preferred Stock held by such Person or any of its
Subsidiaries) and (v) to the extent not otherwise included, the guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), directly or indirectly, in any manner (including, without
limitation, letters of credit and reimbursement agreements in respect thereof),
of all or any part of any Indebtedness by such Person of any indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall be
(i) the accreted value thereof, in the case of any Indebtedness that does not
require current payments of interest, and (ii) the principal amount thereof,
together with any interest thereon that is more than 30'days past due, in the
case of any other Indebtedness.
 
     "Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of

                                       80
<PAGE>   85
 
Indebtedness, Equity Interests or other securities, together with all items that
are or would be classified as investments on a balance sheet prepared in
accordance with GAAP; provided that an acquisition of assets, Equity Interests
or other securities by the Company or any of its Subsidiaries for consideration
consisting of common equity securities of the Company shall not be deemed to be
an Investment. If the Company or any Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect Subsidiary
of the Company such that, after giving effect to any sale or disposition, such
Person is no longer a Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of such Subsidiary not sold or
disposed of in an amount determined as provided in the covenant described above
under the caption "-- Limitations on Restricted Payments."
 
     "Issue Date" means the date of first issuance of the Notes under the
Indenture.
 
     "Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
 
     "Liquidated Damages" means all liquidated damages then owing pursuant to
the Registration Rights Agreement.
 
     "Make-Whole Premium" means, with respect to a Note, an amount equal to the
excess of (a) the present value of the remaining interest, Liquidated Damages,
if any, and principal payments due on such Note as if such Note was redeemed on
July 31, 2002, computed using a discount rate equal to the Treasury Rate plus
100 basis points, over (b) the outstanding Accreted Value of such Note as of the
date of determination. "Treasury Rate" is defined as the yield to maturity at
the time of the computation of United States Treasury securities with a constant
maturity (as compiled by and published in the most recent Federal Reserve
Statistical Release H.15(519)), which has become publicly available at least two
Business Days prior to the date fixed for prepayment (of, if such Statistical
Release is no longer published, any publicly available source of similar market
data) most nearly equal to the then remaining average life of the Notes for
which a Make-Whole Premium is being calculated; provided, however, that if the
average life of such Notes is not equal to the constant maturity of the
applicable United States Treasury securities for which a weekly average yield is
given, the Treasury Rate shall be obtained by linear interpolation (calculated
to the nearest one-twelfth of a year) from the weekly average yields of United
States Treasury securities for which such yields are given, except that if the
average life of such Notes is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
 
     "Moody's" means Moody's Investors Service, Inc. and its successors.
 
     "Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person for such period, determined in accordance with GAAP
and before any reduction in respect of preferred stock dividends, excluding,
however, (i) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with (a) any Asset
Sale (including, without limitation, dispositions pursuant to sale and leaseback
transactions) or (b) the disposition of any securities by such Person or any of
its Subsidiaries or the extinguishment of any Indebtedness of such Person or any
of its Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not
loss), together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
 
     "Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions), any relocation expenses incurred as a
result thereof, any taxes paid or payable by the Company or any of its
Subsidiaries as a result thereof (after taking into account any available tax
credits or deductions and any tax
 
                                       81
<PAGE>   86
 
sharing arrangements), amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
 
     "Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
 
     "Permitted Investments" means (i) any Investment in the Company or in a
Wholly Owned Subsidiary of the Company; (ii) any Investment in Cash Equivalents;
(iii) any Investment by the Company or any of its Subsidiaries in a Person if,
as a result of such Investment, (a) such Person becomes a Wholly Owned
Subsidiary of the Company or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of
the Company; (iv) any Investment existing on the date of the Indenture; (v) any
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "-- Repurchase at the Option of Holders --
Asset Sales," and (vi) other Investments in any Person (other than an Affiliate
that is not Subsidiary or a Person that is controlled by an Affiliate that is
not a Subsidiary) engaged in a line of business that is similar, complementary
or ancillary to the business of the Company on the Issue Date, when taken
together with all other Investments made pursuant to this clause (vi) that are
at the time outstanding, not to exceed $3.0 million.
 
     "Permitted Liens" means (i) Liens securing the Bank Credit Facility; (ii)
Liens in favor of the Company or any of its Subsidiaries; (iii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company or any of its Subsidiaries, provided that such
Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the Person
merged into or consolidated with the Company or any such Subsidiary; (iv) Liens
on property existing at the time of acquisition thereof by the Company or any of
its Subsidiaries, provided that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens to secure Indebtedness permitted by clause (iv)(A) (including Capital
Lease Obligations) of the second paragraph of the covenant entitled "Incurrence
of Indebtedness" covering only the assets acquired with such Indebtedness; (vii)
Liens existing on the date of the Indenture excluding Liens on Indebtedness to
be repaid with the proceeds of the Offering; (viii) Liens for taxes, assessments
or governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; (ix)
Liens incurred in the ordinary course of business of the Company or any of its
Subsidiaries with respect to obligations that do not exceed $2.0 million at any
one time outstanding and that (a) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than trade
credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or any such Subsidiary; (x)
renewals or refundings of any Liens referred to in clauses (iii) through (ix)
above provided that any such renewal or refunding does not extend to any assets
or secure any Indebtedness not securing or secured by the Liens being renewed or
refinanced; (xi) any Lien consisting of a deposit or pledge made in the ordinary
course of business in connection with, or to secure payment of, obligations
under worker's compensation, unemployment insurance or similar legislation; and
(xii) any Lien constituting a renewal, extension or replacement of a Lien
constituting a Permitted Lien, but only if (1) at the time such Lien is granted
and immediately after giving effect thereto, no Default would exist, (2) such
Lien is limited to all or a part of the property or asset that was subject to
the Lien so renewed, extended or replaced and to fixed improvements thereafter
erected on such property or asset, (3) the principal amount of the obligations
secured by such Lien does not exceed the principal amount of the obligation
secured by the Lien so renewed, extended or replaced, (4) the obligations
secured by such Lien bear interest at a rate per annum no exceeding the rate
borne by the obligations secured by the Lien so renewed, extended or replaced
except for any increase that is commercially reasonably at the time of such
increase and (5) the principal amount of the obligations has a final maturity
date of, and has a
 
                                       82
<PAGE>   87
 
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of the obligation secured by the Lien so renewed, extended or
replaced.
 
     "Permitted Refinancing Debt" means any Indebtedness of the Company or any
of its Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund other Indebtedness
of the Company or any such Subsidiary; provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Debt does not
exceed the principal amount (or accreted value, if applicable) of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in connection therewith); (ii)
such Permitted Refinancing Debt has a final maturity date no earlier than the
final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Debt has a final maturity date no earlier than the final maturity date of, and
is subordinated in right of payment to, the Notes on terms at least as favorable
to the Holders of Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Indebtedness is incurred only by the Company or the
Subsidiary that is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
 
     "Person" means any individual, corporation, partnership, limited liability
company, limited liability partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, government or any agency or
political subdivision thereof or any other entity.
 
     "Principals" mean William W. Becker or Donald H. Sledge, their lineal
descendants and any trust, corporation, partnership, association, limited
liability company or other entity in which William W. Becker or Donald H. Sledge
and/or their lineal descendants hold at least 80% of the total, combined
outstanding voting power or similar controlling interest.
 
     "Public Offering" means an underwritten primary public offering of common
stock (other than Disqualified Stock) of the Company registered under the
Securities Act (other than a public offering registered on Form S-8 under the
Securities Act).
 
     "Restricted Investment" means an Investment other than a Permitted
Investment.
 
     "Standard & Poor's" means Standard and Poor's, a division of The
McGraw-Hill Companies, and its successors.
 
     "Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person and/or one or more
Subsidiaries of such Person (or any combination thereof).
 
     "Telecommunications Business" means, when used in reference to any Person,
that such Person is engaged primarily in the business of (i) transmitting, or
providing services relating to the transmission of, voice, video or data through
owned or leased transmission facilities, (ii) creating, developing or marketing
communications related network equipment, software and other devices for use in
a Telecommunications Business, or (iii) evaluating, participating or pursuing
any other activity or opportunity that is related to those identified in (i) or
(ii) above; provided that the determination of what constitutes a
Telecommunications Business shall be made in good faith by the Board of the
Company.
 
     "TNS" means TeleHub Network Services Corporation, an Illinois corporation,
substantially all of the assets of which include an ATM Network.
 
     "TNS/TTC Transaction" means (i) a sale, assignment, transfer, lease,
conveyance or other disposition of all of the capital stock of TNS or all or
substantially all of the assets comprising TNS's ATM Network, and/or

                                       83
<PAGE>   88
 
(ii) a sale, assignment, transfer, lease, conveyance or other disposition of all
of the capital stock of TTC or all or substantially all of the assets comprising
TTC's business; provided that no assets of the Company or any or its
Subsidiaries shall have been or will be transferred or licensed to the
Subsidiary or business being divested by the Company other than on an arm's
length basis and in the ordinary course.
 
     "TTC" means TeleHub Telecommunications Corporation, a Nevada corporation.
 
     "Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
 
     "Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person and one or more Wholly Owned Subsidiaries of such Person.
 
                         BOOK-ENTRY; DELIVERY AND FORM
 
     The New Notes initially will be issued in the form of one or more global
notes (the "Global Notes"). The Global Notes will be deposited with, or on
behalf of, The Depository Trust Company (the "Depositary") and registered in the
name of Cede & Co., as nominee of the Depositary (such nominee being referred to
herein as the "Global Note Holder"). Notes transferred subsequent to the
consummation of the Offering to institutional "accredited investors" (as defined
in Rule 501(a)(1), (2), (3) or (7)) who are not "qualified institutional buyers"
(as defined in Rule 144A) will be represented by an interest in one or more
permanent global Units in definitive, fully registered form without interest
coupons (each an "Accredited Investor Global Unit" and together with the
Regulation S Global Unit and the Restricted Global Unit, the "Global Units") and
will be deposited with the Trustee as custodian for, and registered in the name
of, Cede & Co., as nominee for the DTC. Transfers of beneficial interests in
Global Notes will be subject to the applicable rules and procedures of the DTC
and its direct or indirect participants which may change from time to time.
Except as set forth below regarding "Certificated Securities," owners of
beneficial interests in the Global Notes will not be entitled to receive
physical delivery of Certificated Securities (as defined below).
 
     The DTC is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "DTC's Participants") and to facilitate the clearance and settlement of
transactions in such securities between Participants through electronic
book-entry changes in accounts of its Participants. The DTC's Participants
include securities brokers and dealers, banks and trust companies, clearing
corporations and certain other organizations. Access to the DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or the "DTC's Indirect Participants")
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly. Persons who are not Participants may beneficially
own securities held by or on behalf of the DTC only through the DTC's
Participants or the DTC's Indirect Participants.
 
     The Company expects that pursuant to procedures established by the DTC (i)
upon deposit of the Global Notes the DTC will credit the accounts of holders of
New Notes with portions of the principal amount of the Global Notes and (ii)
ownership of the Notes evidenced by the Global Notes will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by the DTC (with respect to the interests of the DTC's Participants), the DTC's
Participants and the DTC's Indirect Participants (with respect to other owners
of beneficial interest in the Global Notes). Prospective purchasers are advised
that the laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer Notes evidenced by the Global Notes will be limited to such extent. For
certain other restrictions on the transferability of the Notes, see "Notice to
Investors."
 
     So long as the Global Note Holder is the registered owner of any Notes, the
Global Security Holder will be considered the sole holder under the Indenture of
any Notes evidenced by the Global Notes. Beneficial

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<PAGE>   89
 
owners of any Notes evidenced by the Global Notes under the Indenture will not
be considered the owners or holders thereof under the Indenture for any purpose,
including with respect to the giving of any directions, instructions or
approvals to the Trustee thereunder. Neither the Company nor the Trustee will
have any responsibility or liability for any aspect of the records of the DTC or
for maintaining, supervising or reviewing any records of the DTC relating to the
Notes.
 
     Payments in respect of the Accreted Value or principal of, and premium,
interest and Liquidated Damages, if any, on any Notes registered in the name of
the Global Security Holder on the applicable record date will be payable by the
Trustee to or at the direction of the Global Security Holder in its capacity as
the registered holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee may treat the persons in whose names Notes, including
the Global Notes, are registered as the owners thereof for the purpose of
receiving such payments. Consequently, neither the Company nor the Trustee has
or will have any responsibility or liability for the payment of such amounts to
beneficial owners of Notes. The Company believes, however, that it is currently
the policy of the DTC to immediately credit the accounts of the relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant security as shown on the
records of the DTC. Payments by the DTC's Participants and the DTC's Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practice and will be the responsibility of the DTC's
Participants or the DTC's Indirect Participants.
 
CERTIFICATED SECURITIES
 
     Subject to certain conditions, any person having a beneficial interest in
the Global Notes may, upon request to the trustee, exchange such beneficial
interest for Notes in registered form without interest coupons ("Certificated
Securities"). Upon any such issuance, the Trustee is required to register such
Certificated Securities in the name of, and cause the same to be delivered to,
such person or persons (or the nominee of any thereof). In addition, if (i) the
Company notifies the Trustee in writing that the DTC is no longer willing or
able to act as a depositary and the Company is unable to locate a qualified
successor within 90 days or (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Notes in the form of
Certificated Securities under the Indenture, then, upon surrender by the Global
Note Holder of its Global Notes, Certificated Securities will be issued to each
person that the Global Note Holder and the DTC identify as being the beneficial
owner of the related Notes.
 
     Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the DTC in identifying the beneficial owners of Notes and
the Company and the Trustee may conclusively rely on, and will be protected in
relying on, instructions from the Global Note Holder or the DTC for all
purposes.
 
SAME DAY SETTLEMENT AND PAYMENT
 
     The Indenture will require that payments in respect of the Notes
represented by the Global Securities (including principal or Accreted Value and
premium, interest and Liquidated Damages, if any) be made by wire transfer of
immediately available funds to the accounts specified by the Global Security
Holder. With respect to Certificated Securities, the Company will make all
payments of principal or Accreted Value and premium, interest and Liquidated
Damages, if any, by wire transfer of immediately available funds to the accounts
specified by the holders thereof or, if no such account is specified, by mailing
a check to each such holder's registered address. The Notes represented by the
Global Securities are expected to trade in the DTC's Same Day Funds Settlement
System, and any permitted secondary market trading activity in such Notes will
therefore be required by the DTC to be settled in immediately available funds.
The Company expects that secondary trading in the Certificated Securities will
also be settled in immediately available funds.
 
                          DESCRIPTION OF CAPITAL STOCK
 
     The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, of which 12,703,037 shares were outstanding on September 30,
1998, and 100,000,000 shares of preferred stock, of which 4,000,000 shares were
designated as Series A Convertible Preferred Stock (the "Preferred Stock") and
 
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<PAGE>   90
 
3,500,000 shares were outstanding on September 30, 1998. As of September 30,
1998, the Company had issued warrants initially entitling the holders thereof to
purchase 7,412,649 shares of Common Stock.
 
COMMON STOCK
 
     12,703,037 shares of Common Stock were outstanding as of September 30,
1998. Holders of Common Stock are entitled to one vote for each share held on
all matters submitted to a vote of shareholders and do not have cumulative
voting rights. Holders of Common Stock are entitled to receive ratably such
dividends, if any, as the Board may declare out of funds legally available
therefor. The Company, however, intends to retain its earnings, if any, to
finance the development and expansion of its business and, therefore, does not
anticipate paying any dividends in the foreseeable future. Upon the liquidation,
dissolution or winding-up of the Company, holders of Common Stock are entitled
to receive ratably the net assets of the Company available after the payment of
all debts, other liabilities and payments to the holders of preferred stock.
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights.
 
PREFERRED STOCK
 
     The Company is authorized to issue up to 100,000,000 shares of preferred
stock, with respect to which the Board shall have the authority, without further
action by the shareholders, to issue in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, conversion rights, voting rights, terms of redemption, liquidation
preferences, sinking fund terms and the number of shares constituting any series
or the designation of such series. The issuance of preferred stock could
adversely affect the voting power of holders of Common Stock and the likelihood
that such holders would receive dividends or payments upon liquidation. The
issuance of preferred stock could be utilized, under certain circumstances, as a
method of discouraging, deferring or preventing a change in control of the
Company.
 
SERIES A CONVERTIBLE PREFERRED STOCK
 
     There are 3,500,000 shares of Preferred Stock currently issued and
outstanding, which represented approximately 21.7% of the voting power of the
Company's outstanding capital stock. Each share of Preferred Stock may be
converted into one share of Common Stock at any time. The Preferred Stock
outstanding after the completion of an initial public offering will
automatically convert into Common Stock on a one-for-one basis. Holders of
Preferred Stock are entitled to vote on all matters submitted to a vote of the
shareholders. Each share of Preferred Stock has one vote, but does not have
cumulative voting rights. The Preferred Stock has a $5.00 per share liquidation
preference over the Common Stock and any junior class of capital stock.
 
WARRANTS
 
     The Company authorized and issued warrants to purchase an aggregate of
2,625,000 shares of Common Stock with an exercise price of $7.50 per share in
the Spring 1997 Offering and Fall 1997 Offering, which are exercisable from the
first to the third anniversary of their issuance date. As of September 30, 1998,
the Board had separately authorized and issued warrants to purchase an
additional 2,704,917 shares of Common Stock to directors, vendors, placement
agents and service providers ("Vendor Warrants"). These Vendor Warrants have
exercise prices ranging from $5.50 to $14.58, and have terms ranging from three
to ten years. In the Initial Note Offering, the Company issued warrants ("Summer
1998 Warrants") to purchase an aggregate of 2,082,732 shares of Common Stock for
a nominal exercise price, which are exercisable until July 31, 2005. In
addition, the Summer 1998 Warrants are exercisable for an aggregate of 1,084,756
additional shares of Common Stock under certain circumstances.
 
     Warrants do not confer upon the holder any voting rights, preemptive rights
or any other rights as a Company shareholder.
 
STOCK OPTIONS
 
     As of September 30, 1998, the Company had reserved a total of 4,600,000
shares of Common Stock for issuance under the Plan and has awarded options to
purchase a total of 3,665,878 shares of Common Stock.
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<PAGE>   91
 
The exercise price of these options range from $5.00 to $14.58, and have terms
of ten years. The Plan and the option agreements impose limits on
transferability and exercise.
 
MANAGEMENT INCENTIVE PLAN
 
     The Board directed the Compensation Committee to develop a Management
Incentive Plan that provides stock option awards to senior Company management.
If the Company achieves specified market valuations based upon the value of its
common stock from June 2, 1998 to June 2, 2000, then eligible participants may
receive stock options exercisable at $14.58 per share (the estimated fair market
value of the Company's Common Stock on June 2, 1998). The aggregate number of
stock options that may be awarded under this management incentive plan increases
from approximately 500,000 shares if the Company's Common Stock value is $20.00
per share to a maximum of approximately two million shares if the Company's
Common Stock value increases to $60.00 per share.
 
TRANSFER RESTRICTIONS
 
     The Company's securities are "restricted securities." Accordingly, they may
not be transferred or resold except pursuant to registration or qualification
under federal and state securities law or exemption from registration
thereunder. Holders should consult legal counsel before offering, reselling
pledging or transferring these securities.
 
REGISTRATION RIGHTS
 
     In connection with the Spring 1997 Offering and Fall 1997 Offering, the
Company agreed to file a registration statement under the Securities Act with
respect to the resale of the shares of Common Stock issuable upon conversion of
the Preferred Stock or upon exercise of the associated warrants (including the
warrant issued to the Placement Agent) within 90 days after the completion of an
initial public offering of the Company's Common Stock and to use all
commercially reasonable efforts to complete that registration.
 
     Shares of Common Stock issuable upon exercise of Vendor Warrants have
"piggy-back" registration rights.
 
     In the Initial Note Offering, the Company agreed to file a registration
statement to register the resale of the common stock underlying the Summer 1998
Warrants, upon demand by one-quarter of the warrant holders given 180 days after
the Company's initial public offering or July 31, 1999, whichever is earlier.
 
SPECIAL PROVISIONS OF THE COMPANY'S ARTICLES, BYLAWS AND NEVADA CORPORATE LAW
 
     The Company believes that its ultimate success will depend upon adherence
to its long-range business plan. Moreover, implementation of the Company's
long-term business strategies will require experienced and stable management.
Accordingly, the Company's Articles and Bylaws attempt to provide continuity for
the Board and to assure that proposals are consistent with the Company's
long-term interests.
 
  Board of Directors
 
     To promote continuity, stability and experience of the Board, the Company
has a classified Board whereby the directors serve staggered three-year terms.
Shareholders must submit nominations for directorships in advance to the Board.
Shareholders do not have cumulative voting rights in the election of directors
and, as a result, holders of a majority of the Company's voting stock at any
election of directors may elect all of the directors standing for election at
that meeting. Only the Board (not the shareholders) can change the number of
directors or fill vacant directorships. Changing the size of the Board by more
than two directorships per fiscal year requires unanimous Board approval.
Directors may only be removed for cause and upon the affirmative vote of
two-thirds of the Company's holders of capital stock entitled to vote.
 
     The Company believes that these provisions permit directors to develop
expertise and provide continuity on the Board, thereby permitting the Company to
formulate and implement long-term objectives. However, in the event of a change
in control, these provisions would enable incumbent directors to retain their
positions for
                                       87
<PAGE>   92
 
up to two years because at least two annual shareholders' meetings would be
necessary to effectuate a change in the majority of the Board given its current
size. Such potential delay may discourage, delay or prevent a change in control
of the management of the Company.
 
  Stockholder Meetings and Voting
 
     The Articles and Bylaws establish procedures concerning stockholder
meetings, submission of proposals to shareholders, nominations to the Board and
voting. These procedures allow the Board to organize these activities in an
orderly fashion but may restrict shareholders' ability to challenge the Board.
 
     Only the Chairman, Vice Chairman, CEO or COO can call a stockholders
meeting and stockholders may not act by written consent after the Company
becomes subject to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Matters presented for stockholder approval are classified as
either ordinary resolutions or special resolutions; approval of ordinary
resolutions require that affirmative votes exceed negative votes, while approval
of special resolutions requires the affirmative vote of two-thirds (unless a
higher amount is specified in the Articles and Bylaws) of the voting power
entitled to vote. Special resolutions include removal of Directors for cause and
proposals lacking Board recommendation.
 
     The Articles and Bylaws also require that stockholders submit nominations
for the Board and proposals to be submitted for stockholder approval in advance.
The Bylaws also specify the form and timing of shareholder nominations for the
Board. The Articles and Bylaws require that stockholders submit any proposal,
including amendments to the Articles and Bylaws first to the Board for its
recommendation and in accordance with the form and timing specified. If the
Board adopts a resolution expressly recommending the proposal, then the proposal
will be deemed an ordinary resolution, otherwise the proposal will be designated
as a special resolution requiring an affirmative vote of two-thirds of the
Company's shares entitled to vote. The Company believes these procedures
appropriately permit the Board to determine whether proposals are consistent
with the Company's business plan and require a clear shareholder mandate to
overrule the Board's business judgment.
 
  Nevada Corporate Law
 
     Under the Nevada Act, prior board approval is required for combinations
with interested shareholders and for acquisition of a controlling interest.
These provisions may discriminate against existing or prospective shareholders
that own a substantial amount of securities or may prevent change of control of
the Company.
 
     Nevada Act sections 78.411-.444 generally require Board approval of
business combinations between interested shareholders (generally, owners of more
than 10% of the outstanding voting shares) and the Company. Business
combinations include mergers, acquisitions, sales of assets, issuance of more
than 5% of the Company's stock, liquidation or dissolution, recapitalization, or
other activities. During the three years after a person acquired a 10% interest
in the Company thus becoming an interested shareholder, the Board must approve
all business combinations with that interested shareholder; after three years,
either the Board or the majority of the disinterested shareholders must approve
all business combinations.
 
     Nevada Act sections 78.378-.3792 require that any person seeking to acquire
a "controlling interest" in the Company obtain shareholder approval of that
acquisition before obtaining any voting rights in the "control shares." The
Bylaws provide that the Company will become subject to these requirements when
it becomes subject to the reporting requirements of the Exchange Act. In
addition, the Bylaws provide that the acquiring person must deliver a statement
to the Board, which reviews the statement and decides whether to accord voting
rights to the acquiring person. If the Board does not approve the proposed
acquisition, the disinterested shareholders by special resolution, may confer
voting rights on the acquiring person's shares. The Bylaws specify procedures
governing this process. The Nevada Act establishes three different levels of
"controlling interest": 1/5 to 1/3; 1/3 to 1/2; over 1/2 voting power. Thus,
both initial acquisition of substantial ownership and subsequent increases in
ownership will be subject to approval process.
 
                                       88
<PAGE>   93
 
INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     The Articles contain provisions eliminating the personal liability of
Company directors and officers for damages for breach of fiduciary duty. These
provisions, however, do not limit liability for acts or omissions involving
intentional misconduct, fraud, a knowing violation of the law, or illegal
payment of distributions. These provisions offer persons serving as Company
directors or officers protection against monetary damage awards for breach of
fiduciary duty and thereby reduce the ability of Company shareholders to
prosecute actions against a director or officer based on such breach.
Nonetheless, equitable remedies, such as an injunction or rescission, may still
be available. Furthermore, the SEC has taken the position that these limitations
do not affect claims arising under federal securities laws.
 
     Subject to certain limited exceptions, the Articles and the Nevada Act also
provide for mandatory indemnification by the Company of any of the Company's
directors, officers or agents who is involved in any legal proceeding arising
from such person's actions or inactions as a director, officer or agent. Such
indemnification includes reimbursement of expenses incurred by such person in
advance of such legal proceeding.
 
                       FEDERAL INCOME TAX CONSIDERATIONS
 
     The following general discussion summarizes material U.S. federal income
tax aspects of the exchange of Old Notes for New Notes. This discussion is based
upon the Internal Revenue Code ("Code"), as amended, applicable existing
Treasury regulations, judicial authority, current administrative rulings and
pronouncements of the Internal Revenue Service ("IRS") and facts concerning the
Company described in this Prospectus. There can be no assurance that the IRS
will concur with this discussion and the Company will not obtain a ruling from
the IRS with respect to the U.S. federal income tax consequences of investing in
the Notes. Future legislative, judicial or administrative changes or
interpretations could alter the tax consequences identified in this discussion.
Any such changes or interpretations might be retroactive and therefore affect
the tax consequences of this investment.
 
     This discussion pertains only to U.S. Holders, which means (i) citizens or
residents (within the meaning of Section 7701 (b) of the Code) of the U.S., (ii)
corporations, partnerships or other entities created or organized in or under
the laws of the U.S. or any political subdivision thereof, (iii) estates the
income of which is subject to U.S. federal income taxation regardless of its
source, (iv) in general, trusts subject to the primary supervision of a court
within the U.S. and to the control of a U.S. person as described in Section
7701(a)(30) of the Code, and (v) any other person whose income or gain is
effectively connected with the conduct of a U.S. trade or business. Also,
certain types of investors (such as dealers in securities, banks, insurance
companies, financial institutions, tax-exempt organizations, and persons holding
Notes as part of a hedging or conversion transaction or straddle or persons
deemed to sell Notes under the constructive sale provisions of the Code) may be
subject to special rules. This discussion assumes that the Notes are held (or
would be held if acquired) as capital assets within the meaning of Section 1221
of the Code. This discussion does not address tax considerations applicable to
subsequent purchasers. Particular Holders may incur other U.S. federal income
tax consequences resulting from their personal investment or tax circumstances
(for example, persons subject to the Code's alternative minimum tax provisions).
The discussion also does not address any aspect of state, local or foreign law.
 
     PROSPECTIVE HOLDERS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS
ABOUT THE SPECIFIC TAX CONSEQUENCES TO THEM (INCLUDING THE TAX EFFECTS OF ANY
STATE, LOCAL, FOREIGN, OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS)
RESULTING FROM THE EXCHANGE OFFER, OR FROM PURCHASING, HOLDING AND TRANSFERRING
THE NOTES.
 
EXCHANGE OFFER
 
     Under certain circumstances, modification of debt instruments may
constitute a taxable exchange of the existing debt instrument for a new debt
instrument. Since the terms of the New Notes do not significantly
 
                                       89
<PAGE>   94
 
modify the terms of the Old Notes, IRS regulations should treat each New Note as
a continuation of the corresponding Old Note. Consequently, the issuance of the
New Note will be disregard for federal income tax purposes, and a holder
exchanging an Old Note for a New Note (as well as a non-exchanging holder) will
not recognize any gain or loss as a result of the Exchange (or the Exchange
Offer).
 
STATED INTEREST
 
     Interest earned on a New Note must be recognized as income for federal
income tax purposes in accordance with the holder's method of tax accounting.
Holders using the accrual method of accounting for tax purposes generally must
include interest in ordinary income as such interest accrues, while holders
using a cash basis must include interest income when the holder receives the
cash payments.
 
ORIGINAL ISSUE DISCOUNT
 
     For debt instruments such as the Notes, the amount by which the debt
instrument's "stated redemption price at maturity" exceeds its "original issue
price" is called the Original Issue Discount ("OID"). The OID generally is
treated as ordinary interest income that accrues at a constant yield to maturity
(i.e., every year the holder recognizes a portion of the OID as income so that
by maturity the holder has recognized the entire amount of the OID). Since the
OID is only received when the debt instrument is redeemed, holders recognize OID
income before receiving the OID. Moreover, the holder must pay federal income
taxes on this imputed OID income as it accrues. Since interest on the Notes
accretes until July 2001, the Notes were issued with OID. Consequently, each
Holder will annually recognize OID income, include any OID income in the
Holder's taxable gross income and pay taxes on the OID income before receiving
any cash from such imputed OID income. The Company annually will furnish the IRS
and record Note holders with information concerning OID accruing during a
calendar year, based upon the Notes' adjusted issue price as though the Holder
were the original Note holder.
 
     The amount of OID that accrues for any semi-annual accrual period equals
the Note's "adjusted issue price" at the start of the accrual period multiplied
by the Note's "yield to maturity". OID that accrues during any accrual period
must be allocated ratably among the days in the accrual period. For each day in
a taxable year in which it holds a Note, a Holder must recognize the daily
allocation of OID as income. The "adjusted issue price" at the start of any
accrual period equals the Note's "original issue price" increased by the accrued
OID for all previous accrual periods and reduced by all cash paid (excluding
"qualified stated interest") in prior accrual periods; the "yield to maturity"
of a Note is the discount rate that, when applied to all payments due under the
Note, produces a present value equal to the Note's original issue price; the
"stated redemption price at maturity" is the sum of the Note's principal amount
plus all payments except for "qualified stated interest" payments; "qualified
stated interest" is stated interest that is unconditionally payable at least
annually at a single fixed rate in either cash or property (excluding other
Company debt instruments).
 
     The tax basis of a Note in the hands of each Holder will be increased by
the amount of any OID that is included in Holder's gross income and will be
reduced by the amount of any cash payments on the Note (other than qualified
stated interest) whether such payments are denominated as principal or interest.
 
     If a bankruptcy proceeding is commenced by or against the Company after the
issuance of the Notes, claims by Holders of Notes may be limited to an amount
equal to the sum of (i) the Notes' initial offering price and (ii) that portion
of the OID that the Holder had amortized as of the bankruptcy filing. The IRS
has taken the position that a holder of an OID obligation must continue to
accrue OID even if there is no prospect of payment of the obligation. However,
the Holder may be able to offset such OID by accrual by claiming a deduction for
such accrual as part of a claim for total or partial worthlessness of the
obligation under sec.166 of the Code.
 
SALE, EXCHANGE, OR REDEMPTION OF A NOTE
 
     Upon the sale, exchange (other than the Exchange Offer) or redemption of a
Note, a holder will recognize taxable gain or loss equal to the difference
between (i) the amount of cash and the fair market value of property received
(other than amounts received attributable to interest not previously taken into
account,
                                       90
<PAGE>   95
 
which amount will be treated as interest received), and (ii) the holder's
adjusted tax basis in the Note. A holder's adjusted tax basis in a Note
generally will equal the cost of the Note to the holder, increased by the amount
of any OID previously included in income by the holder with respect to the Note
and reduced by any payments previously received by the holder with respect to
the Note, other than qualified stated interest payments, and by any premium
amortization deductions previously claimed by the holder. Provided the Note is a
capital asset in the hands of the holder and has been held for more than one
year, any gain or loss recognized by the holder will generally be a long-term
capital gain or loss.
 
BACKUP WITHHOLDING
 
     Under the backup withholding rules, a holder of a Note may be subject to a
backup withholding at the rate of 31% on interest paid on the Note or on any
other cash payment with respect to the sale or redemption of the Note, unless
(i) such holder is a corporation or comes under certain other exempt categories
and when required demonstrates this fact or (ii) such holder provides a correct
taxpayer identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules in the Treasury Regulations. Prospective holders of the Notes
(who did not previously furnished a Form W-9 with respect to the Old Notes) will
be required to complete a Form W-9 in order to provide the required information
to the Company. A holder of a Note who does not provide the Company with the
holder's correct taxpayer identification number may be subject to penalties
imposed by the IRS. Any amounts withheld under the backup withholding rules will
be allowed as a refund or a credit against the holder's federal income tax
liability, provided that the required information is furnished to the IRS.
 
     The Company will report to the holders of the Notes and to the IRS the
amount of any "reportable payments" for each calendar year and the amount of tax
withheld, if any, with respect to payments on the Notes.
 
     THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER SHOULD
CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE
EXCHANGE, OWNERSHIP, AND DISPOSITION OF THE NOTES, INCLUDING THE APPLICABILITY
AND EFFECT OF STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS.
 
                              PLAN OF DISTRIBUTION
 
     Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes are acquired as a result of market-making activities or other
trading activities. The Company has agreed that it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale for a period of 180 days from the date of the Prospectus,
or such shorter period as will terminate when all Old Notes acquired by
broker-dealers for their own accounts as a result of market-making activities or
other trading activities have been exchanged for New Notes and resold by such
broker-dealers.
 
     The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own accounts
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market or, in negotiated transactions or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such New
Notes. Any broker-dealer that resells New Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"Underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions
                                       91
<PAGE>   96
 
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
 
     For a period of 180 days from the date of this Prospectus, or such shorter
period as will terminate when all Old Notes acquired by broker-dealers for their
own accounts as a result of market-making activities or other trading activities
have been exchanged for New Notes and resold by such broker-dealers, the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act.
 
                                 LEGAL MATTERS
 
     The validity of the New Notes offered hereby will be passed upon for the
Company by Haligman Lottner Rubin & Fishman, P.C., Denver, Colorado. Attorneys
at Haligman Lottner Rubin & Fishman, P.C., beneficially own warrants to purchase
a total of 112,500 shares of Common Stock. In addition, Mr. Michael L. Glaser, a
director and shareholder of Haligman Lottner Rubin & Fishman, P.C., served as
the Company's corporate Secretary from January 1, 1997, to March 3, 1997.
 
                                    EXPERTS
 
     The consolidated balance sheets as of December 31, 1996 and 1997 and the
consolidated statements of operations, retained earnings, and cash flows for the
period from January 18, 1996 (date of inception) to December 31, 1996 and for
the year ended December 31, 1997, included in this Prospectus, have been
included herein in reliance on the report, which includes an explanatory
paragraph regarding certain factors raising substantial doubt about the
Company's ability to continue as a going concern, of PricewaterhouseCoopers LLP
(the successor firm to Coopers & Lybrand LLP), independent accountants, given on
the authority of that firm as experts in accounting and auditing.
 
                             AVAILABLE INFORMATION
 
     The Company is not currently subject to the periodic reporting and other
informational requirement of the Exchange Act. The Company has agreed that,
whether or not it is required to do so by the rules and regulations of the SEC,
for so long as any of the Securities remain outstanding, it will furnish to the
holders of the Securities and, if accepted by the SEC, file with the SEC (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were
required to file such forms, including a "Management's Discussion and Analysis
of Results of Operations and Financial Condition" and, with respect to the
annual information only, a report thereon by the Company's independent auditors
and (ii) all reports that would be required to be filed with the SEC on Form 8-K
if the Company were required to file such reports, in each case, within the time
periods set forth in the rules and regulations of the SEC. In addition, for so
long as any of the Securities remain outstanding, the Company has agreed to make
available to the holders of the Securities, securities analysts, prospective
purchasers of the Securities or beneficial owners of the Securities in
connection with any sale thereof, the information required by Rule 144A(d)(4)
under the Securities Act.
 
     This Prospectus constitutes a part of a registration statement on Form
S-4(together with all amendments thereto, the "Registration Statement") filed by
the Company with the SEC under the Securities Act. This Prospectus, which forms
a part of the Registration Statement, does not contain all the information set
forth in the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the SEC. Reference is hereby made
to the Registration Statement and related exhibits and schedules filed therewith
for further information with respect to the Company and the New Notes offered
hereby. Statements contained herein concerning the provisions of any document
are not necessarily complete and, in each instance, reference is made to the
copy of such document filed as an exhibit to the Registration Statement or
otherwise filed by the Company with the SEC and each such statement is qualified
in its entirety
                                       92
<PAGE>   97
 
by such reference. The Registration Statement and the exhibits and schedules
thereto may be inspected and copied at the public reference facilities
maintained by the SEC: 450 Fifth Street, N.W., Washington, D.C.; 20549 New York
Regional Office, Seven World Trade Center, New York, New York 10048; and Chicago
Regional Office, 500 West Madison Street, Chicago, Illinois 60661. The SEC
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
Copies of the Registration Statement may be obtained from the SEC's Internet
address at http://www.sec.gov.
 
     Statements made herein concerning the contents of any contract or other
documents are not necessarily complete. Requests for relevant documents or other
information should be submitted in writing to the Company at the Company's
principal executive offices at 1375 Tri-State Parkway, Suite 250, Gurnee,
Illinois 60031; telephone (800) TELEHUB; Attention: Chief Financial Officer.
 
                                       93
<PAGE>   98
 
                                    GLOSSARY
 
Ancillary Services           Options available to an enhanced service provider,
                             which support and complement the provision of
                             enhanced services. Examples include protocol
                             conversion and DID with third number billing
                             inhibited.
 
Asynchronous Transfer Mode
  (ATM)                      Asynchronous Transfer Mode -- A fast cell-switched
                             technology based on a fixed-length 53-byte cell.
                             ATM is capable of handling voice, data, and video
                             transmissions over the same facility.
 
Client                       End user computer on a network (local or Internet).
 
Competitive Access Provider
  (CAP)                      A new term coined by the FCC to describe a
                             facilities-based local carrier (such as MFS, MCI,
                             Metro, etc.) competing directly with the incumbent
                             carrier. A CAP can also be referred to as a CLEC.
 
Competitive Local Exchange
  Carrier (CLEC)             A new term coined by the FCC to describe a
                             facilities-based local carrier (defined in 1996 FCC
                             Interconnection Order). Such carrier may also be
                             referred to as a CAP.
 
DS-3                         Digital service, Level 3. Equipment of 28 T-1
                             channels, and operating at 44.736 Mbps. Also called
                             T-3.
 
End-Office                   A Central Office to which a telephone subscriber is
                             connected -- frequently referred to as a Class 5
                             office -- that actually delivers dial tone to the
                             subscriber.
 
Incumbent LEC (ILEC)         With respect to an area, the local exchange carrier
                             that, on February 8, 1996, provided telephone
                             exchange service in such area and on that date was
                             deemed to be a member of the exchange carrier
                             association or is a person or entity that, on or
                             after February 8, 1996, became a successor or
                             assign of a member of the foregoing. RBOCs are
                             considered ILECs.
 
Independent Telephone
Company (ITC)                A telephone company not affiliated with one of the
                             former RBOCs.
 
Interexchange Carrier (IXC)  These are carriers providing connections between
                             Local Access and Transport Areas (LATAs) and
                             serving areas where the calling and called
                             customers are located in different LATAs.
 
Internet Protocol (IP)       Part of the TCP/IP family of protocols describing
                             software that tracks the Internet address of nodes,
                             routes, outgoing message, and recognizes incoming
                             messages.
 
InterLATA                    Telecommunications services that originate in one
                             LATA and terminate in another.
 
Leased Lines                 A carrier or reseller leases T3, T1, or OC-level
                             trunks for use between switching facilities. The
                             carrier or reseller is responsible for ensuring
                             that there is enough capacity to support the
                             requisite traffic.
 
LEC                          Local Exchange Carrier -- any company that is
                             engaged in the provision of local telephone
                             exchange service or exchange access.
 
Network Element              A facility or the equipment used in the provision
                             of a telecommunications service. The term includes
                             subscriber numbers, databases, signaling systems,
                             and information sufficient for billing and
                             collection or used in
 
                                       94
<PAGE>   99
 
                             the transmission, routing, or other provision of a
                             telecommunications service.
 
Number Portability           The technology that will allow a telephone number
                             to travel with a customer from place to place and,
                             for 800 numbers, from one long distance carrier to
                             another.
 
Operational Support Systems
  (OSS)                      Methods and procedures (generally mechanized) that
                             directly support the daily operation of the
                             telecommunications provider's infrastructure, e.g.,
                             order processing, equipment assignment, etc. A
                             typical LEC will have hundreds of OSSs.
 
Public Switch Telephone
  Network (PSTN)             Usually refers to the worldwide voice telephone
                             network accessible to all those with telephones and
                             access privileges (i.e., in the United States, it
                             was formerly called Bell System Network or the AT&T
                             long distance network).
 
Regional Bell Operating
  Company (RBOC)             Originally seven regional telephone companies
                             created by the divestiture of AT&T in 1984. Each
                             company consists of two or more Bell Operating
                             Companies.
 
Reseller                     Company that uses and buys the transmission
                             facilities and capacity of another carrier. The
                             price at which it buys services is the wholesale
                             rate.
 
Service Control Point (SCP)  Also called Signal Control Point. A remote database
                             within the SS7 network.
 
Server                       The main computer on a network, including local
                             area networks (LANs) and hosts on the Internet. So
                             called because it "serves" software or information
                             to the "client" computers on the network.
 
Service Provider             A carrier or other organization that provides dial
                             tone, access lines, transport, e-mail or Internet
                             connectivity, typically for a fee.
 
Signaling System 7 (SS7)     An internationally standardized, general purpose
                             signaling system. It is a dedicated signaling
                             network that is separate from the regular message
                             network. The message network still carries the
                             voice and/or data between the calling and called
                             parties.
 
Signal Transfer Points
(STP)                        Highly reliable packet switches that route
                             signaling messages between signaling end points on
                             the network. STPs are the "signaling tandems" of
                             the signaling network. STPs provide translation and
                             routing functions for signaling messages received
                             from the network.
 
Synchronous Optical Network
  (SONET)                    A family of fiber-optic transmission rates from
                             51.84 Mbps to 13.22 Gbps. SONET is an optical
                             interface standard that allows internetworking of
                             transmission products from multiple vendors.
 
Switchless Resellers         Like aggregators, these companies have no
                             facilities, but they assume their own identity
                             through billing and customer care services-earning
                             their revenues on the difference between wholesale
                             and retail rates.
 
Telecommunications           The transmission between or among points specified
                             by the user, of information of the user's choosing
                             (including voice, data, image, graphics, and video)
                             without change in the form or content of the
                             information.
 
                                       95
<PAGE>   100
 
Telecommunication Carrier    Any provider of telecommunications services.
 
Third-Tier Carriers          Also known as switch-based resellers or carriers.
                             These companies lease networks to interconnect one
                             or more of their own switches. Revenues vary
                             dramatically -- from under $1 million to over $100
                             million annually.
 
Virtual Access Services
Platform (VASP(TM))          The Company's proprietary software and database
                             which provide an Advanced Intelligence Network
                             platform front-end database integrator for billing,
                             management and control interfacing adjuncts.
 
                                       96
<PAGE>   101
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<S>                                                           <C>
Report of Independent Accountants...........................  F-2
Consolidated Balance Sheets.................................  F-3
Consolidated Statements of Operations.......................  F-4
Consolidated Statement of Stockholders' Equity (Deficit)....  F-5
Consolidated Statements of Cash Flows.......................  F-7
Notes to Consolidated Financial Statements..................  F-8
</TABLE>
 
     The following consolidated financial statements do not include separate
financial statements of the Company's Subsidiaries (Telehub Network Services,
Telehub Technology Corporation and Telehub Leasing Corporation) as management
has determined that they would not be material to investors. This determination
is based on the fact that (i) the parent Company has no operations or
significant assets other than its investments in its subsidiaries, (ii) the
guarantor subsidiaries are wholly owned, (iii) the subsidiaries' guarantee of
the parent Company's debt are full, unconditional, joint and several, (iv) the
operations of the sole non-guarantor in which the Company holds a minority
interest are immaterial to the consolidated financial statements; and (v)
segment information is presented in note 16 to the following consolidated
financial statements.
 
                                       F-1
<PAGE>   102
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders of
TeleHub Communications Corporation:
 
     We have audited the accompanying consolidated balance sheets of TeleHub
Communications Corporation and its subsidiaries (a development stage company)
(the Company) as of December 31, 1996 and December 31, 1997, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for the period from January 18, 1996 (inception) to December 31, 1996 and
for the year ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of TeleHub
Communications Corporation and its subsidiaries (a development stage company) as
of December 31, 1996 and December 31, 1997, and the consolidated results of
their operations and their cash flows for the period from January 18, 1996
(inception) to December 31, 1996 and the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
 
     The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has accumulated losses from the development of
its products and services and must obtain substantial additional debt and equity
financings to execute its business plan. These factors raise substantial doubt
regarding the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
 
                                            Coopers & Lybrand L.L.P.
 
San Francisco, California
January 16, 1998
 
                                       F-2
<PAGE>   103
 
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                          CONSOLIDATED BALANCE SHEETS
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 (INCEPTION) TO SEPTEMBER 30, 1998, IS
                                   UNAUDITED)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,   DECEMBER 31,   SEPTEMBER 30,
                                                                  1996           1997           1998
                                                              ------------   ------------   -------------
<S>                                                           <C>            <C>            <C>
Current assets:
  Cash and cash equivalents.................................  $   184,936    $  9,380,320   $ 55,416,128
  Restricted cash...........................................           --       1,730,382        592,884
  Accounts receivable, net..................................           --              --      1,334,858
  Prepayments on leases.....................................           --         905,268      1,066,050
  Other assets..............................................      810,212         505,333      1,841,870
                                                              -----------    ------------   ------------
         Total current assets...............................      995,148      12,521,303     60,251,790
Property and equipment, net.................................    2,960,159      19,446,322     20,333,938
Prepayments on leases.......................................           --       1,939,054      1,260,103
Other assets................................................       73,947         351,721      5,216,971
                                                              -----------    ------------   ------------
         Total assets.......................................  $ 4,029,254    $ 34,258,400   $ 87,062,802
                                                              ===========    ============   ============
Current liabilities:
  Accounts payable..........................................  $   791,107    $  1,995,639   $  3,437,595
  Accrued liabilities.......................................        7,742       1,809,032      4,463,859
  Accounts payable, related parties.........................      179,085              --             --
  Notes payable, shareholders...............................    1,273,125              --             --
  Accrued interest..........................................       58,296              --             --
  Current portion -- capital lease obligations..............       56,347       2,028,898      2,321,949
  Current portion -- long-term debt.........................           --         238,624        269,832
  Deferred gain on sale/leaseback...........................           --           3,867         24,478
                                                              -----------    ------------   ------------
         Total current liabilities..........................    2,365,702       6,076,060     10,517,713
Payable to equipment vendor.................................    2,273,972              --             --
Deferred revenue............................................    1,350,000              --             --
Notes payable, shareholders.................................      911,243              --             --
Capital lease obligations...................................      103,760       9,655,461      8,723,028
Other long-term debt........................................           --         676,316     64,266,226
Accrued liabilities.........................................           --         449,385      1,851,062
Deferred gain on sale/leaseback.............................           --           7,733         35,750
                                                              -----------    ------------   ------------
         Total liabilities..................................    7,004,677      16,864,955     85,393,779
                                                              -----------    ------------   ------------
Commitments and contingencies (Note 6)
Stockholders' equity (deficit):
  Convertible preferred stock, $.001 par value; 100,000,000
    shares authorized; 4,000,000 shares designated as Series
    A; 3,500,000 shares issued and outstanding at December
    31, 1997 and September 30, 1998; liquidation preference
    $17,500,000.............................................           --           3,500          3,500
  Common stock, $.001 par value; 100,000,000 shares
    authorized; 10,000,000, 12,634,450, and 12,703,037
    shares issued and outstanding at December 31, 1996 and
    1997 and September 30, 1998, respectively...............       10,000          12,634         12,703
Common stock warrants.......................................           --       1,831,234     27,246,651
Additional paid-in capital..................................      991,000      38,613,919     40,100,733
Common stock committed to be issued.........................      512,250              --             --
Shareholder notes receivable................................         (500)             --             --
Note receivable -- employee.................................           --        (250,000)      (635,340)
Deficit accumulated during development stage................   (4,488,173)    (22,580,997)   (64,911,197)
Deferred compensation.......................................           --        (236,845)      (148,027)
                                                              -----------    ------------   ------------
         Total stockholders' equity (deficit)...............   (2,975,423)     17,393,445      1,669,023
                                                              -----------    ------------   ------------
         Total liabilities and stockholders' equity
           (deficit)........................................  $ 4,029,254    $ 34,258,400   $ 87,062,802
                                                              ===========    ============   ============
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-3
<PAGE>   104
 
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 (INCEPTION) TO SEPTEMBER 30, 1998, IS
                                   UNAUDITED)
 
<TABLE>
<CAPTION>
                                JANUARY 18,                                                     JANUARY 18,
                                    1996                             NINE MONTHS ENDED              1996
                               (INCEPTION) TO    YEAR ENDED    -----------------------------   (INCEPTION) TO
                                DECEMBER 31,    DECEMBER 31,   SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,
                                    1996            1997           1997            1998             1998
                               --------------   ------------   -------------   -------------   --------------
<S>                            <C>              <C>            <C>             <C>             <C>
REVENUES:
  Telecommunications
     services................   $        --     $      1,280   $         --    $  1,613,368     $  1,614,648
  Licenses...................            --        2,000,000             --       3,000,000        5,000,000
  Consulting services........            --          900,000             --              --          900,000
                                -----------     ------------   ------------    ------------     ------------
                                         --        2,901,280             --       4,613,368        7,514,648
                                -----------     ------------   ------------    ------------     ------------
OPERATING EXPENSES:
  Operations.................       401,878        9,676,095      4,675,613      25,040,951       35,118,924
  General and
     administrative..........     1,616,265        4,606,776      2,566,677       5,337,888       11,560,929
  Research and development...     1,606,608        4,245,347      3,451,654       5,985,404       11,837,359
  Sales and marketing........        42,568          955,694        694,719       2,103,503        3,101,765
  Depreciation and
     amortization............        68,556          784,548        263,418       3,270,855        4,123,959
                                -----------     ------------   ------------    ------------     ------------
          Total operating
            expenses(1)......     3,735,875       20,268,460     11,652,081      41,738,601       65,742,936
                                -----------     ------------   ------------    ------------     ------------
OPERATING LOSS...............    (3,735,875)     (17,367,180)   (11,652,081)    (37,125,233)     (58,228,288)
                                -----------     ------------   ------------    ------------     ------------
OTHER INCOME (EXPENSE):
  Amortization of debt
     discount................       (85,375)        (546,875)      (546,875)     (1,999,137)      (2,631,387)
  Interest expense...........       (66,973)        (520,148)      (119,203)     (4,012,602)      (4,599,723)
  Indemnification expense....      (600,000)              --             --              --         (600,000)
  Interest income............            --          306,490        157,372         789,883        1,096,373
  Other income...............            50           34,889            114          16,889           51,828
                                -----------     ------------   ------------    ------------     ------------
          Net loss...........   $(4,488,173)    $(18,092,824)  $(12,160,673)   $(42,330,200)    $(64,911,197)
                                ===========     ============   ============    ============     ============
Basic and diluted loss per
  share......................   $     (0.52)    $      (1.70)  $      (1.20)   $      (3.35)
                                ===========     ============   ============    ============
Weighted average shares
  outstanding used in per
  share calculations -- basic
  and
  diluted....................     8,614,815       10,624,251     10,153,442      12,651,034
                                ===========     ============   ============    ============
</TABLE>
 
- ---------------
(1) The following related party balances are included in total operating
expenses:

<TABLE>
<S>                             <C>             <C>            <C>             <C>              <C>
  Related party..............   $ 1,926,027     $    415,000   $    180,000    $    131,250     $  2,472,277
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-4
<PAGE>   105
 
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 (INCEPTION) TO SEPTEMBER 30, 1998, IS
                                   UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                                                        COMMON
                                                                                                                         STOCK
                                                PREFERRED STOCK         COMMON STOCK          COMMON     ADDITIONAL    COMMITTED
                                               ------------------   ---------------------     STOCK        PAID-IN       TO BE
                                                SHARES     AMOUNT     SHARES      AMOUNT     WARRANTS      CAPITAL      ISSUED
                                               ---------   ------   -----------   -------   ----------   -----------   ---------
<S>                                            <C>         <C>      <C>           <C>       <C>          <C>           <C>
BALANCES AT JANUARY 18, 1996 (INCEPTION):
  Common stock issued in exchange for
    contributed software on January 18,
    1996.....................................                         1,510,000   $ 1,510                $    (1,510)
  Common stock ($.00066 per share) issued in
    exchange for cash and note receivable on
    January 18, 1996.........................                         1,500,000     1,500                       (500)
  Common stock issued in exchange for
    contribution of VASP(TM) software on
    March 7, 1996............................                         2,740,000     2,740                     (2,740)
  Common stock ($.23529 per share) issued for
    cash on March 7, 1996....................                         4,250,000     4,250                    995,750
  Common stock committed to be issued per
    Bridge Loan Agreement dated December 10,
    1996.....................................                                                                          $ 512,250
  Net Loss...................................
                                               ---------   ------   -----------   -------   ----------   -----------   ---------
BALANCES, DECEMBER 31, 1996..................                        10,000,000    10,000                    991,000     512,250
  Repayment of shareholder note receivable in
    January 1997.............................
  Common stock committed to be issued per
    Bridge Loan Agreement dated December 10,
    1996.....................................                                                                            120,000
  Common Stock ($5.00 per share) issued per
    Bridge Loan Agreement and in exchange for
    note receivable on March 17, 1997........                           134,450       134                    672,116    (632,250)
  Series A convertible preferred stock ($5.00
    per share) and warrant to purchase Common
    Stock issued on conversion of notes
    payable in February and March 1997.......    490,000   $ 490                                           2,449,510
  Series A convertible preferred stock ($5.00
    per share) and warrant to purchase Common
    Stock issued for cash in February through
    April 1997, net of cash issuance costs of
    $2,005,921...............................  3,010,000   3,010                            $   72,240    13,041,069
  Forgiveness of note receivable in exchange
    for consulting services on August 31,
    1997.....................................
  Private placement of Common Stock and
    warrant to purchase additional Common
    Stock for cash during August and
    September 1997 ($10.00 per share), net of
    issuance cost of $1,848,720..............                         1,000,000     1,000      501,000     8,150,263
 
<CAPTION>
                                                                            DEFICIT
                                                                          ACCUMULATED                       TOTAL
                                               SHAREHOLDER      NOTE         DURING                     STOCKHOLDER'S
                                                  NOTES      RECEIVABLE   DEVELOPMENT      DEFERRED        EQUITY
                                               RECEIVABLE     EMPLOYEE       STAGE       COMPENSATION     (DEFICIT)
                                               -----------   ----------   ------------   ------------   -------------
<S>                                            <C>           <C>          <C>            <C>            <C>
BALANCES AT JANUARY 18, 1996 (INCEPTION):
  Common stock issued in exchange for
    contributed software on January 18,
    1996.....................................                                                                     --
  Common stock ($.00066 per share) issued in
    exchange for cash and note receivable on
    January 18, 1996.........................   $   (500)                                               $        500
  Common stock issued in exchange for
    contribution of VASP(TM) software on
    March 7, 1996............................                                                                     --
  Common stock ($.23529 per share) issued for
    cash on March 7, 1996....................                                                              1,000,000
  Common stock committed to be issued per
    Bridge Loan Agreement dated December 10,
    1996.....................................                                                                512,250
  Net Loss...................................                             $ (4,488,173)                   (4,488,173)
                                                --------     ---------    ------------    ---------     ------------
BALANCES, DECEMBER 31, 1996..................       (500)                   (4,488,173)                   (2,975,423)
  Repayment of shareholder note receivable in
    January 1997.............................        500                                                         500
  Common stock committed to be issued per
    Bridge Loan Agreement dated December 10,
    1996.....................................                                                                120,000
  Common Stock ($5.00 per share) issued per
    Bridge Loan Agreement and in exchange for
    note receivable on March 17, 1997........    (40,000)                                                         --
  Series A convertible preferred stock ($5.00
    per share) and warrant to purchase Common
    Stock issued on conversion of notes
    payable in February and March 1997.......                                                              2,450,000
  Series A convertible preferred stock ($5.00
    per share) and warrant to purchase Common
    Stock issued for cash in February through
    April 1997, net of cash issuance costs of
    $2,005,921...............................                                                             13,116,319
  Forgiveness of note receivable in exchange
    for consulting services on August 31,
    1997.....................................     40,000                                                      40,000
  Private placement of Common Stock and
    warrant to purchase additional Common
    Stock for cash during August and
    September 1997 ($10.00 per share), net of
    issuance cost of $1,848,720..............                                                              8,652,263
</TABLE>
 
                                       F-5
<PAGE>   106
 
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
    CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 (INCEPTION) TO SEPTEMBER 30, 1998, IS
                                   UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                                         COMMON
                                                                                                                          STOCK
                                                PREFERRED STOCK         COMMON STOCK          COMMON      ADDITIONAL    COMMITTED
                                               ------------------   ---------------------      STOCK        PAID-IN       TO BE
                                                SHARES     AMOUNT     SHARES      AMOUNT     WARRANTS       CAPITAL      ISSUED
                                               ---------   ------   -----------   -------   -----------   -----------   ---------
<S>                                            <C>         <C>      <C>           <C>       <C>           <C>           <C>
  Supplemental private placement of Common
    Stock for cash between October and
    December 1997 ($10.00 per share), net of
    issuance costs of $2,198,286.............                         1,490,000     1,490       746,490    12,700,224
  Common Stock issued for payment of note
    payable in November 1997 ($10.00 per
    share) net of issuance costs of
    $14,010..................................                            10,000        10         5,010        85,980
  Issuance of stock options at below fair
    value and related deferred
    compensation.............................                                                                 523,757
  Amortization of deferred compensation
    related to stock options.................
  Issuance of stock warrants in return for
    services and related deferred
    compensation.............................                                                   506,494
  Amortization of deferred compensation
    related to stock warrants................
  Issuance of note receivable to employee in
    December 1997............................
  Net loss...................................
                                               ---------   ------   -----------   -------   -----------   -----------   ---------
BALANCES, DECEMBER 31, 1997..................  3,500,000   3,500     12,634,450    12,634     1,831,234    38,613,919          --
Amortization of deferred compensation related
  to stock options...........................
Issuance of fully vested employee stock
  options in lieu of bonus...................                                                                 486,883
Issuance of stock warrants relating to the
  debt issuance and services provided........                                                 3,154,739
Common stock issued for cash.................                            68,587        69                     999,931
Issuance of stock warrants related to notes
  issue......................................                                                22,260,678
Issuance of note receivable to employees.....
Repayment of note receivable from employee...
Net Loss.....................................
                                               ---------   ------   -----------   -------   -----------   -----------   ---------
BALANCES, SEPTEMBER 30, 1998.................  3,500,000   $3,500    12,703,037   $12,703   $27,246,651   $40,100,733   $      --
                                               =========   ======   ===========   =======   ===========   ===========   =========
 
<CAPTION>
                                                                            DEFICIT
                                                                          ACCUMULATED                       TOTAL
                                               SHAREHOLDER      NOTE         DURING                     STOCKHOLDER'S
                                                  NOTES      RECEIVABLE   DEVELOPMENT      DEFERRED        EQUITY
                                               RECEIVABLE     EMPLOYEE       STAGE       COMPENSATION     (DEFICIT)
                                               -----------   ----------   ------------   ------------   -------------
<S>                                            <C>           <C>          <C>            <C>            <C>
  Supplemental private placement of Common
    Stock for cash between October and
    December 1997 ($10.00 per share), net of
    issuance costs of $2,198,286.............                                                             13,448,204
  Common Stock issued for payment of note
    payable in November 1997 ($10.00 per
    share) net of issuance costs of
    $14,010..................................                                                                 91,000
  Issuance of stock options at below fair
    value and related deferred
    compensation.............................                                             $(523,757)              --
  Amortization of deferred compensation
    related to stock options.................                                               286,912          286,912
  Issuance of stock warrants in return for
    services and related deferred
    compensation.............................                                               (14,450)         492,044
  Amortization of deferred compensation
    related to stock warrants................                                                14,450           14,450
  Issuance of note receivable to employee in
    December 1997............................                $(250,000)                                     (250,000)
  Net loss...................................                              (18,092,824)                  (18,092,824)
                                                --------     ---------    ------------    ---------     ------------
BALANCES, DECEMBER 31, 1997..................         --      (250,000)    (22,580,997)    (236,845)      17,393,445
Amortization of deferred compensation related
  to stock options...........................                                                88,818           88,818
Issuance of fully vested employee stock
  options in lieu of bonus...................                                                                486,883
Issuance of stock warrants relating to the
  debt issuance and services provided........                                                              3,154,739
Common stock issued for cash.................                                                              1,000,000
Issuance of stock warrants related to notes
  issue......................................                                                             22,260,678
Issuance of note receivable to employees.....                 (635,340)                                     (635,340)
Repayment of note receivable from employee...                  250,000                                       250,000
Net Loss.....................................                              (42,330,200)          --      (42,330,200)
                                                --------     ---------    ------------    ---------     ------------
BALANCES, SEPTEMBER 30, 1998.................   $     --     $(635,340)   $(64,911,197)   $(148,027)    $  1,669,023
                                                ========     =========    ============    =========     ============
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-6
<PAGE>   107
 
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 (INCEPTION) TO SEPTEMBER 30, 1998, IS
                                   UNAUDITED)
 
<TABLE>
<CAPTION>
                                                   JANUARY 18,                                                   JANUARY 18,
                                                      1996                             NINE MONTHS ENDED             1996
                                                 (INCEPTION) TO     YEAR ENDED           SEPTEMBER 30,          (INCEPTION) TO
                                                  DECEMBER 31,     DECEMBER 31,   ---------------------------   SEPTEMBER 30,
                                                      1996             1997           1997           1998            1998
                                                 ---------------   ------------   ------------   ------------   --------------
<S>                                              <C>               <C>            <C>            <C>            <C>
Cash flows from operations:
  Net Loss.....................................    $(4,488,173)    $(18,092,824)  $(12,160,673)  $(42,330,200)   $(64,911,197)
  Adjustments to reconcile net loss to net cash
    used in operating activities
    Depreciation and amortization..............         68,556         784,548         263,418      3,270,855       4,123,959
    Provision for bad debts....................             --              --              --         48,401          48,401
    Amortization of deferred compensation......             --         301,362              --        575,701         877,063
    Amortization of debt discount..............         85,375         546,875         546,875      1,999,137       2,631,387
    Accretion of debt discount.................             --              --              --      1,964,449       1,964,449
    Indemnification expense financed and
      settled through issuance of stock........        600,000              --              --             --         600,000
    Expenses financed through notes payable....        161,243              --              --             --         161,243
    Items settled through issuance of stock and
      other equity transactions................             --         820,801         228,757      1,694,452       2,515,253
    Other non-cash credits.....................             --         (47,734)             --        (99,821)       (147,555)
    Changes in assets and liabilities
      (Increase) decrease in assets:
        Accounts receivable....................             --              --              --     (1,383,259)     (1,383,259)
        Prepayments on leases..................             --      (2,844,322)       (810,106)       518,169      (2,326,153)
        Other assets...........................       (884,159)         27,105         462,737       (375,121)     (1,232,175)
      Increase (decrease) in liabilities
        Deferred revenue.......................      1,350,000      (1,350,000)             --             --              --
        Accounts payable.......................        791,107       1,204,532       2,075,665      1,441,956       3,437,595
        Accrued liabilities....................          7,742       2,250,675          10,806      4,056,504       6,314,921
        Accounts payable -- related parties....        179,085        (179,085)       (179,085)            --              --
        Accrued interest.......................         58,296         (58,296)        (58,296)            --              --
        Deferred gain from sale and lease-back
          of equipment.........................             --          11,600              --         48,628          60,228
                                                   -----------     ------------   ------------   ------------    ------------
        Net cash used in operating
          activities...........................     (2,070,928)    (16,624,763)     (9,619,902)   (28,570,149)    (47,265,840)
Cash flows from investing activities:
  Payments for property and equipment..........       (572,672)     (8,897,005)     (6,254,378)    (4,387,757)    (13,857,434)
  Proceeds from sale and lease-back of
    equipment..................................             --         998,352              --      1,220,697       2,219,049
  Restricted cash..............................             --      (1,730,382)     (1,730,382)     1,137,498        (592,884)
                                                   -----------     ------------   ------------   ------------    ------------
        Net cash used in investing
          activities...........................       (572,672)     (9,629,035)     (7,984,760)    (2,029,562)    (12,231,269)
Cash flows from financing activities:
  Proceeds from debt issue.....................             --              --              --     77,727,084      77,727,084
  Proceeds from issuance of common stock.......      1,000,500      22,091,467       8,682,568      1,000,000      24,091,967
  Proceeds from issuance of preferred stock....             --      13,116,319      13,116,319             --      13,116,319
  Receipt of payment on shareholder notes
    receivable.................................             --             500             500             --             500
  Proceeds from notes payable to
    shareholders...............................      1,850,000         650,000         650,000             --       2,500,000
  Repayment of shareholder notes...............             --      (1,000,000)     (1,000,000)            --      (1,000,000)
  Payment for note receivable -- related
    party......................................             --              --              --       (635,340)       (635,340)
  Repayment on note receivable -- related
    party......................................             --        (250,000)             --        250,000              --
  Payments on capital lease obligations and
    loans......................................        (21,964)       (159,309)        (85,413)    (1,706,225)     (1,887,498)
  Proceeds from loans..........................             --       1,000,205       1,000,205     12,000,000      13,000,205
  Repayment of loan............................             --              --              --    (12,000,000)    (12,000,000)
                                                   -----------     ------------   ------------   ------------    ------------
        Net cash provided by financing
          activities...........................      2,828,536      35,449,182      22,364,179     76,635,519     114,913,237
                                                   -----------     ------------   ------------   ------------    ------------
Net increase in cash and cash equivalents......        184,936       9,195,384       4,759,517     46,035,808      55,416,128
Cash and cash equivalents balance -- beginning
  of period....................................             --         184,936         184,936      9,380,320              --
                                                   -----------     ------------   ------------   ------------    ------------
Cash and cash equivalents balance -- end of
  period.......................................    $   184,936     $ 9,380,320    $  4,944,453   $ 55,416,128    $ 55,416,128
                                                   ===========     ============   ============   ============    ============
</TABLE>
 
See Note 14 for Supplemental Disclosure of Cash Flow Information.
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-7
<PAGE>   108
 
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 (INCEPTION) TO SEPTEMBER 30, 1998, IS
                                   UNAUDITED)
 
1. ORGANIZATION AND BASIS OF PRESENTATION:
 
  ORGANIZATION:
 
     TeleHub Communications Corporation was formed in January 1996 to develop a
wholesale long distance communications carrier network deploying its proprietary
technology. In September 1996, the name of TeleHub Communications was changed to
TeleHub Network Services ("TNS"). In addition, a new holding company, TeleHub
Communications Corporation (the "Company" or "TeleHub") was formed. TeleHub
initiated an exchange offer in which TNS stockholders received ten thousand
shares of TeleHub common stock for each share of TNS common stock on like terms.
This exchange offer closed on January 1, 1997. All of the shares in TNS were
exchanged in this manner. The Company possesses proprietary software and systems
known as the Virtual Access Services Platform ("VASP(TM)"), which have been
under development to allow the management, billing and control of voice, data
and video content using cell-based efficiencies of asynchronous transfer mode
("ATM"). The Company's wholly-owned subsidiary, TeleHub Technology Corporation
("TTC"), markets and enhances the VASP(TM) technology. The Company has installed
equipment in three switching centers located in Chicago, New York, and Los
Angeles. The Company's activities to date have consisted of product development,
raising capital, acquiring property and equipment, and marketing its products.
The Company is considered a development stage company as of December 31, 1997.
 
     These financial statements reflect the financial position and results of
operations for TeleHub and its consolidated subsidiaries, TNS, TTC and TeleHub
Leasing Corporation ("TLC"). The capital structure of the new holding company,
TeleHub has been reflected on a retroactive basis for all periods presented.
Additionally, the name of the new holding company, TeleHub Communications
Corporation, has been applied on a retroactive basis.
 
     At December 31, 1997, TLC has been incorporated but has had no activity.
TeleHub owns 100% of the common stock of TLC.
 
     The telecommunications industry is highly competitive, as is the specific
wholesale long distance market the Company is entering. The success of the
Company in the wholesale long distance business is dependent upon the Company's
ability to generate significant customer traffic, to manage an efficient long
distance network and related customer service, and future enhancements of
VASP(TM). The Company has not previously managed a long distance network and
there can be no assurance that its long distance services can be sold at a
profit. Furthermore, the VASP(TM) platform is subject to substantial
technological uncertainty and there can be no assurance that the VASP(TM)
platform can be commercially successful.
 
  BASIS OF PRESENTATION:
 
     The financial statements have been prepared assuming the Company will
continue as a going concern. The Company has accumulated losses since its
inception in 1996, related primarily to the development of its software and
construction of its network sites. Management has developed an operations plan
which requires substantial additional debt and equity financings to complete
product development and to successfully launch and market products in
development. The Company's continued existence is dependent upon obtaining
sufficient additional financing and achieving profitable operations. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. The Company raised additional proceeds through the Initial Note
Offering of debt and equity securities (see Note 17). The Company believes that
the proceeds of that offering will be sufficient to fund its operations for the
next twelve months. However, there can be no assurance that the Company's
efforts to achieve profitable operations or raise capital will be successful.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
 
                                       F-8
<PAGE>   109
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 TO SEPTEMBER 30, 1998, IS UNAUDITED)
 
2. SIGNIFICANT ACCOUNTING POLICIES:
 
  PRINCIPLES OF CONSOLIDATION:
 
     The consolidated financial statements of the Company include the accounts
of TeleHub Communications Corporation and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been eliminated.
 
  UNAUDITED INTERIM FINANCIAL INFORMATION:
 
     The Consolidated Financial Statements as of and for the nine month period
ended September 30, 1998 are unaudited, but, in the opinion of management,
include all adjustments, consisting only of normal recurring accruals, necessary
for a fair presentation of the results for such period. The results of
operations for the nine months ended September 30, 1998 are not necessarily
indicative of results to be expected for the full fiscal year.
 
  USE OF ESTIMATES:
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
  REVENUE RECOGNITION:
 
     Telecommunications Services:
 
     Revenues from telecommunications services provided to customers are
     recognized as services are rendered.
 
     Licenses:
 
     Revenues from licenses are recognized when the user installs the product,
     if there are no significant post-delivery obligations and collection of the
     receivables is probable. Revenue from maintenance is recognized ratably
     over the product's life cycle, which may exceed one year. Costs related to
     insignificant obligations are accrued.
 
     One customer accounted for all of the Company's licensing revenues during
     fiscal year 1997 and the three month period ended March 31, 1998.
 
     Consulting Services:
 
     The Company's policy is to recognize revenue from consulting services as
     such services are performed.
 
  SOFTWARE DEVELOPMENT COSTS:
 
     Statement of Financial Accounting Standards No. 86, Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed, requires
that software development costs be capitalized once the technological
feasibility of the software product has been established. As of December 31,
1997 all software development costs have been charged to expense in the period
incurred as technological feasibility of the products under development has not
been established.
 
                                       F-9
<PAGE>   110
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 TO SEPTEMBER 30, 1998, IS UNAUDITED)
 
  RESEARCH AND DEVELOPMENT COSTS:
 
     Costs related to research and development activities are expensed when
incurred.
 
  PROPERTY AND EQUIPMENT:
 
     Depreciation and amortization are computed on the straight-line basis over
the estimated useful lives of the assets or the length of the capital lease,
whichever is shorter. Estimated useful lives are as follows:
 
<TABLE>
<S>                                          <C>
Computer equipment.........................   3 years
Network equipment..........................   5 years
Office furniture...........................  10 years
</TABLE>
 
     Expenditures incurred for assets under construction are capitalized.
Leasehold improvements are amortized on a straight-line basis over the term of
the lease, or the useful life of the assets; whichever is shorter.
 
     Maintenance and repairs are expensed as incurred. When assets are sold or
retired, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is included in operations.
 
     The Company reviews property and equipment for impairment whenever events
or changes in circumstances indicate the carrying value of an asset may not be
recoverable. No such events have occurred to date. In performing the review for
recoverability, the Company would estimate the future cash flows expected to
result from the use of the asset and its eventual disposition. The amount of the
impairment loss, if an impairment exists, would be calculated based on the
excess of the carrying amount of the asset over its fair value.
 
  CASH AND CASH EQUIVALENTS:
 
     All cash and cash equivalents are held in checking, money market accounts
or short-term investments with original maturities of 90 days or less, with two
banks. Cash equivalents are recorded at cost, which approximates fair value. As
of December 31, 1997, these balances exceed existing federally insured limits.
 
  ISSUANCE OF EQUITY INSTRUMENTS TO NON-EMPLOYEES
 
     The Company issues equity instruments to non-employees in consideration for
goods or services. Such transactions are accounted for based on the fair value
of the consideration received by the Company or the fair value of the equity
instrument issued, whichever is more reliably measurable, as required under the
provisions of Financial Accounting Standards No. 123, Accounting for Stock Based
Compensation.
 
  INCOME TAXES:
 
     The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, which
requires an asset and liability approach to financial accounting and reporting
for income taxes. Accordingly, deferred tax assets and liabilities arise from
the differences between the tax basis of an asset or liability and its reported
amount in the financial statements and net operating loss carryforwards.
Deferred tax amounts are determined by using the tax rates expected to be in
effect when the taxes will actually be paid or refunds received, as provided
under currently enacted tax law. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to
 
                                      F-10
<PAGE>   111
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 TO SEPTEMBER 30, 1998, IS UNAUDITED)
 
be realized. Income tax expense or benefit is the tax payable or refundable,
respectively, for the period plus or minus the change in deferred tax assets and
liabilities during the period.
 
  NET LOSS PER SHARE:
 
     The Company computes loss per share pursuant to Statement of Financial
Accounting Standards No. 128, Earnings per Share.
 
  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
 
     In 1997, the Financial Accounting Standards Board issued Financial
Accounting Standards ("FAS") Number 129, Disclosure of Information About Capital
Structure, FAS Number 130, Reporting Comprehensive Income, and FAS Number 131,
Disclosure About Segments of an Enterprise and Required Information, which are
effective for the year ending December 31, 1998. In 1998, the Accounting
Standards Executive Committee of the AICPA Issued Statement of Position Number
98-1, Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use, and Number 98-5, Reporting on the Costs of Start-up Activities,
which are effective for the year ending December 31, 1999. The Company has not
yet determined the impact of the implementation of these pronouncements on its
financial statements; however, it is not expected to be material.
 
  RECLASSIFICATIONS:
 
     Certain amounts in the financial statements have been reclassified to
conform with the current year's presentation.
 
3. PROPERTY AND EQUIPMENT:
 
     Property and equipment consists of:
 
<TABLE>
<CAPTION>
                                                DECEMBER 31,   DECEMBER 31,   SEPTEMBER 30,
                                                    1996           1997           1998
                                                ------------   ------------   -------------
<S>                                             <C>            <C>            <C>
Equipment under capital lease:
  Network equipment...........................   $2,526,636    $12,740,048     $13,730,703
  Computer equipment..........................       25,403        182,072         182,072
  Furniture...................................      156,668        151,787         151,787
Network equipment.............................       30,468      1,744,888       2,798,964
Computer and production equipment.............      207,206      2,026,160       3,348,406
Furniture.....................................       12,586        758,078       1,033,045
Leasehold improvements........................       69,748      2,648,658       3,061,953
                                                 ----------    -----------     -----------
          Total property and equipment........    3,028,715     20,251,691      24,306,930
Less accumulated depreciation and
  amortization................................      (68,556)      (805,369)     (3,972,992)
                                                 ----------    -----------     -----------
Property and equipment, net...................   $2,960,159    $19,446,322     $20,333,938
                                                 ==========    ===========     ===========
</TABLE>
 
     Included in accumulated depreciation and amortization is $30,345, $312,737,
and $2,307,053 of accumulated amortization as of December 31, 1996 and 1997, and
September 30, 1998, respectively, related to leased furniture and equipment.
 
     Depreciation and amortization expense was $68,556, $263,418, $784,548,
$3,270,855 and $4,123,959 for the period from January 18, 1996 (inception) to
December 31, 1996, the nine months ended September 30,
 
                                      F-11
<PAGE>   112
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 TO SEPTEMBER 30, 1998, IS UNAUDITED)
 
1997, the year ended December 31, 1997, the nine months ended September 30,
1998, and the period from January 18, 1996 (inception) to September 30, 1998,
respectively.
 
4. ACCRUED LIABILITIES:
 
     The primary components of accrued liabilities are as follows:
 
<TABLE>
<CAPTION>
                                                                              SEPTEMBER
                                                        DECEMBER 31,             30,
                                                   -----------------------   -----------
                                                      1996         1997         1998
                                                   ----------   ----------   -----------
<S>                                                <C>          <C>          <C>
Employee bonuses.................................          --   $  708,362   $1,135,683
Sales tax on purchased equipment.................          --      694,153      694,153
Accrued leases...................................          --        6,109    1,079,078
Accrued network costs............................          --      146,037    1,017,215
Other accrued expenses...........................  $    7,742      254,371      537,730
                                                   ----------   ----------   ----------
          Total Accrued Liabilities..............  $    7,742   $1,809,032   $4,463,859
                                                   ==========   ==========   ==========
</TABLE>
 
5. INCOME TAXES:
 
     The primary components of temporary differences which give rise to deferred
taxes are as follows:
 
<TABLE>
<CAPTION>
                                        DECEMBER 31, 1996         DECEMBER 31, 1997
                                       --------------------   -------------------------
                                        FEDERAL     STATE       FEDERAL        STATE
                                       ---------   --------   -----------   -----------
<S>                                    <C>         <C>        <C>           <C>
DEFERRED TAX ASSETS:
Capitalized R&D for tax purposes.....         --         --   $ 4,800,000   $   820,000
Net operating loss...................  $ 560,000   $ 80,000     2,200,000       400,000
Other, including nondeductible
  accruals...........................         --         --     1,000,000       230,000
                                       ---------   --------   -----------   -----------
Total deferred tax assets............    560,000     80,000     8,000,000     1,450,000
Depreciable assets...................         --         --       200,000        30,000
                                       ---------   --------   -----------   -----------
Net deferred tax asset...............    560,000     80,000     7,800,000     1,420,000
Valuation allowance..................   (560,000)   (80,000)   (7,800,000)   (1,420,000)
                                       ---------   --------   -----------   -----------
Net deferred tax asset...............  $      --   $     --   $        --   $        --
                                       =========   ========   ===========   ===========
</TABLE>
 
     Due to uncertainty of realization, a valuation allowance has been provided
to eliminate the net deferred tax asset at both December 31, 1997 and 1996. The
increase in the valuation allowance was $8,580,000 and $640,000 during the year
ended December 31, 1997 and for the period from January 18, 1996 (inception) to
December 31, 1996, respectively.
 
                                      F-12
<PAGE>   113
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 TO SEPTEMBER 30, 1998, IS UNAUDITED)
 
     At December 31, 1997, the Company had net operating loss (NOL)
carryforwards of approximately $6,500,000 and $6,650,000, for federal and state
income tax purposes, respectively. These carryforwards expire as follows:
 
<TABLE>
<CAPTION>
                                                                                  EXPIRING IN
YEAR ENDED                                                           NOL          YEAR ENDING
DECEMBER 31,                                                    CARRYFORWARDS     DECEMBER 31,
- ------------                                                    -------------     ------------
<S>                                                           <C>                 <C>
Federal
  1996......................................................     $1,650,000           2011
  1997......................................................      4,850,000           2012
State
  1996......................................................        165,000           2001
  1997......................................................      5,000,000           2002
</TABLE>
 
     Pursuant to the provisions of the Tax Reform Act of 1986, utilization of
the NOL carryforwards may be subject to an annual limitation if the Company
experienced a greater than 50% change in ownership of the Company within a
three-year period.
 
6. COMMITMENTS AND CONTINGENCIES:
 
  LEASE OBLIGATIONS:
 
     The Company is obligated under the terms of operating leases with various
parties for office space, switch room facilities, office equipment and vehicles.
These contracts may provide for adjustments or escalations based upon changes in
consumer price indices or operating expenses. A summary of such fixed
commitments at December 31, 1997 for the next five succeeding years and
thereafter is as follows:
 
<TABLE>
<CAPTION>
                                                                               OPERATING
YEARS                                                        CAPITAL LEASES     LEASES
- -----                                                        --------------   -----------
<S>                                                          <C>              <C>
1998.......................................................    $2,896,366     $ 9,142,032
1999.......................................................     2,866,258      12,488,890
2000.......................................................     2,825,096      11,461,526
2001.......................................................     2,825,096       6,523,533
2002.......................................................     2,795,748       1,667,973
Thereafter.................................................            --       5,696,205
                                                               ----------     -----------
Total minimum lease payments...............................    14,208,564     $46,980,159
                                                                              ===========
Less amount representing interest..........................     2,524,205
                                                               ----------
Present value of minimum lease payments under capital
  leases...................................................    11,684,359
Less current portion.......................................     2,028,898
                                                               ----------
Noncurrent portion.........................................    $9,655,461
                                                               ==========
</TABLE>
 
     Rent expense under all operating lease agreements was $133,553, $1,741,784,
$3,397,635, $8,781,642, and $12,312,830 for the period from January 18, 1996
(inception) to December 31, 1996, the nine months ended September 30, 1997, the
year ended December 31, 1997, the nine months ended September 30, 1998, and the
period from January 18, 1996 (inception) to September 30, 1998, respectively.
 
                                      F-13
<PAGE>   114
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 TO SEPTEMBER 30, 1998, IS UNAUDITED)
 
  PURCHASE COMMITMENTS:
 
     During 1996 and 1997, the Company entered into equipment financing
arrangements with an equipment vendor to purchase equipment. At December 31,
1996, $2,273,972 was payable to the vendor. In January 1998, the Company
renegotiated the terms of its arrangements into a capital lease. The amount owed
at December 31, 1997 is reflected in the capital lease balances.
 
  EMPLOYMENT AGREEMENTS:
 
     The Company has entered into employment agreements with certain of its
executives. These agreements generally provide for two to four-year initial
terms and thereafter one-year renewal terms until either party provides 30 days
notice of termination prior to the end of a term. If the Company terminates the
employment without cause, or if the employment is terminated upon the occurrence
of a major transaction, as defined, involving the Company, then the executive
shall receive a termination fee equal to 50% to 200% of the executive's annual
salary plus benefits plus a specified bonus. Payments shall only be made upon
execution of a standard release waiving all claims against the Company. The
Company's total potential obligation under these employment agreements was
$1,902,500 at December 31, 1997.
 
  LITIGATION:
 
     On April 15, 1997, Cam-Net Communications Network, Inc. ("Cam-Net") filed
an action against the Company in the United States District Court for the
Northern District of Illinois (Cam-Net Communications Network, Inc. v. TeleHub
Communications Corp. and TeleHub Network Services Corp., Cause No. 97 C 2578).
Cam-Net alleged, among other complaints, the breach of a September 1996
agreement under which TeleHub was to create a new network, billing, and
accounting system for Cam-Net's operations. Cam-Net further alleged that it paid
TeleHub a consulting fee of $1,350,000, but that TeleHub failed to complete the
system. The Company recorded the $1,350,000 it received from Cam-Net as deferred
revenue at December 31, 1996 pending resolution of this complaint. During 1997,
the Company settled its litigation with Cam-Net out of court. The terms of the
settlement required the Company to return $450,000 of the consulting fees it had
received to Cam-Net. The Company retained $900,000 in fees related to the
consulting services and recognized such fees as revenue during 1997.
 
7. RELATED PARTY TRANSACTIONS:
 
     Hartford Holdings, Ltd. ("Hartford"), a substantial shareholder of the
Company, is controlled by the Chairman of the Board of Directors of the Company.
The Vice-chairman, President and Chief Executive Officer of the Company holds a
beneficial interest in the Sledge Family Trust which is a shareholder of the
Company. Hartford and the Sledge Family Trust advanced funds to further the
Company's growth and development in amounts further described in Note 9. The
Company has also indemnified Hartford from certain losses incurred in connection
with the matter discussed in Note 8.
 
     During 1996, the Company paid the President of the Company $110,500 for
consulting services associated with the Cam-Net merger negotiations which were
subsequently abandoned (Note 8). The Company also incurred $169,304 in expenses
for consulting services provided by the Chairman of the Board of Directors. This
amount was payable to Hartford at December 31, 1996 and was settled on March 7,
1997 through the issuance of 33,800 shares of Series A Convertible Preferred
Stock.
 
     In January 1996, Roseville Computer Projects Limited ("Roseville")
contributed certain software in exchange for shares of common stock in TNS which
were later converted into 1,510,000 shares of the Company's common stock. As a
result of this transaction, Roseville and the Company became entities under
 
                                      F-14
<PAGE>   115
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 TO SEPTEMBER 30, 1998, IS UNAUDITED)
 
common control. In March 1996, Roseville assigned all rights, title and interest
in the VASP(TM) to the Company in exchange for additional shares of common stock
in TNS which were later converted into 2,740,000 shares of the Company's common
stock. No value was assigned to the contributed software.
 
     During 1997, Roseville sold certain network databases and libraries to the
Company for $485,000. Under a 1997 consulting agreement with the Company, a
subsidiary of Roseville provided consulting services and maintained those
network databases and libraries for the Company for a fee of $20,000 per month.
The Roseville subsidiary received a total of $325,000 under this consulting
agreement prior to being terminated on January 1, 1998.
 
     During 1996, development efforts on the VASP(TM) were continued by
employees of the Company and programmers and system developers contracted by
Access Point Communications Corp. ("APCC"). APCC is controlled by the Chief
Technology Officer of the Company. APCC billed the Company $974,915 pursuant to
this arrangement during the period from January 18, 1996 (inception) to December
31, 1996. The Company began contracting directly with the programmers and
developers in January 1997. A subsidiary of Roseville received approximately
$300,000 in 1996 as a subcontractor of APCC. This fee also covered the 1996 use
of certain network databases and libraries owned by Roseville. During the year
ended December 31, 1997 and the period from January 18, 1996 (inception) to
December 31, 1996, the fees totaled $240,000 and $85,000, respectively, and were
paid directly to the Roseville subsidiary. The Company also reimbursed APCC
$36,308 for other operating expenses during 1996. During 1996, the Company also
paid APCC management fees and library maintenance fees of $550,000 of which
$14,535 remained outstanding at December 31, 1996.
 
     The Company's Chief Technology Officer has extended, without additional
consideration, personal guarantees to further support lender requirements on one
operating and one capital lease obligation.
 
     The Company loaned the Chief Financial Officer $250,000 due in 1999. The
interest rate applied to this note receivable is 1% over the prime rate. The
executive pledged a warrant exercisable for the purchase of 150,000 shares at
$7.50 per share as collateral. In May 1998, the executive repaid the principal
of the loan and the related accrued interest.
 
     During 1997, the Company contracted with International Telecom for
consulting services. International Telecom is owned by the Chairman of the Board
of Directors. Fees to International Telecom during 1997 totaled $175,000.
 
     In February 1998, the Company loaned $112,029 to an executive in exchange
for an unsecured non-interest bearing promissory note. In May 1998, the
executive repaid this note.
 
     In August 1998, the Company loaned $400,000 to an executive in exchange for
an interest bearing promissory note, which is collateralized by a second
mortgage on prime residential real estate, pursuant to executive's relocation
and employment contract. Also in August 1998, the Company loaned $235,340 to
another executive. This note was repaid in November 1998.
 
8. INDEMNIFICATION EXPENSE:
 
     During 1996, the Company agreed to indemnify Hartford (see Note 7) from any
claims and liabilities that Hartford might incur in assisting with the placement
of securities of Cam-Net. Parties unrelated to Hartford had previously advanced
$600,000 to Cam-Net in connection with a private placement of Cam-Net
securities. When the proposed merger was terminated, the securities offering by
Cam-Net was also rescinded, and Hartford was required to repay $600,000 pursuant
to its arrangement with the advancing party. The Company recognized its
obligation to indemnify Hartford as an expense during the period ending December
31, 1996. The Company issued a note payable to Hartford for this $600,000
obligation which is included in
 
                                      F-15
<PAGE>   116
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 TO SEPTEMBER 30, 1998, IS UNAUDITED)
 
notes payable at December 31, 1996. The note was settled through the issuance of
120,000 shares of Series A Convertible Preferred Stock and a warrant to purchase
60,000 shares of the Company's common stock on March 7, 1997 (see Note 9).
 
9. LONG-TERM DEBT:
 
  NOTES PAYABLE, STOCKHOLDERS:
 
     As of December 31, 1996, the Company had the following notes payable
outstanding to stockholders:
 
<TABLE>
<S>                                                           <C>
Bridge loan payable -- Hartford Holdings, Ltd., commitment
  for total advances of $1,000,000 by January 31, 1997,
  interest compounded quarterly at 17% per annum, principal
  and interest payable from proceeds of any security
  offering by the Company, but not later than July 1,
  1997......................................................  $   400,000
Notes payable -- Hartford Holdings, Ltd., interest at 7.5%
  per annum, compounded quarterly, interest and principal
  payable from proceeds of any security offering by the
  Company, but not later than August 30, 1997, convertible
  into securities of the Company on same terms as extended
  to other investors........................................    1,300,000
Notes payable -- Hartford Holdings, Ltd., interest at 12%
  per annum, compounded quarterly, interest and principal
  payable from proceeds of any security offering by the
  Company but not later than July 1, 1998...................      411,243
Note payable -- Hartford Holdings, Ltd., interest at 7.5%
  per annum, compounded quarterly, interest and principal
  payable from proceeds of any security offering by the
  Company, but not later than August 1, 1998, convertible
  into securities of the Company on same terms as extended
  to other investors........................................      450,000
Note payable -- Officer, interest at 7.5% per annum,
  compounded quarterly, interest and principal payable from
  proceeds of any security offering by the Company, but not
  later than August 1, 1998, convertible into securities of
  the Company on same terms as extended to other
  investors.................................................       50,000
                                                              -----------
Total advances and notes, stockholders......................    2,611,243
Less: unamortized discount on notes payable.................     (426,875)
                                                              -----------
                                                                2,184,368
Less current portion........................................   (1,273,125)
                                                              -----------
Long-term portion...........................................  $   911,243
                                                              ===========
</TABLE>
 
     On March 7, 1997, the Company repaid $1 million of the loans and advances
in cash. The remaining balances were converted into 490,000 shares of the
Company's Series A Convertible Preferred Stock. In conjunction with the
exchange, the Company also issued warrants to purchase 245,000 shares of the
Company's common stock at a price of $7.50 per share.
 
     In December 1996, the Company entered into a Bridge Loan Agreement with
Hartford Holdings. In consideration for the Bridge Loan, the Company agreed to
issue common stock to Hartford equal to 20% of the total amount of notes payable
and advances Hartford provided to the Company through March 1997. Pursuant to
the terms of the agreement, the Company issued 134,450 shares of common stock to
Hartford on March 7, 1997. In conjunction with the issuance of the common stock,
the Company accepted a note receivable from Hartford for $40,000. The estimated
fair value of the common stock issued to Hartford has
 
                                      F-16
<PAGE>   117
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 TO SEPTEMBER 30, 1998, IS UNAUDITED)
 
been recognized by the Company as a discount on the notes payable to Hartford.
Amortization expense on the discount was $546,875 and $85,375 for the three
month period ended March 31, 1997 and for the period from January 18, 1996
(inception) to December 31, 1996, respectively.
 
     In May 1998, the Company received a $12 million loan ("Bridge Loan") from a
financial institution. The Bridge Loan accrued interest at an annual rate of 12%
and was collateralized by all of the Company's intangible property. The
financial institution also received a warrant to purchase 240,000 shares of
Common Stock for $10.00 per share, exercisable until May 5, 2005 or two years
after an initial public offering. The Company recorded the loan at a discount of
approximately $1,460,000, which discount was allocated to the warrant. The fair
value of the warrant was estimated on the date of grant using the Black-Scholes
model with the following assumptions: expected volatility of 35%, risk-free
interest rate of 5.76%, expected life of 7 years and no dividends. The debt
discount has been recorded at the fair value of the warrant. The Company
recorded the entire $1,460,000 during the nine month period ended September 30,
1998. Interest expense on this loan amounted to $335,802 as of September 30,
1998. The Company repaid this Bridge Loan in July 1998.
 
  OTHER LONG-TERM DEBT:
 
     The Company has entered into an agreement to finance certain equipment
which is collateralized by the equipment. The loan bears interest at 16.5% per
annum, interest and principal payable monthly. Scheduled repayments of the loan
subsequent to December 31, 1997 are as follows:
 
<TABLE>
<CAPTION>
YEAR ENDING
- -----------
<S>                                <C>
1998.............................  $ 238,624
1999.............................    281,116
2000.............................    269,384
2001.............................    125,816
                                   ---------
Total............................    914,940
Less current portion.............   (238,624)
                                   ---------
Long-term portion................  $ 676,316
                                   =========
</TABLE>
 
10. LETTERS OF CREDIT:
 
     At December 31, 1997, the Company has $1,682,350 available in standby
letters of credit with a financial institution. The letters of credit expire
from May 13, 1998 to October 27, 1998. The letters of credit are secured by
$1,730,382 of certificates of deposit, reflected as restricted cash in the
accompanying financial statements.
 
11. COMMON AND PREFERRED STOCK:
 
  PREFERRED STOCK:
 
     The Company has authorized 100,000,000 shares of Preferred Stock, of which
4,000,000 are designated Series A Convertible Preferred Stock ("Series A
Stock"). At December 31, 1997, there were 3,500,000 shares of Series A Stock
outstanding.
 
     Preferred stockholders receive one vote for each common share into which
such preferred shares are convertible. Each share of Series A Stock is
convertible at the option of the stockholder into one share of the Company's
common stock. Shares of the Series A Stock have a liquidation preference of
$5.00 per share. All
 
                                      F-17
<PAGE>   118
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 TO SEPTEMBER 30, 1998, IS UNAUDITED)
 
shares of Series A Stock automatically convert into common stock in the event
that the Company completes an initial public offering or becomes subject to the
reporting requirements of the Securities Exchange Act of 1934. The Series A
Stock is noncumulative.
 
  COMMON STOCK:
 
     The Company has authorized 100,000,000 shares of common stock. At December
31, 1997, there were 12,634,450 shares of common stock outstanding.
 
  COMMON STOCK WARRANTS:
 
     Issued in conjunction with equity financings:
 
     In February 1997, the Company issued warrants to purchase 1,750,000 shares
of Company common stock to certain shareholders in connection with the issuance
of Series A Preferred Stock for cash. These warrants are exercisable at any time
from February 20, 1998 to February 20, 2000.
 
     In August 1997, the Company issued warrants to purchase 875,000 shares of
Company common stock to certain shareholders in connection with the issuance of
common stock for cash. These warrants are exercisable through August 26, 2000.
 
     Issued for services and financings:
 
     The Company also issued warrants to purchase common stock to consultants,
and equipment lease providers. At December 31, 1997, the following warrants to
purchase common stock were outstanding:
 
<TABLE>
<CAPTION>
NUMBER OF
  SHARES     AGGREGATE
  UNDER       EXERCISE
 WARRANT       PRICE                            EXERCISE PERIOD
- ---------    ----------                         ---------------
<C>          <C>          <S>
   301,000   $1,655,500   Exercisable at any time from April 30, 1998 to April 30,
                            2000
   150,000    1,500,000   Exercisable at any time from April 30, 1998 to April 30,
                            2000
    25,000      187,500   Exercisable at any time from May 15, 1997 to May 15, 2000
   375,000    2,812,500   Exercisable at any time from August 26, 1998 to August 26,
                            2000
     1,750       13,125   Exercisable at any time from December 25, 1998 to December
                            25, 2000
     5,500       55,000   Exercisable at any time from December 15, 1997 until the
                            later of December 15, 2004 or second anniversary of an
                            initial public offering
     4,667       35,000   Exercisable at any time from June 15, 1997 until the later
                            of June 15, 2007 or the fifth anniversary of an initial
                            public offering
    45,000      337,000   Exercisable at any time from August 1, 1998 to November 14,
                            2000
    80,070      600,525   Exercisable at any time; no expiration date
</TABLE>
 
     As of December 31, 1997, none of the foregoing warrants had been exercised.
 
     In March 1998, the Company issued a warrant to purchase 10,000 shares of
common stock for $10.00 per share. This warrant is exercisable at any time from
March 24, 1999 until March 24, 2000.
 
     In May 1998, the Company issued a warrant to purchase 75,000 shares of
common stock for $10.00 per share. This warrant is exercisable at any time from
May 1, 1999 until May 1, 2001.
 
     In May 1998, the Company issued a warrant to purchase 240,000 shares of
common stock for $10.00 per share to a financial institution in connection with
the $12 million loan financing as discussed in Note 9. In
 
                                      F-18
<PAGE>   119
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 TO SEPTEMBER 30, 1998, IS UNAUDITED)
 
connection with this financing, in September 1998, the Company also issued a
warrant to purchase 100,000 shares of common stock for $12.50 per share to one
of the Company's directors.
 
     In July 1998, the Company issued warrants to purchase 2,082,732 shares of
common stock at an exercise price of $0.01 per share in conjunction with the
Initial Note Offering. These warrants are exercisable at any time through July
2005.
 
     The following table summarizes information with respect to stock warrants
issued to non-employees that were outstanding at December 31, 1997:
 
<TABLE>
<CAPTION>
                                                        WEIGHTED AVERAGE                                    WEIGHTED AVERAGE
                         NUMBER      WEIGHTED AVERAGE      REMAINING                            NUMBER       EXERCISE PRICE
      RANGE OF         OUTSTANDING    FAIR VALUE OF       CONTRACTUAL      WEIGHTED AVERAGE   EXERCISABLE    OF EXERCISABLE
   EXERCISE PRICES     AT 12/31/97   OPTIONS/WARRANT      LIFE (YEARS)      EXERCISE PRICE    AT 12/31/97   OPTIONS/WARRANTS
   ---------------     -----------   ----------------   ----------------   ----------------   -----------   ----------------
<S>                    <C>           <C>                <C>                <C>                <C>           <C>
$ 5.50 - $7.50.......    832,487          $1.77               2.2               $ 6.72          109,737          $ 7.50
$10..................    155,000          $1.78               2.5               $10.00            5,500          $10.00
                         -------                                                                -------
                         987,987                                                                115,237
                         =======                                                                =======
</TABLE>
 
     The fair value of each non-employee grant is estimated on the date of grant
using the Black-Scholes model with the following assumptions; expected
volatility of 35%, risk-free interest rate ranging from 6.62% to 5.76%, expected
lives ranging from 2 to 10 years and no dividends. The Company charges the
related compensation costs to expense at the time the services are provided or
over the life of the related financing arrangement. The compensation expense for
the year ended December 31, 1997, amounted to $229,320. Warrants issued during
the nine month period ended September 30, 1998 were valued using the same
assumptions.
 
  OPTION ISSUED TO NON-EMPLOYEE:
 
     The Company has issued an option to purchase 10,000 shares of the Company's
common stock at an exercise price of $5.00 per share to a consultant in exchange
for services rendered. As of December 31, 1997, this option was exercisable
until August 1, 2007. The Company estimated the fair value of this option and
charged such amount to expense at the time the services were provided. The
Company reserved 10,000 shares of common stock for the exercise of this option
and as of December 31, 1997, the option had not been exercised.
 
12. EMPLOYEE STOCK OPTION PLAN:
 
     In 1997, the Company created an Employee Stock Option Plan. Under this
plan, the Company may grant options for common stock to its employees,
directors, and consultants either as incentive stock options or nonstatutory
options. The exercise price of each option is determined by the Board of
Directors and an option's maximum term generally is 10 years. Options generally
vest 25% on the day of grant, and 25% annually on January 1st of each year
thereafter. 3,025,000 and 4,600,000 shares of stock were reserved for the
exercise of stock options at December 31, 1997 and September 30, 1998,
respectively.
 
     During 1997, the Company granted a warrant to purchase 150,000 shares at
$7.50 per share to an employee. This warrant expires on the fifth anniversary of
an initial public offering.
 
                                      F-19
<PAGE>   120
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 TO SEPTEMBER 30, 1998, IS UNAUDITED)
 
     The following table summarizes activity under the Company's stock option
plan for the period ended December 31, 1997 and the nine month period ended
September 30, 1998:
 
<TABLE>
<CAPTION>
                                                           OPTION AND                     WEIGHTED
                                              NUMBER      WARRANT PRICE     AGGREGATE     AVERAGE
                                             OF SHARES      PER SHARE         PRICE       EXERCISE
                                             ---------    -------------    -----------    --------
<S>                                          <C>          <C>              <C>            <C>
Options and warrants:
  Granted..................................  1,626,000     $5.00-7.50      $ 7,460,000     $ 5.28
  Exercised................................         --         --                   --         --
  Forfeited................................    (10,500)      $5.00             (52,500)    $ 5.00
  Expired..................................     (1,500)      $5.00              (7,500)    $ 5.00
                                             ---------                     -----------
Options and warrants outstanding at
  December 31, 1997........................  1,614,000         --          $ 7,400,000     $ 4.58
  Granted..................................  3,223,878    $5.00-14.58       38,998,280     $12.10
  Exercised................................         --         --                   --         --
  Forfeited................................    (25,000)      $10.00           (250,000)    $10.00
  Expired..................................     (2,000)      $5.00             (10,000)    $ 5.00
                                             ---------                     -----------
Options and warrants outstanding at
  September 30, 1998.......................  4,810,878                     $46,138,280     $ 9.59
                                             =========                     ===========
</TABLE>
 
     Employee options and warrants to purchase 512,500 and 2,501,253 shares of
common stock were exercisable at December 31, 1997 and September 30, 1998,
respectively, and 1,441,000 and 934,122 shares remained available for issuance
at December 31, 1997 and September 30, 1998, respectively.
 
     The following table summarizes information with respect to stock options
and warrants outstanding at December 31, 1997:
 
<TABLE>
<CAPTION>
                                                                                                              WEIGHTED
                                                                     WEIGHTED                                  AVERAGE
                                                      WEIGHTED        AVERAGE                                 EXERCISE
                                                       AVERAGE       REMAINING     WEIGHTED      NUMBER       PRICE OF
  ON DATE OF GRANT,      RANGE OF       NUMBER       FAIR VALUE     CONTRACTUAL    AVERAGE     EXERCISABLE   EXERCISABLE
     THE EXERCISE        EXERCISE     OUTSTANDING    OF OPTIONS/       LIFE        EXERCISE        AT         OPTIONS/
      PRICE WAS:          PRICES      AT 12/31/97      WARRANT        (YEARS)       PRICE       12/31/97      WARRANTS
- ----------------------  ----------    -----------    -----------    -----------    --------    -----------   -----------
<S>                     <C>           <C>            <C>            <C>            <C>         <C>           <C>
Below fair value of
  the stock...........    $5.00          409,000        $3.38          9.52         $5.00         98,750        $5.00
Below fair value of
  the stock...........    $7.50          150,000        $3.73          9.64         $7.50        150,000        $7.50
Above fair value of
  the stock...........  $5.00-5.50     1,055,000        $0.06          9.34         $5.08        263,750        $5.08
                                       ---------                                                 -------
                                       1,614,000                                                 512,500
                                       =========                                                 =======
</TABLE>
 
     The fair value of each option and warrant grant is estimated on the date of
grant using the minimum value method with the following assumptions used for
grants in 1997: no expected volatility, risk-free interest rate of 5.693%,
expected life of 10 years, and no dividends.
 
     The following information concerning the Company's stock option plan is
provided in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation. The Company accounts for the plan in accordance with APB No. 25
and related Interpretations. In accordance with APB No. 25, for the year ended
December 31, 1997, the Company incurred compensation expense in relation to
employee stock options and
 
                                      F-20
<PAGE>   121
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 TO SEPTEMBER 30, 1998, IS UNAUDITED)
 
warrants totaling $262,012 and $151,500, respectively. Had the Company accounted
for compensation expense according to SFAS No. 123, the pro forma net loss would
be as follows:
 
<TABLE>
<S>                                                            <C>
Net loss -- as reported.....................................   $18,092,824
Net loss -- pro forma.......................................   $18,939,602
Net loss per share -- as reported...........................   $      1.70
Net loss per share -- pro forma.............................   $      1.78
</TABLE>
 
13. 401(K) PLAN:
 
     In June 1997, the Company established a 401(k) Plan (the "Plan"). All
employees of the Company are eligible to participate in the Plan. The Company is
not obligated to make contributions to the Plan and made no such contributions
during fiscal 1997.
 
14. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
<TABLE>
<CAPTION>
                                           JANUARY 18, 1996                     NINE MONTHS ENDED      JANUARY 18, 1996
                                            (INCEPTION) TO     YEAR ENDED         SEPTEMBER 30,         (INCEPTION) TO
                                             DECEMBER 31,     DECEMBER 31,   -----------------------    SEPTEMBER 30,
                                                 1996             1997          1997         1998            1998
                                           ----------------   ------------   ----------   ----------   ----------------
<S>                                        <C>                <C>            <C>          <C>          <C>
Cash payment for interest................     $    7,761      $   487,379    $   97,624   $1,137,612     $ 1,638,758
Noncash investing and financing
  activities:
  Property and equipment financed by
    capital lease obligations............        182,071       10,018,475    10,018,475      891,590      11,092,136
  Property and equipment financed by
    equipment vendor.....................      2,273,972               --            --           --       2,273,972
  Settlement of accounts payable, related
    shareholders, through issuance of
    preferred stock......................             --          150,000       150,000           --         150,000
  Settlement of accrued interest through
    issuance of preferred stock..........             --           38,757        38,757           --          38,757
  Settlement of notes payable, related
    shareholders, through issuance of
    preferred stock......................             --        2,261,243     2,261,243           --       2,261,243
  Common stock issued per Bridge Loan
    Agreement............................             --          672,250        72,250           --         672,250
  Issuance of stock options to
    employees............................             --          262,013            --           --         262,013
  Issuance of stock options to
    nonemployees.........................             --           24,900            --           --          24,900
  Issuance of stock warrant to
    employees............................             --          151,500            --           --         151,500
  Issuance of stock warrant to
    nonemployees.........................             --          102,994            --           --         102,994
</TABLE>
 
                                      F-21
<PAGE>   122
                       TELEHUB COMMUNICATIONS CORPORATION
                         (A DEVELOPMENT STAGE COMPANY)
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF AND RELATING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
                               SEPTEMBER 30, 1998
   AND THE PERIOD FROM JANUARY 18, 1996 TO SEPTEMBER 30, 1998, IS UNAUDITED)
 
15. NET LOSS PER SHARE:
 
     In accordance with the requirements of Statement of Financial Accounting
Standards No. 128, Earnings Per Share, a reconciliation of the numerator and
denominator of basic and diluted EPS is provided as follows:
 
<TABLE>
<CAPTION>
                                      JANUARY 18, 1996
                                       (INCEPTION) TO     YEAR ENDED    NINE MONTHS ENDED SEPTEMBER 30,
                                        DECEMBER 31,     DECEMBER 31,   -------------------------------
                                            1996             1997            1997             1998
                                      ----------------   ------------   --------------   --------------
<S>                                   <C>                <C>            <C>              <C>
Numerator -- Basic and Diluted EPS
  Net loss..........................    $ (4,488,173)    $(18,092,824)   $(12,160,673)    $(42,330,200)
                                        ============     ============    ============     ============
Denominator -- Basic and Diluted EPS
  Weighted average common stock
     outstanding....................       8,614,815       10,624,251      10,153,442       12,651,034
                                        ============     ============    ============     ============
Basic and diluted loss per share....    $      (0.52)    $      (1.70)   $      (1.20)    $      (3.35)
                                        ============     ============    ============     ============
</TABLE>
 
     Options and warrants to purchase an additional 5,191,987 and 11,078,527
shares of common stock were outstanding as of December 31, 1997 and September
30, 1998, respectively, and were excluded from the loss per share calculation as
they have the effect of decreasing loss per share. In addition, the Company had
3,500,000, 3,500,000, and 3,500,000 shares of convertible preferred stock
outstanding as of September 30, 1997, December 31, 1997 and September 30, 1998.
The effect of the conversion of such shares of preferred stock was also excluded
from the loss per share calculation as the effect would have decreased the loss
per share.
 
16. SEGMENT INFORMATION:
 
     The Company operates in two business segments: (i) telecommunications
software products; and (ii) telecommunications network services. The following
table presents revenues and other financial information by business segment for
the period from January 18, 1996 (inception) to December 31, 1996 and the year
ended December 31, 1997:
 
<TABLE>
<CAPTION>
                                  SOFTWARE PRODUCTS          NETWORK SERVICES             CONSOLIDATED
                               -----------------------   ------------------------   ------------------------
                                  1996         1997         1996         1997          1996         1997
                               ----------   ----------   ----------   -----------   ----------   -----------
<S>                            <C>          <C>          <C>          <C>           <C>          <C>
Revenues.....................          --   $2,000,000           --   $   901,280           --   $ 2,901,280
Operating loss...............  $1,606,607    4,434,231   $2,129,267    12,932,949   $3,735,875    17,367,180
Identifiable assets..........          --    7,359,999    4,029,254    26,898,401    4,029,254    34,258,400
Depreciation and
  amortization...............          --      185,651       68,556       598,897       68,556       784,548
Capital expenditures.........          --    1,506,012    3,028,715    16,715,315    3,028,715    18,221,327
</TABLE>
 
     Identifiable assets are those assets used exclusively in the operations of
each business segment, or which are allocated when used jointly.
 
17. SUBSEQUENT EVENTS (UNAUDITED):
 
     Subsequent to September 30, 1998, the Company issued options to purchase
206,100 shares of common stock to employees at an exercise price of $14.58 per
share.
 
     In July 1998, the Company entered into an agreement to form a joint venture
that will use the Company's technology to manage satellite telecommunications
delivery in the Australasian region (Australia, New Zealand, Southeast Asia,
India, and the Philippines). Under the agreement, the Company will contribute a
non-exclusive VASP(TM) license and associated technical support and received a
49% interest, while the joint venture partner will contribute $5.0 million for
operating funds in cash for the remaining 51% interest. As of November 24, 1998,
the venture partners have not formed the joint venture or agreed on the timing
and operational details of the contribution.
 
                                      F-22
<PAGE>   123
 
              ---------------------------------------------------
              ---------------------------------------------------
 
     NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER MADE HEREBY. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR SOLICITATION OF AN OFFER TO BUY, IN ANY JURISDICTION WHERE, OR TO ANY PERSON
TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE COMPANY'S AFFAIRS SINCE THE
DATE OF THIS PROSPECTUS.
                             ---------------------
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                     PAGE
                                     ----
<S>                                  <C>
Summary............................     1
Risk Factors.......................     9
The Exchange Offer.................    19
Use of Proceeds....................    26
Dividend Policy....................    26
Capitalization.....................    27
Selected Consolidated Financial
  Data.............................    28
Management's Discussion And
  Analysis of Financial Condition
  And Results of Operations........    30
Business...........................    36
Management.........................    53
Security Ownership of Certain
  Beneficial Owners and
  Management.......................    59
Certain Relationships and Related
  Transactions.....................    61
Description of The Notes...........    63
Book-Entry; Delivery and Form......    84
Description of Capital Stock.......    85
Certain Federal Income Tax
  Considerations...................    89
Plan of Distribution...............    91
Legal Matters......................    92
Experts............................    92
Available Information..............    92
Glossary...........................    94
Index to Consolidated Financial
  Statements.......................   F-1
</TABLE>
 
                             ---------------------
 
   
     DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT
PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
    
 
              ---------------------------------------------------
              ---------------------------------------------------
              ---------------------------------------------------
              ---------------------------------------------------
                       OFFER TO EXCHANGE ALL OUTSTANDING
 
                              13.875% SENIOR NOTES
                             DUE 2005 ("OLD NOTES")
                                      FOR
                              13.875% SENIOR NOTES
                             DUE 2005 ("NEW NOTES")
                             ---------------------
                                    TELEHUB
                           COMMUNICATIONS CORPORATION
                             ---------------------
                                   PROSPECTUS
                             ---------------------
   
                            DATED DECEMBER 18, 1998
    
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              ---------------------------------------------------



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