VERSATEL TELECOM INTERNATIONAL N V
424B3, 1998-11-06
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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<PAGE>   1
                                            Filed pursuant to Rule 424 (b) (3)
                                            Registration Statement No. 333-59979
 
                            [VersaTel TELECOM Logo]
 
                               OFFER TO EXCHANGE
                            ANY AND ALL OUTSTANDING
                         13 1/4% SENIOR NOTES DUE 2008
             ($225,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
                                      FOR
                         13 1/4% SENIOR NOTES DUE 2008
                                       OF
 
                      VERSATEL TELECOM INTERNATIONAL N.V.
 
           THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
                   TIME ON DECEMBER 4, 1998, UNLESS EXTENDED
 
     VersaTel Telecom International N.V., formerly known as VersaTel Telecom
B.V., ("VersaTel" or the "Company"), a company organized under the laws of The
Netherlands, hereby offers (the "Exchange Offer"), upon the terms and subject to
the conditions set forth in this Prospectus and the accompanying letter of
transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount
of its 13 1/4% Senior Notes due May 15, 2008, (the "Exchange Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to the Registration Statement (as defined on page 10) of which
this Prospectus constitutes a part, for each $1,000 principal amount of the
outstanding 13 1/4% Senior Notes due May 15, 2008 (the "Outstanding Notes") of
the Company of which $225,000,000 aggregate principal amount is outstanding. The
Exchange Notes and the Outstanding Notes are collectively referred to herein as
the "Notes."
 
     The Company will accept for exchange any and all Outstanding Notes that are
validly tendered on or prior to 5:00 p.m., New York City time, on the date the
Exchange Offer expires, which will be December 4, 1998, unless the Exchange
Offer is extended (the "Expiration Date"). Tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date, unless previously accepted for payment. The Exchange Offer is not
conditioned upon any minimum principal amount of Outstanding Notes being
tendered for exchange. However, the Exchange Offer is subject to certain
conditions, which may be waived by the Company, and to the terms and provisions
of the Registration Rights Agreement (as defined on page ii). See "The Exchange
Offer." Outstanding Notes may be tendered only in denominations of $1,000 and
integral multiples thereof. The Company has agreed to pay the expenses of the
Exchange Offer.
 
     The Exchange Notes will be obligations of the Company entitled to the
benefits of the Indenture (as defined on page 65) relating to the Outstanding
Notes. The form and terms of the Exchange Notes are identical in all material
respects to the form and terms of the Outstanding Notes except that the Exchange
Notes have been registered under the Securities Act. Application has been made
to list the Exchange Notes on the Luxembourg Stock Exchange. No application has
been made to list the Outstanding Notes. Following the completion of the
Exchange Offer, none of the Notes will be entitled to the benefits of the
Registration Rights Agreement relating to contingent increases in the interest
rates provided for pursuant thereto. See "The Exchange Offer."
 
                                             (Cover continued on following page)
 
     SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
                            ------------------------
  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 NOVEMBER 5, 1998.
<PAGE>   2
 
(Cover continued from previous page)
 
     The Exchange Notes will bear interest from May 27, 1998. Holders of
Outstanding Notes whose Outstanding Notes are accepted for exchange will be
deemed to have waived the right to receive any payment in respect of interest on
the Outstanding Notes accrued from May 27, 1998 to the date of the issuance of
the Exchange Notes. Interest on the Exchange Notes will be payable semiannually
on May 15 and November 15 of each year, commencing November 15, 1998, and will
accrue from May 27, 1998 at a rate of 13 1/4% per annum.
 
     The Exchange Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after March 1, 2003 at the redemption prices
set forth herein, together with accrued and unpaid interest Additional Amounts
(as defined on page 82), if any, and Liquidated Damages (as defined in the
Registration Right Agreement), if any, to the redemption date. The Notes will
not be subject to any mandatory sinking fund. The Notes may also be redeemed at
the option of VersaTel, in the event of certain changes affecting Netherlands
withholding taxes requiring the payments of Additional Amounts. See "Description
of the Exchange Notes -- Redemption for Taxation Reasons." In the event of a
Change of Control (as defined on page 86), each holder of the Notes will have
the right to require the Company to purchase all or any part of such holder's
Notes at a price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, Additional Amounts, if any, and Liquidated Damages, if any, to
the date of purchase. See "Description of the Exchange Notes -- Repurchase of
Notes upon a Change of Control."
 
     The Notes will be general unsecured obligations of the Company and will
rank senior in right of payment to all existing and future Indebtedness (as
defined on page 89) of the Company that is, by its terms or by the terms of the
agreement or instrument governing such Indebtedness, expressly subordinated in
right of payment to the notes and equal in right of payment to all existing and
future unsecured liabilities of the Company that are not so subordinated. The
Company intends to transfer all or substantially all of its assets and
liabilities (other than the Notes) to certain of its Restricted Subsidiaries (as
defined on page 92). After such transfer, the Company will be a holding company
with limited assets and will operate its business through its Restricted
Subsidiaries. Any right of the Company and its creditors, including holders of
the Notes, to participate in the assets of any of the Company's Subsidiaries
upon any liquidation or administration of any such Subsidiary will be subject to
the prior claims of the creditors of such Subsidiary. The claims of creditors of
the Company, including holders of the Notes, will be effectively subordinated to
all existing and future third-party indebtedness and liabilities, including
trade payables, of the Company's Subsidiaries. At June 30, 1998, the Company's
Subsidiaries had total liabilities of approximately $13.9 million reflected on
the Company's balance sheet.
 
     The ability of the Company to incur additional Indebtedness in the future
is limited by the provisions of the Indenture relating to the Notes. See
"Description of Exchange Notes -- Certain Covenants -- Limitation on
Indebtedness."
 
     The Exchange Notes are being offered hereunder to satisfy certain
obligations of the Company contained in the registration rights agreement, dated
May 27, 1998 (the "Registration Rights Agreement") between the Company and
Lehman Brothers Inc., as the initial purchaser (the "Initial Purchaser") with
respect to the sale of 225,000 units (the "Units") consisting of the Outstanding
Notes and warrants to purchase 1,500,000 ordinary shares of the Company (the
"Warrants"). The Units were sold by the Company (the "Offering") on May 27, 1998
to the Initial Purchaser who placed the Units with certain institutional
investors in reliance on certain exceptions under the Securities Act. The Notes
and the Warrants were separated on August 18, 1998 (the "Separation Date"). The
Warrants will not be registered under the Securities Act and cannot be tendered
for exchange. As a consequence, the Warrants will continue to be subject to the
restrictions on transfer of such Warrants as set forth on the legends thereon.
 
     The Outstanding Notes, initially purchased by qualified institutional
buyers (as defined in Rule 144A under the Securities Act ("QIBs")) or in
offshore transactions pursuant to Regulation S under the Securities Act, were
initially represented by two global Notes in registered form, in the name of a
nominee of The
 
                                       ii
<PAGE>   3
 
Depository Trust Company ("DTC"), as depository. The Exchange Notes exchanged
for Outstanding Notes represented by the global Notes will be represented by up
to two global Exchange Notes in registered form, registered in the name of the
nominee of DTC, unless the beneficial holders thereof request otherwise. The
global Exchange Notes will be exchangeable for Exchange Notes in registered
form, in denomination of $1,000 and integral multiples thereof. See "Description
of the Exchange Notes -- Book-Entry Delivery and Form."
 
     Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Outstanding Notes may be offered for resale, resold and otherwise transferred by
any holder thereof (other than (i) a broker-dealer who purchased such
Outstanding Notes directly from the Company to resell pursuant to Rule 144A or
any other available exemption under the Securities Act or (ii) a person that is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the holder is acquiring the
Exchange Notes in its ordinary course of business and is not participating, and
has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes. Holders of Outstanding Notes wishing to
accept the Exchange Offer must represent to the Company that such conditions
have been met. In the event that the Company's belief is inaccurate, holders of
Exchange Notes who transfer Exchange Notes in violation of the prospectus
delivery provisions of the Securities Act and without an exemption from
registration thereunder may incur liability under the Securities Act. The
Company does not assume or indemnify holders against such liability, although
the Company does not believe any such liability should exist.
 
     Each broker-dealer that receives Exchange Notes in exchange for Outstanding
Notes held for its own account, 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 Exchange Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, such broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by such broker-dealer in connection with resales of Exchange Notes
received in exchange for Outstanding Notes. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus and
any amendment or supplement to this Prospectus available to any such
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
 
     The Company believes that no registered holder of the Outstanding Notes is
an affiliate (as such term is defined in Rule 405 under the Securities Act) of
the Company.
 
     The Company will not receive any proceeds from the Exchange Offer, and no
underwriter is being utilized in connection with the Exchange Offer.
 
     Upon completion of the Exchange Offer, Outstanding Notes which have not
been exchanged for Exchange Notes will remain outstanding. See "Risk
Factors -- Consequences of Failure to Exchange."
 
     Prior to the Exchange Offer, there has been no public market for the
Outstanding Notes or Exchange Notes. If a market for the Exchange Notes should
develop, the Exchange Notes could trade at a discount from their principal
amount. While application has been made to list the Exchange Notes on the
Luxembourg Stock Exchange, there can be no assurance that the listing can be
obtained or, if so, that an active public market for the Exchange Notes will
develop.
 
     The Company has been advised by the Initial Purchaser, that, following
completion of the Exchange Offer, it intends to make a market in the Exchange
Notes; however, the Initial Purchaser is under no obligation to do so and any
market activities with respect to the Exchange Notes may be discontinued at any
time.
 
                                       iii
<PAGE>   4
 
     THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS OF OR EXCHANGE FROM, HOLDERS OF OUTSTANDING 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.
 
     NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. 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 OR A SOLICITATION
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
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
 
     THE SECURITIES MAY NOT BE OFFERED OR SOLD IN OR INTO THE UNITED KINGDOM
EXCEPT IN CIRCUMSTANCES THAT DO NOT CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE
MEANING OF THE PUBLIC OFFERS OF SECURITIES REGULATION 1996. ALL APPLICABLE
PROVISIONS OF THE FINANCIAL SERVICES ACT 1986 MUST BE COMPLIED WITH IN RESPECT
OF ANYTHING DONE IN RELATION TO SECURITIES IN, FROM OR OTHERWISE INVOLVING THE
UNITED KINGDOM.
 
     THE SECURITIES MAY NOT BE OFFERED, TRANSFERRED OR SOLD, AS APART OF THEIR
INITIAL DISTRIBUTION OR AT ANY TIME THEREAFTER, TO ANY INDIVIDUAL OR LEGAL
ENTITY ESTABLISHED, DOMICILED OR RESIDENT IN THE NETHERLANDS. THE COMPANY
CONFIRMS THAT ANY ANNOUNCEMENT OF AN OFFER OF THE SECURITIES, AS PART OF THEIR
INITIAL DISTRIBUTION, ANY ADVERTISEMENT RELATING TO SUCH OFFER AND ANY SUCH
OFFER ITSELF WILL COMPLY WITH ALL APPLICABLE SECURITIES LAWS IN THE COUNTRIES IN
WHICH THE SECURITIES ARE OFFERED. A STATEMENT TO THAT EFFECT WILL BE SUBMITTED
TO THE DUTCH SECURITIES AUTHORITIES ("STICHTING TOEZICHT EFFECTEN VERKEER")
BEFORE THE SECURITIES ARE OFFERED. THIS STATEMENT WILL ALSO BE MENTIONED IN ALL
OFFERS AND OFFER DOCUMENTS.
 
     THE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR DELIVERED AS PART
OF THEIR INITIAL DISTRIBUTION OR AT ANY TIME THEREAFTER, DIRECTLY OR INDIRECTLY,
OTHER THAN TO (INVESTMENT) BANKS, PENSION FUNDS INSURANCE COMPANIES, SECURITIES
FIRMS, INVESTMENT INSTITUTIONS, CENTRAL GOVERNMENTS, LARGE INTERNATIONAL AND
SUPRA-NATIONAL ORGANIZATIONS AND OTHER COMPARABLE ENTITIES, INCLUDING, ITNER
ALIA, TREASURIES AND FINANCE COMPANIES OF LARGE ENTERPRISES, WHO OR WHICH ARE
ACTIVE ON A REGULAR AND PROFESSIONAL BASIS IN THE FINANCIAL MARKETS FOR THEIR
OWN ACCOUNT.
 
     THE COMPANY, HAVING MADE ALL REASONABLE INQUIRIES, CONFIRMS THAT THIS
PROSPECTUS CONTAINS ALL INFORMATION WHICH IS MATERIAL IN THE CONTEXT OF THE
EXCHANGE OF THE NOTES, THAT THE INFORMATION CONTAINED HEREIN IS TRUE AND
ACCURATE IN ALL MATERIAL RESPECTS AND IS NOT MISLEADING IN ANY MATERIAL RESPECT,
THAT THE OPINIONS AND INTENTIONS EXPRESSED HEREIN ARE HONESTLY HELD AND THAT
THERE ARE NO OTHER FACTS THE OMISSION OF WHICH WOULD MAKE ANY OF SUCH
INFORMATION OR THE EXPRESSION OF ANY SUCH OPINIONS OR INTENTIONS MISLEADING IN
ANY MATERIAL RESPECT. THE COMPANY ACCEPTS RESPONSIBILITY ACCORDINGLY.
 
                                       iv
<PAGE>   5
 
                             SERVICE OF PROCESS AND
                      ENFORCEABILITY OF CIVIL LIABILITIES
 
     The Company is incorporated under the laws of The Netherlands and
substantially all of its assets are located outside the United States. In
addition, most executive officers, the member of the Management Board and
members of the Supervisory Board of the Company are residents of countries other
than the United States. As a result, it may not be possible for investors to
effect service of process within the United States upon such persons or to
enforce against such persons or the Company judgments of courts of the United
States predicated upon civil liabilities under the United States federal
securities laws. Since there is no treaty between the United States and The
Netherlands providing for the reciprocal recognition and enforcement of
judgments, United States judgments are not enforceable in The Netherlands.
However, a final judgment for the payment of money obtained in a United States
court, which is not subject to appeal or any other means of contestation and is
enforceable in the United States, would in principle be upheld by a Netherlands
court of competent jurisdiction when asked to render a judgment in accordance
with such final judgment by a United States court, without substantive
re-examination or relitigation on the merits of the subject matter thereof;
provided that such judgment has been rendered by a court of competent
jurisdiction, in accordance with rules of proper procedure, that it has not been
rendered in proceedings of a penal or revenue nature and that its content and
possible enforcement are not contrary to public policy or public order of The
Netherlands. Notwithstanding the foregoing, there can be no assurance that
United States investors will be able to enforce against the Company, or
executive officers or members of the Management or Supervisory Boards, or
certain experts named herein who are residents of The Netherlands or other
countries outside the United States, any judgments in civil and commercial
matters, including judgments under the federal securities laws. The Company has
been advised by its Netherlands counsel, Stibbe Simont Monahan Duhot, that,
there is doubt as to whether a Netherlands court would impose civil liability on
the Company, or on its executive officers or on the members of the Management or
Supervisory Boards in an original action predicated solely upon the federal
securities laws of the United States brought in a court of competent
jurisdiction in The Netherlands against the Company or such members.
 
     The Company is organized under the laws of The Netherlands and its
executive offices are currently located at Paalbergweg 36, 1105 BV
Amsterdam-Zuidoost, The Netherlands, and its telephone number is
+31-20-430-4300.
 
                DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
 
     Certain statements included in this Offering Memorandum, including without
limitation those concerning (i) the Company's expansion plans for its Network
(as defined on page 3), (ii) management's belief concerning the impact of this
expansion on its revenue potential, cost basis and margins, (iii) management's
belief concerning the competitiveness of its services, (iv) the effects on the
Company of certain regulatory developments and the rate and scope of the
liberalization of telecommunication services across Europe and (v) the Company's
revenue, access, network and termination costs, liquidity and capital resources
and rate of future expenditures, contain certain forward-looking statements
concerning the Company's business, operating performance and financial
condition. Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, no assurance can be given that such
expectations will prove to have been correct. Important factors that could cause
results to differ materially from such expectations ("Cautionary Statements")
are disclosed in this Prospectus, including, without limitation, in conjunction
with certain forward-looking statements under "Risk Factors," "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
 
                                        1
<PAGE>   6
 
                          PRESENTATION OF INFORMATION
 
     The Company publishes its financial statements in Dutch guilders. In this
Prospectus, references to "U.S. dollars" or "$" are to United States dollars,
references to "Dutch guilders" or "NLG" are to the currency of The Netherlands
and references to "Belgian francs" or "BEF" are to the currency of Belgium.
Solely for the convenience of the reader, this Prospectus contains translations
of certain Dutch guilder amounts into U.S. dollars at specified rates. These
translations should not be construed as representations that the Dutch guilder
amounts actually represent such U.S. dollar amounts or could be converted into
U.S. dollars at the rate indicated or at any other rate. Unless otherwise
indicated, the translations of Dutch guilders into U.S. dollars have been made
at NLG 2.03 per $1.00, the noon buying rate in the City of New York for cable
transfers in Dutch guilders as certified for customs purposes by the Federal
Reserve Bank of New York ("Noon Buying Rate") on June 30, 1998. See "Exchange
Rate Information" for historical information regarding the Noon Buying Rate. On
September 28, 1998, the Noon Buying Rate was NLG 1.89 per $1.00. See "Risk
Factors -- Risks Associated with International Operations and Exchange Rate
Fluctuations" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for a discussion of the effects of exchange rate
fluctuations on the Company. No representation is made that the amounts in Dutch
guilders have been, could have been or could be converted into U.S. dollars at
the rates indicated or at any other rates. For information regarding recent
rates of exchange between Dutch guilders and U.S. dollars, see "Exchange Rate
Information." This Prospectus contains translations of certain Belgian franc
amounts into U.S. dollars at specified rates. These translations should not be
construed as representations that the Belgian francs amounts actually represent
such U.S. dollar amounts or could be converted into U.S. dollars at the rate
indicated or at any other rate. Unless otherwise indicated, the translation of
Belgian francs into U.S. dollars has been made at BEF 35.81 per $1.00, the noon
buying rate in the City of New York for cable transfers in Belgian francs as
certified for customs purposes by the Federal Reserve Bank of New York on June
30, 1998.
 
                                        2
<PAGE>   7
 
                                    SUMMARY
 
     The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information, including risk factors, and
the financial statements (including the notes thereto) appearing elsewhere in
this Prospectus. Unless otherwise noted, all information in this Prospectus
reflects the completion of the Recapitalization, which was completed immediately
prior to the closing of the Offering. Unless the context otherwise requires, the
terms "Company" and "VersaTel" refer to VersaTel Telecom International N.V. See
"Glossary" for the definitions of certain terms used in this Prospectus.
 
THE COMPANY
 
     VersaTel is a rapidly growing alternative telecommunications service
provider based in Amsterdam, The Netherlands. VersaTel's objective is to become
the leading alternative provider of facilities-based national and international
telecommunications services in the Benelux region. The Company, formed in
October 1995, currently provides high quality, competitively priced,
international and increasingly national long distance telecommunications
services in The Netherlands and Belgium, primarily to small- and medium-sized
businesses, and wholesale telecommunications services to other carriers.
VersaTel plans to offer additional services, including toll-free, local access,
Internet and high speed data services to its business customers over the next 18
months.
 
     At present, the Benelux market is dominated by the former monopoly
telecommunications carriers, PTT Telecom B.V. ("PTT Telecom", recently renamed
KPN Telecom N.V.), Belgacom S.A. ("Belgacom"), and P&T Luxembourg, in,
respectively, The Netherlands, Belgium and Luxembourg. The Company believes that
the Benelux telecommunications market represents a substantial opportunity on
which it can capitalize by capturing a portion of the incremental growth of the
market and by winning market share from the PTTs.
 
NETWORK PLAN
 
     The Company has begun building a network infrastructure which is designed
to connect all major business and population centers in the Benelux region and
to provide local access in high density business areas as well as international
connectivity to Germany, France and the United Kingdom (the "VersaTel Network"
or the "Network").
 
     The VersaTel Network will consist of three integrated elements:
 
     - Benelux Overlay Network.  VersaTel plans to construct an overlay network
       that will connect the major commercial centers in the Benelux region (the
       "Benelux Overlay Network").
 
     - Local Access Network.  VersaTel intends to establish local access
       infrastructure (the "Local Access Network") along the Benelux Overlay
       Network. The Local Access Network will connect business customers
       directly to the VersaTel Network.
 
     - International Network.  VersaTel intends to build or acquire direct
       fiber-optic links connecting the Benelux Overlay Network to
       interconnection points in Germany, France and the United Kingdom (the
       "International Network").
 
BUSINESS STRATEGY
 
     VersaTel's objective is to become the leading alternative provider of
facilities-based national and international telecommunications services in the
Benelux region. The principal elements of the Company's strategy are: (i) a
targeted network roll-out; (ii) to grow customer base; (iii) to increase product
and service offerings; (iv) a focus on superior customer service; (v) to expand
facilities-based wholesale services; and (vi) to pursue selective acquisitions
and strategic relationships.
 
REGULATORY AND COMPETITIVE ENVIRONMENT
 
     The European telecommunications market has historically been dominated by
monopoly PTTs. With a series of directives, the European Commission ("EC") has
been instrumental in opening the telecommunications market to competition. As
part of the liberalization of the telecommunications market, PTTs are now
required to offer cost-oriented interconnection agreements to alternative
service providers. In addition, the EC
 
                                        3
<PAGE>   8
 
has mandated carrier selection, carrier pre-selection and number portability.
The Company has and will continue to maintain a proactive approach to regulatory
issues on both a national and European level. The Company believes that this
approach will help ensure compliance by the PTTs with EC directives, allow it to
take advantage of regulatory opportunities and help it influence a regulatory
framework that fosters a competitive environment. Liberalization has resulted in
increased competition from new market entrants, reduced long distance tariffs
and increased traffic volumes as well as the emergence of new service offerings
and enhanced product and price awareness.
 
MANAGEMENT
 
     VersaTel was founded by R. Gary Mesch, the Company's Managing Director. Mr.
Mesch has substantial experience in telecommunications in the United States,
where he founded NovaNet Communications, Inc. ("NovaNet"), a regional carrier in
Colorado, which was acquired by ICG Communications in 1994, and in Europe, where
he acted as a strategic adviser to several large telecommunications carriers.
VersaTel's management team also includes W. Greg Mesch, Chief Operations
Officer, brother of R. Gary Mesch. W. Greg Mesch was the Chief Operations
Officer of Esat Telecom Limited, the predecessor of Esat Telecom Group plc, a
facilities-based long distance and wireless carrier in Ireland, from 1993 to
1996. VersaTel's senior management team also includes co-founder Marc van der
Heijden, Legal Counsel; Raj Raithatha, Chief Financial Officer, who was
previously the Chief Financial Officer and Director of Business Development for
ACC Corp.'s European operations; Larry Hendrickson, Chief Technology Officer;
John de Rooij, Sales Manager, and Maurice J.J.J.M. Bergmans, Manager Belgium
Operations.
 
RECENT DEVELOPMENTS
 
     VersaTel has undertaken a four part recapitalization (the
"Recapitalization"). In February 1998, two of the three shareholders of the
Company, Telecom Founders B.V. ("Telecom Founders") and NeSBIC Venture Fund C.V.
("NeSBIC"), a subsidiary of Fortis, invested an additional NLG 7.2 million in
equity capital in the Company. In addition, NeSBIC and Cromwilld Limited
("Cromwilld"), the third shareholder of the Company, converted their
subordinated convertible notes totaling NLG 3.6 million into Ordinary Shares of
the Company, and NeSBIC converted its NLG 4.5 million bridge loan into Ordinary
Shares of the Company. The third component of the Recapitalization was comprised
of a new equity investment by Paribas Deelnemingen N.V. ("Paribas") of NLG 12.8
million. Lastly, the Company received from Telecom Founders, NeSBIC, Paribas and
Nederlandse Participatie Maatschappij N.V. ("NPM") an additional NLG 15.0
million in equity capital immediately prior to the closing of the Offering. As a
result of the Recapitalization, the Company's share capital has increased from
NLG 7.0 million to NLG 50.1 million. See "Capitalization" and "Security
Ownership of Principal Shareholders and Management."
 
     VersaTel's revenues for the fourth quarter of 1997 and the first and second
quarters of 1998 were NLG 4.6 million, NLG 6.4 million and NLG 9.4 million,
respectively, representing quarter over quarter revenue growth of 38.2% and
46.0%, respectively. VersaTel's billed minutes of use for the fourth quarter of
1997 and the first and second quarters of 1998 were 7.1 million, 12.4 million
and 26.9 million, respectively, representing quarter over quarter minutes of use
growth of 74.4% and 116.1%, respectively. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation -- Results of
Operations." In June 1998, the Company acquired a 55% interest in Bizztel
Telematica B.V., a small, regional switchless reseller with over 400 small- and
medium-sized business customers in The Netherlands. The Company acquired the
remaining 45% of equity in July 1998.
 
                                        4
<PAGE>   9
 
                   SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
 
     The Exchange Offer relates to the exchange of up to $225,000,000 aggregate
principal amount of Outstanding Notes for an equal aggregate principal amount
Exchange Notes. The Exchange Notes will be obligations of the Company entitled
to the benefits of the Indenture relating to the Outstanding Notes. The form and
terms of the Exchange Notes are identical in all material respects to the form
and terms of the Outstanding Notes except that the Exchange Notes have been
registered under the Securities Act, and therefore are not entitled to the
benefits of the registration rights (the "Registration Rights") granted under
the Registration Rights Agreement relating to the contingent increases in the
interest rates provided for pursuant thereto.
 
The Exchange Offer.........  $1,000 principal amount of Exchange Notes will be
                             issued in exchange for each $1,000 principal amount
                             of Outstanding Notes validly tendered pursuant to
                             the Exchange Offer. As of the date hereof, $225
                             million in aggregate principal amount of
                             Outstanding Notes is outstanding. The Company will
                             issue the Exchange Notes to tendering holders of
                             Outstanding Notes on or promptly after the
                             Expiration Date.
 
Resale of the Exchange
Notes......................  Based on interpretation by the staff of the
                             Commission set forth in no-action letters issued to
                             third parties, including "Exxon Capital Holdings
                             Corporation" (available May 13, 1988), "Morgan
                             Stanley & Co. Incorporated" (available June 5,
                             1991), "Mary Kay Cosmetics, Inc." (available June
                             5, 1991) and "Warnaco, Inc." (available October 11,
                             1991), the Company believes that Exchange Notes
                             issued pursuant to the Exchange Offer in exchange
                             for Outstanding Notes may be offered for resale,
                             resold and otherwise transferred by any holder
                             thereof (other than (i) a broker-dealer who
                             purchased such Outstanding Notes directly from the
                             Company for resale pursuant to Rule 144A or any
                             other available exemption under the Securities Act
                             or (ii) a person that is an "affiliate" of the
                             Company within the meaning of the Rule 405 under
                             the Securities Act) without compliance with the
                             registration and prospectus delivery provisions of
                             the Securities Act, provided that the holder is
                             acquiring the Exchange Notes in its ordinary course
                             of business and is not participating, and has no
                             arrangement or understanding with any person to
                             participate, in the distribution of the Exchange
                             Notes. In the event that the Company's belief is
                             inaccurate, holders of Exchange Notes who transfer
                             Exchange Notes in violation of the prospectus
                             delivery provisions of the Securities Act and
                             without an exemption from registration thereunder
                             may incur liability under the Securities Act. The
                             Company does not assume or indemnify holders
                             against such liability, although the Company does
                             not believe that any such liability should exist.
 
                             Each broker-dealer that receives Exchange Notes in
                             exchange for Outstanding Notes held for its own
                             account, as a result of market-making activities or
                             other trading activities, must acknowledge that it
                             will deliver a prospectus in connection with any
                             resale of such Exchange Notes. The Letter of
                             Transmittal states that by so acknowledging and by
                             delivering a prospectus, such broker-dealer will
                             not be deemed to admit that it is an "underwriter"
                             within the meaning of the Securities Act. This
                             Prospectus, as it may be amended or supplemented
                             from time to time, may be used by such
                             broker-dealer in connection with resales of
                             Exchange Notes received in exchange for Outstanding
                             Notes. The Company has agreed that, for a period of
                             180 days after the date of this Prospectus, it will
                             make this Prospectus and any amendment or
                             supplement to this Prospectus available to any such
                             broker-dealer for use in
                                        5
<PAGE>   10
 
                             connection with any such resales. See "Plan of
                             Distribution." The Company believes that no
                             registered holder of the Outstanding Notes is an
                             affiliate (as such term is defined in Rule 405 of
                             the Securities Act) of the Company.
 
                             The Exchange Offer is not being made to, nor will
                             the Company accept surrenders for exchange from,
                             holders of Outstanding Notes in any jurisdiction in
                             which this Exchange Offer or the acceptance thereof
                             would not be in compliance with the securities or
                             blue sky laws of such jurisdiction.
 
Expiration of Exchange
Offer......................  5:00 p.m., New York City time, on December 4, 1998,
                             unless the Exchange Offer is extended, in which
                             case the term "Expiration Date" means the latest
                             date and time to which the Exchange Offer is
                             extended. See "The Exchange Offer -- Expiration
                             Date; Extensions; Amendments."
 
Accrued Interest on the
  Exchange Notes and the
  Outstanding Notes........  The Exchange Notes will bear interest from May 27,
                             1998. Holders of Outstanding Notes whose
                             Outstanding Notes are accepted for exchange will be
                             deemed to have waived the right to receive any
                             payment in respect of interest on such Outstanding
                             Notes accrued from May 27, 1998 to the date of the
                             issuance of the Exchange Notes. Consequently,
                             holders who exchange their Outstanding Notes for
                             Exchange Notes will receive the same interest
                             payment on November 15, 1998 (the first interest
                             payment date with respect to the Outstanding Notes
                             and the Exchange Notes) that they would have
                             received had they not accepted the Exchange Offer.
                             See "The Exchange Offer -- Interest on the Exchange
                             Notes."
 
Termination of the Exchange
  Offer....................  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, new law, statute,
                             rule or regulation or any interpretation of the
                             staff of the Commission of any existing law,
                             statute, rule or regulation. The Company does not
                             expect any of the foregoing conditions to occur,
                             although there can be no assurance that such
                             conditions will not occur. Holders of Outstanding
                             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."
 
Procedures for Tendering
  Outstanding Notes........  Each holder of Outstanding Notes wishing to accept
                             the Exchange Offer must complete, sign and date the
                             Letter of Transmittal, or a facsimile thereof, in
                             accordance with the instructions contained herein
                             and therein, and mail or otherwise deliver such
                             Letter of Transmittal, or such facsimile, together
                             with the Outstanding Notes to be exchanged and any
                             other required documentation to United States Trust
                             Company of New York, as Exchange Agent, at the
                             address set forth herein and therein or effect a
                             tender of Outstanding Notes pursuant to the
                             procedures for book-entry transfer as provided
                             herein. See "The Exchange Offer -- Procedures for
                             Tendering."
 
                             By executing the Letter of Transmittal, each holder
                             will represent to the Company that, among other
                             things, (i) the Exchange Notes acquired
                                        6
<PAGE>   11
 
                             pursuant to the Exchange Offer are being obtained
                             in the ordinary course of business of the person
                             receiving such Exchange Notes, whether or not such
                             person is the holder, (ii) neither the holder nor
                             any such other person has an arrangement or
                             understanding with any person to participate in the
                             distribution of such Exchange Notes and (iii)
                             neither the holder nor any such other person is an
                             "affiliate," as defined in Rule 405 under the
                             Securities Act, of the Company.
 
Special Procedures for
Beneficial Holders.........  Any beneficial holder whose Outstanding Notes are
                             registered in the name of a broker, dealer,
                             commercial bank, trust company or other nominee and
                             who wishes to tender in the Exchange Offer should
                             contact such registered holder promptly and
                             instruct such registered holder to tender on its
                             behalf. If such beneficial holder wishes to tender
                             on his own behalf, such beneficial holder must,
                             prior to completing and executing the Letter of
                             Transmittal and delivering its Outstanding Notes,
                             either make appropriate arrangements to register
                             ownership of the Outstanding Notes in such holder's
                             name or obtain a properly completed bond power from
                             the registered holder. The transfer of record
                             ownership may take considerable time. See "The
                             Exchange Offer -- Procedures for Tendering."
 
Guaranteed Delivery
  Procedures...............  Holders of Outstanding Notes who wish to tender
                             their Outstanding Notes and whose Outstanding Notes
                             are not immediately available or who cannot deliver
                             their Outstanding Notes (or who cannot complete the
                             procedure for book-entry transfer on a timely
                             basis) and a properly completed Letter of
                             Transmittal or any other documents required by the
                             Letter of Transmittal to the Exchange Agent prior
                             to the Expiration Date may tender their Outstanding
                             Notes according to the guaranteed delivery
                             procedures set forth in "The Exchange
                             Offer -- Guaranteed Delivery Procedures."
 
Withdrawal Rights..........  Tenders of Outstanding Notes may be withdrawn at
                             any time prior to 5:00 p.m., New York City time, on
                             the Expiration Date unless previously accepted for
                             exchange. See "The Exchange Offer -- Withdrawal of
                             Tenders."
 
Acceptance of Outstanding
Notes and Delivery of
  Exchange Notes...........  Subject to certain conditions (as summarized above
                             in "Termination of the Exchange Offer" and
                             described more fully under the "The Exchange
                             Offer -- Termination"), the Company will accept for
                             exchange any and all Outstanding Notes which are
                             properly tendered in the Exchange Offer prior to
                             5:00 p.m., New York City time, on the Expiration
                             Date. The Exchange Notes issued pursuant to the
                             Exchange Offer will be delivered promptly following
                             the Expiration Date. See "The Exchange
                             Offer -- General."
 
Certain Tax
Considerations.............  The exchange pursuant to the Exchange Offer will
                             generally not be a taxable event for federal income
                             tax purposes. See "Certain Tax Considerations."
 
Exchange Agent.............  United States Trust Company of New York, the
                             Trustee under the Indenture, is serving as exchange
                             agent (the "Exchange Agent") in connection with the
                             Exchange Offer. The address of the Exchange Agent
                                        7
<PAGE>   12
 
                             is: United States Trust Company of New York, 770
                             Broadway, 13th Floor, New York, NY 10003,
                             Attention: Corporate Trust Services. For
                             information with respect to the Exchange Offer, the
                             telephone number for the Exchange Agent is (800)
                             548-6565 and the facsimile number for the Exchange
                             Agent is (212) 780-0592.
 
Use of Proceeds............  There will be no cash proceeds payable to the
                             Company from the issuance of the Exchange Notes
                             pursuant to the Exchange Offer. The net proceeds to
                             the Company from the sale of the Outstanding Notes
                             were approximately $216.2 million, after deducting
                             underwriting discounts and commissions and
                             estimated fees and expenses. The Company used
                             approximately $81.6 million to acquire the Pledged
                             Securities with respect to the first six interest
                             payments on the Notes. The Company intends to use
                             the remaining net proceeds from the Offering,
                             together with the proceeds from the
                             Recapitalization, to make capital expenditures
                             related to the expansion and development of the
                             VersaTel Network, including through acquisitions,
                             to fund operating losses and working capital
                             requirements and for other general corporate
                             purposes including acquisitions and strategic
                             alliances. The Company estimates that the total
                             capital expenditures necessary to construct and
                             develop its Network through 1999 will be
                             approximately NLG 222.2 million ($109.5 million),
                             with approximately NLG 106.5 million required for
                             the construction and development of the Benelux
                             Overlay Network, approximately NLG 46.6 million for
                             the construction and development of the initial
                             Local Access Network, approximately NLG 37.1
                             million for the construction and development of the
                             International Network and NLG 32.0 million for
                             switching, network management and billing/back-
                             office support systems. Prior to the application of
                             the net proceeds from the sale of the Outstanding
                             Notes, as described above, such funds will be
                             invested by the Company in short-term investment
                             grade securities.
 
                   SUMMARY DESCRIPTION OF THE EXCHANGE NOTES
 
Notes Offered..............  $225,000,000 principal amount of 13 1/4% Senior
                             Notes due 2008.
 
Maturity Date..............  May 15, 2008.
 
Interest Payment Dates.....  May 15 and November 15 of each year, commencing
                             November 15, 1998.
 
Ranking....................  The Notes will rank senior in right of payment to
                             any existing and future subordinated Indebtedness
                             of the Company and equal in right of payment to all
                             existing and future senior Indebtedness of the
                             Company. At June 30, 1998, the Company had
                             approximately $225 million of Indebtedness. The
                             claims of creditors of the Company, including
                             holders of the Notes, will be effectively
                             subordinated to all existing and future third-
                             party indebtedness and liabilities, including trade
                             payables, of the Company's Subsidiaries. At June
                             30, 1998 the Company's Subsidiaries had total
                             liabilities of $13.9 million reflected on the
                             Company's balance sheet.
 
Escrow Account.............  Concurrently with the consummation of the Offering,
                             the Company purchased, pledged and transferred to
                             the Trustee (as defined on page 65), for the
                             benefit of the Holders of the Notes, U.S.
                             Government Securities in such amounts sufficient
                             upon scheduled interest and princi-
 
                                        8
<PAGE>   13
 
                             pal payments of such securities to provide for the
                             payment in full of the first six scheduled interest
                             payments on the Notes (excluding any Additional
                             Amounts and any Liquidated Damages). The company
                             used approximately $81.6 million of the net
                             proceeds of the Offering to acquire the Pledged
                             Securities. The Pledged Securities have been
                             pledged to the Trustee for the benefit of the
                             Escrow Account (as defined on page 88) held by an
                             Escrow Agent (as defined on page 88) for the
                             benefit of the Trustee and the Holders of the Notes
                             in accordance with the Escrow Agreement (as defined
                             on page 88). Funds may be disbursed from the Escrow
                             Account for interest payments on the Notes. Upon
                             acceleration of the maturity of the notes, the
                             Escrow Agreement will provide for the payment of
                             the amount remaining in the Escrow Account to the
                             Trustee to be applied on account of amounts owing
                             on the Notes as provided in the Indenture. Pending
                             such disbursement, any uninvested funds contained
                             in the Escrow Account will be invested in Cash
                             Equivalents (as defined on page 86). See
                             "Description of the Exchange Notes -- Escrow
                             Account."
 
Optional Redemption........  The Notes may be redeemed at the option of the
                             Company, in whole or in part at any time on or
                             after May 15, 2003 at the redemption prices set
                             forth herein, plus accrued and unpaid interest,
                             Additional Amounts, if any, and Liquidated Damages,
                             if any, to the redemption date. The Notes may also
                             be redeemed at the option of the Company, in whole
                             but not in part, at any time at a redemption price
                             equal to the aggregate principal amount thereof,
                             together with accrued and unpaid interest and
                             Liquidated Damages, if any, to the redemption date
                             and all Additional Amounts then due and which will
                             become due as a result of the redemption or
                             otherwise in the event of certain changes affecting
                             Netherlands, withholding taxes. See "Description of
                             the Exchange Notes -- Optional Redemption" and
                             "-- Redemption for Taxation Reasons."
 
Withholding Taxes;
Additional Amounts.........  Unless required by law, all payments by the Company
                             respect of the Notes will be made without
                             withholding or deduction for or on account of any
                             Taxes imposed by or within any Relevant Taxing
                             Jurisdiction. Subject to certain exceptions and
                             limitations, the Company will be required to pay
                             any Additional Amounts as may be necessary in order
                             that the net amounts received by the holders after
                             any withholding or deduction in respect of any such
                             Taxes required by law shall equal the respective
                             amounts of principal and interest that would have
                             been received in respect of the Notes in the
                             absence of such withholding or deduction. See
                             "Description of the Exchange Notes -- Withholding
                             Taxes."
 
Change of Control..........  Upon a Change of Control, holders of the Notes will
                             have the right to require the Company to purchase
                             their Notes in whole or in part at a price in cash
                             equal to 101% of the aggregate principal amount
                             thereof plus accrued and unpaid interest, thereon
                             to the date of repurchase, plus Additional Amounts,
                             if any, and Liquidated Damages, if any, to the date
                             of repurchase. See "Description of the Exchange
                             Notes -- Repurchase of Notes upon a Change of
                             Control."
 
Certain Covenants..........  The Indenture contains certain covenants that,
                             among others things, limit the ability of the
                             Company and its Restricted Subsidiaries to incur
                                        9
<PAGE>   14
 
                             additional Indebtedness, create Liens, pay
                             dividends or make other distributions or
                             investments, repurchase Equity Interest or make
                             certain other Restricted Payments, sell assets of
                             the Company or its Restricted Subsidiaries, enter
                             into certain consolidations or mergers or enter
                             into certain transactions with affiliates. In
                             addition, under certain circumstances, the Company
                             will be required to offer to purchase the Notes, in
                             whole or in part, at a purchase price equal to 100%
                             of the outstanding principal amount thereof, plus
                             accrued and unpaid interest thereon, plus
                             Additional Amounts, if any, and Liquidated Damages,
                             if any, to the date fixed for the closing of such
                             offer, with the proceeds of certain Asset Sales.
                             These covenants are subject to a number of
                             important exceptions and qualifications. See
                             "Description of the Exchange Notes -- Certain
                             Covenants."
 
Registration Rights........  In connection with the sale of the Outstanding
                             Notes, the Company agreed in the Registration
                             Rights Agreement to (i) file within 90 days, and
                             use its reasonable best efforts to cause to be
                             declared effective within 150 days, of the date of
                             the original issuance of the Outstanding Notes, a
                             registration statement (the "Registration
                             Statement") of which this Prospectus is a part with
                             respect to a registered offer to exchange the
                             Outstanding Notes for the Exchange Notes with terms
                             identical in all material respects to the
                             Outstanding Notes and (ii) use its reasonable best
                             efforts to cause the Exchange Offer to be
                             consummated on or before 30 days after the date on
                             which the Registration Statement is declared
                             effective by the Commission.
 
                             In the event that (i) the Company is not permitted
                             to file the Registration Statement or to consummate
                             the Exchange Offer on account of changes in law or
                             the applicable interpretations of the staff of the
                             Commission, (ii) any holder that is a QIB notifies
                             the Company at least 20 business days prior to the
                             consummation of the Exchange Offer that (a)
                             applicable law or SEC policy prohibits the Company
                             from participating in the Exchange Offer, (b) such
                             holder may not resell the Exchange Notes acquired
                             by it in the Exchange Offer to the public without
                             delivering a prospectus and that this Prospectus is
                             not appropriate or available for such resales by
                             such holder or (c) such holder is a broker-dealer
                             and holds Notes acquired directly from the Company
                             or an affiliate of the Company, (iii) the Exchange
                             Offer is not for any other reason consummated
                             within 180 days after the original issue date of
                             the Outstanding Notes, (iv) any holder (other than
                             a Participating Broker-Dealer) is not eligible to
                             participate in the Exchange Offer, or in the case
                             of any holder that participates in the Exchange
                             Offer, such holder does not receive Exchange Notes
                             on the date of the exchange that may be sold
                             without restriction under federal securities laws
                             (other than due solely to the status of such holder
                             as an affiliate of the Company within the meaning
                             of the Securities Act or due to the requirement
                             that such holder deliver a copy of this Prospectus
                             in connection with any resale of the Exchange
                             Notes) or (v) the Exchange Offer has been completed
                             and in the opinion of counsel for the Initial
                             Purchaser a Registration Statement must be filed
                             and a prospectus must be delivered by the Initial
                             Purchaser in connection with any offering or sale
                             of Transfer Restricted Securities (as defined in
                             the Registration Rights Agreement), the Company
                             will use its reasonable best efforts to file,
                             within 90 days of the earliest to occur of the
                             preceding events, a shelf registration statement
                                       10
<PAGE>   15
 
                             pursuant to the Securities Act with respect to the
                             resale of the Outstanding Notes (the "Shelf
                             Registration Statement") and to keep the Shelf
                             Registration Statement effective until the second
                             anniversary of the Issue Date.
 
                             In the event that (i) neither the Registration
                             Statement nor the Shelf Registration Statement is
                             filed with the Commission on or prior to the 90th
                             day following the date of original issue of the
                             Outstanding Notes, (ii) neither the Registration
                             Statement nor the Shelf Registration Statement is
                             declared effective on or prior to the 150th day
                             following the date of original issue of the
                             Outstanding Notes, (iii) the Exchange Offer is not
                             consummated on or before 30 days after the 150th
                             day following the date of original issue of the
                             Outstanding Notes, or (iv) (a) the Registration
                             Statement is filed and declared effective but
                             thereafter ceases to be effective or fails to be
                             usable for its intended purpose at any time prior
                             to the time that the Exchange Offer is consummated
                             and is not declared effective within five business
                             days thereafter or (b) the Shelf Registration
                             Statement is filed and declared effective but
                             thereafter ceases to be effective or fails to be
                             usable for its intended purpose at any time during
                             the Effectiveness Period (as defined in the
                             Registration Rights Agreement) and is not declared
                             effective again within five business days
                             thereafter, the interest rate borne by the
                             Outstanding Notes shall be increased by one-half of
                             one percent per annum following such 90-day period
                             in the case of clause (i) above, following such
                             150-day period in the case of clause (ii) above,
                             following such 30-day period in the case of clause
                             (iii) above, or commencing on the day the
                             applicable registration statement ceases to be
                             effective or usable for its intended purpose
                             without being declared effective again within 5
                             business days in the case of clause (iv) above. The
                             aggregate amount of such increase from the original
                             interest rate pursuant to these provisions will in
                             no event exceed 1.5 percent per annum. Upon (w) the
                             filing of the Registration Statement or the Shelf
                             Registration Statement for the Exchange Offer after
                             the 90-day period described in clause (i) above,
                             (x) the effectiveness of the Registration Statement
                             or Shelf Registration Statement after the 150-day
                             period described in clause (ii) above, (y) the
                             consummation of the Exchange Offer after the 30-day
                             period described in clause (iii) above, or (z) the
                             effectiveness or usability of the Registration
                             Statement which had ceased to remain effective or
                             be usable, or the effectiveness or usability of the
                             Shelf Registration Statement which had ceased to
                             remain effective or be usable, the interest rate
                             borne by the Outstanding Notes from the date of
                             such filing, effectiveness, usability or the day
                             before the date of consummation, as the case may
                             be, will be reduced to the original interest rate
                             if the Company is otherwise in compliance with such
                             requirements. See "Exchange Offer."
 
Trustee, Escrow Agent
  And Paying Agent.........  United States Trust Company of New York.
 
Listing....................  The Notes are expected to be designated as eligible
                             for trading in the PORTAL market. Application has
                             been made to list the Exchange Notes on the
                             Luxembourg Stock Exchange.
 
Risk Factors...............  See "Risk Factors" for a discussion of certain
                             factors which should be considered by prospective
                             investors in evaluating an investment in the
                             Exchange Notes.
                                       11
<PAGE>   16
 
     For additional information concerning the Exchange Notes and the
definitions of certain capitalized terms used above, see "Description of the
Exchange Notes."
 
                      CONSEQUENCES OF FAILURE TO EXCHANGE
 
     Untendered Outstanding Notes that are not exchanged for Exchange Notes
pursuant to the Exchange Offer will remain restricted securities. Outstanding
Notes will continue to be subject to the following restrictions on transfer: (i)
Outstanding Notes may be resold only if registered pursuant to the Securities
Act, if an exemption from registration is available thereunder, or if neither
such registration nor such exemption is required by law, (ii) Outstanding Notes
shall bear a legend restricting transfer in the absence of registration or an
exemption therefrom and (iii) a holder of Outstanding Notes who desires to sell
or otherwise dispose of all or any part of its Outstanding Notes under an
exemption from registration under the Securities Act, if requested by the
Company, must deliver to the Company an opinion of independent counsel
experienced in Securities Act matters, reasonably satisfactory in form and
substance to the Company, that such exemption is available. See "Risk
Factors -- Consequences of Failure to Exchange."
 
                                  RISK FACTORS
 
     FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED CAREFULLY IN
CONNECTION WITH AN INVESTMENT IN THE EXCHANGE NOTES, SEE "RISK FACTORS"
BEGINNING ON PAGE 15.
 
                                       12
<PAGE>   17
 
                        SUMMARY FINANCIAL AND OTHER DATA
 
     The summary financial data for VersaTel, presented below, as of and for the
two fiscal years ended December 31, 1996 and 1997 have been derived from the
financial statements of VersaTel, which have been prepared in accordance with
U.S. generally accepted accounting principles ("U.S. GAAP") and have been
audited by Arthur Andersen, independent public accountants (together with the
notes thereto, the "Audited Financial Statements"). The summary financial data
as of and for the six months ended June 30, 1997 and 1998, have been derived
from the unaudited financial statements of VersaTel, which have been prepared in
accordance with U.S. GAAP and on a basis which management believes is consistent
with that of the Audited Financial Statements (the "Unaudited Financial
Statements" and, together with the Audited Financial Statements, the "Financial
Statements"). The unaudited financial data for the six months ended June 30,
1997 and 1998 include all normal and recurring adjustments necessary for the
fair presentation of the results of operations and financial condition of the
Company for such periods. The information set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations" and the Financial Statements
included elsewhere in this Prospectus.
 
<TABLE>
<CAPTION>
                                 FISCAL YEAR ENDED DECEMBER 31,         SIX MONTHS ENDED JUNE 30,
                               -----------------------------------   -------------------------------
                                1995     1996          1997           1997             1998
                               ------   ------   -----------------   -------   ---------------------
                                NLG      NLG       NLG      $(1)       NLG       NLG         $(1)
                                                   (IN THOUSANDS, EXCEPT RATIO)
<S>                            <C>      <C>      <C>       <C>       <C>       <C>        <C>
STATEMENT OF OPERATIONS DATA:
Revenue......................      52    6,428    18,896     9,308     8,938     15,750      7,759
Operating expenses:
  Cost of revenue............     117    4,954    17,405     8,574     6,329     13,090      6,449
  Selling, general and
     administrative..........     538    5,485    17,527     8,634     5,331     14,274      7,032
  Depreciation and
     amortization............      11      453     3,237     1,594       680      2,694      1,327
                               ------   ------   -------   -------   -------   --------    -------
     Total operating
       expenses..............     666   10,892    38,169    18,802    12,340     30,058     14,808
                               ------   ------   -------   -------   -------   --------    -------
Loss from operations.........    (614)  (4,464)  (19,273)   (9,494)   (3,402)   (14,308)    (7,049)
Interest expense (income),
  net........................       1      269       534       263       190      6,026      2,968
Currency loss................      --       --        53        26         0        340        167
                               ------   ------   -------   -------   -------   --------    -------
Net loss.....................    (615)  (4,733)  (19,860)   (9,783)   (3,592)   (20,674)   (10,184)
                               ======   ======   =======   =======   =======   ========    =======
Net loss per share (Basic and
  Diluted)...................   (0.18)   (0.95)    (2.20)    (1.08)    (0.40)     (1.58)     (0.78)
Weighted average number of
  shares outstanding.........   3,327    5,004     9,042     9,042     8,910     13,123     13,123
CASH FLOW DATA:
Net cash provided by (used
  in) operating activities...    (715)  (1,718)    5,762     2,838      (420)  (178,461)   (87,912)
Net cash used in investing
  activities.................    (234)  (2,569)   (7,126)   (3,510)   (3,579)   (13,573)    (6,686)
Net cash provided by
  financing activities.......   1,109    8,571     2,850     1,404       (92)   473,135    233,071
</TABLE>
 
                                       13
<PAGE>   18
 
<TABLE>
<CAPTION>
                                             AS OF DECEMBER 31,
                                    ------------------------------------      AS OF JUNE 30,
                                    1995     1996            1997                  1998
                                    ----    ------    ------------------    ------------------
                                    NLG      NLG        NLG       $(1)        NLG       $(1)
                                                          (IN THOUSANDS)
<S>                                 <C>     <C>       <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Cash and restricted cash..........   160     4,443      1,495        736    448,572    220,971
Working capital (excluding cash
  and restricted cash)............   436    (2,704)   (24,774)   (12,204)   (27,311)   (13,454)
Property plant and equipment,
  net.............................   224     2,340     13,619      6,709     24,666     12,151
Total assets......................   820     8,160     19,331      9,523    502,555    247,564
Total long-term obligations
  (including current portion).....   614     4,185      8,491      4,183    455,330    224,301
Total shareholders' equity
  (deficit).......................  (120)      146    (18,214)    (8,972)    10,038      4,945
</TABLE>
 
<TABLE>
<CAPTION>
                                      SUMMARY OPERATING DATA BY QUARTER
                                                                         THREE MONTHS ENDED
                                                       ------------------------------------------------------
                                                       JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,
                                                         1997       1997        1997       1998        1998
                                                       --------   ---------   --------   ---------   --------
<S>                                                    <C>        <C>         <C>        <C>         <C>
Number of billable minutes (thousands)(2)............   5,769       6,230      7,127      12,432      26,863
Average revenue per billable minute (NLG)............    0.87        0.85       0.65        0.51        0.35
Gross margin as percentage of revenue................    28.4%        9.1%     (34.6%)      14.7%       18.4%
Total customers -- business (at period end)..........   1,152       1,463      2,014       2,619       3,810
Total customers -- residential (at period end).......      --          --        230         617       1,054
</TABLE>
 
<TABLE>
<CAPTION>
                                 FISCAL YEAR ENDED DECEMBER 31,         SIX MONTHS ENDED JUNE 30,
                               -----------------------------------   -------------------------------
                                1995     1996          1997           1997             1998
                               ------   ------   -----------------   -------   ---------------------
                                NLG      NLG       NLG      $(1)       NLG       NLG         $(1)
                                                   (IN THOUSANDS, EXCEPT RATIO)
<S>                            <C>      <C>      <C>       <C>       <C>       <C>        <C>
OTHER DATA:
EBITDA(3)....................    (603)  (4,011)  (16,036)   (7,900)   (2,722)   (11,614)    (5,722)
Capital expenditures.........     213    2,569    14,516     7,151     3,579     13,573      6,686
Ratio of earnings to fixed
  charges(4).................      --       --        --        --        --         --         --
Deficiency of Earnings plus
  fixed charges to cover
  fixed charges(5)...........    (614)  (4,464)  (19,326)   (9,520)   (3,402)   (14,647)    (7,215)
</TABLE>
 
- ---------------
(1) Solely for the convenience of the reader, Dutch guilder amounts have been
    translated into U.S. dollars at the Noon Buying Rate on June 30, 1998 of NLG
    2.03 per $1.00.
 
(2) Billable minutes are those minutes during which a call is connected to the
    VersaTel switch and for which the Company bills a customer.
 
(3) EBITDA consists of earnings (loss) before interest expense, income taxes,
    depreciation, amortization and foreign exchange gain (loss). EBITDA is
    included because management believes it is a useful indicator of a company's
    ability to incur and service debt. EBITDA should not be considered as a
    substitute for operating earnings, net income, cash flow or other statements
    of operations or cash flow data computed in accordance with U.S. GAAP or as
    a measure of the Company's results of operations or liquidity. Funds
    depicted by this measure may not be available for management's discretionary
    use (due to covenant restrictions, debt service payments, the expansion of
    the VersaTel Network, and other commitments). Because all companies do not
    calculate EBITDA identically, the presentation of EBITDA contained herein
    may not be comparable to other similarly entitled measures of other
    companies.
 
(4) The ratio of earnings to fixed charges is calculated by dividing (i) income
    (loss) from continuing operations before income taxes ("Earnings") plus
    fixed charges by (ii) fixed charges. Fixed charges consist of interest
    expense. Earnings plus fixed charges were insufficient to cover fixed
    charges by NLG 0.6 million in 1995, NLG 4.5 million in 1996, NLG 19.3
    million in 1997, NLG 3.4 million for the six months ended June 30, 1997 and
    NLG 14.6 million for the six months ended June 30, 1998.
 
(5) The deficiency of earnings plus fixed charges to cover fixed charges is
    calculated by adding (i) income (loss) from continuing operations before
    income taxes plus (ii) fixed charges. Fixed charges consist of interest
    expense.
 
                                       14
<PAGE>   19
 
                                  RISK FACTORS
 
     Prospective participants in the Exchange Offer should consider carefully
the following factors in evaluating the Company and its business in addition to
the other information contained in this Prospectus.
 
SUBSTANTIAL INDEBTEDNESS
 
     The Company has substantial indebtedness after the Offering. As of June 30,
1998, the Company's total indebtedness was approximately NLG 455.3 million and
its stockholders' equity was approximately NLG 10.0 million and the Company
would have had total assets of approximately NLG 502.6 million. In addition, the
Company and its subsidiaries may incur additional indebtedness and liens on
their assets in the future, subject to limitations imposed by its debt
instruments, including, without limitation, the Indenture. The Indenture does
not limit the amount of indebtedness that may be incurred to finance the cost of
the development of the VersaTel Network. A significant amount of such
indebtedness will likely be secured. Consequently, in the event of a bankruptcy,
liquidation, dissolution, reorganization or similar proceeding, the holders of
any secured indebtedness will be entitled to proceed against the collateral that
secures such indebtedness and such collateral will not be available for
satisfaction of any amounts owed under the Notes. The Company anticipates that
it will incur substantial additional indebtedness in the future. See "Selected
Financial and Other Data," the Financial Statements included elsewhere in this
Prospectus, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Description of the Exchange Notes."
 
     The level of the Company's indebtedness and the terms of such indebtedness
could have several important effects on the future operations of VersaTel and
the holders of the Notes, including the following: (i) the ability of the
Company to obtain any necessary financing in the future for working capital,
capital expenditures, debt service requirements or other purposes may be
restricted; (ii) a substantial portion of the Company's cash flow from
operations will be dedicated to the payment of principal and interest on its
indebtedness and other obligations and will not be available for use in its
business; (iii) the Company's level of indebtedness could limit its flexibility
in planning for, or reacting to, changes in its business; (iv) the Company may
be more highly leveraged than many of its competitors, which may place it at a
competitive disadvantage; (v) the debt service requirements of any additional
indebtedness could make it more difficult for the Company to make payments of
principal and interest on the Notes; (vi) the Company will be required to comply
with certain financial covenants and other restrictions contained in its debt
instruments; and (vii) the Company's high degree of indebtedness will increase
its vulnerability to adverse general economic and industry conditions.
 
     Although the Company has entered into an Escrow Agreement pursuant to which
it has deposited with the Escrow Agent Pledged Securities in such amounts as
will be sufficient to cover the first six scheduled interest payments on the
Notes, the ability to deal freely with the funds in the Escrow Account following
an Event of Default under the Indenture may be limited by applicable bankruptcy,
reorganization, receivership, insolvency, liquidation or other similar
legislation or legal principles. See "Description of the Exchange
Notes -- Escrow Account."
 
HISTORICAL AND FUTURE OPERATING LOSSES; NEGATIVE EBITDA; LIQUIDITY
 
     For the year ended December 31, 1997, the Company had a loss from operating
activities of NLG 19.3 million and negative EBITDA of NLG 16.0 million and for
the year ended December 31, 1996, the Company had a loss from operating
activities of NLG 4.5 million and negative EBITDA of NLG 4.0 million. In
addition, the Company had an accumulated deficit of NLG 25.2 million as of
December 31, 1997. Although the Company has experienced revenue growth since it
commenced operations in 1995, there can be no assurance that such growth shall
continue. The Company expects to incur negative EBITDA and significant operating
losses and net losses for the foreseeable future as it incurs additional costs
associated with the development and expansion of its Network, the expansion of
its marketing and sales organization and the introduction of new
telecommunications services. In addition, prices in the telecommunications
industry in Europe have declined in recent years and, as competition continues
to increase, the Company expects that prices will continue to decline. Although
the Company believes that such decreases in price will be at least
 
                                       15
<PAGE>   20
 
partially offset by increased traffic volume and decreases in the cost of
providing telecommunication services, there can be no assurance that VersaTel
will achieve or, if achieved, will sustain profitability or positive cash flow
from operating activities in the future.
 
     After giving pro forma effect to the Recapitalization and the Offering,
interest expense of the Company for the year ended December 31, 1997 would have
been NLG 62.0 million. Accordingly, VersaTel will need to increase substantially
its net cash flow in order to meet its debt service obligations, including its
obligations with respect to the Notes. The ability of the Company to improve its
operating performance and financial results will depend not only on its ability
to successfully implement its business plan, but also upon economic, financial,
competitive, regulatory and other factors beyond its control, including,
fluctuations in exchange rates and general economic conditions in the Benelux
region. There can be no assurance that the Company will generate sufficient
positive cash flow from operating activities in the future to service its debt
and to allow the Company to make necessary capital expenditures. If the Company
is unable to generate sufficient positive cash flow in the future, it may be
required to refinance all or a portion of its debt, including the Notes, to sell
assets or to obtain additional financing. There can be no assurance that any
such refinancing would be possible or that any such sales of assets or
additional financing could be achieved. The failure by the Company to meet its
debt service obligations or to otherwise comply with any of the covenants
contained in any of its debt instruments could result in a default thereunder
permitting the acceleration of the maturity of the indebtedness under such
agreement. Any default or acceleration under such agreement could also result in
other debt of the Company, including the Notes, becoming immediately payable.
Under any of these circumstances, there can be no assurance that the Company
would have sufficient funds or other resources to satisfy all of such
obligations, including payments with respect to the Notes, on a timely basis or
otherwise. See "-- Future Capital Needs; Uncertainty of Additional Funding" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
 
ANTICIPATED HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION OF THE NOTES;
DEPENDENCE UPON CASH FLOW OF SUBSIDIARIES
 
     The Company intends to transfer all or substantially all of its assets and
liabilities (other than the Notes) to certain of its Restricted Subsidiaries.
After such transfer, the Company will be a holding company with limited assets
and will operate its business through its Restricted Subsidiaries. Consequently,
the Company will rely upon distributions from its subsidiaries, as well as its
own credit arrangements, to generate the funds necessary to meet its
obligations, including payments on the Notes. Such subsidiaries will be separate
and distinct legal entities which have no obligation, contingent or otherwise,
to pay any amount due pursuant to the Notes or to make any funds available
therefor, whether by dividends, loans or other payments. In addition, the
ability of the Company's subsidiaries to pay dividends and make other payments
to the Company may be restricted by, among other things, applicable corporate
and other laws and regulations and by the terms of the agreements to which such
subsidiaries become subject. Although the Indenture will limit the ability of
such subsidiaries to enter into consensual restrictions on their ability to pay
dividends and make other payments, such limitations are subject to a number of
significant qualifications. See "Description of the Exchange Notes -- Certain
Covenants -- Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries." The failure of the Company's subsidiaries to pay any
such dividends or to make any such other payments would restrict the Company's
ability to pay principal and interest on the Notes and to utilize cash flow from
one subsidiary to cover shortfalls of another subsidiary, and could otherwise
have a material adverse effect on the Company's business, financial condition
and results of operation.
 
     Generally, claims of creditors of a subsidiary, including trade creditors,
secured creditors and creditors holding indebtedness and guarantees issued by
such subsidiary, and claims of preferred stockholders (if any) of such
subsidiary, will have priority with respect to the assets and earnings of such
subsidiary over the claims of creditors of its parent company. Accordingly, the
Notes will be effectively subordinated to all creditors (including trade
creditors) and preferred stockholders (if any) of the Company's subsidiaries.
Although the Indenture will limit the incurrence of Indebtedness and preferred
stock of certain of the Company's subsidiaries, such limitation is subject to a
number of significant qualifications. Moreover, the Indenture will not impose
any limitation on the incurrence by such subsidiaries of liabilities that are
not considered
 
                                       16
<PAGE>   21
 
Indebtedness or preferred stock under the Indenture. See "Description of the
Exchange Notes -- Certain Covenants -- Limitation on Indebtedness." Any right of
the Company to receive assets of any subsidiary upon the liquidation or
reorganization of such subsidiary (and the consequent rights of the holders of
the Notes to participate in those assets) will be effectively subordinated to
the claims of such subsidiary's creditors (including trade creditors) and
preferred stockholders (if any), except to the extent that the Company is itself
recognized as a creditor, in which case the claims of the Company would still be
subordinated with respect to any assets of such subsidiary pledged to secure
other indebtedness and any indebtedness of such subsidiary senior to that held
by the Company.
 
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
 
     The development and expansion of the Company's Network, sales and marketing
capabilities and product and service offerings, as well as the funding of
operating losses and working capital needs will require significant capital. The
Company does not currently maintain significant lines of credit or similar
facilities with commercial banks, but has historically financed its operations
via capital contributions and shareholder loans. The Company expects that the
net proceeds from the Recapitalization and the Offering, together with other
available financing, and cash flow from operations will provide the Company with
sufficient capital to fund planned capital expenditures and anticipated losses
through December 1999. The amount of VersaTel's future capital requirements will
depend primarily on the rate and extent of the Company's development and
expansion of its network infrastructure, its sales and marketing capabilities
and its product and service offerings, and the level of partner participation in
sharing funding of certain sections of the Network, as well as other factors
such as competitive conditions, regulatory or other government actions and the
rate of its customer growth. In the event that the Company's plans or
assumptions change or prove to be inaccurate or the net proceeds of the
Offering, together with funds available from the Recapitalization and cash flow
from operations, if any, prove to be insufficient to fund the Company's growth
and operations, then some or all of the Company's development and expansion
plans (including the planned development of the VersaTel Network) could be
delayed or abandoned, or the Company may be required to seek additional
financing earlier than anticipated. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." There can be no assurance that, the Company will be able to obtain
additional financing, if necessary, or, if obtained, that it will be able to do
so on a timely basis or on terms favorable to the Company. In addition, the
Company's debt instruments, including the Indenture, impose limitations on the
Company's ability to raise additional indebtedness and to create liens on its
assets. Any additional indebtedness incurred by the Company is likely to be
subject to additional restrictive financial covenants. The inability of the
Company to obtain such additional capital or to obtain such additional capital
on acceptable terms could have a material adverse effect on the Company's
business, results of operations and financial condition.
 
RISKS ASSOCIATED WITH THE DEVELOPMENT, EXPANSION AND OPERATION OF THE NETWORK
 
     The Company currently provides its services through a single Nortel DMS 100
switch in Amsterdam and does not own, lease or manage any telecommunications
transmission infrastructure. The long-term success of the Company is dependent
upon its ability to construct, operate, manage and maintain its own
telecommunications network. Success in these activities will depend on, among
other factors, the Company's ability to: (i) attract and retain experienced and
qualified personnel; (ii) obtain additional switch sites; (iii) interconnect
with the PTTs' and other carriers' networks; (iv) obtain and retain necessary
licenses permitting origination and termination of traffic; and (v) construct or
obtain access to additional transmission facilities, all in a timely manner, at
reasonable costs and on terms and conditions acceptable to VersaTel. In
addition, the Company must obtain easements, rights-of-way and entry to premises
from various property owners, actual and potential competitors and national,
provincial and local governments in order to construct its Network. There can be
no assurance that the Company will obtain rights and licenses on acceptable
terms or that current or potential competitors will not obtain similar rights
and licenses on more favorable terms that will allow them to compete
successfully against the Company. The successful implementation of the Company's
construction and expansion strategy will be subject to a variety of other risks,
including operating and technical problems, regulatory uncertainties, delays in
the full implementation of the EC directives regarding
                                       17
<PAGE>   22
 
telecommunications liberalization, competition, the availability of capital and
the risk of damage to software and hardware resulting from fire, power loss,
natural disasters and other causes. There can be no assurance that the VersaTel
Network will grow and develop as planned or, if developed, that such growth or
development will be completed on schedule, at a commercially reasonable cost or
within the Company's specifications.
 
     Although the Company believes that its cost estimates and build-out
schedule are reasonable, there can be no assurance that the actual construction
or acquisition costs or time required to construct the Network will not
substantially exceed current estimates. In addition, there can be no assurance
that even if the Network is successfully developed that the Company will be able
to operate the Network efficiently. Any significant delay or increase in the
costs associated with the construction, development and management of the
Network could have a material adverse impact on the Company, including the
ability of the Company to make payments on the Notes, and on the Company's
business, results of operations and financial condition generally.
 
     The construction and development of the VersaTel Network will entail
significant expenditures of resources based on projections of growth in traffic
volumes and routing preferences and determinations of the most cost-effective
means of constructing the VersaTel Network. Failure to project traffic volume
and determine route preferences correctly or to determine the optimal means of
constructing the VersaTel Network could have a material adverse effect on
VersaTel's business, results of operations and financial condition. See
"Business -- Network." The Company has signed a framework agreement for the
design and construction of key components of its planned network infrastructure
with Detron, a Benelux-based engineering, consulting and construction firm. In
addition, the Company has signed a framework agreement with Nortel to implement
portions of its SDH network and network management systems on a turnkey basis.
However, definitive agreements for significant other portions of the Network
with Nortel and the construction contractors have not been signed and there can
be no assurance that such agreements will be entered into or if entered into,
that these companies will efficiently and cost-effectively design and deliver
the VersaTel Network. In addition, the Company's proposed Network will be
significantly dependent on the technology and products which the Company
acquires from its suppliers. These firms provide similar products and services
to competitors of the Company. There can be no assurance that these firms will
continue to act for the Company or, should they cease to so act, that the
Company would be able to obtain equivalent products and services from other
sources. The failure of the Company to obtain similar products and services from
alternative sources on a timely and cost-effective basis could result in delays,
operational problems and increased expenses and thus could have a material
adverse effect on the Company.
 
     The success of the Company is largely dependent upon its ability to deliver
high quality, uninterrupted telecommunications services and on its ability to
protect its software against damage. Service quality and availability may be
disrupted by (i) the inability to provide adequate network capacity; (ii) the
inability to accomplish timely and error free upgrades to network and management
systems; and (iii) the failure to prevent damage from external causes. Although
the Company will take all reasonable measures to provide adequate capacity in
all system components and all locations, no assurance can be given that adequate
capacity will be available. As growth occurs, network and management systems
must be upgraded. Timing of upgrades cannot be predicted with certainty and most
upgrades create many opportunities for errors, especially when done under time
pressure. Although the Company will use all standard quality management
practices and procedures, no assurances can be given that failures will not
occur from time to time. In addition, all telecommunications networks are
subject to external damage, in particular from construction work, but also from
such causes as floods and vehicle accidents. Such events are mostly beyond the
control of the Company. The VersaTel Network will utilize high quality design
and management techniques for rerouting traffic in case of failures and will be
designed for rapid restoration in the event such failures occur. However, any
prolonged or significant system failures or difficulties in customers accessing
the VersaTel Network could threaten the Company's relationship with clients,
damage the reputation of the Company and result in customer attrition and
financial losses. Such failures could have a material adverse impact on the
Company's business, financial condition and results of operations.
 
                                       18
<PAGE>   23
 
LIMITED OPERATING HISTORY; ENTRY INTO NEW MARKETS
 
     VersaTel, a development stage enterprise, was founded in October 1995, and,
as a result, has a limited operating history and has generated only limited
revenues. The Company intends to enter the Belgium and Luxembourg markets where
it has no operating experience and where services have previously been provided
primarily by the national PTTs. Accordingly, there can be no assurance that the
Company's future operations will generate operating or net income, and the
Company's prospects must therefore be considered in light of the risks,
expenses, problems and delays inherent in establishing operations.
 
RISKS ASSOCIATED WITH A RAPIDLY CHANGING INDUSTRY; TECHNOLOGY
 
     The European telecommunication industry is changing rapidly due to, among
other factors, liberalization, privatization of PTTs, technology improvements,
expansion of telecommunications infrastructure and the globalization of the
world's economies and trade. Such changes may happen at any time and can
significantly affect the Company's operations. There can be no assurance that
one or more of these factors will not occur as the Company expects or will not
have unforeseen effects which could have a material adverse effect on the
Company. There can also be no assurance, even if these factors turn out as
anticipated, that the Company's strategy will be successful in this rapidly
evolving market.
 
     The telecommunications industry is in a period of rapid technological
evolution, marked by the introduction of new products and services, and
increased availability of transmission capacity, as well as the increasing
utilization of the Internet for voice and data transmission. The Company's
success will depend substantially on its ability to predict which of the many
possible current and future networks, products and services will be important to
finance, establish and maintain. In particular, as the Company undertakes to
further expand and develop its Network, it will become increasingly exposed to
the risks associated with the relative effectiveness of its technology and
equipment. The cost of implementation of emerging and future technologies could
be significant, and there can be no assurances that the Company will select
appropriate technology and equipment or that the Company will obtain appropriate
new technology on a timely basis or on satisfactory terms. The failure to obtain
effective technology and equipment may adversely affect the ability of the
Company to provide competitive products and service, and the viability of the
Company's operations and could have a material adverse impact on the Company's
business, financial condition and results of operations. See "-- Development,
Expansion and Operation of the Network."
 
DEPENDENCE ON MANAGEMENT AND OTHER KEY PERSONNEL
 
     The Company's success depends in significant part upon the continued
service of its senior management personnel, including R. Gary Mesch, the
Company's Managing Director. In addition, several of the Company's key
personnel, including its Chief Financial Officer and Chief Technology Officer,
have been with the Company for only a short period of time. All of the Company's
executive officers work on a full-time basis for the Company. See "Management."
The Company does not maintain any "key person" insurance. Two members of the
Company's key management and technical personnel are working for the Company
pursuant to consultancy agreements. In total, approximately 9% of full-time
employees are working pursuant to consultancy agreements. Such agreements are
terminable at will by the consultant. The consultancy agreements do not contain
non-competition clauses in the event that such consultant's employment
terminates, and as a result, there can be no assurance that such consultants
will not work for direct competitors of the Company in the future. If such key
management and technical personnel left the Company and/or began to work for
competitors, it could have a material adverse effect on the Company's business,
financial condition and results of operation.
 
     The Company's future growth and success also depend on its ability to
attract, train, retain and motivate highly skilled managerial, sales, marketing,
administrative, operating and technical personnel. Competition for qualified
employees and personnel in the telecommunications industry in Europe is intense,
and there are generally a limited number of persons with the requisite knowledge
and experience in the particular sectors and countries in which the Company
operates and intends to operate. There can be no assurance that the Company will
be able to attract, recruit and retain sufficient qualified personnel as the
Company expands its
 
                                       19
<PAGE>   24
 
current operations and enters into new markets. The loss of the services of one
or more of the Company's key management or operating personnel, or the failure
to attract and retain additional key personnel could have a material adverse
effect on the Company's business, operating results and financial condition.
 
MANAGEMENT OF GROWTH
 
     The Company's growth strategy has placed, and is expected to continue to
place, a significant strain on the Company's management, systems, controls and
operational and financial resources. The Company's growth has resulted in
increased responsibilities for management personnel, and the Company's expansion
plans will create significant additional demands on the Company's managerial
resources. The Company's ability to manage its growth successfully will require
it to further expand its Network, enhance its management, financial and
information systems and controls and expand, train and manage its employee base
effectively. Management is currently in the process of addressing certain
potential weaknesses in the Company's systems of internal controls that have
been identified by the Company's auditors. In this respect, Management has
revised its financial, collection of data and call billing procedures. In
addition, as the Company increases its product and service offerings and expands
its target markets, there will be additional demands on its customer service,
support, sales, marketing and administrative resources. If the Company's
management is unable to manage growth effectively or maintain the quality of its
service, the Company's business, financial condition and results of operations
would be materially adversely effected.
 
DEPENDENCE ON FACILITIES PROVIDERS AND INTERCONNECT ARRANGEMENTS
 
     The Company does not own any transmission infrastructure and currently uses
telecommunications transmission infrastructure owned by other carriers under a
variety of arrangements. As a result, the Company depends and will continue to
depend upon the transmission infrastructures of the PTTs and other facilities-
based carriers in the Benelux region. Most of these carriers are competitors of
the Company. In addition, the Company's ability to connect its customers to the
Company's Network is dependent on the Company securing and maintaining
interconnection agreements with the local PTTs in the Benelux region. There can
be no assurance that the Company will be successful in securing and maintaining
such arrangements at attractive rates, if at all. Former monopoly carriers may
try to limit access to their facilities by new competitors, which may adversely
affect the Company's entry into the Belgian and Luxembourg markets as well as
other European markets. The Company's profitability depends in part on its
ability to secure and maintain interconnection arrangements on a timely basis
and at favorable rates. The failure of the PTTs to provide cost-oriented access
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "-- Intense Competition,"
"-- Regulation" and "Business -- Regulation."
 
     All of the Company's transmission capacity is currently obtained under
arrangements with third parties which subjects the Company to the risk of
unanticipated price fluctuations and service restrictions or cancellations.
Although the Company believes that its arrangements and relationships with
carriers generally are satisfactory, the deterioration or termination of the
Company's arrangements and relationships, or the Company's inability to enter
into new arrangements and relationships with one or more carriers could have a
material adverse effect upon the Company's cost structure, service, quality,
network coverage, results of operations and financial condition.
 
RISKS ASSOCIATED WITH THE YEAR 2000
 
     The Year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year. Because of this programming
convention, software, hardware or firmware may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failures,
miscalculations or errors causing disruptions of operations or other business
problems, including among others, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
 
                                       20
<PAGE>   25
 
     THE YEAR 2000 AND VERSATEL'S READINESS
 
     VersaTel is undertaking a comprehensive program to address the Year 2000
issue with respect to the following:
 
1.  The company's information technology systems;
2.  The telephony switching network (including equipment installed at customers'
    premises);
3.  The company's non-information technology systems (including buildings,
    plant, equipment, and other infrastructure systems that may contain embedded
    micro controller technology);
4.  The systems of the Company's major vendors (insofar as they relate to the
    company's business); and
5.  The company's customers.
 
     This program involves four "Steps": (1) a wide ranging assessment of Year
2000 problems that might affect the company; (2) the development and
implementation of remedies to address discovered problems; (3) the testing of
the Company's systems; and (4) an analysis of the worst case scenario for the
Company. The Company expects to complete Steps 1 and 2 of this program by the
end of 1998, Step 3 by the end of the first quarter of 1999 and Step 4 by the
end of the second quarter of 1999.
 
     STEPS 1-2: ASSESSMENT OF YEAR 2000 ISSUES, DEVELOPMENT AND IMPLEMENTATION
OF REMEDIES
 
     The Information Technology Systems.
 
     The Company is currently undergoing a major program to replace all of its
existing OSS systems for billing, customer care and mediation and expects to
have completed the replacement program by the end of the first quarter of 1999.
In selecting the new OSS systems, the Company asks for guarantees from the
manufacturers of Year 2000 compliance. The Company is also checking all its
custom designed software for Year 2000 compliance.
 
     The Company uses Windows 95 and Windows NT 4.0 as its operating systems.
The Company expects to upgrade all of its Windows 95 operating systems to
Windows 98, which is Year 2000 compliant, in the first half of 1999. The Company
expects to install the latest service pack for its NT 4.0 operating systems
which is Year 2000 compliant in the first quarter of 1999. The Company does not
presently use any other desktop or server operating systems.
 
     The Telephony Switching Network.
 
     The Company has consulted with Nortel, the manufacturer of its DMS-100
telephony switches and believes that its switches will be Year 2000 compliant
before the end of 1998. The Company is currently upgrading its switch operating
software to EURO-8, which is Year 2000 certified and is also investigating the
Year 2000 compliance of its routers installed at customer premises to direct
traffic on to the VersaTel Network.
 
     The non-Information Technology Systems.
 
     The Company's office buildings have the following embedded systems: monitor
alarm (intrusion + sensors), personnel registration plus floor access, fire
alarm, climate control and electrical power maintenance (UPS + generators). The
Company's facilities management team is currently investigating if the embedded
systems are Year 2000 compliant and intends to ensure that they will be by the
end of the fourth quarter of 1998.
 
     Major Vendors' Systems.
 
     The Company is asking all of its major vendors to demonstrate their
approach to the Year 2000 problem and to give guarantees that the millennium
will not interrupt their services to the Company. The Company is informing its
vendors that Year 2000 compliance in their services and products is an essential
element of the existing business relationship. The managers responsible for each
vendor relationship are asking for these guarantees and the response to date has
been positive. The Company is now formalizing these requests, sending letters,
and compiling a list of vendors' responses.
                                       21
<PAGE>   26
 
     Customers' Systems.
 
     The Company's customer services department intends to discuss with
customers the Year 2000 issue, including whether such customer is Year 2000
compliant and to suggest that where this issue has not been resolved, the
customer seeks advice. No assurances can be given that the Company's customers
will either take advice or be Year 2000 compliant.
 
     STEP 3: TESTING OF THE COMPANY'S SYSTEMS
 
     VersaTel intends to conduct a full operational test of its entire business
by the end of the second quarter of 1999, when the Company expects to be
confident that all of its systems and processes are Year 2000 compliant. The
Company's services and products are primarily provided to business customers who
operate Monday through Friday and therefore plan to conduct this test during a
weekend. Certain customers have approved this plan and have agreed to
participate in the test.
 
     STEP 4: WORST CASE SCENARIO
 
     The worst effect of the Year 2000 issue would be the inability of customers
to complete calls. Nortel, the manufacturer of the Company's switches, has
conducted extensive Year 2000 tests with the EURO-8 software and has informed
the Company that it believes the Company's switches are Year 2000 compliant. The
Company will be approaching Nortel for guarantees regarding this compliance.
 
     If the Company's Year 2000 compliant billing system fails to function
correctly, the Company believes that bills could still be distributed by
modifying the Call Detail Record's timestamp to reflect a pre year 2000 date.
 
     The ability of the Company's customer care team to supply quality service
would be significantly affected if the OSS systems were not available. Service
provisioning, additional services and the development of new customers could not
continue effectively if the automated provisioning systems fail. The Company is
asking for certificates from the manufacturers of these systems that they are
Year 2000 compliant.
 
     The Company's ability to collect revenues depends upon certain financial
institutions' computer systems, because 80% of its retail customers pay by way
of direct debit facilities. The Company is seeking assurances from these
financial institutions that they are Year 2000 compliant.
 
     The Company believes that it is not very likely that any of the above
situations will occur as a result of the assurances of Year 2000 compliance that
it expects to receive from its vendors, software and systems programmers,
customers and financial institutions. In the event that one or more of the
situations should occur, the Company would attempt to rectify the problem with
the appropriate people. However, no assurance can be given that the Company
would be successful in obtaining valid assurances or guarantees, that the Year
2000 issue will not affect the Company significantly, that any Year 2000 effects
could be resolved or that the Company would be reimbursed for any additional
expenditure under any of the anticipated assurances or guarantees or otherwise.
 
     COSTS RELATED TO THE YEAR 2000 ISSUE.
 
     To date, the Company has incurred approximately NLG 200,000 in costs for
its Year 2000 program. A substantial portion of costs for the Year 2000 issue
will be included in the replacement of the current generation of operating
support systems. The Company is replacing these systems to support the business
growth and not specifically to remedy the Year 2000 problem. The Company expects
to incur additional specific Year 2000 charges that are estimated to be less
than NLG 2 million, the majority of which will be incurred during 1999.
 
INTENSE COMPETITION
 
     Liberalization in the European telecommunications market has coincided with
technological innovation to create an increasingly competitive market,
characterized by still-dominant PTTs as well as an increasing
 
                                       22
<PAGE>   27
 
number of new market entrants. In the Benelux region, the Company competes
primarily with the national PTTs and other providers which have greater market
presence, network coverage, brand name recognition, customer loyalty, and
financial and other resources. The PTTs generally have significant competitive
advantages (including cost advantages) due to their control over domestic
transmission lines and connection to such lines that the Company and its other
competitors do not have. In addition, customers in most of these markets are not
accustomed to alternative service providers and may be reluctant to switch from
the dominant PTTs to new and relatively unproven competitors such as VersaTel.
In addition, the Company relies on the PTTs for timely access to their
transmission infrastructure lines. Moreover, these PTTs generally have certain
competitive advantages due to their close ties with national regulatory
authorities, which have, in certain instances, shown reluctance to adopt
policies and grant regulatory approvals that would result in increased
competition for the local PTT. The reluctance of some national regulators to
accept liberalizing policies, grant regulatory approvals and to enforce access
to PTT networks may have a material adverse effect on the Company's competitive
position. See "-- Dependence on Facilities Providers and Interconnect
Arrangements."
 
     Competition in the European long distance telecommunications industry is
based upon price, customer service, type and quality of products and services
and customer relationships. VersaTel's strategy is predicated on its ability to
price its services at a discount to the prices charged by the PTTs in each of
its markets and to offer high quality customer care and telecommunications
products and services. However, prices for international long distance calls
have decreased substantially over the last few years in most of the markets in
which VersaTel currently maintains operations or in which it expects to
establish operations. Some of the Company's larger competitors may be able to
use their greater financial resources to cause severe price competition in the
countries in which VersaTel operates or plans to operate. The Company expects
that prices for its services will continue to decrease for the foreseeable
future and that PTTs and other providers will continue to improve their product
offerings. Price competition could have a material adverse effect on VersaTel's
business, results of operations and financial condition. In addition, the
introduction of the euro will lead to a greater transparency for prices in the
European Telecommunications market, which may lead to further competition and
price decreases.
 
     The Company believes that competition for telecommunications services in
the Benelux region will continue to increase as a result of continuing
liberalization of the telecommunications industry. The Company faces strong
competition from, among others, Telfort B.V., RSL Communications Ltd., Viatel,
Inc., Telenet N.V., EnerTel N.V., Telegroup, Inc. and Tele2 A.B., as well as
other resellers, microwave and satellite carriers, mobile wireless
telecommunications providers, cable television companies, utilities and other
competitive local telecommunications providers. In addition, the development of
new technologies could give rise to significant new competitors to the Company.
Many of the Company's competitors have significantly greater financial,
managerial and operational resources and more experience than the Company. See
"Business -- Competition."
 
RISKS ASSOCIATED WITH ACQUISITIONS, INVESTMENTS AND STRATEGIC ALLIANCES
 
     As part of its business strategy, the Company may enter into strategic
alliances with, acquire assets or businesses from, or make investments in,
companies in business areas that are complementary to its current operations.
Any such future strategic alliances, acquisitions or investments would involve
risks. VersaTel's strategy presents risks inherent in assessing the value,
strengths and weaknesses of acquisition and investment opportunities, and in
integrating and managing newly-acquired operations and improving their operating
efficiency. In addition, such acquisitions and investments could divert the
resources and management time of the Company. There can be no assurance that any
desired strategic alliance, acquisition or investment could be made in a timely
manner or on terms and conditions acceptable to VersaTel. There can also be no
assurance that the Company will be successful in identifying attractive
acquisition candidates, completing and financing additional acquisitions on
favorable terms, or integrating the acquired businesses or assets into its
existing operations. VersaTel's ability to make acquisitions will depend on the
availability of additional debt financing on acceptable terms and will be
subject to compliance with the covenants contained in its debt instruments,
including the Indenture. See "Description of the Exchange Notes." In addition,
VersaTel expects
 
                                       23
<PAGE>   28
 
that the realization of certain acquisition-related benefits may be dependent
upon VersaTel taking certain actions which will result in one-time charges or
expenses.
 
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND EXCHANGE RATE FLUCTUATIONS
 
     The Company's international expansion will present certain risks, including
complying with a multiplicity of regulatory and taxation regimes, difficulties
in staffing and managing foreign operations, any of which could have a material
adverse effect on the Company's future operations and, consequently, on the
Company's business, results of operations and financial condition. In addition,
there can be no assurance that laws or administrative practices relating to
taxation, foreign exchange or other matters of countries within which the
Company operates or plans to operate will not change. Any such change could have
a material adverse effect on the Company's business, financial condition and
results of operations.
 
     The proceeds of the Offering are denominated in U.S. dollars, but the
Company expects to incur many of its expenses in the construction of its Network
and the expansion of its sales and marketing capabilities and product and
service offerings in Dutch guilders and Belgian francs. Any change in the
currency exchange rates that reduces the amount obtained in Dutch guilders or
Belgian francs upon conversion of the U.S. dollar proceeds of the Offering could
have a material adverse effect on the Company and its ability to fund its
capital expenditure program. VersaTel's revenues will be largely denominated in
Dutch guilders, Belgian francs, and, upon its introduction, euro, but principal
and interest on the Notes will be payable in U.S. dollars. Consequently, the
ability of the Company to pay interest and principal when due is dependent on
current and future exchange rates, which are subject to fluctuation. In
addition, the Company will become subject to greater foreign exchange
fluctuations as it expands into markets outside The Netherlands and begins to
receive revenues denominated in currencies other than Dutch Guilders, although
the introduction of the euro will largely eliminate these risks as all three
Benelux countries are scheduled to adopt the euro as their legal currency. The
Company has not entered into hedging transactions to limit the foreign currency
risk exposure, although the Company may implement such practices in the future.
While the Company may enter into transactions to hedge the risk of exchange rate
fluctuations, there can be no assurance that the Company will be able to obtain
hedging arrangements on commercially satisfactory terms.
 
RISK OF FRAUD AND BAD DEBT
 
     VersaTel's revenues for the three months ended December 31, 1997 were
negatively impacted by a case of fraud in October 1997, which the Company
estimates resulted in a loss of approximately NLG 1,000,000. The fraud involved
the unauthorized use of one of the Company's test codes. As a result, a large
number of calls were originated over the course of four days and the associated
origination and termination costs were expensed as miscellaneous operating
expenses. In addition, some of the Company's regular customers were unable to
complete calls through the VersaTel Network. The Company lost revenue from such
customers and offered credits to these customers. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The Company does
not believe that its experiences with such problems are substantially different
from what is generally experienced in the telecommunications industry. While the
Company believes that changes in the technology it employs will curtail
potential fraudulent use of its facilities, the Company does not have in place
insurance coverage for potential fraud. The Company's revenue for any given
period may be adversely affected by significant fraud since revenue is recorded
upon the completion of a call but may be subsequently reversed if the Company is
unable to bill for that call. In addition, where the Company uses third party
service providers to complete calls, any charges payable by the Company which
result from the fraudulent use of the Company's facilities will remain payable
by the Company. The Company believes it makes provisions for non-payment at
adequate levels. The Company expects that the bad debt risk associated with its
customer base will increase as it begins to target residential consumers. Any
significant increase in the levels of fraud and bad debt could have a material
adverse impact on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
 
                                       24
<PAGE>   29
 
RISKS ASSOCIATED WITH CHANGES IN REGULATORY ENVIRONMENT
 
     The Company's strategy has in part been based upon the timely
implementation of regulatory liberalization of the EU telecommunications market
(particularly in the Benelux region). Although EU Member States have a legal
obligation to liberalize their markets under existing EC directives,
implementation and enforceability of the EC directives is dependent on the
action taken by each EU Member State and may be subject to delays in specific
countries. The Company is dependent on implementation of the EC directives in
order to gain cost-oriented access to the PTTs' network infrastructure and to be
permitted to provide certain services to its customers. See "-- Dependence on
Facilities Providers and Interconnect Arrangements" and
"Business -- Regulation." If the implementation or enforceability of the
relevant EC directives is challenged or delayed in any of the markets in which
the Company operates or intends to operate, such delay could have a material
adverse effect on the Company's business, results of operations and financial
condition.
 
     The Company is subject to varying degrees of regulation in each of the
jurisdictions in which it operates or intends to operate. Local laws and
regulations, and the interpretation of such laws and regulations, differ among
the jurisdictions in which the Company operates or intends to operate. There can
be no assurance that future regulatory, judicial and legislative changes will
not have a material adverse effect on the Company, that regulators or third
parties will not raise material issues with regard to the Company's compliance
or noncompliance with applicable regulations or that any changes in applicable
laws or regulations will not have a material adverse effect on the Company.
 
     The Company's operations are dependent on licenses which it acquires from
governmental authorities in each jurisdiction in which it operates. The Company
has obtained licenses, authorizations and/or registrations in The Netherlands
and Belgium and has applied for such licenses, authorizations and/or
registrations in the United Kingdom. The terms and conditions of these licenses
may limit or otherwise affect the Company's scope of operations. There can be no
assurance that it will be able to obtain, maintain or renew licenses to provide
the services it currently provides and plans to provide or that such licenses
will be issued or renewed on terms or with fees that are commercially viable. In
certain circumstances such registrations, authorizations and licenses may be
revoked. The loss, revocation, or failure to obtain these telecommunications
registrations, authorizations and licenses or a substantial limitation upon the
terms of these telecommunications registrations, authorizations and licenses
could have a material adverse effect on the Company. See "Business --
Regulation."
 
CONTROL BY PRINCIPAL SHAREHOLDERS AND DISPUTES AMONG SHAREHOLDERS
 
     Telecom Founders, NeSBIC, Cromwilld, Paribas and NPM (collectively, the
"Shareholders") currently own 82.9% of the Company's outstanding Ordinary Shares
on a fully diluted basis, assuming all warrants and options currently
outstanding have been exercised. See "Summary -- Recent Developments." The
Shareholders have the power to exercise voting and management control of the
Company, including, without limitation, the right to adopt amendments to the
Company's Articles of Association and approve mergers, sales of all or
substantially all of the Company's assets or other similar transactions. The
interests of the Shareholders may differ from those of holders of the Notes.
 
     Cromwilld, the owner of 15.6% of the Company's outstanding Ordinary Shares
on a fully diluted basis after giving effect to the Recapitalization and the
Offering, has objected to the Recapitalization and the Offering and has
threatened to challenge in court certain of the Company's actions in connection
therewith. Cromwilld is controlled by Denis O'Brien, a member of the Supervisory
Board. The legal remedies potentially available to Cromwilld include an action
petitioning for the nullification of certain resolutions of the Company's
shareholders meeting, Management Board or Supervisory Board. Such a petition
would need to be premised on a claim that the adoption of such resolution was
procedurally defective or contrary to Netherlands legal principles of
reasonableness and fairness to the aggrieved shareholder. According to The
Netherlands Civil Code, a nullification judgment would in principle invalidate
the Company's actions, including the Offering, based upon the nullified
resolution. Based upon advice from its Netherlands legal counsel, the Company
believes that, although no assurances can be given, Cromwilld has no legally
valid grounds for any
 
                                       25
<PAGE>   30
 
such challenges and that the objections made by Cromwilld are without merit. In
addition, there can be no assurance that Cromwilld will not attempt to block
certain other corporate actions that require the approval of all the
shareholders of the Company.
 
CHANGE OF CONTROL
 
     Upon the occurrence of a Change of Control, each holder of Notes will be
entitled to require the Company to purchase any or all of such Notes held by
such holder at the prices stated herein. However, the Company's ability to
repurchase its Notes upon a Change of Control may be limited by the terms of
then existing contractual obligations of the Company. In addition, the Company
may not have adequate financial resources to effect such purchase, and there can
be no assurance that the Company would be able to obtain such resources. If the
Company fails to repurchase all of its Notes tendered for purchase upon the
occurrence of a Change of Control, such failure will constitute an Event of
Default under the Indenture. See "Description of the Exchange Notes."
 
RESTRICTIONS ON TRANSFERABILITY AND ABSENCE OF PUBLIC MARKET
 
     There is no existing trading market for the Notes. Although the Initial
Purchaser has advised the Company that it currently intends to make a market in
the Notes, it is not obligated to do so and it may discontinue such
market-making at any time without notice. In addition, such market-making
activity may be limited during the Exchange Offer and the pendency of the Shelf
Registration Statements. Although the Notes are expected to be eligible for
trading in the PORTAL market of the Nasdaq Stock Market Inc. by "qualified
institutional buyers" ("QIBs"), as defined in Rule 144A under the Securities
Act, there can be no assurance as to the development of any market or the
liquidity of any market that may develop for the Notes. If such a market were to
develop the Notes could trade at prices higher or lower than the initial
offering price depending on many factors, including, among other things,
prevailing interest rates, the Company's operating results and the market for
similar securities.
 
     While application has been made to list the Exchange Notes on the
Luxembourg Stock Exchange, there can be no assurance that such listing can be
obtained.
 
     Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the Notes will not be
subject to similar disruptions. Any such disruptions may have an adverse effect
on holders of the Notes.
 
INVESTMENT COMPANY CONSIDERATIONS
 
     VersaTel's U.S. counsel, Shearman & Sterling, has advised the Company that,
in such counsel's opinion, it is not an "investment company" which is required
to be registered under the U.S. Investment Company Act of 1940, as amended (the
"Investment Company Act"). In rendering such opinion, Shearman & Sterling did
not independently establish or verify any information or facts supplied by the
Company and, with the Company's permission, assumed and relied entirely on the
completeness and accuracy of the information supplied by the Company. The
Company intends to conduct its affairs so as to avoid becoming an "investment
company." The Investment Company Act contains substantive regulations with
respect to investment companies, including restrictions on their capital
structure, operations, transactions with related persons and other matters which
may be incompatible with the operations of the Company. If the Company were to
be deemed an "investment company," it would, among other things, effectively be
precluded from making any public offering in the United States and, accordingly,
would be unable to implement the Exchange Offer. If the Company, is deemed an
"investment company," it could also be subject to administrative or legal
proceedings and, among other things, contracts to which the Company is a party
might be rendered unenforceable or subject to rescission.
 
                                       26
<PAGE>   31
 
CONSEQUENCES OF FAILURE TO EXCHANGE
 
     Untendered Outstanding Notes that are not exchanged for Exchange Notes
pursuant to the Exchange Offer will remain restricted securities. Outstanding
Notes will continue to be subject to the following restrictions on transfer: (i)
Outstanding Notes may be resold only if registered pursuant to the Securities
Act, if an exemption from registration is available thereunder, or if neither
such registration nor such exemption is required by law, (ii) Outstanding Notes
shall bear a legend restricting transfer in the absence of registration or an
exemption therefrom and (iii) a holder of Outstanding Notes who desires to sell
or otherwise dispose of all or any part of its Outstanding Notes under an
exemption from registration under the Securities Act, if requested by the
Company, must deliver to the Company an opinion of independent counsel
experienced in Securities Act matters, reasonably satisfactory in form and
substance to the Company, that such exemption is available.
 
                                       27
<PAGE>   32
 
                                USE OF PROCEEDS
 
     The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
contemplated herein, the Company will receive in exchange Outstanding Notes in
like principal amount. The Outstanding Note surrendered in exchange for the
Exchange Notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the Exchange Notes will not result in any change in the Indebtedness
of the Company.
 
     The net proceeds from the Offering were approximately $216.2 million, after
deducting underwriting discounts and commissions and estimated fees and
expenses. The Company used approximately $81.6 million to acquire the Pledged
Securities with respect to the first six interest payments on the Notes. The
Company intends to use the remaining net proceeds from the Offering, together
with the proceeds from the Recapitalization, to make capital expenditures
related to the expansion and development of the VersaTel Network, including
through acquisitions, to fund operating losses and working capital requirements
and for other general corporate purposes including acquisitions and strategic
alliances. The Company estimates that the total capital expenditures necessary
to construct and develop its Network through 1999 will be approximately NLG
222.2 million ($109.5 million), with approximately NLG 106.5 million required
for the construction and development of the Benelux Overlay Network,
approximately NLG 46.6 million for the construction and development of the
initial Local Access Network, approximately NLG 37.1 million for the
construction and development of the International Network and NLG 32.0 million
for switching, network management and billing/back-office support systems. Prior
to the application of the net proceeds from the Offering, as described above,
such funds will be invested by the Company in short-term investment grade
securities.
 
                               THE EXCHANGE OFFER
 
GENERAL
 
     In connection with the sale of the Outstanding Notes, the Company agreed in
the Registration Rights Agreement to (i) file within 90 days, and use its
reasonable best efforts to cause to be declared effective within 150 days, of
the date of the original issuance of the Outstanding Notes, a registration
statement (the "Registration Statement") of which this Prospectus is a part with
respect to a registered offer to exchange the Outstanding Notes for the Exchange
Notes with terms identical in all material respects to the Outstanding Notes and
(ii) use its reasonable best efforts to cause the Exchange Offer to be
consummated on or before 30 days after the date on which the Registration
Statement is declared effective by the Commission.
 
     In the event that (i) the Company is not permitted to file the Registration
Statement or to consummate the Exchange Offer on account of changes in law or
the applicable interpretations of the staff of the Commission, (ii) any holder
that is a QIB notifies the Company at least 20 business days prior to the
consummation of the Exchange Offer that (a) applicable law or SEC policy
prohibits the Company from participating in the Exchange Offer, (b) such holder
may not resell the Exchange Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and that this Prospectus is not
appropriate or available for such resales by such holder or (c) such holder is a
broker-dealer and holds Notes acquired directly from the Company or an affiliate
of the Company, (iii) the Exchange Offer is not for any other reason consummated
within 180 days after the original issue date of the Outstanding Notes, (iv) any
holder (other than a Participating Broker-Dealer) is not eligible to participate
in the Exchange Offer, or in the case of any holder that participates in the
Exchange Offer, such holder does not receive Exchange Notes on the date of the
exchange that may be sold without restriction under federal securities laws
(other than due solely to the status of such holder as an affiliate of the
Company within the meaning of the Securities Act or due to the requirement that
such holder deliver a copy of this Prospectus in connection with any resale of
the Exchange Notes) or (v) the Exchange Offer has been completed and in the
opinion of counsel for the Initial Purchaser a Registration Statement must be
filed and a prospectus must be delivered by the Initial Purchaser in connection
with any offering or sale of Transfer Restricted Securities (as defined in the
Registration Rights Agreement), the Company will use its reasonable best efforts
to file, within 90 days of the earliest to occur of
 
                                       28
<PAGE>   33
 
the preceding events, a shelf registration statement pursuant to the Securities
Act with respect to the resale of the Outstanding Notes (the "Shelf Registration
Statement") and to keep the Shelf Registration Statement effective until the
second anniversary of the Issue Date.
 
     In the event that (i) neither the Registration Statement nor the Shelf
Registration Statement is filed with the Commission on or prior to the 90th day
following the date of original issue of the Outstanding Notes, (ii) neither the
Registration Statement nor the Shelf Registration Statement is declared
effective on or prior to the 150th day following the date of original issue of
the Outstanding Notes (iii) the Exchange Offer is not consummated on or before
30 days after the 150th day following the date of original issue of the
Outstanding Notes, or (iv) (a) the Registration Statement is filed and declared
effective but thereafter ceases to be effective or fails to be usable for its
intended purpose at any time prior to the time that the Exchange Offer is
consummated and is not declared effective within five business days thereafter
or (b) the Shelf Registration Statement is filed and declared effective but
thereafter ceases to be effective or fails to be usable for its intended purpose
at any time during the Effectiveness Period (as defined in the Registration
Rights Agreement) and is not declared effective again within five business days
thereafter, the interest rate borne by the Outstanding Notes shall be increased
by one-half of one percent per annum following such 90-day period in the case of
clause (i) above, following such 150-day period in the case of clause (ii)
above, following such 30-day period in the case of clause (iii) above, or
commencing on the day the applicable registration statement ceases to be
effective or usable for its intended purpose without being declared effective
again within 5 business days in the case of clause (iv) above. The aggregate
amount of such increase from the original interest rate pursuant to these
provisions will in no event exceed 1.5 percent per annum. Upon (w) the filing of
the Registration Statement or the Shelf Registration Statement for the Exchange
Offer after the 90-day period described in clause (i) above, (x) the
effectiveness of the Registration Statement or Shelf Registration Statement
after the 150-day period described in clause (ii) above, (y) the consummation of
the Exchange Offer after the 30-day period described in clause (iii) above, or
(2) the effectiveness or usability of the Registration Statement which had
ceased to remain effective or be usable, or the effectiveness or usability of
the Shelf Registration Statement which had ceased to remain effective or be
usable the interest rate borne by the Outstanding Notes from the date of such
filing, effectiveness, usability or the day before the date of consummation, as
the case may be, will be reduced to the original interest rate if the Company is
otherwise in compliance with such requirements.
 
     Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all
Outstanding Notes validly tendered prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Outstanding
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Outstanding Notes pursuant to the Exchange Offer in denominations of $1,000 and
integral multiples thereof.
 
     Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Outstanding Notes may be offered for resale,
resold and otherwise transferred by any holder thereof (other than (i) a
broker-dealer who purchased such Outstanding Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that the holder is acquiring the Exchange Notes in its ordinary course
of business and is not participating, and has no arrangements or understanding
with any person to participate, in the distribution of the Exchange Notes.
Holders of Outstanding Notes wishing to accept the Exchange Offer must represent
to the Company that such conditions have been met.
 
     Each broker-dealer that receives Exchange Notes in exchange for Outstanding
Notes held for its own account, 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 Exchange Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, such broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. The Prospectus, as it may be amended or supplemented from time to time, may
be used by such broker-dealer in connection with resales of Exchange
                                       29
<PAGE>   34
 
Notes received in exchange for Outstanding Notes. The Company has agreed that,
for a period of 180 days after the Expiration Date, it will make this Prospectus
and any amendment or supplement to this Prospectus available to any such
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
 
     As of the date of this Prospectus, $225 million aggregate principal amount
of the Outstanding Notes is outstanding. In connection with the issuance of the
Outstanding Notes, the Company arranged for the Outstanding Notes initially
purchased by Qualified Institutional Buyers to be issued and transferable in
book-entry form through the facilities of DTC, acting as depositary. The
Exchange Notes will also be issuable and transferable in book-entry form through
DTC.
 
     This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of November 3, 1998 (the "Record Date").
 
     The Company shall be deemed to have accepted validly tendered Outstanding
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. See "-- Exchange Agent." The Exchange Agent will act as
agent for the tendering holders of Outstanding Notes for the purpose of
receiving Exchange Notes from the Company and delivering Exchange Notes to such
holders.
 
     If any tendered Outstanding Notes are not accepted for exchange because of
an invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Outstanding Notes will be returned, without
expenses, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
 
     Holders of Outstanding Notes who tender in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of
Outstanding Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than certain applicable taxes, in connection with
the Exchange Offer. See "-- Fees and Expenses."
 
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
 
     The term "Expiration Date" shall mean December 4, 1998 unless the Company,
in its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
 
     In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Outstanding Notes an announcement thereof, each prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Such announcement may state that the Company is
extending the Exchange Offer for a specified period of time.
 
     The Company reserves the right (i) to delay acceptance of any Outstanding
Notes, to extend the Exchange Offer or to terminate the Exchange Offer and to
refuse to accept Outstanding Notes not previously accepted, if any of the
conditions set forth herein under "-- Termination" shall have occurred and shall
not have been waived by the Company (if permitted to be waived by the Company),
by giving oral or written notice of such delay, extension or termination to the
Exchange Agent, and (ii) to amend the terms of the Exchange Offer in any manner
deemed by it to be advantageous to the holders of the Outstanding Notes. Any
such delay in acceptance, extension, termination or amendment will be followed
as promptly as practicable by oral or written notice thereof. If the Exchange
Offer is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment in a manner reasonably
calculated to inform the holders of the Outstanding Notes of such amendment.
 
     Without limiting the manner by which the Company may choose to make public
announcements of 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 making a
timely release to the Dow Jones News Service.
 
                                       30
<PAGE>   35
 
INTEREST ON THE EXCHANGE NOTES
 
     The Exchange Notes will bear interest from May 27, 1998, payable
semiannually on May 15 and November 15 of each year commencing on November 15,
1998, at the rate of 13 1/4% per annum. Holders of Outstanding Notes whose
Outstanding Notes are accepted for exchange will be deemed to have waived the
right to receive any payment in respect of interest on the Outstanding Notes
accrued from May 27, 1998 until the date of the issuance of the Exchange Notes.
Consequently, holders who exchange their Outstanding Notes for Exchange Notes
will receive the same interest payment on November 15, 1998 (the first interest
payment date with respect to the Outstanding Notes and the Exchange Notes) that
they would have received had they not accepted the Exchange Offer.
 
PROCEDURES FOR TENDERING
 
     To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the
Outstanding Notes (unless such tender is being effected pursuant to the
procedure for book-entry transfer described below) and any other required
documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
 
     Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Outstanding Notes
by causing DTC to transfer such Outstanding Notes into the Exchange Agent's
account in accordance with DTC's procedure for such transfer. Although delivery
of Outstanding Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received or confirmed by the
Exchange Agent at its addresses set forth herein under "-- Exchange Agent" prior
to 5:00 p.m., New York City time, on the Expiration Date. DELIVERY OF DOCUMENTS
TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
 
     The tender by a holder of Outstanding Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
 
     Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also request that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
such holders.
 
     The method of delivery of Outstanding Notes and the Letters of Transmittal
and all other required documents to the Exchange Agent is at the election and
risk of the holders. Instead of delivery by mail, it is recommended that holders
use an overnight or hand delivery service. In all cases, sufficient time should
be allowed to assure timely delivery. No Letter of Transmittal or Outstanding
Notes should be sent to the Company.
 
     Only a holder of Outstanding Notes may tender such Outstanding Notes in the
Exchange Offer. The term "holder" with respect to the Exchange Offer means any
person in whose name Outstanding Notes are registered on the books of the
Company or any other person who has obtained a properly completed bond power
from the registered holder, or any person whose Outstanding Notes are held of
record by DTC who desires to deliver such Outstanding Notes by book-entry
transfer at DTC.
 
     Any beneficial holder whose Outstanding Notes are registered in the name of
his broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on his behalf. If such beneficial holder wishes
to tender on his own behalf, such beneficial holder must, prior to completing
and executing the Letter of Transmittal and delivering his Outstanding Notes,
either make appropriate arrangements to register ownership of the Outstanding
Notes in such holder's name or obtain a properly completed bond power from the
registered holder. The transfer of record ownership may take considerable time.
 
                                       31
<PAGE>   36
 
     Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" (an "Eligible Institution")
within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended ( the "Exchange Act") unless the Outstanding Notes tendered pursuant
thereto are tendered (i) by a registered holder who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the Letter of Transmittal or (ii) for the account of an Eligible Institution.
 
     If the Letter of Transmittal is signed by a person other than the
registered holder of any Outstanding Notes listed therein, such Outstanding
Notes must be endorsed or accompanied by appropriate bond powers which authorize
such person to tender the Outstanding Notes on behalf of the registered holder,
in either case signed as the name of the registered holder or holders appears on
the Outstanding Notes.
 
     If the Letter of Transmittal or any Outstanding Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
 
     All the questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Outstanding Notes will be
determined by the Company in its sole discretion, which determinations will be
final and binding. The Company reserves the absolute right to reject any and all
Outstanding Notes not validly tendered or any Outstanding Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Outstanding Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Outstanding Notes must be cured within such time as
the Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Outstanding Notes nor shall any of
them incur any liability for failure to give such notification. Tenders of
Outstanding Notes will not be deemed to have been made until such irregularities
have been cured or waived. Any Outstanding Notes received by the Exchange Agent
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned without cost by the Exchange
Agent to the tendering holder of such Outstanding Notes unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
 
     In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Outstanding Notes that remain outstanding
subsequent to the Expiration Date, or, as set forth under "Termination," to
terminate the Exchange Offer and (b) to the extent permitted by applicable law,
purchase Outstanding Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers may differ
from the terms of the Exchange Offer.
 
     By tendering, each holder of Outstanding Notes will represent to the
Company that, among other things, the Exchange Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is the holder,
that neither the Holder nor any other person has an arrangement or understanding
with any person to participate in the distribution of the Exchange Notes and
that neither the holder nor any such other person is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act.
 
GUARANTEED DELIVERY PROCEDURES
 
     Holders who wish to tender their Outstanding Notes and (i) whose
Outstanding Notes are not immediately available, or (ii) who cannot deliver
their Outstanding Notes, the Letter of Transmittal, or any
 
                                       32
<PAGE>   37
 
other required documents to the Exchange Agent prior to the Expiration Date, or
if such Holder cannot complete the procedure for book-entry transfer on a timely
basis, may effect a tender if:
 
          (a) The tender is made through an Eligible Institution;
 
          (b) Prior to the Expiration Date, the Exchange Agent receives from
     such 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 of the Outstanding Notes,
     the certificate number or numbers of such Outstanding Notes and the
     principal amount of Outstanding Notes tendered, stating that the tender is
     being made thereby, and guaranteeing that, within five business days after
     the Expiration Date, the Letter of Transmittal (or facsimile thereof),
     together with the certificate(s) representing the Outstanding Notes to be
     tendered in proper form for transfer and any other documents required by
     the Letter of Transmittal, will be deposited by the Eligible Institution
     with the Exchange Agent; and
 
          (c) Such properly completed and executed Letter of Transmittal (or
     facsimile thereof), together with the certificate(s) representing all
     tendered Outstanding Notes in proper form for transfer (or confirmation of
     a book-entry transfer into the Exchange Agent's account at DTC of
     Outstanding Notes delivered electronically) and all other documents
     required by the Letter of Transmittal are received by the Exchange Agent
     within five business days after the Expiration Date.
 
WITHDRAWAL OF TENDERS
 
     Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date unless previously accepted for exchange.
 
     To withdraw a tender of Outstanding Notes in the Exchange Offer, a written
or facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the business day prior to the Expiration Date and prior to acceptance for
exchange thereof by the Company. Any such notice of withdrawal must (i) specify
the name of the person having deposited the Outstanding Notes to be withdrawn
(the "Depositor"), (ii) identify the Outstanding Notes to be withdrawn
(including the certificate number or numbers and principal amount of such
Outstanding Notes), (iii) be signed by the Depositor in the same manner as the
original signature on the Letter of Transmittal by which such Outstanding Notes
were tendered (including any required signature guarantees) or be accompanied by
documents of transfers sufficient to permit the Trustee with respect to the
Outstanding Notes to register the transfer of such Outstanding Notes into the
name of the Depositor withdrawing the tender and (iv) specify the name in which
any such Outstanding Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) for such withdrawal notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Outstanding
Notes so withdrawn will be deemed not to have been validly tendered for purposes
of the Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Outstanding Notes so withdrawn are validly tendered. Any Outstanding
Notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Outstanding Notes may be tendered by following one of
the procedures described above under "-- Procedures for Tendering" at any time
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 Exchange Notes for, any
Outstanding Notes not therefore accepted for exchange, and may terminate or
amend the Exchange Offer as provided herein before the acceptance of such
Outstanding Notes if: (i) any action or proceeding is instituted or threatened
in any court or by or before any governmental agency with respect to the
Exchange Offer, which, in the reasonable judgment of the Company, 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
                                       33
<PAGE>   38
 
staff of the Commission or court of competent jurisdiction in a manner, which,
in the reasonable judgment of the Company, 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 Outstanding Notes and
return any Outstanding Notes that have been tendered to the holders thereof,
(ii) extend the Exchange Offer and retain all Outstanding Notes tendered prior
to the Expiration of the Exchange Offer, subject to the rights of such holders
of tendered Outstanding Notes to withdraw their tendered Outstanding Notes, or
(iii) waive such termination event with respect to the Exchange Offer and accept
all properly tendered Outstanding 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 Outstanding Notes, and the Company will
extend the Exchange Offer for a period of five to ten business days, depending
upon the significance of the waiver and the manner of disclosure to the
registered holders of the Outstanding Notes, if the Exchange Offer would
otherwise expire during such period.
 
EXCHANGE AGENT
 
     United States Trust Company of New York, the Trustee under the Indenture,
has been appointed as Exchange Agent for the Exchange Offer. Questions and
requests for assistance and requests for additional copies of this Prospectus or
of the Letter of Transmittal should be directed to the Exchange Agent addressed
as follows:
 
     By Mail or Hand Delivery:  United States Trust Company of New York
                            770 Broadway, 13th Floor
                            New York, New York 10003
                            Attention: Corporate Trust Services
 
     Facsimile Transmission: (212) 780-0592
     Confirm by Telephone: (800) 548-6565
 
FEES AND EXPENSES
 
     The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone.
 
     The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Outstanding Notes and in handling or
forwarding tenders for exchange.
 
     The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company.
 
     The Company will pay all transfer taxes, if any, applicable to the exchange
of Outstanding Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Outstanding Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Outstanding Notes tendered, or if tendered Outstanding Notes are
registered in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Outstanding Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
 
                                       34
<PAGE>   39
 
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
 
                           EXCHANGE RATE INFORMATION
 
     The table below sets forth, for the periods and dates indicated, certain
information concerning the Noon Buying Rates for Dutch guilders expressed in
U.S. dollars per Dutch guilder. On September 28, 1998, the Noon Buying Rate was
NLG 1.89 per $1.00.
 
<TABLE>
<CAPTION>
                                                                           PERIOD
                      PERIOD                        HIGH        LOW      AVERAGE(1)    PERIOD END
                      ------                        -----       ----     ----------    ----------
<S>                                                 <C>         <C>      <C>           <C>
1993..............................................   1.96       1.76        1.87          1.95
1994..............................................   1.98       1.67        1.82          1.74
1995..............................................   1.75       1.52        1.60          1.60
1996..............................................   1.76       1.61        1.69          1.73
1997..............................................   2.12       1.73        1.95          2.03
1998 (through September 28, 1998).................   2.09       1.89        2.02          1.89
</TABLE>
 
- ---------------
(1) The average of the Noon Buying Rates on the last day of each full month
    during the period.
 
     Netherlands law does not impose restrictions that would affect the
remittance of interest or other payments to nonresident holders of the Notes or
any other foreign exchange controls. Fluctuations in the exchange rate between
the Dutch guilder and the U.S. dollar in the past are not necessarily indicative
of fluctuations that may occur during the term of the Notes.
 
                                       35
<PAGE>   40
 
                                 CAPITALIZATION
 
     The following table sets forth the cash and restricted cash and the
capitalization of the Company as of June 30, 1998. The information set forth in
the following table should be read in conjunction with the Financial Statements
included elsewhere in this Prospectus.
 
<TABLE>
<CAPTION>
                                                                AS OF JUNE 30, 1998
                                                              -----------------------
                                                                  NLG          $(1)
<S>                                                           <C>             <C>
Cash and restricted cash....................................    448,572       220,971
                                                                =======       =======
Current maturities of long-term debt........................          0             0
Long-term debt (less current portion):
  Other debt................................................        249           123
  13 1/4% Senior Notes due 2008.............................    455,081       224,178
                                                                -------       -------
          Total debt........................................    455,330       224,301
                                                                -------       -------
 
Shareholders' equity:
  Ordinary Shares, par value NLG 0.10 per share --
     44,550,000 shares authorized; 19,927,405 shares issued
     and outstanding........................................      1,943           957
  Warrants..................................................      3,191         1,572
  Additional paid-in capital................................     50,787        25,018
  Accumulated deficit.......................................    (45,883)      (22,602)
                                                                -------       -------
          Total shareholders' equity (deficit)..............     10,038         4,945
                                                                -------       -------
          Total capitalization..............................    465,368       229,246
                                                                =======       =======
</TABLE>
 
- ---------------
(1) Solely for the convenience of the reader, the U.S. dollar amount of the
    Notes has been translated into Dutch guilders at the Noon Buying Rate on
    June 30, 1998 of NLG 2.03 per $1.00.
 
     There has been no material change in the capitalization of the Company
since June 30, 1998.
 
                                       36
<PAGE>   41
 
                       SELECTED FINANCIAL AND OTHER DATA
 
     The selected financial data for VersaTel, presented below, as of and for
the two fiscal years ended December 31, 1996 and December 31, 1997 have been
derived from the Audited Financial Statements of VersaTel, which have been
audited by Arthur Andersen, independent public accountants. The summary
financial data for the six months ended June 30, 1997 and June 30, 1998, have
been derived from the Unaudited Financial Statements, which have been prepared
in accordance with U.S. GAAP and on a basis which management believes is
consistent with that of the Audited Financial Statements. The unaudited
financial data for the six months ended June 30, 1997 and 1998 include all
normal and recurring adjustments necessary for the fair presentation of the
results of operations and financial condition of the Company for such periods.
The information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations" and the Financial Statements included
elsewhere in this Prospectus.
 
<TABLE>
<CAPTION>
                                                                FISCAL YEAR ENDED DECEMBER 31,        SIX MONTHS ENDED JUNE 30,
                                                             ------------------------------------    ----------------------------
                                                             1995      1996           1997            1997            1998
                                                             -----    ------    -----------------    ------    ------------------
                                                              NLG      NLG        NLG       $(1)      NLG        NLG       $(1)
                                                                                 (IN THOUSANDS, EXCEPT RATIO)
<S>                                                          <C>      <C>       <C>        <C>       <C>       <C>        <C>
STATEMENT OF OPERATIONS DATA:
Revenue....................................................     52     6,428     18,896     9,308     8,938     15,750      7,759
Operating expenses:
  Cost of revenue..........................................    117     4,954     17,405     8,574     6,329     13,090      6,449
  Selling, general and administrative......................    538     5,485     17,527     8,634     5,331     14,274      7,032
  Depreciation and amortization............................     11       453      3,237     1,594       680      2,694      1,327
                                                             -----    ------    -------    ------    ------    -------    -------
    Total operating expenses...............................    666    10,892     38,169    18,802    12,340     30,058     14,808
                                                             -----    ------    -------    ------    ------    -------    -------
Loss from operations.......................................   (614)   (4,464)   (19,273)   (9,494)   (3,402)   (14,308)    (7,049)
Interest expense (income), net.............................      1       269        534       263       190      6,026      2,968
Currency loss..............................................     --        --         53        26         0        340        167
                                                             -----    ------    -------    ------    ------    -------    -------
Net loss...................................................   (615)   (4,733)   (19,860)   (9,783)   (3,592)   (20,674)   (10,184)
                                                             =====    ======    =======    ======    ======    =======    =======
Net loss per share (Basic and Diluted).....................  (0.18)    (0.95)     (2.20)    (1.08)    (0.40)     (1.58)     (0.78)
Weighted average number of shares outstanding..............  3,327     5,004      9,042     9,042     8,910     13,123     13,123
</TABLE>
 
<TABLE>
<CAPTION>
                                                                       AS OF DECEMBER 31,
                                                              ------------------------------------      AS OF JUNE 30,
                                                              1995     1996            1997                  1998
                                                              ----    ------    ------------------    ------------------
                                                              NLG      NLG        NLG       $(1)        NLG       $(1)
                                                                                    (IN THOUSANDS)
<S>                                                           <C>     <C>       <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Cash and restricted cash....................................   160     4,443      1,495        736    448,572    220,971
Working capital (excluding cash and restricted cash)........   436    (2,704)   (24,774)   (12,204)   (27,311)   (13,454)
Property plant and equipment, net...........................   224     2,340     13,619      6,709     24,666     12,151
Total assets................................................   820     8,160     19,331      9,523    502,555    247,564
Total long-term obligations (including current portion).....   614     4,185      8,491      4,183    455,330    224,301
Total shareholders' equity (deficit)........................  (120)      146    (18,214)    (8,972)    10,038      4,945
</TABLE>
 
<TABLE>
<CAPTION>
                                                              FISCAL YEAR ENDED DECEMBER 31,          SIX MONTHS ENDED JUNE 30,
                                                           -------------------------------------    -----------------------------
                                                            1995      1996           1997            1997            1998
                                                           ------    ------    -----------------    ------    -------------------
                                                            NLG       NLG        NLG       $(1)      NLG        NLG        $(1)
                                                                                       (IN THOUSANDS)
<S>                                                        <C>       <C>       <C>        <C>       <C>       <C>         <C>
OTHER FINANCIAL DATA:
  SG&A as a percentage of revenue........................  1194.2%     85.3%      92.8%     92.8%     59.6%       90.6%      90.6%
  EBITDA(2)..............................................    (603)   (4,011)   (16,036)   (7,900)   (2,722)    (11,614)    (5,722)
  Capital expenditures...................................     213     2,569     14,516     7,151     3,579      13,573      6,686
CASH FLOW DATA:
Net cash provided by (used in) operating activities......    (715)   (1,718)     5,762     2,838      (420)   (178,461)   (87,912)
Net cash used in investing activities....................    (234)   (2,569)    (7,126)   (3,510)   (3,579)    (13,573)    (6,686)
Net cash provided by financing activities................   1,109     8,571      2,850     1,404       (92)    473,135    233,071
OTHER DATA:
  Total customers (at period end)........................      35       670      2,245     2,245     1,153       4,867      4,867
  Number of billable minutes (in thousands)(3)...........      51     6,487     23,361    23,361    10,004      39,295     39,295
  Average revenue per billable minute....................    1.03      0.99       0.81      0.40      0.89        0.40       0.20
</TABLE>
 
- ---------------
(1) Solely for the convenience of the reader, Dutch guilder amounts have been
    translated into U.S. dollars at the Noon Buying Rate on June 30, 1998 of NLG
    2.03 per $1.00.
(2) EBITDA consists of earnings (loss) before interest expense, income taxes,
    depreciation, amortization and foreign exchange gain (loss). EBITDA is
    included because management believes it is a useful indicator of a company's
    ability to incur and service debt. EBITDA should not be considered as a
    substitute for operating earnings, net income, cash flow or other statements
    of operations or cash flow data computed in accordance with U.S. GAAP or as
    a measure of the Company's results of operations or liquidity. Funds
    depicted by this measure may not be available for management's discretionary
    use (due to covenant restrictions, debt service payments, the expansion of
    the VersaTel Network, and other commitments). Because all companies do not
    calculate EBITDA identically, the presentation of EBITDA contained herein
    may not be comparable to other similarly entitled measures of other
    companies.
(3) Billable minutes are those minutes during which a call is connected to the
    VersaTel switch and for which the Company bills a customer.
 
                                       37
<PAGE>   42
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion and analysis should be read in conjunction with
the Financial Statements contained elsewhere in this Prospectus. See "Selected
Financial and Other Data." Certain information contained below and elsewhere in
this Prospectus, including information with respect to the Company's plans and
strategy for its business, are forward-looking statements. See "Disclosure
Regarding Forward-Looking Statements."
 
OVERVIEW
 
     VersaTel is a rapidly growing alternative telecommunications service
provider based in Amsterdam, The Netherlands. VersaTel's objective is to become
the leading alternative provider of facilities-based national and international
telecommunications services in the Benelux region. The Company currently
provides high quality competitively priced, international, and increasingly
national, long distance telecommunications services in The Netherlands,
primarily to small- and medium-sized businesses and selected residential
customers. The VersaTel Network currently consists of a Nortel DMS 100 switch
located in Amsterdam and connections to other carriers, including PTT Telecom.
Business and residential customers access the VersaTel Network indirectly by
dialing (manually, through an auto-dialer or through pre-programmed PBX's) the
Company's "1611" carrier select code. Wholesale customers access the Network
directly through leased lines. Prior to liberalization and the implementation of
the "1611" code, business and residential customers used the six-digit Virtual
Private Network ("VPN") code or the Company's Direct Inward System Access
("DISA") code, which involves a two stage call set-up. Both the VPN and DISA
codes are currently being phased out as customers are being migrated to the
"1611" carrier select code.
 
  REVENUES
 
     VersaTel currently derives its revenues from the provision of long distance
telecommunications services in The Netherlands. VersaTel provides international
long distance and national long distance services to its customer base of small-
and medium-sized businesses as well as selected residential customers. The
Company also provides wholesale services to other telecommunications service
providers.
 
     VersaTel's revenues are derived from minutes of telecommunications traffic
billed. The following table sets forth the total revenues and billable minutes
of use attributable to VersaTel's operations for the years ended December 31,
1996 and December 31, 1997 and for the six months ended June 30, 1997 and June
30, 1998 as well as the total number of customers as of December 31, 1996 and
December 31, 1997 and as of June 30, 1998. All of VersaTel's 1996 and 1997
revenues were derived from The Netherlands. VersaTel expects to start generating
revenues in Belgium in 1998 and in Luxembourg in 1999.
 
<TABLE>
<CAPTION>
                                                               FISCAL
                                                             YEARS ENDED      SIX MONTHS ENDED
                                                            DECEMBER 31,          JUNE 30,
                                                           ---------------    ----------------
                                                           1996      1997      1997      1998
                                                           -----    ------    ------    ------
                                                                   (NLG IN THOUSANDS)
<S>                                                        <C>      <C>       <C>       <C>
REVENUES
  Business customers.....................................  6,143    16,948     8,104    13,833
  Residential customers..................................      0        11         0       123
  Wholesale customers....................................    285     1,937       834     1,794
                                                           -----    ------    ------    ------
          Total..........................................  6,428    18,896     8,938    15,750
 
                                                                     (IN THOUSANDS)
BILLABLE MINUTES OF USE
  Business customers.....................................  6,237    21,469     9,219    31,654
  Residential customers..................................      0        42         0       458
  Wholesale customers....................................    250     1,850       785     7,183
                                                           -----    ------    ------    ------
          Total..........................................  6,487    23,361    10,004    39,295
</TABLE>
 
                                       38
<PAGE>   43
 
<TABLE>
<CAPTION>
                                                              AS OF DECEMBER 31,    AS OF JUNE 30,
                                                              ------------------    --------------
                                                               1996       1997           1998
                                                              -------    -------    --------------
<S>                                                           <C>        <C>        <C>
CUSTOMERS
  Business customers........................................     669      2,014          3,810
  Residential customers.....................................       0        230          1,054
  Wholesale customers.......................................       1          1              3
                                                              ------     ------         ------
          Total.............................................     670      2,245          4,867
</TABLE>
 
     Currently, small- to medium-sized businesses generate the majority of
VersaTel's revenues. VersaTel expects revenues from the residential customer
segment to grow substantially with increased awareness of its "1611" carrier
select code, future introduction of carrier pre-selection, additional marketing
efforts and the introduction of new products and services targeted at
residential customers. In the future, the Company also expects to derive
revenues from monthly charges, incoming calls and new services as a result of
directly connecting business customers to the VersaTel Network. The Company also
derives a limited amount of revenues from switched voice services offered to
other telecommunications service providers on a wholesale basis. As the Benelux
Overlay Network is completed and as the Company has capacity available, it
intends to increase its marketing efforts in the wholesale segment to increase
utilization of the Network. The Company expects to expand its wholesale
offerings to include the sale of dark fiber, conduit and rights-of-way access to
help offset the cost of constructing the Network.
 
     VersaTel generally prices its services at a discount to the local PTTs and
expects to continue this pricing strategy as the Company expands its operations.
In general, PTTs have been reducing their rates over the last few years. As a
result, VersaTel has experienced and expects to continue to experience declining
revenue per minute. PTT Telecom reduced its prices on several occasions in 1997
and most recently in April 1998 with a reduction of approximately 10.0% which
may have an adverse impact on margins. Additionally, the Company expects to
increase its national billable minutes, which are priced at lower rates than
international minutes. As national and wholesale billable minutes increase as a
percentage of total billable minutes, average revenue per billable minute will
further decline. However, due to technological improvements, liberalization of
the European telecommunications market and increased available transmission
capacity, both from third parties and as the VersaTel Network is built out,
VersaTel expects costs per minute to decline as well. Management believes that
the decline of per minute costs will out-pace the decline in per minute prices;
however, there can be no assurances that this will occur. If reductions in costs
do not in fact out-pace reductions in revenues, VersaTel may experience a
substantial reduction in its margins on calls which, absent a significant
increase in billable minutes of traffic carried or increased charges for
additional services, would have a material adverse effect on VersaTel's business
and financial results. In addition, the introduction of the euro will lead to a
greater transparency for prices in the European Telecommunications market, which
may lead to further competition and price decreases. See "Risk
Factors -- Intense Competition."
 
  COST OF REVENUES
 
     VersaTel's costs of revenues are comprised of origination costs, network
costs and termination costs and are both fixed and variable. Origination costs
represent the cost of carrying traffic from the customer to the VersaTel
Network. Origination charges for calls transported to the VersaTel Network are
variable and are incurred on a per minute basis, including the call set-up
charges. Origination charges for business and residential customers are charged
by the PTT either to VersaTel, in the case of the "1611" and VPN codes, or
directly to customers, in the case of the DISA code. In cases where the business
or residential customer is charged directly by the PTT for the origination
costs, VersaTel reimburses the customer by means of a credit to the customer's
account. The charges credited directly to the customer are a result of the use
of the DISA access code and, as noted above, are being phased out by the
Company. Origination costs billed directly to customers by the PTT are not
included in the revenues of VersaTel. The charges credited to the customer are
recorded as cost of revenues. VersaTel's revenues are derived from minutes of
telecommunications traffic billed and revenues are allocated to the period in
which the traffic has occurred.
 
     The Company has experienced a significant decrease in origination costs and
expects that they will continue to decrease significantly over time due to
competition and regulatory orders. In April 1998, the Netherlands regulatory
authority, the Onafhankelijke Post en Telecommunicatie Autoriteit ("OPTA"),
ordered a reduction in origination charges which management estimates could
reduce these charges by up to
 
                                       39
<PAGE>   44
 
40.0%. In addition, as VersaTel builds-out its Network, it intends to connect as
many business customers as economically feasible directly to the VersaTel
Network, thereby eliminating origination charges for these customers. These
decreases would be offset to some extent by amortization and depreciation
charges associated with the construction of the Network. There can be no
assurance that the trend in decreasing access costs will continue. As a result,
if origination costs do not continue to decrease, anticipated decreases in
revenues per minute would cause the Company to experience a decline in gross
margins per billable minute which would have a material adverse effect on the
Company's business and financial performance. See "Risk Factors -- Intense
Competition."
 
     Currently, network costs represent the cost of transporting traffic between
the VersaTel switch and points of interconnection using leased lines. However,
as VersaTel builds-out the Network, the Company will establish more points of
interconnection and, as a result, expects network costs to rise in the future.
 
     Termination costs are the per minute costs associated with using carriers
to carry a call from the point of interconnection to the final destination.
Through least-cost routing, the VersaTel switch directs calls to the most
cost-efficient carrier for the required destination. As VersaTel builds-out the
Network to new points of interconnection, the Company expects to be able to
reduce average termination costs per minute. For example, once VersaTel
establishes a direct link from Amsterdam to Rotterdam, the Company will no
longer pay for national termination costs on that route and will only pay local
termination costs from the point of interconnection in Rotterdam to the final
destination in that city. The Company also believes that per minute termination
costs will continue to decrease due to several additional factors including: (i)
the incremental build-out of the VersaTel Network which will increase the number
of carriers with which it interconnects; (ii) the increase of minutes originated
by VersaTel should lead to higher volume discounts available to the Company;
(iii) more rigorous implementation of the EC directives requiring cost-based
termination rates and leased line rates; and (iv) emergence of new
telecommunication service providers and the construction of new transmission
facilities resulting in increased competition. There can be no assurance,
however, that the trend in decreasing termination costs will continue.
 
  SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
 
     Selling, general and administrative expenses are comprised primarily of
salaries, employee benefits, office and administrative expenses, professional
and consulting fees and marketing costs. These expenses have increased as the
Company has developed and expanded its workforce, and are expected to continue
to increase as new operations are established and the Company expands. Selling,
general and administrative expenses as a percentage of revenue will continue to
vary from period to period as a result of start-up costs relating to expansion
into new regions.
 
     The Company has grown substantially since its inception and intends to
continue to grow by adding more sales, marketing and customer support staff. In
addition, the Company expects to establish additional sales offices in the
future. The expansion of its sales, marketing and customer support staff and the
development of additional sales offices involves substantial training costs and
start-up costs, a large portion of which will be reflected as fixed costs and
recorded as selling, general and administrative charges. Accordingly, the
Company's results of operations will vary depending on the timing and speed of
the Company's expansion strategy and, during a period of rapid expansion,
selling, general and administrative expenses will be relatively higher than
during more stable periods of growth. See "Business -- Sales and
Marketing -- Sales and Marketing Staff."
 
  DEPRECIATION AND AMORTIZATION
 
     The Company capitalizes and depreciates its fixed assets, including
switching equipment and fiber-optic cable, over periods ranging from two to
twenty-five years. In addition, the Company capitalizes and amortizes the cost
of installing dialers at customer sites. The development of the VersaTel Network
will require large capital expenditures and larger depreciation charges in the
future. The Company expects that the total cost of
 
                                       40
<PAGE>   45
 
construction of the VersaTel Network through 1999 will be approximately NLG
222.2 million, with approximately NLG 106.5 million required for the Benelux
Overlay Network, approximately NLG 46.6 million required for the Local Access
Network, approximately NLG 37.1 million required for the International Network
and approximately NLG 32.0 million for switching, network management and
billing/ back-office support systems. Increased capital expenditures will
adversely affect the Company's future operating results due to increased
depreciation charges and interest expense. See "Business -- Strategy" and "--
Network."
 
  FOREIGN EXCHANGE LOSS
 
     Since the Offering, the Company has substantial dollar denominated
indebtedness. Also, as it expands its activities into additional European
countries it will become more exposed to fluctuations in different foreign
currencies which may result in foreign exchange gains and/or losses. To date,
these gains and/or losses have been immaterial as the Company has not had
significant dollar denominated indebtedness or business and conducts its
business only in The Netherlands and largely in Dutch guilders. Only a limited
number of equipment purchases and consultancy activities are billed to the
Company in currencies other than Dutch guilders. The Company reviews on a weekly
basis the currency risk of US Dollars to Dutch Guilders. Based on the currency
requirements for Dutch Guilders the Company hedges the foreign currency risk in
order to lock into a rate for a given time.
 
RESULTS OF OPERATIONS
 
  FOR THE SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE
30, 1997
 
     Revenues increased by NLG 6.9 million to NLG 15.8 million for the six
months ended June 30, 1998 from NLG 8.9 million for the six months ended June
30, 1997, representing an increase of 76.2%. The growth in revenues resulted
primarily from the addition of new customers, the introduction of national long
distance services in The Netherlands and an increase in wholesale traffic. The
revenue for the first six months of 1998 as compared to the same period in 1997
was negatively impacted by PTT Telecom's June 1997 introduction of a
volume-based business customer discount plan allowing for discounts of
approximately 10.0% and by general price reductions in October 1997 of
approximately 28.0% and in May 1998 of approximately 10.0%. VersaTel responded
to these price reductions by reducing its own prices, the effect of which
exceeded reductions in originating and termination costs.
 
     Billable minutes of use increased by 29.3 million to 39.3 million for the
six months ended June 30, 1998 from 10.0 million for the six months ended June
30, 1997, representing an increase of 292.8%. The number of customers increased
by 3,714 to 4,867 as of June 30, 1998 from 1,153 as of June 30, 1997.
 
     Cost of revenues increased by NLG 6.8 million to NLG 13.1 million for the
six months ended June 30, 1998 from NLG 6.3 million for the six months ended
June 30, 1997, primarily reflecting an increase in billable minutes. This
increase was partially offset by declines in per minute international
termination and origination costs resulting from the migration of customers from
the DISA and VPN codes to the "1611" carrier select code.
 
     Selling, general and administrative expense increased by NLG 9.0 million to
NLG 14.3 million for the six months ended June 30, 1998 from NLG 5.3 million for
the six months ended June 30, 1997, representing a 167.8% increase. This
primarily resulted from an increase in the cost of staff (including temporary
personnel and consultants) in the areas of network operations, customer service,
sales and marketing, installation services, and accounting personnel.
 
     Depreciation and amortization expenses increased by NLG 2.0 million to NLG
2.7 million for the six months ended June 30, 1998 from NLG 0.7 million for the
six months ended June 30, 1997. This increase was primarily due to capital
expenditures incurred in connection with the deployment of the Nortel DMS 100
switch in Amsterdam and an increase in the number of dialers installed due to
customer growth.
 
  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 1996
 
     Revenues increased by NLG 12.5 million to NLG 18.9 million in the fiscal
year ended December 31, 1997 from NLG 6.4 million in the fiscal year ended
December 31, 1996, representing a 194.0% increase. The growth in revenue
resulted primarily from an increased number of customers, as well as increased
usage from existing customers. In both years, all revenues were generated in The
Netherlands.
 
                                       41
<PAGE>   46
 
     Billable minutes of use increased by 16.9 million to 23.4 million in the
fiscal year ended December 31, 1997 from 6.5 million in the fiscal year ended
December 31, 1996, representing a 260.1% increase. The number of customers
increased by 1,575 to 2,245 as of December 31, 1997, from 670 as of December 31,
1996.
 
     VersaTel's revenues in 1997 were negatively impacted by PTT Telecom's June
1997 introduction of a volume-based business customer discount plan allowing for
discounts of approximately 10.0% and by a general price reduction in October
1997 of approximately 28.0%. In order to maintain VersaTel's price discount
relative to PTT Telecom's prices, VersaTel also introduced a discount plan in
June 1997 and again reduced its prices in October 1997. As a result of the
overall reduction in prices, VersaTel's revenues for the fourth quarter of 1997
were 13.0% lower than its revenues of NLG 5.3 million for the third quarter of
1997. However, billable minutes of use for the fourth quarter were 14.4% higher
than the billable minutes of use for the third quarter. The Company expects PTT
Telecom to continue to lower its prices and create new discount plans on a
regular basis and the Company expects to adjust its pricing accordingly.
 
     Cost of revenues increased by NLG 12.4 million to NLG 17.4 million in the
fiscal year ended December 31, 1997 from NLG 5.0 million in the fiscal year
ended December 31, 1996, representing a 251.3% increase. As a percentage of
revenues, cost of revenues increased to 92.1% in the fiscal year ended December
31, 1997 from 77.1% in the fiscal year ended December 31, 1996, primarily as a
result of tariff reductions by the Company to respond to those implemented by
PTT Telecom which exceeded reductions in origination and termination costs.
 
     VersaTel's revenues for the three months ended December 31, 1997 were
negatively impacted by a case of fraud in October 1997, which the Company
estimates affected approximately four days of customer traffic. The fraud
involved the unauthorized use of one of the Company's test codes. As a result, a
large number of calls were originated, primarily through ethnic calling shops,
over the course of four days and the associated origination and termination
costs of NLG 0.6 million were expensed as miscellaneous operating expenses. In
addition, as a result of excessive call volumes, some customers were unable to
complete calls through the VersaTel Network and reverted to PTT Telecom for
service. The Company lost revenues from such customers and offered credits to
these customers to cover the price differential between PTT Telecom and VersaTel
retroactively. As a result, VersaTel estimates the total losses from the
incident to be approximately NLG 1,000,000. The Company has filed the case with
the local authorities and is currently determining the possibility of filing a
claim against certain parties for the cost of service and lost revenue. The
Company believes that the risk of future fraud has been reduced with the
introduction of the "1611" access code (which does not allow the type of fraud
that occurred from the unauthorized use of a test code to occur) and by tracking
multiple calls with the same access code.
 
     Selling, general and administrative expenses increased by NLG 12.0 million
to NLG 17.5 million in the fiscal year ended December 31, 1997 from NLG 5.5
million in the fiscal year ended December 31, 1996, primarily as a result of the
Company's increased sales, and an increase in customer service, billing,
collections and accounting staff required to support revenue growth. Staff
levels grew by 38, to 70 employees at December 31, 1997 from 32 employees at
December 31, 1996, an increase of approximately 118.8%. As a percentage of
revenues, selling, general and administrative expenses increased to 92.8% in the
fiscal year ended December 31, 1997 from 85.3% in the fiscal year ended December
31, 1996, as a result of the Company's continuing investments in back-office
infrastructure and in people. Bad debt expense was NLG 81,000 for the fiscal
year ended December 31, 1997, or 0.4% of revenues.
 
     Depreciation and amortization expenses increased by NLG 2.7 million to NLG
3.2 million in the fiscal year ended December 31, 1997, from NLG 0.5 million in
the fiscal year ended December 31, 1996, primarily due to increased capital
expenditures incurred in connection with the expansion and deployment of the
VersaTel Network.
 
     Interest expense, net increased by NLG 0.2 million to NLG 0.5 million in
the fiscal year ended December 31, 1997 from NLG 0.3 million in the fiscal year
ended December 31, 1996, primarily due to increased shareholders' loans.
 
                                       42
<PAGE>   47
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company has incurred significant operating losses and negative cash
flows as a result of the development of its business and Network, including the
recent acquisition of its Nortel DMS 100 switch. The Company has financed its
growth primarily through equity and subordinated convertible loans from its
shareholders. In addition, the Company has made limited use of bank facilities
and capital lease financing. The Company will require substantial additional
capital to fund construction of its Network, operating losses and other general
corporate purposes.
 
     Net cash provided by operating activities was NLG 5.8 million in the fiscal
year December 31, 1997 compared to negative NLG 1.7 million in the fiscal year
ended December 31, 1996. This was primarily the result of an increase in
accounts payable of NLG 18.7 million in the fiscal year ended December 31, 1997.
The increase in accounts payable was mainly caused by non-paying of current
payables as a result of the liquidity difficulties discussed below.
 
     Net cash used in investing activities was NLG 14.5 million in the fiscal
year ended December 31, 1997 and NLG 2.6 million in the fiscal year ended
December 31, 1996. Substantially all the cash utilized by investing activities
in each fiscal year resulted from an increase in capital expenditures to expand
the VersaTel Network. The Company does not expect any material disruption nor
any material expenditures in connection with the transition of its billing and
information systems to the year 2000.
 
     Net cash provided by financing activities was NLG 5.8 million in the fiscal
year ended December 31, 1997 and NLG 8.6 million in the fiscal year ended
December 31, 1996. Net cash provided by financing activities in the fiscal year
ended December 31, 1997 resulted mainly from NLG 1.5 million of capital
contributions and NLG 4.5 million of subordinated loans obtained from one of the
Company's shareholders. For the fiscal year ended December 31, 1996, net cash
provided by financing activities of NLG 8.6 million resulted from NLG 5.0
million of capital contributions and NLG 3.2 million of subordinated loans
obtained from the Company's shareholders, as well as capital leases to an amount
of NLG 0.4 million.
 
     During the first three months of 1998, the Company experienced liquidity
difficulties, which resulted in attachments to its bank account by certain
creditors. This situation has been resolved by the contribution of new equity by
certain of the Company's shareholders and by issuing guarantees for the benefit
of one of the creditors. Additional equity contributions were made by certain
existing shareholders immediately prior to the Offering.
 
     In February 1998, as part of the Recapitalization two of the three
shareholders of the Company, Telecom Founders and NeSBIC, a subsidiary of
Fortis, invested an additional NLG 7.2 million in equity capital in the Company.
Although this contribution was received in February 1998, the formal
shareholders meeting approving the amount to be labelled as capital was not
executed until April 17, 1998. In addition, NeSBIC and Cromwilld converted their
subordinated convertible notes totaling NLG 3.6 million into Ordinary Shares of
the Company, and NeSBIC converted its NLG 4.5 million bridge loan into Ordinary
Shares of the Company. The third component of the Recapitalization was comprised
of a new equity investment by Paribas of NLG 12.8 million. Lastly, the Company
received from Telecom Founders, NeSBIC, Paribas and NPM an additional NLG 15.0
million in equity capital immediately prior to the closing of the Offering. As a
result of the Recapitalization, the Company's share capital has increased from
NLG 7.0 million to NLG 50.1 million. See "Capitalization" and "Security
Ownership of Principal Shareholders and Management."
 
                                       43
<PAGE>   48
 
                                    BUSINESS
 
OVERVIEW
 
     VersaTel is a rapidly growing alternative telecommunications service
provider based in Amsterdam, The Netherlands. VersaTel's objective is to become
the leading alternative provider of facilities-based national and international
telecommunications services in the Benelux region. The Company, formed on
October 10, 1995, currently provides high quality, competitively priced,
international and increasingly national long distance telecommunications
services in The Netherlands, primarily to small- and medium-sized businesses,
and wholesale telecommunications services to other carriers. With over 3,800
business customers, the Company is a leading alternative to PTT Telecom, the
former monopoly telecommunications carrier of The Netherlands, in the small- and
medium-sized business market. The Company's business customer base has grown
from 669 as of December 31, 1996 to 3,810 as of June 30, 1998. In addition, the
Company has recently begun offering its services to targeted residential
customers. As of June 30, 1998, the Company had 1,054 residential customers. The
Company's revenues for the year ended December 31, 1997 were approximately NLG
18.9 million and for the six months ended June 30, 1998 were approximately NLG
15.8 million.
 
     Currently, VersaTel's primary service offerings consist of international
and increasingly national long distance services. VersaTel has recently
introduced services aimed at the residential market including VersaContact, a
dial-around service, and calling cards. In addition to its retail voice and data
services, the Company offers wholesale switched voice services to other
telecommunications service providers. These services include international
gateway and national termination services in The Netherlands. VersaTel plans to
offer additional services, including toll-free, local access, Internet and high
speed data services to its business customers over the next 18 months.
 
     VersaTel was one of the first carriers in The Netherlands to obtain a
carrier select code and to obtain full interconnection with PTT Telecom.
Customers access VersaTel's services by dialing (manually or through an
auto-dialer) the Company's select codes or through leased lines. The Company's
Nortel DMS 100 switch located in Amsterdam connects customers' calls to the
required destination using the most efficient routing. In addition to
interconnection with PTT Telecom, VersaTel has a national carrier agreement with
Castel N.V., one of the largest regional cable television companies in The
Netherlands, and international carrier agreements with companies such as Telfort
B.V., WorldCom Inc., FaciliCom International Inc. and Global One Communications
B.V.
 
THE BENELUX MARKET OPPORTUNITY
 
     VersaTel was founded to capitalize on the opportunities created by the
liberalization of the telecommunications market in the Benelux region. With a
population of approximately 26.2 million, the Benelux market is characterized by
one of the world's highest population densities (approximately 351 persons per
square kilometer) and relatively high income levels (a per capita GDP of
approximately $24,033 in 1997). Located in the heart of Europe in a relatively
small geographic area, the Benelux region is a major transportation and trade
gateway, generating a relatively high level of telecommunications traffic.
According to EITO (European Information Technology Observatory), the total
Benelux telecommunications services market amounted to approximately $14.0
billion in 1997, and would, according to EITO, if ranked as a single country,
have been the fifth largest market in telecommunications services expenditures
in Western Europe behind Germany, France, the United Kingdom and Italy. The
Company expects that the importance of telecommunications will continue to
increase as the Benelux market liberalizes, and that total telecommunications
revenues as a percentage of GDP in the Benelux region (2.6% in 1997) will
increase to levels approaching those of more liberalized markets such as the
United Kingdom (2.9% in 1997) and the United States (2.7% in 1997). At present,
the Benelux market is dominated by the former monopoly telecommunications
carriers, PTT Telecom, Belgacom, and P&T Luxembourg, in, respectively, The
Netherlands, Belgium and Luxembourg. The Company believes that the Benelux
telecommunications market represents a substantial opportunity which it can
capitalize on by capturing a portion of the incremental growth of the market and
by winning market share from the PTTs.
 
                                       44
<PAGE>   49
 
     The following chart illustrates the relative importance of the Benelux
telecommunications market.
 
[Telecommunications Services Western European Expenditures 1997 Bar Graph]
 
<TABLE>
<CAPTION>
<S>                                                            <C>
Germany                                                                   39765
France                                                                    26203
UK                                                                        25376
Italy                                                                     22451
Benelux                                                                   14010
Spain                                                                     11218
Switzerland                                                                6302
Sweden                                                                     5088
Austria                                                                    3537
Denmark                                                                    3382
Greece                                                                     3291
Portugal                                                                   2966
Norway                                                                     2765
Finland                                                                    2380
Ireland                                                                    2053
</TABLE>
 
- ---------------
 
Source: European Information Technology Observatory 1998
 
     The Company currently operates in The Netherlands and in Belgium and plans
to extend its operations to Luxembourg by mid-1999. The following is a brief
description of each country comprising the Benelux market.
 
  THE NETHERLANDS
 
     With a population of 15.6 million and a population density of approximately
376 persons per square kilometer, The Netherlands is the most densely populated
country in Europe. This high population density will enable the Company to reach
a larger number of potential customers with a less extensive network and, as a
result, lower capital expenditures. Due to its location in the heart of western
Europe and its connections with the rest of western Europe through major
highways, railroads and waterways, distribution and the export and import of
products and services account for a significant portion of the national economy.
The Netherlands per capita GDP was $23,609 in 1997. Total telecommunications
expenditures accounted for approximately 2.8% of the GDP of The Netherlands in
1997.
 
     According to EITO, the Netherlands market accounted for approximately 5.1%
of Western Europe's telecommunications services expenditures, making it the
sixth largest market in Western Europe. EITO also estimates that the Netherlands
market for telecommunications services has grown at a rate of 12.9%, 11.6% and
9.0% for the years 1995, 1996 and 1997, respectively and also estimates that the
total size of the Netherlands telecommunications services market in 1997 was
$8.7 billion.
 
  BELGIUM AND LUXEMBOURG
 
     With a population of 10.2 million and a population density of 334 persons
per square kilometer, Belgium is a relatively densely populated country. It is
host to a number of international organizations, including the European
Commission, parts of the European Parliament and NATO headquarters. Belgian per
capita GDP was $24,137 in 1997.
 
                                       45
<PAGE>   50
 
     With a population of 423,000, Luxembourg is the smallest Member State of
the European Union ("EU"). It is a financial center and host to a large number
of EU institutions. The country has the highest GDP per capita in Europe
($37,132 versus $21,527 for the EU in 1997).
 
     According to EITO, total telecommunications expenditures accounted for
approximately 2.3% of combined Belgium and Luxembourg GDP in 1997, the combined
Belgian and Luxembourg market accounted for approximately 3.1% of Western
Europe's telecommunications services expenditures and the combined Belgian and
Luxembourg market for telecommunications services has grown at a rate of 14.0%,
10.6% and 10.3% for the years 1995, 1996 and 1997, respectively. EITO also
estimates that the total size of the combined Belgian and Luxembourg
telecommunications services market in 1997 was $5.26 billion which accounted for
approximately 2.0% of the GDP of the countries.
 
THE VERSATEL NETWORK
 
     Network Plan.  The Company has begun building a network infrastructure
which is designed to connect all major business and population centers in the
Benelux region and provide local access in high density business areas as well
as international connectivity to Germany, France and the United Kingdom.
VersaTel believes that the demographics and high concentration of businesses in
the Benelux market will enable the Company to access a substantial portion of
the business and residential market with relatively low capital expenditures.
The Company plans to establish the first integrated overlay network in the
Benelux region and plans for the Network to connect to most of the PTTs' points
of interconnection, pass within five kilometers of more than 270,000 businesses
and cover all major population centers. VersaTel believes that its Network will
enable the Company to better control costs, ensure access to bandwidth, offer a
broader portfolio of services and improve margins.
 
     The VersaTel Network will consist of three integrated elements:
 
     - Benelux Overlay Network.  VersaTel plans to construct the Benelux Overlay
       Network that will connect the major commercial centers in the Benelux
       region, including most interconnection points with the PTTs and other
       telecommunications service providers. The Company has contracted to
       acquire fiber-ready conduit between Rotterdam, The Netherlands and
       Antwerp, Belgium. The Company is also negotiating to acquire dark fiber
       and rights-of-way from a number of utilities and has contracted to build
       fiber-optic rings. The initial phase of the Benelux Overlay Network will
       consist of a fiber-optic ring connecting The Netherlands Randstad and a
       fiber-optic link extending to Antwerp and Brussels. This initial phase is
       expected to be completed by the end of 1998. The remainder of the Benelux
       Overlay Network is expected to connect an additional 23 major business
       centers in the Benelux by the end of 1999. Upon completion, the Company
       expects that the Benelux Overlay Network will consist of approximately
       2,200 route kilometers of fiber-optic rings.
 
     - Local Access Network.  VersaTel intends to establish local access
       infrastructure in areas with high business concentrations along the
       Benelux Overlay Network. The Local Access Network will connect business
       customers directly to the VersaTel Network. The Local Access Network will
       consist of both fiber-optic cable and radio links. The Company intends to
       start implementing local access early in 1999, shortly after the first
       segment of the Benelux Overlay Network becomes operational. The Company
       plans to install up to 1,500 route kilometers of local access
       infrastructure over the next 18 months.
 
     - International Network.  VersaTel intends to build or acquire direct
       fiber-optic links connecting the Benelux Overlay Network to
       interconnection points in Germany, France and the United Kingdom.
       VersaTel expects to complete fiber-optic links to its initial
       interconnection points in Dusseldorf, Lille, Paris and London in 1999.
 
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<PAGE>   51
 
     The figure below sets forth the elements of the Company's Network.
 
                             [NETWORK DESIGN GRAPH]
 
     Network Design and Implementation.  VersaTel's Network will utilize
advanced technology to achieve high reliability, low operating costs and rapid
capacity expansion. The key attributes of the network architecture include
self-healing, shared protection rings, diverse routing and separate paths into
redundant network nodes and interconnection points.
 
     The Company's network architecture is designed to allow for substantial
expansion in capacity. The Company will provide for future capacity by
installing additional underground ducts, fiber pairs, building space and
building systems (such as power equipment) when building out the VersaTel
Network, since the marginal
 
                                       47
<PAGE>   52
 
construction costs associated with providing future capacity are low. For
example, three ducts will be installed along most fiber-optic routes -- one for
the initial cable installation, one as back-up and maintenance space and a third
as growth or trading currency. Each duct can hold two fiber cables, which will
each contain 48 fibers. In addition, the Company intends to implement management
systems that will have the capacity, flexibility and design architecture to
support anticipated expansion.
 
     The Company intends to use advanced network equipment and management
systems to maintain low operating costs. These technologies automate many of the
functions for both network and service management. In addition, the Network will
be controlled from a single network management center, supported by a redundant
backup center. Having a single center controlling the entire Network, including
local access links, will minimize the staff required to manage network and
service operations.
 
     The Network will use SDH transmission equipment, the industry standard for
creating bandwidth from the underlying transmission medium whether microwave,
fiber-optic cable or satellite. SDH equipment automates most of the functions of
defining, routing and connecting service bandwidth and reroutes these channels
in the event failures occur. The Company intends to continue to use Nortel DMS
switching equipment for its voice-grade circuit-switching network. The Nortel
DMS 100 switch is capable of supporting all "intelligent network" and
value-added services common in the industry. The Company intends to establish
data communications and Internet service networks utilizing the Benelux Overlay
Network.
 
     The Company expects to develop the first STM-64 (10 Gbps) fiber network in
the Benelux region (20 Gbps including back-up capacity). This high capacity is
expected to provide a very competitive, low cost per bit transmitted. In the
future, capacity could be expanded to 80 Gbps per fiber pair with existing WDM
technology and even further as this technology is improved. In addition,
VersaTel intends to have the first deployment of Nortel's Reunion broadband
radio system in the Benelux region. This will provide high speed Internet access
as well as low cost customer access to all the services VersaTel plans to offer.
 
     The Company has tailored the proposed routing of the Benelux Overlay
Network to support its strategy of targeting small- and medium-sized businesses.
The Company expects that the Network will pass more businesses within five
kilometers than the networks of most other carriers. The Company believes that
although this plan will increase route length and construction costs, it will
lower the costs of local access substantially and will, ultimately, minimize the
total cost of serving its target market.
 
     To provide local access, the Network has been designed with physical access
points at intervals averaging one kilometer. All aspects of network planning
will integrate local customer access with the Benelux Overlay Network. The
Company believes centralized control of both local access and overlay
infrastructure as well as integrated network and service management systems will
allow the Company to deliver faster service provisioning and fault repair,
better service management and lower cost. As a result, the Company believes that
its network implementation will provide it with an advantage over most of its
competitors.
 
     The Local Access Network will consist of both fiber-optic links and
point-to-multipoint radio connections to customers. VersaTel will decide the
means of local access based primarily on the density of the customers
anticipated in an area and the customers' distance from the Benelux Overlay
Network. Fiber-optic cables will be used to connect to office buildings and
business parks near the Benelux Overlay Network. Radio technology, which is
evolving rapidly as a capital efficient means of providing flexible bandwidth,
will be used to connect to more dispersed customers. VersaTel is working with
Nortel, a world leader in this point-to-multipoint radio technology, to become a
pioneer in implementing this technology in Europe. The Company recently received
a license which allows it to test this point-to-multipoint technology in The
Netherlands. VersaTel intends to begin a trial in the third quarter of 1998 in
which selected business customers will be connected to the Benelux Overlay
Network via wideband and broadband wireless access. The Company believes it will
be able to offer local access customers a broader range of services, higher
service quality, faster service provisioning and lower costs than its
competitors.
 
     The International Network will include links from the Benelux Overlay
Network to the main interconnection points in Germany, France and the United
Kingdom. Interconnection locations will initially be Dusseldorf, Lille, Paris
and London. Later, Aachen, Cologne and Metz are expected to be added. The
 
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<PAGE>   53
 
international links will also employ design principles of diverse routing, as
well as redundant and self-healing rings. The Company intends to build the
international links by purchasing or leasing dark fiber, swapping capacity with
alternative carriers and building its own infrastructure.
 
     VersaTel intends to build-out the Network by entering into agreements for
the supply of transmission equipment and engineering and construction services
with several companies. VersaTel has entered into a framework agreement with
Nortel to supply all initial transmission equipment and network management
systems through a turn-key project. VersaTel also has a similar arrangement with
Detron, a Benelux contractor, for the engineering and construction of the fiber
network. Both companies have completed initial engineering steps, including
capacity sizing. The two companies anticipate working with a single project
management office and with common contract incentives. In addition, pursuant to
the agreement with Nortel, the Company is in the process of negotiating
contracts with Nortel to provide implementation and operations services as well
as vendor financing. See "Risk Factors -- Development, Expansion and Operation
of the Network."
 
     The civil engineering and construction companies that are engaged will be
responsible for obtaining rights-of-way, civil engineering, physical
construction and testing of the Benelux Overlay Network. The Benelux Overlay
Network could utilize rights-of-way of public authorities, pipeline companies,
power and gas companies and others. Under the new telecommunications
legislation, the Company expects to have rights-of-way on public lands in The
Netherlands. The Company also expects to have rights-of-way on public lands in
Belgium, upon obtaining its license. Separately, the Company may also negotiate
rights-of-way from private landowners. VersaTel has already identified readily
available rights-of-way, trenches, empty ducts and dark fiber for over 700 km of
the planned route. See "Risk Factors -- Development, Expansion and Operation of
the Network" and "-- Regulation."
 
     The Company expects to operate the entire Network and to own substantially
all of the network equipment and most fiber-optic links. The Company plans to
utilize fiber-optic cable for most of the Benelux Overlay Network. To accelerate
implementation, VersaTel intends to acquire trench space ducts, dark fiber and
leased capacity from other infrastructure operators, particularly on
international links. The Company has entered into preliminary discussions with
potential partners to acquire or construct portions of the VersaTel Network.
These potential partners are interested in obtaining dark fiber capacity and, in
some cases, will trade fiber capacity on routes already constructed.
 
BUSINESS STRATEGY
 
     VersaTel's objective is to become the leading alternative provider of
facilities-based national and international telecommunications services in the
Benelux region. The principal elements of the Company's strategy are:
 
     - Targeted Network Roll-out.  The Benelux Overlay Network's routing is
       designed to cover the major business and population centers in the
       Benelux region and pass as many businesses as economically feasible. As
       individual segments of the Benelux Overlay Network are completed, the
       Company intends to connect business customers directly via the Local
       Access Network. For example, the first segment of the Benelux Overlay
       Network, when completed, will connect the Netherlands Randstad, Antwerp
       and Brussels and will pass within five kilometers of approximately
       100,000 businesses. The Company believes that this targeted network
       roll-out strategy will allow it to gain market share rapidly, increase
       revenues and improve margins.
 
     - Grow Customer Base.  The Company intends to leverage the growth of its
       facilities-based Network, its product and service offerings and its sales
       and marketing capabilities to expand its customer base. The Company
       believes it has developed strong brand recognition in its target market
       of small- and medium-sized businesses and intends to capitalize on this
       by increasing its direct sales force, introducing new distribution
       channels and targeting new customer segments, including high-usage
       residential customers.
 
                                       49
<PAGE>   54
 
     - Increase Product and Service Offerings.  The Company intends to provide
       new products and services in order to attract additional customers,
       enhance customer loyalty and increase network utilitization by its
       existing customer base. In addition to international long distance,
       VersaTel has also introduced national long distance, dial-around services
       and calling cards to its customers. The Company also expects to introduce
       toll-free, local access, Internet and high speed data services over the
       next 18 months.
 
     - Focus on Superior Customer Service.  VersaTel strives to maintain a
       competitive advantage over its competitors in its target markets by
       providing superior customer service. The Company believes that its target
       market of small- and medium-sized businesses has been particularly
       underserved by the PTTs and that providing a high level of customer
       service is a key element to establishing customer loyalty and attracting
       new customers. The Company has dedicated customer service representatives
       who initiate contact with customers on a routine basis to ensure
       satisfaction and market new products. In addition, the Company provides
       detailed monthly billing statements and monthly call management reports
       which identify savings to customers and enable them to manage their
       telecommunications expenditures more effectively.
 
     - Expand Facilities-Based Wholesale Services.  The Company currently offers
       international gateway services as well as domestic termination services
       for both international and national carriers. In addition, as VersaTel
       deploys its Network, the Company intends to offer additional wholesale
       services, including leased lines, conduits, dark fiber and managed
       bandwidth in order to increase network utilization and to offset the cost
       of network construction. The Company expects the creation of network
       capacity in the form of dark fiber, conduits and rights-of-way will
       provide a trading currency to be used with other carriers as a means of
       accelerating the deployment of the VersaTel Network.
 
     - Pursue Selective Acquisitions and Strategic Relationships.  The Company
       seeks to acquire other alternative telecommunications service providers
       and Internet service providers in order to accelerate the growth of its
       customer base, Network and service portfolio. In addition, the Company is
       actively pursuing strategic relationships with alternative carriers in
       Germany, France and the United Kingdom in order to establish
       interconnection agreements, to partner on infrastructure projects and to
       expand its geographic reach.
 
PRODUCTS AND SERVICES
 
  CURRENT PRODUCTS AND SERVICES OFFERINGS
 
     The Company currently offers the following products and services:
 
     Long Distance.  VersaTel offers international and increasingly national
long distance telecommunications services to over 4,800 customers in The
Netherlands. The Company began offering switched-based international long
distance services to business customers in 1995, to telecommunication services
providers in 1996 and to residential customers in December 1997. Historically,
the Company has focused primarily on the sale of international voice and data
services to small- and medium-sized businesses; however, with the liberalization
of the Netherlands telecommunications market, the Company has expanded its
service offerings to include national long distance services. The Company will
complete its roll-out of national long distance service to its existing customer
base during the third quarter of 1998 as PTT Telecom provides additional
interconnect capacity to VersaTel. As a result, the Company expects that
revenues from national long distance voice services as a percentage of total
revenues will increase significantly. International and national long distance
services are the Company's core products as it expands in other markets. The
Company plans to begin offering international and national long distance
services in Belgium in the third quarter of 1998 and throughout the Benelux
region by the end of 1998.
 
     Calling Cards.  In The Netherlands, the Company currently offers post-paid
calling cards and plans to offer pre-paid calling cards in the second half of
1998. The Company's post-paid calling card is provided to the Company's business
customers and high international volume residential customers. The post-paid
calling card provides international and national call access in all countries
where available through one toll-free
 
                                       50
<PAGE>   55
 
number worldwide. Call charges are itemized and appear on the call management
report. The Company expects to offer pre-paid calling cards in The Netherlands
in the third quarter of 1998 and throughout the Benelux region by the third
quarter of 1998.
 
     Wholesale Switched Voice Services.  In addition to its retail switched
voice and data services, the Company offers wholesale switched services to other
telecommunications service providers. These services include international
gateway and national termination services in The Netherlands. The increase in
traffic volume generated by offering these services allows the Company to obtain
greater volume discounts. As the Company completes its Network, it will be able
to offer wholesale services over its own Network throughout the Benelux region,
Germany, France and the United Kingdom, thus increasing network utilization and
improving gross margins.
 
  FUTURE PRODUCTS AND SERVICE OFFERINGS
 
     VersaTel continually evaluates potential product and service offerings as
well as competitors' offerings in order to retain and expand its customer base
and to increase revenue per customer. The Company places a high priority on the
development of new products and services and expects to introduce the following:
 
     Toll-free Services.  The Company plans to offer toll-free services to its
customers in the Benelux region by the first quarter of 1999. This service will
target business and residential customers who have a high volume of incoming
international and national long distance calls, such as import and export
companies. Customers of VersaTel's toll-free services will be assigned a
proprietary toll-free number that will route calls to the VersaTel switch and
from there to the customer.
 
     Local Services.  VersaTel plans to offer local services to its small and
medium-sized business customers in the first quarter of 1999 when the Company's
local access facilities are installed. The Company will provide subscriber
access service, local calling, data communications and value-added services.
 
     Enhanced Switched Voice Services.  The Company is developing advanced call
service offerings that are expected to appeal to its core customer segment,
including voice mail, fax mail, voice response, personal numbering and automated
secretary. VersaTel's present switched voice system is capable of supporting
most of these enhanced services. The remaining equipment required to offer these
enhanced services is expected to be installed in 1999. These services are
expected to aid in customer retention and increase network utilization and
average revenue per customer.
 
     Managed Bandwidth Services.  With the completion of the initial links in
the Benelux Overlay Network and its International Network, the Company will be
able to participate in the market for selling bandwidth capacity. The Company is
planning service offerings beginning with E1 channels (2 Mbps) up to STM-1
channels (155 Mbps). The Company expects to provide these services primarily to
its wholesale customers, particularly at locations where the Company is the only
alternative to the PTT.
 
     Data Communication Services.  VersaTel plans to offer high-speed data
communications services to its small- and medium-sized business customers
beginning in the third quarter of 1999. The Company believes that there is a
growing market for high-speed data communications services, such as frame relay,
Ethernet, and ATM services in the small- and medium-sized business market. Data
communications services and the specific protocols are evolving rapidly and the
Company is currently developing its portfolio of data communications services
and the roll-out sequence.
 
     Internet Services.  VersaTel plans to acquire Internet service providers to
accelerate the introduction of Internet services to its target market. Demand
for Internet services is growing rapidly in the Benelux region, as small- and
medium-sized businesses are starting to use these services for e-mail, data
retrieval, information services and electronic commercial transactions. The
Company expects that Internet services will generate an increasingly large share
of telecommunications industry revenue as a result of both the introduction of
new applications and substitution for various existing services.
 
                                       51
<PAGE>   56
 
SALES AND MARKETING
 
     VersaTel seeks to capitalize on its position as a leading alternative
telecommunications services provider that offers comprehensive customer service
and low-cost communications services in The Netherlands with a focus on small-
and medium-sized businesses and residential customers. VersaTel believes that it
has created a prominent brand name in its target market that it expects to
successfully apply throughout the Benelux region. The Company brands all of its
products and services offerings with "Versa," such as VersaBizz (post-paid
calling cards), VersaCall (voice services), VersaFax (facsimile services) and
VersaData (data communications). VersaTel markets its products and services
through several marketing channels, including database marketing, targeted
telemarketing, brand and promotional advertising, direct mail and the Company's
direct sales force.
 
  CUSTOMERS
 
     The Company markets its services on a retail basis to its business and
residential customers and on a wholesale basis to other carriers.
 
     Small- and Medium-sized Businesses.  The Company's target customers are
small- and medium-sized businesses (under 100 employees). The Company focuses
particularly on those business and industry segments which have historically
generated significant volumes of national and international traffic, such as
shipping, transport, import and export and agri/horti culture. The Company
believes that the small- and medium-sized business segment has been underserved
by the PTTs and the major alternative service providers. Traditionally, the PTTs
and the other major carriers have focused on offering their lowest rates and
best services primarily to larger, higher volume business customers.
 
     Residential Customers.  VersaTel has recently begun targeting residential
customers. The Company's initial focus is to market its services to employees of
its business customers and residential customers in certain niche markets
characterized by high volume calling patterns. In addition, the Company markets
its services to residential customers in The Netherlands via marketing
communications methods such as direct mail, multi-level marketing and
telemarketing. The Company believes that this approach is a cost-effective way
of targeting the residential market segment.
 
     Wholesale Customers.  The Company markets its wholesale services to
international and domestic carriers. The wholesale sales effort is supported by
senior management's existing relationships in the industry. The Company intends
to establish a carrier sales force with account managers focusing on specific
carrier customers.
 
  SALES AND MARKETING STAFF
 
     The Company's sales force is composed of direct sales personnel,
telemarketers and independent sales agents. Marketing to small- and medium-sized
businesses is currently conducted by over 20 direct sales personnel in
Amsterdam. In the future, the Company expects to significantly expand its direct
sales force and open sales offices in Antwerp, Rotterdam and Brussels. The
Company's sales personnel make direct calls to prospective and existing business
customers, analyze business customers' usage and service needs, and demonstrate
how the Company's service package will improve a customer's communications
capabilities and costs. Each member of the Company's sales force is required to
complete the Company's intensive training program. In addition, the Company has
a telemarketing group that screens prospective customers and verifies call
volumes.
 
     VersaTel recently established a sales agents program under which sales
agents receive commissions, but are not employed by the Company. Agents are
provided with an advertising and sales promotion budget based on the volume of
their sales. The Company currently has over 70 such sales agents and intends to
continue to increase this program.
 
                                       52
<PAGE>   57
 
CUSTOMER SERVICE
 
     VersaTel strives to maintain a competitive advantage over its competitors
in its target markets by providing superior customer service. The Company
believes that providing a high level of customer service is a key element to
establishing customer loyalty and attracting new customers. The Company has
dedicated customer service representatives who initiate contact with its
customers on a routine basis to ensure customer satisfaction and market new
products. In addition, the Company provides detailed monthly billing statements
and monthly call management reports which identify savings to customers and
enable them to manage their telecommunications expenditures more effectively.
 
     VersaTel also believes that technology plays an important role in customer
satisfaction. Advanced technological equipment is crucial to enabling the
Company to provide a high quality of service to its customers. The Company has
installed sophisticated status-monitoring and diagnostic equipment on its NOC
and plans to install similar units on its SDH network. This equipment allows the
Company to identify and remedy network problems before they are detected by
customers. By providing superior customer service and through the effective use
of technology, VersaTel expects to maintain a competitive advantage in its
target markets.
 
BILLING AND INFORMATION SYSTEMS
 
     The Company must process millions of call detail records quickly and
accurately in order to produce customer bills in a timely and efficient manner.
Call detail records are collected, backed-up, processed and verified by VersaTel
on a daily basis. This data is then transmitted electronically to a printing
company for printing and then returned to VersaTel for verification and
distribution. The Company is currently reviewing its billing systems in
anticipation of continued growth and anticipates replacing its current billing
system by the end of 1998. The Company does not expect any material disruption
in its billing or information systems as a result of the year 2000. In addition,
the Company has planned and budgeted replacements and enhancements to its
information systems to handle growth in the size and complexity of the Company,
its customer base and its product portfolio in areas such as work flow, fixed
asset management, sales support and service provisioning. See "Risk
Factors -- Ability to Manage Growth."
 
COMPETITION
 
     Until recently, the telecommunications market in each EU Member State has
been dominated by the national PTT. Since the implementation of a series of EC
directives beginning in 1990, the EU Member States have started to liberalize
their respective telecommunications markets, thus permitting alternative
telecommunications providers to enter the market. Liberalization has coincided
with technological innovation to create an increasingly competitive market,
characterized by still-dominant PTTs as well as an increasing number of new
market entrants. Competition in the European long distance telecommunications
industry is driven by numerous factors, including price, customer service, type
and quality of services and customer relationships.
 
     In The Netherlands, Belgium and Luxembourg the Company competes or will
compete primarily with the national PTTs. As the former monopolist providers of
telecommunications services in these countries, the PTTs have an established
market presence, fully-built networks and financial and other resources that are
substantially greater than those of the Company. In addition, the national PTTs
own and operate virtually all of the infrastructure which the Company must
currently access to provide its services. The Company estimates that in each of
these countries the national PTT still controls the vast majority of the
telecommunications market.
 
     In addition, various new providers of telecommunications services have
entered the market in each of these countries, targeting various segments of the
market in these countries. Companies such as EnerTel, a consortium of
Netherlands utility companies, Telfort B.V., a company formed by British Telecom
and Nederlandse Spoorwegen N.V., the Netherlands railroad company, as well as
Global One Communications, Worldcom Inc. and Esprit Telecom plc compete with PTT
Telecom in The Netherlands for contracts with large multinational companies.
Unisource N.V., Concert, France Telecom, AT&T, Worldcom, Esprit
 
                                       53
<PAGE>   58
 
Telecom plc. and Telenet N.V. compete with Belgacom in Belgium for contracts
with large multinational companies. The Company does not currently serve this
segment of the business market, as the Company believes that it does not
presently have a competitive advantage to successfully target large corporate
customers.
 
     In VersaTel's primary target market of small- and medium-sized businesses,
competitors include RSL Communications Ltd. and Viatel, Inc. in both The
Netherlands and in Belgium. In the residential customer market, the Company
competes with companies such as EnerTel N.V., Tele2 A.B., Telegroup, Inc.,
Viatel, Inc. and callback operators in The Netherlands. In Belgium, the
residential customer market has only recently been aggressively targeted by
service providers such as Tele2 A.B., Telenet N.V. and Telegroup, Inc.
 
REGULATION
 
     In Europe, the traditional system of monopoly PTTs has ensured the
development of broad access to telecommunications services; however, it has also
restricted the growth of high quality and competitively priced voice and data
services. The liberalization in European telecommunications market is intended
to address these market deficiencies by ending PTTs' monopolies, allowing new
telecommunications service providers to enter the market and increasing the
competition within the European telecommunications market. The inefficiencies of
the traditional monopoly system combined with the EU liberalization initiatives
have created the current market opportunity for the Company's product and
service offerings.
 
     The current regulatory framework in the EU and in the countries in which
the Company provides its services or intends to provide its services is briefly
described below. There can be no assurance that future regulatory, judicial and
legislative changes will not have a material adverse effect on the Company, that
national or international regulators or third parties will not raise material
issues with regard to the Company's compliance or noncompliance with applicable
regulations or that any changes in applicable laws or regulations will not have
a material adverse effect on the Company. See "Risk Factors -- Regulation."
 
  EUROPEAN UNION
 
     Starting in 1987, the EC Green Paper on Telecommunications charted the
course for the current changes in the EU telecommunications industry by
advancing principles such as separation of operators from regulators,
transparency of procedures and information, cost orientation of tariffs, access
to monopoly infrastructure networks and the liberalization of services. In 1990,
the EU Member States approved two directives that established these principles
in EU law: the Open Network Provision ("ONP") Framework Directive and the EC
Services Directive. These two directives set forth the basic rules for access to
the PTT public networks and the liberalization of the provision of all
telecommunications services within the EU except for "voice telephony."
 
     The ONP Framework Directive established the conditions under which
competitors and users could gain cost-oriented access to the PTTs' public
networks. The EC Services Directive abolished the existing monopolies on, and
permitted the competitive provision of, all telecommunications services with the
exception of "voice telephony." The intended effect of the Services Directive
was to permit the competitive provision of all services, other than voice
telephony, including value-added services and voice services to closed user
groups ("CUGs"). As a result, many new entrants entered the market, labeling
their services as CUG services, while in fact providing voice telephony
services.
 
     In 1992, the EC approved the ONP Leased Line Directive, which required the
PTTs to lease lines to competitors and end users, and to establish cost
accounting systems for those products by the end of 1993. The national
regulatory authorities were to use this cost information to set cost-oriented
tariffs for leased lines. This Directive has recently been amended. The purpose
of the revised ONP Leased Lines Directive is to ensure that, in a competitive
market, all users continue to have access to leased lines from at least one
operator, under harmonized conditions of access and use.
 
     In 1996, the EU issued the Full Competition Directive, which requires EC
Member States to permit alternative infrastructure providers, such as existing
networks of cable companies, railroads, electric and other
 
                                       54
<PAGE>   59
 
utility companies, to resell capacity on these networks for the provision of
services other than voice telephony from July 1996. This allows the Company to
lease transmission capacity from companies other than the PTTs. The Full
Competition Directive also established January 1, 1998 as the date by which all
EU Member States (with the exception of Spain, Greece, Portugal, Ireland and
Luxembourg, each of which may delay implementation for various periods) must
establish a legal framework which removes all remaining restrictions on the
provision of telecommunications services, including "voice telephony." Subject
to the foregoing, each EU Member State is obliged, under EU law, to enforce the
terms of the Full Competition Directive. Enforceability of the Full Competition
Directive may be challenged at the EU level or at the EU Member State level. See
"Risk Factors -- Regulation."
 
     In addition to the Full Competition Directive, the EU issued the Licensing
Directive in April 1997 and the Interconnection Directive in June 1997. The
Licensing Directive establishes a common framework for general authorizations
and individual licenses in the field of telecommunication services. The
Licensing Directive is intended to allow telecommunications operators to benefit
from an EU-wide market for telecommunications and establish a common framework
for national authorization regimes and seeks to facilitate cross-border networks
and services. The Interconnection Directive standardizes regulatory frameworks
to be implemented by EU Member States and their national regulatory authorities,
including the regulation of public telecommunications networks and services. The
Interconnection Directive governs the manner in which alternative network
operators and service providers are permitted to interconnect with the PTTs'
public networks. The Interconnection Directive requires national regulators to
ensure that interconnection agreements provide for access at cost-oriented
rates.
 
     The Interconnection Directive has been amended to provide for carrier
selection (ensuring that end users can on a call-by-call basis select the long
distance or international carrier of their choice) as of January 1, 1998, and
carrier pre-selection (ensuring end users can prior to the time calls are made
select the long distance or international carrier of their choice) and number
portability (the ability of end users to keep their numbers when changing
operators) by January 1, 2000. Carrier selection and carrier pre-selection are
required to be made available by carriers with significant market power. The
Interconnection Directive indicates that significant market power could be
assumed if the carrier's market share exceeds 25%, but Member States may adopt
different standards.
 
     Despite these regulatory initiatives supporting the liberalization of the
telecommunications market, most EU Member States are still in the initial stages
of liberalizing their telecommunications markets and establishing competitive
regulatory structures to replace the monopolistic environment in which the PTTs
previously operated. For example, most EU Member States have only recently
established a national regulatory authority. In addition, the implementation,
interpretation and enforcement of these EC directives differ significantly among
the EU Member States. While some EU Member States have embraced the
liberalization process and achieved a high level of openness, others have
delayed the full implementation of the directives and maintain several levels of
restrictions on full competition.
 
     An overview of the regulatory framework in the individual markets where the
Company operates or intends to operate is described below. This discussion is
intended to provide a general outline, rather than a comprehensive discussion of
the more relevant regulations and current regulatory posture of these
jurisdictions. VersaTel requires licenses, authorizations or registrations in
all countries in which it operates to provide its services. Licenses,
authorizations and/or registrations have been obtained in The Netherlands and
Belgium. The Company intends to apply for such licenses and registrations in
Luxembourg in the future. The Company has received an International Facilities
License (IFL) in the United Kingdom. Although the Company expects that these
licenses and registrations will be granted, there can be no assurance that
VersaTel will be able to obtain such licenses, authorizations or registrations
or that VersaTel's operations will not become subject to other regulatory
authorization or registration requirements in the countries in which it operates
or plans to operate.
 
                                       55
<PAGE>   60
 
  THE NETHERLANDS
 
     The Telecommunications Act of 1988 provides the current regulatory
framework in The Netherlands. Due to a series of EC directives, numerous
provisions of this Act have been amended. Most notably in July 1996, an
amendment to a certain extent liberalized telecommunications infrastructure and
the supply of leased lines. The rules for granting licenses for "alternative"
infrastructure and the provision of leased lines were laid down in a separate
act. Other significant amendments took effect on July 1, 1997. They led to the
full liberalization of public voice telephony, thereby complying with the Full
Competition Directive six months ahead of schedule. To remedy the present
legislative and regulatory patchwork, a new telecommunications bill is currently
pending in The Netherlands Parliament. This bill is expected to take effect in
the final quarter of 1998. The current draft of the Telecommunications Act in
consideration by The Netherlands Parliament also contains provisions that will
give registered telecommunication services providers rights-of-way, subject to
certain conditions, thereby facilitating the construction of the Network. In
addition, The Netherlands may require PTT Telecom to offer access to local
customer access lines at the Main Distributing Frame (MDF) in PTT Telecom's
central exchange offices.
 
     As part of the liberalization of the Netherlands telecommunications market,
a new independent supervisory authority, the Onafhankelijke Post en
Telecommunicatie Autoriteit ("OPTA"), was established by the Ministry of Traffic
and Waterways. OPTA started its activities on August 1, 1997. OPTA's main tasks
include ensuring compliance with the telecommunications laws and regulations in
The Netherlands, granting licenses for telecommunications activities and
resolving disputes among market participants, such as disputes regarding
interconnection rates. Although no assurances can be given, the initial rulings
of OPTA have given the Company confidence that new providers of
telecommunications services will be granted fair and equal access to the market
in The Netherlands.
 
     In August 1997, VersaTel obtained one of the first Netherlands
authorizations to operate as a telecommunications service provider of public
voice telephony (other than PTT Telecom). In September 1997, VersaTel obtained
an infrastructure license with rights-of-way for the construction and operation
of telecommunications facilities in a limited geographic area. However, as
described above, the new Telecommunications Act is expected to grant VersaTel
and other telecommunications services providers rights-of-way throughout The
Netherlands subject to their registration as a public telecommunications service
provider.
 
     Since its start in October 1995, VersaTel has adopted a proactive
regulatory strategy. In October 1996, VersaTel successfully challenged PTT
Telecom's use of its invoice records to offer VersaTel's customers additional
discounts. In a warning letter to PTT Telecom, the Directorate for Competition
(DG IV) of the EC held this to be an abuse of power by PTT Telecom. Not only did
the EC require PTT Telecom to stop using information regarding the calling
behavior of customers for competitive activities, such as approaching VersaTel's
customers with discounts and other special offers, it also questioned the
legitimacy of PTT Telecom's discount plans for business customers. The EC
requires that such discounts be based on actual cost savings and not on
predatory pricing tactics. OPTA, to whom the European Commission had delegated
this matter, has recently ruled that these discount plans indeed violate
competition law principles and has required PTT Telecom to change them.
 
     The Company's legal and regulatory strategy has enabled VersaTel to become
one of the first voice telephony competitors in The Netherlands to interconnect
with PTT Telecom and to implement a carrier select code in all of PTT Telecom's
telephone switches. The introduction of carrier pre-selection in The
Netherlands, which is expected to be introduced in January 2000 will allow
customers the option to pre-select a carrier other than PTT Telecom for all
their international and national long distance calls. The Company continues to
seek to obtain lower interconnection rates from PTT Telecom. In April 1998, OPTA
ordered a reduction in origination charges which management estimates amounts to
approximately 40.0%. The terms and conditions of interconnection have had and
will continue to have a material effect on the competitive position of the
Company. See "Risk Factors -- Dependence on Facilities Providers and
Interconnect Arrangements."
 
                                       56
<PAGE>   61
 
  BELGIUM
 
     Belgium started the liberalization of its telecommunications market in 1991
with an amendment to the Belgian public post and telecommunications act. It
provided the basis for the privatization of Belgacom, and allowed new entrants
to the telecommunications services market to provide all services, with the
exception of voice telephony, upon obtaining a license. At the same time a new
regulatory entity was introduced, the Belgisch Instituut voor Post en
Telecommunicatie, under the Ministry of Economy and Telecommunications.
 
     A further amendment to this Act was adopted by the Belgian Parliament in
December 1997, to implement the liberalization of voice telephony and
infrastructure. The amended Act was published in the Belgian Official Journal on
January 19, 1998 but in order to implement the amended act certain
administration regulations are required. To prevent any delays in providing
access to the market for new entrants, the Ministry of Economy and
Telecommunications issued a notice which opened the way for temporary licenses
for service providers and infrastructure operators. It is expected that the
definitive regulatory framework will be in place within the next few months.
 
     VersaTel has obtained licenses to operate facilities and provide
telecommunications services in Belgium. For marketing purposes VersaTel has
reserved the same carrier select code "1611" as it currently uses in The
Netherlands. VersaTel has started the process to interconnect with Belgacom for
carrier selection and call termination services.
 
  LUXEMBOURG
 
     The Luxembourg telecommunications market has been liberalized since the
July 1st, 1998, six months after liberalization in most other EU Member States.
Until that date, P&T Telecom Luxembourg, a state-owned company, had a 100%
monopoly in the provision of basic voice telephony and telecommunications
infrastructure. A new regulatory entity, the Institut Luxembourgeois des
Telecommunications, has been installed to oversee the newly deregulated market.
Under this new regulatory regime, competition is expected to develop along the
same lines as in the other Benelux countries.
 
PROPERTY
 
     The Company's principal executive offices are located at Paalbergweg 36,
Amsterdam-Zuidoost, The Netherlands. The office space currently leased by the
Company at this location will expire in May 2001.
 
EMPLOYEES
 
     As of June 30, 1998, the Company had 84 full-time employees and 8 full-time
consultants. In addition, the Company employs approximately 25 temporary
employees at any given time. None of the Company's employees is represented by a
labor union or covered by a collective bargaining agreement, and the Company has
never experienced a work stoppage. The Company considers its employee relations
to be good.
 
INTELLECTUAL PROPERTY
 
     The Company has registered the trademark (woordmerk) "VersaTel" with the
Benelux trademark bureau (Benelux Merkenbureau).
 
LEGAL PROCEEDINGS
 
     The Company has filed complaints in the past with the European Commission,
OPTA and the Minister of Transport and Waterways of The Netherlands, as part of
its regulatory strategy. See "-- Regulation." The Company also makes routine
filings with the regulatory agencies and governmental authorities in the
countries in which the Company operates or intends to operate. In addition,
Cromwilld, one of the Shareholders has objected to the Recapitalization and the
Offering and has threatened to challenge in court certain of the Company's
actions in connection therewith.
 
     The Company is from time to time involved in routine litigation in the
ordinary course of business. The Company believes that no currently pending
litigation to which it is a party will have a material adverse effect on the
Company's financial position or results of operations.
 
                                       57
<PAGE>   62
 
                                   MANAGEMENT
 
     The members of the Supervisory Board and the Management Board of the
Company and certain other significant employees of the Company and their
respective ages and positions with the Company are set forth below.
 
MANAGEMENT BOARD
 
     R. Gary Mesch is the sole managing director (statutair directeur) of the
Company.
 
SUPERVISORY BOARD
 
<TABLE>
<CAPTION>
                    NAME                       AGE                     POSITION
                    ----                       ---                     --------
<S>                                            <C>    <C>
Leopold W.A.M. van Doorne....................  39     Chairman
Denis O'Brien................................  40     Member
Hans Wackwitz................................  43     Member
James Meadows................................  46     Member
EXECUTIVE OFFICERS
               NAME                            AGE                     POSITION
               ----                            ---                     --------
R. Gary Mesch................................  45     Managing Director
W. Greg Mesch................................  38     Chief Operations Officer
Raj Raithatha................................  36     Chief Financial Officer
Larry Hendrickson............................  55     Chief Technology Officer(1)
Marc A.J.M. van der Heijden..................  39     Legal Counsel
Maurice J.J.J.M. Bergmans....................  33     Manager Belgium Operations
John J.L. de Rooij...........................  39     Sales Manager
Leo Y.J. van der Veen........................  42     Finance Manager
Andy Cooper..................................  36     Network Manager(1)
L. Michiel van Dis...........................  35     Manager Customer Care
</TABLE>
 
- ---------------
 
(1) Messrs. Hendrickson and Cooper serve in these positions as consultants to
    the Company.
 
SUPERVISORY BOARD
 
     Under Netherlands law and the Articles of Association of the Company, the
management of the Company is entrusted to the Management Board (Directie) under
the supervision of the Supervisory Board (Raad van Commissarissen). Under the
laws of The Netherlands, Supervisory Directors cannot at the same time be
Managing Directors of the same company. The primary responsibility of the
Supervisory Board is to supervise the policies pursued by the Management Board
and the general course of affairs of the Company and its business. In fulfilling
their duties, the members of the Supervisory Board are required to act in the
best interests of the Company and its business.
 
     Pursuant to the Articles of Association, the Supervisory Board consists of
such number of members as may be determined by the general meeting of
shareholders. The December 1996 Shareholders Agreement (the "Shareholders'
Agreement") specifies that the Supervisory Board shall consist of four members.
See "Certain Relationships and Related Transactions -- Shareholders' Agreement."
The members of the Supervisory Board are appointed by the general meeting of
shareholders. Resolutions of the Supervisory Board require the approval of a
majority of the members. The Shareholders' Agreement sets out the specific rules
for voting. The Supervisory Board meets each time this is deemed necessary by
one of its members. Members of the Supervisory Board shall periodically retire
in accordance with a roster drawn up by the general meeting of shareholders.
Every retiring Supervisory Director may be reappointed, provided that such
Supervisory Director has not attained the age of 72. A member of the Supervisory
Board must retire not later than on the day of the general meeting of
shareholders held in the fiscal year in which such member reaches the age of 72.
 
                                       58
<PAGE>   63
 
     A member of the Supervisory Board may at all times be suspended or removed
by the general meeting of shareholders, at any time. The members of the
Supervisory Board may receive such compensation as may be determined by the
general meeting of shareholders.
 
MANAGEMENT BOARD
 
     The management of the Company is entrusted to the Management Board under
the supervision of the Supervisory Board. The Articles of Association provide
that the Management Board may from time to time adopt written policies governing
its internal organization. Such written policies require the approval of the
Supervisory Board. In addition, the Articles of Association list certain actions
which require prior approval of the Supervisory Board. Such actions include,
among other things: (i) borrowing or lending money; (ii) participating directly
or indirectly in the capital of another company; (iii) making any investments;
and (iv) providing security in the name of Company or its property.
 
     The Management Board consists of such number of members as may be
determined by the general meeting of shareholders. In addition, the general
meeting of shareholders appoint the members of the Management Board.
 
     The general meeting of shareholders has the power to suspend or dismiss
members of the Management Board. The Supervisory Board also has the power to
suspend members of the Management Board. If a member of the Management Board is
temporarily prevented from acting, the remaining members of the Management Board
shall temporarily be responsible for the management of the Company. If all
members of the Management Board are prevented from acting, a person appointed by
the Supervisory Board (who may be a member of the Supervisory Board) will be
temporarily responsible for the management of the Company. The compensation and
other terms and conditions of employment of the members of the Management Board
are determined by the general meeting of shareholders.
 
BIOGRAPHIES
 
     R. GARY MESCH has served as Managing Director of VersaTel individually or
through his position as President of Open Skies International, Inc. ("Open
Skies") since October 1995. In 1991 he founded and became President of Open
Skies, a telecommunications consultancy with operations based in Amsterdam,
which provided consulting for early stage development of competitive European
telecommunications businesses. From 1991 to 1995 Open Skies advised such clients
as Unisource, PTT Telecom International, Inmarsat, NEC and Eurocontrol. In 1984
he founded and until 1990 managed the commercial operations of NovaNet, a
Denver-based regional provider of satellite-based long distance networks.
NovaNet was acquired by ICG Communications in 1993. From 1981 to 1983 he served
as director of sales for Otrona Advanced Systems, a Colorado-based manufacturer
of high performance computer systems. From 1975 to 1981 he served as a senior
systems engineer with Westinghouse Electric. Mr. Gary Mesch holds a B.S. in
Electrical Engineering from the University of Colorado and an M.B.A. from Denver
University.
 
     LEOPOLD W.A.M. VAN DOORNE has served as Chairman of the Supervisory Board
of the Company on behalf of NeSBIC since December 1995. Since 1996, Mr. van
Doorne has been the Managing Director of NeSBIC Groep B.V., a venture capital
company and a subsidiary of Fortis, an international group of more than 100
companies operating in the fields of insurance, banking and investments.
Worldwide, Fortis has over 35,000 employees. From 1994 to 1996 he served as
Managing Director of NeSBIC Venture Management B.V. From 1990 to 1994 he was
Regional Director of Banque de Suez Nederland N.V. Mr. van Doorne serves as a
member of the supervisory board of various other companies. Mr. van Doorne holds
a degree in law from the University of Utrecht.
 
     DENIS O'BRIEN, JR. has served as a member of the Supervisory Board of the
Company on behalf of Cromwilld since December, 1996. Mr. O'Brien is Chairman of
the Board and Chief Executive Officer of Esat Telecom Group Plc, a public
company listed on NASDAQ. In addition to his positions with Esat, Mr. O'Brien
has been the Chairman of the Board of Esat Digifone since 1996, and the Chairman
of the Board and Chief Executive Officer of Esat Telecom, which he founded in
1991. Prior to that time, he was employed
 
                                       59
<PAGE>   64
 
by Guinness Peat Aviation ("GPA Group"), from 1983 to 1985. Mr. O'Brien holds an
M.B.A. from Boston College.
 
     HANS WACKWITZ has served as a member of the Supervisory Board of the
Company on behalf of Paribas since August 1998. Mr. Wackwitz is a member of the
management board of COBEPA S.A. and Paribas Deelnemingen N.V. From 1991 to 1993
he was employed by Paribas Capital Markets and responsible for the Benelux
region within the investment banking group. From 1986 to 1991 he served at
various management positions at Bankers Trust Company, including vice president
corporate finance, vice president short term finance and vice president money
market. Mr. Wackwitz holds a degree in economics from the Rijks Universiteit
Groningen and an M.B.A. from Columbia University.
 
     JAMES R. MEADOWS has served as a member of the Supervisory Board of the
Company on behalf of Telecom Founders since August 1998. Mr. Meadows is Senior
Vice-President and co-founder of PrimeTEC International, Inc., a U.S.-based
international telecommunications services provider, since 1997. From 1989 to
1997 he served as Director Government Affairs at Capital Network System, Inc.
(CNSI), a telecommunications services provider. Mr. Meadows is the President of
America's Carriers Telecommunications Association (ACTA) and is a member of the
Board of Directors of Lone Star 2000, a public policy foundation. Mr. Meadows
holds a degree in history from the University of Texas at Austin.
 
     W. GREG MESCH has served as Chief Operations Officer of VersaTel since
April 1998. From the Company's inception in 1995 until August 1998, he served as
a member of the Supervisory Board of the Company on behalf of Telecom Founders
and has performed operations consulting roles for the Company. From 1993 to
1997, Mr. Greg Mesch was a consultant to Esat Telecom in Ireland serving in the
role of Chief Operations Officer. From 1986 to 1992, he served as Chief
Executive Officer of Nova-Net. Nova-Net was a company he founded with his
brother Mr. Gary Mesch. Mr. Mesch has been a Director of In-Touch Associates
Ltd., a U.K.-based telecommunications consulting firm, since 1997. Mr. Mesch has
an M.B.A. from Denver University.
 
     RAJ RAITHATHA has served as Chief Financial Officer of the Company since
April 1998. From 1994 to April 1998 he has served as Chief Financial Officer and
Director of Business Development of ACC Corp.'s European Operations. From 1992
to 1994 he served as Finance Director of Bay Trading Company. From 1989 to 1992
he served as divisional finance director at Securiguard Group Plc and from 1987
to 1989 he was financial controller at Harrison Willis. From 1983 to 1987 he was
employed by KPMG Peat Marwick. Mr. Raithatha holds a degree in economics and
mathematics from the University of Cardiff, England.
 
     LARRY HENDRICKSON has served as Chief Technology Officer of the Company
since April 1998. From 1994 to 1998 he was senior consultant and partner of DDV
Telecommunications Strategies, a Benelux-based telecommunications consulting
company, and from 1993 to 1994 he was an independent telecommunications
consultant. From 1986 to 1993 he served at various management positions at
Cincinnati Bell, including President of Europe Group, President and Chief
Executive Officer of LDN Communications (Cincinnati Bell) and President of the
Mobile Communications Division of Cincinnati Bell Information Systems. From 1964
to 1986 he was employed by AT&T. Mr. Hendrickson holds a B.S. in management from
the Massachusetts Institute of Technology and completed the Advanced Management
Program at Harvard Business School.
 
     MARC A.J.M. VAN DER HEIJDEN has served as Legal Counsel to the Company
since June 1998. Mr. van der Heijden served as regulatory counsel to the Company
on matters of telecommunications law and regulatory policy since October 1995 as
an independent consultant. As an independent consultant on telecommunications
law he has acted as advisor to the European Commission, the Governments of The
Netherlands and the United Kingdom and various telephone companies, such as
France Telecom and PTT Telecom and financial institutions, such as ABN AMRO and
Nederlandse Investerings Bank. He worked as an expert for KPMG Peat Marwick on
bidding processes for mobile telephony and sale of cable companies.
 
     MAURICE J.J.J.M. BERGMANS has served as Manager Belgium Operations of the
Company since April 1998. He joined the Company in 1997 and he served as
business development manager of the Company since November 1997. From 1989 to
1996 he worked at Koning en Hartman B.V., a business unit of Getronics N.V., a
publicly traded company in The Netherlands. At Koning en Hartman B.V. he held
several positions in
 
                                       60
<PAGE>   65
 
product marketing and management in the area of telephony and interactive voice
response activities and services. Mr. Bergmans holds a degree in computer
science.
 
     JOHN J.L. DE ROOIJ has served as Sales Manager of the Company since October
1995. From 1989 to 1995 he served as sales manager at Lanier Office Products,
initially as sales manager for fax and copier products for The Netherlands and
subsequently for the entire Benelux region. The last three years at Lanier's he
acted as the European Training Manager. From 1986 to 1989 he served as account
manager for Wang Laboratories The Netherlands. Mr. de Rooij holds a degree in
biology.
 
     LEO Y.J. VAN DER VEEN has served as Finance Manager of the Company since
November 1997. From 1995 to 1997 he worked as European Finance Manager at Morton
Automotive Safety Products. From 1994 to 1995 he served as controller Benelux of
Stratus Computers. From 1983 to 1993 he served as Director Finance &
Administration Benelux and in various other financial positions at NCR Benelux.
Mr. van der Veen holds a masters degree in international management from the
American Graduate School of International Management and degrees in business
administration and mechanical engineering.
 
     ANDY COOPER has served as Network Manager of the Company since June 1997 as
an independent consultant. From 1985 to 1997, he worked at Mercury
Communications Ltd. in the United Kingdom. From 1993 to 1994, he was seconded to
Cable and Wireless Plc., Mercury's parent. His responsibilities included network
development, transmission systems maintenance, switch operations, VPN, ISDN,
Centrex and intelligent networking.
 
     L. MICHIEL VAN DIS has served as Manager Customer Care of the Company since
May 1997. From 1991 to 1992 he worked at KLM (Royal Dutch Airlines). In 1992, he
joined Independent Mail B.V. as operations manager and subsequently became
general manager of this company. Independent Mail B.V., a re-mail house for DHL,
was taken over by KPN N.V., the holding company of PTT Telecom and the Dutch
Postal Service, in 1996. From 1996 to 1997 he worked as an independent
consultant, primarily for Independent Mail B.V. Mr. van Dis holds a degree in
business administration.
 
EXECUTIVE COMPENSATION
 
     The total aggregate compensation for the Supervisory Board of the Company
as a group for 1997 was NLG 37,500. The total aggregate compensation (including
amounts paid pursuant to management and consulting agreements) of all executive
officers (including the Managing Director) of the Company as a group for 1997
was NLG 2,108,619. See "Certain Relationships and Related
Transactions -- Additional Agreements."
 
     During 1997, VersaTel did not accrue any amounts to provide pension,
retirement and similar benefits to the executive officers of the Company or to
any of the Managing or Supervisory Directors of the Company.
 
STOCK OPTION PLANS
 
  1997 STOCK OPTION PLAN
 
     In December 1996, VersaTel's shareholders approved the 1997 Stock Option
Plan (the "1997 Plan"). The 1997 Plan provides for the grant of options to
certain key employees of the Company to purchase depositary receipts issued for
Ordinary Shares of the Company. Under the 1997 Plan, no options have been
granted with an expiration date of more than five years after the granting of
the option. The option exercise price is determined in the particular grant of
the option.
 
     The option holder is not entitled to retain any depositary receipts
received by the option holder as a result of the exercise of its option. Upon
exercise of its option by the option holder, the option holder is required to
offer the depositary receipts received by it to the Company or to another party
designated by the Company at the Purchase Price (as defined in the 1997 Plan).
Unless otherwise specified in the particular grant of the option, the Purchase
Price will be the fair market value of the Ordinary Shares minus a penalty
discount. The 1997 Plan contains provisions in the event of a dispute regarding
the fair market value of the Ordinary Shares. The penalty discount, if any, is
determined by the length of employment of the particular option holder.
 
                                       61
<PAGE>   66
 
     Pursuant to the Shareholders' Agreement, Telecom Founders, Cromwilld and
NeSBIC must make available the shares underlying the depositary receipts to be
issued under the 1997 Plan. As of the date of this Prospectus 199,000 options to
purchase 199,000 depositary receipts had been granted under the 1997 Plan and
the Company does not intend to grant any more options under the 1997 Plan.
 
  1998 STOCK OPTION PLAN
 
     In March 1998, VersaTel's shareholders approved the 1998 Stock Option Plan
(the "1998 Plan"). The 1998 Plan allows the Company to grant options to
employees to purchase depositary receipts issued for Ordinary Shares of the
Company. The option period will commence at the date of the grant and will last
five years. The option exercise price shall be the economic value of the
depositary receipt at the date of the grant of the option. The 1998 Plan
contains specific provisions for the determination of the economic value of the
depositary receipts.
 
     The option holder is not entitled to retain any depositary receipts
received by the option holder as a result of the exercise of its option. Upon
exercise of its option by the option holder, the option holder is required to
offer the depositary receipts received by it, within one year after the end of
the option period, to the Company or to another party designated by the Company,
at a purchase price equal to the economic value of the depositary receipts.
 
     As of the date of this Prospectus, 2,500,000 options to purchase 2,500,000
depositary receipts have been granted under the 1998 Plan.
 
     The depositary receipts issued under both the 1997 Plan and the 1998 Plan
will be administered by the Stichting Administratiekantoor VersaTel.
 
                                       62
<PAGE>   67
 
                        SECURITY OWNERSHIP OF PRINCIPAL
                          SHAREHOLDERS AND MANAGEMENT
 
     The following table sets forth certain information regarding the beneficial
ownership of the Ordinary Shares of the Company, as of June 30, 1998, by each
beneficial owner of 5.0% or more of the Ordinary Shares and by executive
officers and directors of the Company as a group.
 
<TABLE>
<CAPTION>
                                                              NUMBER OF
                                                                SHARES      PERCENT(1)
                                                              ----------    ----------
<S>                                                           <C>           <C>
Telecom Founders B.V.(2)....................................   3,375,292       17.4%
NeSBIC Venture Fund C.V. ...................................   7,581,448       39.0
Cromwilld Limited(3) .......................................   3,653,024       18.8
Paribas Deelnemingen N.V. ..................................   3,641,170       18.7
Nederlandse Participatie Maatschappij N.V. .................   1,176,471        6.1
All directors and executive officers as a group(4)..........   7,028,316       36.2
</TABLE>
 
- ---------------
(1) Does not give effect to dilution from the exercise of the Warrants (covering
    Ordinary Shares) or of options granted to employees (covering 2,699,000
    Ordinary Shares). See "Management -- Stock Option Plans."
 
(2) Telecom Founders B.V., a Netherlands company is a wholly-owned subsidiary of
    Relyt Holdings N.V., a Netherlands Antilles company owned by R. Gary Mesch.
    The Shareholders' Agreement requires Mr. Mesch to own more than 50.0% of the
    shares of Telecom Founders B.V. Certain of the officers and directors of the
    Company have beneficial interests in Telecom Founders B.V.
 
(3) Cromwilld Limited, an Isle of Man company, is controlled by Denis O'Brien, a
    member of the Supervisory Board of the Company. The Shareholders' Agreement
    requires Mr. O'Brien to own more than 90.0% of the shares of Cromwilld
    Limited.
 
(4) Reflects the 3,375,292 shares held by Telecom Founders B.V., beneficial
    ownership of which may be attributed to Mr. Mesch, and 3,653,024 shares held
    by Cromwilld Limited, beneficial ownership of which may be attributed to Mr.
    O'Brien.
 
                                       63
<PAGE>   68
 
                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
SHAREHOLDERS' AGREEMENT
 
     In December 1996, Telecom Founders, NeSBIC and Cromwilld entered into a
participation and shareholders' agreement (the "Shareholders' Agreement"), which
contains, among other things, provisions restricting the transfer of shares of
the Company, provisions relating to appointment of members of the Management
Board and the Supervisory Board and provisions with respect to the funding of
the Company. The Shareholders' Agreement superseded a prior shareholders'
agreement among VersaTel's initial shareholders. Pursuant to the Shareholders'
Agreement, the Company issued new shares to the shareholders and certain
shareholders provided subordinated convertible loans to the Company. These
subordinated convertible loans have been converted into equity as part of the
Recapitalization. As part of the Recapitalization, Paribas and NPM have agreed
to be bound by the terms of the Shareholders' Agreement pursuant to deeds of
accession and acknowledgment.
 
     The Shareholders' Agreement contains provisions restricting the transfer of
shares of the Company (such provisions also provided for an amendment of the
Articles of Association of the Company containing similar transfer
restrictions). If a shareholder wishes to transfer its shares, it must first
offer the other shareholders the right to purchase such shares. See "Description
of Capital Stock -- Restriction on Transfer of Shares." In addition, no
shareholder may transfer its shares unless the transferee has accepted and
agreed to be bound by the provisions of the Shareholders' Agreement, nor will
the Company issue shares to any person unless such person accepts and agrees to
be bound by the Shareholders' Agreement.
 
     The Shareholders' Agreement provides that the Supervisory Board of the
Company shall be composed of four members. NeSBIC and Cromwilld each have the
right to nominate one member of the Supervisory Board, whereas Telecom Founders
will have the right to nominate two members of the Supervisory Board, one of
which will have to be reasonably acceptable to both NeSBIC and Cromwilld. As
part of the Recapitalization and pursuant to an agreement between Paribas and
Telecom Founders, Telecom Founders has agreed with Paribas to nominate the
person to be designated from time to time by Paribas as one of its members of
the Supervisory Board. The member of the Supervisory Board appointed upon
nomination of NeSBIC shall have a deciding vote in case of a tie in votes.
Pursuant to the Shareholders' Agreement, the Management Board requires the prior
approval of the Supervisory Board for certain transactions. See "Management --
Management Board."
 
     The Shareholders' Agreement will terminate upon any of the following
events: (i) by written agreement of all the parties thereto or (ii) upon the
joint sale and transfer by the parties to the Shareholders' Agreement of the
entire share capital of the Company or (iii) the listing of the entire share
capital of the Company on any securities market.
 
RECENT DEVELOPMENTS
 
     In February 1998, as part of the Recapitalization, two of the three
shareholders of the Company, Telecom Founders and NeSBIC, a subsidiary of
Fortis, invested an additional NLG 7.2 million in equity capital in the Company.
In addition, NeSBIC and Cromwilld, the third shareholder of the Company,
converted their subordinated convertible notes totaling NLG 3.6 million into
Ordinary Shares of the Company; and NeSBIC converted its NLG 4.5 million bridge
loan into Ordinary Shares of the Company. The third component of the
Recapitalization was comprised of a new equity investment by Paribas of NLG 12.8
million. Lastly, the Company received from Telecom Founders, NeSBIC, Paribas and
NPM an additional NLG 15.0 million in equity capital immediately prior to the
closing of the Offering. As a result of the Recapitalization, the invested
equity in the Company has increased from NLG 7.0 million to NLG 50.1 million.
 
ADDITIONAL AGREEMENTS
 
     Mr. Greg Mesch is also a director of In-Touch Associates Ltd., a
London-based telecommunications consulting company that performs services for
the Company. The amounts paid by the Company in respect of these services are
not material.
 
                                       64
<PAGE>   69
 
                       DESCRIPTION OF THE EXCHANGE NOTES
 
     The Outstanding Notes were issued under an Indenture (the "Indenture")
dated as of May 27, 1998 between the Company and the United States Trust Company
of New York, as trustee (the "Trustee"). The Exchange Notes will be issued under
the Indenture, which will be qualified under the United States Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), upon the effectiveness of
the Registration Statement of which this Prospectus is a part. The form and
terms of the Exchange Notes are the same in all material respects as the form
and terms of the Outstanding Notes, except that the Exchange Notes will have
been registered under the Securities Act and, therefore, will not bear legends
restricting transfer thereof (other than those relating to the offer and sale of
Exchange Notes in The Netherlands and the United Kingdom). Upon the consummation
of the Exchange Offer, holders of the Outstanding Notes will not be entitled to
registration rights under, or the contingent increase in interest rate provided
pursuant to, the Registration Rights Agreement. The Exchange Notes will evidence
the same debt as the Outstanding Notes and will be treated as a single class
under the Indenture with any Outstanding Notes that remain outstanding. The
Outstanding Notes and Exchange Notes are herein collectively referred to as the
"Notes."
 
     The following summary of certain provisions of the Indenture, the Escrow
Agreement and the Registration Rights Agreement does not purport to be complete
and 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, the Escrow
Agreement and the Registrations Rights Agreement, including the definitions of
certain terms therein and those terms made a part of the Indenture by reference
to the Trust Indenture Act. Copies of the Indenture, the Escrow Agreement and
the Registration Rights Agreement have been filed with the Commission as an
Exhibit to the Registration Statement of which this Prospectus is a part. The
definitions of certain terms used in the following summary are set forth under
"-- Certain Definitions."
 
GENERAL
 
     The Outstanding Notes have been issued by the Company pursuant to the
Indenture between the Company and United States Trust Company of New York, as
trustee (the "Trustee"). The Indenture will be qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), upon issuance of
the Exchange Notes or the effectiveness of the Shelf Registration Statement. See
"-- Exchange Offer and Registration Rights." 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 Indenture does not purport to be complete
and is qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. The definitions of certain
terms used in the following summary are set forth below under "-- Certain
Definitions."
 
     Application has been made to list the Exchange Notes on the Luxembourg
Stock Exchange after the Separation Date. If and so long as the Exchange Notes
are listed on the Luxembourg Stock Exchange, the Company will maintain a special
agent or, as the case may be, a paying and transfer agent in Luxembourg. See
"Listing and General Information."
 
RANKING
 
     The Notes will be general unsecured obligations of the Company and will
rank senior in right of payment to all future Indebtedness of the Company that
is, by its terms or by the terms of the agreement or instrument governing such
Indebtedness, expressly subordinated in right of payment to the Notes and pari
passu in right of payment with all existing and future unsecured liabilities of
the Company that are not so subordinated.
 
     The Company intends to transfer all or substantially all of its assets and
liabilities (other than the Notes) to certain of its Restricted Subsidiaries.
After such transfer, the Company will be a holding company with limited assets
and will operate its business through its Restricted Subsidiaries. Any right of
the Company and its creditors, including holders of the Notes, to participate in
the assets of any of the Company's Subsidiaries upon any liquidation or
administration of any such Subsidiary will be subject to the prior claims of the
creditors of such Subsidiary. The claims of creditors of the Company, including
holders of the Notes, will be effectively subordinated to all existing and
future third-party indebtedness and liabilities, including trade
 
                                       65
<PAGE>   70
 
payables, of the Company's Subsidiaries. At June 30, 1998, the Company's
Subsidiaries had total liabilities of $13.9 million reflected on the Company's
balance sheet. The Company and its Subsidiaries may incur other debt in the
future, including secured debt.
 
     The Notes will not be entitled to any security and will not be entitled to
the benefit of any guarantees, except under the circumstances described under
"-- Certain Covenants -- Limitation on Issuances of Guarantees of Indebtedness
by Restricted Subsidiaries."
 
PRINCIPAL, MATURITY AND INTEREST
 
     The Notes will be limited to $225,000,000 in aggregate principal amount and
will mature on May 15, 2008. The redemption price at maturity will be 100%. The
Notes will bear interest at the rate of 13 1/4% per annum, payable semi-annually
in arrears on each May 15 and November 15 (each an "Interest Payment Date"),
commencing on November 15, 1998 to the Person in whose name the Note (or any
predecessor Note) is registered at the close of business on the preceding May 1
or November 1, as the case may be. Interest will be computed on the basis of a
360-day year of twelve 30-day months. Principal of, premium, if any, interest,
Additional Amounts, if any, and Liquidated Damages, if any, on the Notes will be
payable at the office or agency of the Company maintained for such purpose
within the City and State of New York or, at the option of the Company, payment
of interest, Additional Amounts, if any, 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. Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose. The Notes are currently represented by two
global Notes in registered, global form without interest coupons. The global
Notes shall be exchanged by the Company (with authentication by the Trustee) for
one or more Definitive Notes (the "Definitive Notes"), if (a) DTC (i) has
notified the Company that it is unwilling or unable to continue as, or ceases to
be, a clearing agency registered under the Exchange Act and (ii) a successor to
DTC registered as a clearing agency under the Exchange Act is not able to be
appointed by the Company within 90 days of such notification or (b) at any time
at the option of the Company. If an Event of Default occurs and is continuing,
the Company shall, at the request of the Holder thereof, exchange all or part of
a global Note for one or more Definitive Notes (with authentication by the
Trustee); provided, however, that the principal amount of such Definitive Notes
and such global Note after such exchange shall be $1,000 or integral multiples
thereof. The Notes will be issued in minimum denominations of $1,000 (in
principal amount) and integral multiples thereof. If Definitive Notes are
issued, the Company will appoint Kredietbank S.A. Luxembourgeoise, or such other
Person located in Luxembourg and reasonably acceptable to the Trustee, as an
additional paying and transfer agent. Upon the issuance of Definitive Notes,
Holders will be able to receive principal, interest, Additional Amounts, if any,
and Liquidated Damages, if any, on the Notes and will be able to transfer
Definitive Notes at the Luxembourg office of such paying and transfer agent,
subject to the right of the Company to mail payments in accordance with the
terms of the Indenture. In case of transfer of past only of a Definitive
Exchange Note, the new Definitive Notes will be available at the office of the
transfer agent. Payment of principal on the Definitive Notes will be made upon
their surrender at an office of the paying agent in Luxembourg.
 
ESCROW ACCOUNT
 
     Concurrently with the consummation of the Offering, pursuant to the Escrow
Agreement, the Company purchased, pledged and transferred to the Escrow Agent,
for the benefit of the holders of the Notes, U.S. Government Securities in such
amounts as will be sufficient upon scheduled interest payments of such
securities to provide for the payment in full of the first six scheduled
interest payments on the Notes (excluding, in each case, any Additional Amounts
and any Liquidated Damages). The Company used approximately $81.6 million of the
net proceeds of the Offering to acquire the Pledged Securities. The Pledged
Securities were pledged to the Escrow Agent for the benefit of the Holders of
the Notes and deposited in the Escrow Account held by the Escrow Agent for the
benefit of the Trustee and the Holders of the Notes in accordance with the
Escrow Agreement. The Escrow Agreement provides, among other things, that funds
may be disbursed from the Escrow Account for interest payments on the Notes. The
Escrow Agent has been
 
                                       66
<PAGE>   71
 
instructed to cause any uninvested funds in the Escrow Account to be invested,
pending disbursement, in cash equivalents (as provided in the Escrow Agreement).
Interest earned on the Pledged Securities and any such cash equivalents will be
added to the related Escrow Account.
 
     Under the Escrow Agreement, the Company has granted to the Trustee, for the
benefit of the Holders, a first priority and exclusive security interest in the
Escrow Collateral. The Escrow Agreement provides that the Trustee may foreclose
on the Escrow Collateral upon acceleration of the maturity of the Notes. Under
the terms of the Indenture, the proceeds of the Escrow Collateral will be
applied, first, to amounts owing to the Trustee in respect of fees and expenses
of the Trustee, and second, to amounts owing on the Notes as provided in the
Indenture. The ability of Holders to realize upon the Escrow Collateral may be
subject to certain bankruptcy law limitations in the event of the bankruptcy of
the Company.
 
     Upon payment in full of the first six scheduled interest payments
(including any Additional Amounts and any Liquidated Damages), if no Default has
occurred and is continuing, the Escrow Collateral will be released to the
Company.
 
MANDATORY REDEMPTION
 
     The Company will not be required to make mandatory redemptions or sinking
fund payments prior to maturity of the Notes.
 
OPTIONAL REDEMPTION
 
     Except as described below and in the following paragraph or under
"Redemption for Taxation Reasons," the Notes will not be redeemable at the
Company's option prior to May 15, 2003. On or after May 15, 2003, the Notes will
be subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' prior notice, published in a leading
newspaper having a general circulation in New York (which is expected to be The
Wall Street Journal) and in Amsterdam (which is expected to be Het Financieele
Dagblad) (and, if and so long as the Exchange Notes are listed on the Luxembourg
Stock Exchange and the rules of such Stock Exchange shall so require, a
newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort)) or, in the case of Definitive Notes, mailed by
first-class mail to each Holder's registered address (and, if and so long as the
Exchange Notes are listed on the Luxembourg Stock Exchange and the rules of such
Stock Exchange shall so require, a newspaper having a general circulation in
Luxembourg (which is expected to be Luxemburger Wort)) at the redemption prices
(expressed as a percentage of principal amount) set forth below, plus accrued
and unpaid interest, Additional Amounts, if any, and Liquidated Damages, if any,
to the applicable redemption date (and, in the case of Definitive Notes, subject
to the right of Holders of record on the relevant record date to receive
interest and Additional Amounts, if any, and Liquidated Damages, if any, due on
the relevant interest payment date in respect thereof), if redeemed during the
twelve-month period beginning on May 15 of each of the years indicated below:
 
<TABLE>
<CAPTION>
                                                                REDEMPTION
                            YEAR                                  PRICE
                            ----                                ----------
<S>                                                             <C>
2003........................................................     106.625%
2004........................................................     104.417%
2005........................................................     102.208%
2006 and thereafter.........................................     100.000%
</TABLE>
 
     In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal securities exchange, if any, on which such Notes are listed or, if
such Notes are not so listed or such exchange prescribes no method of selection,
on a pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate, although no Note of $1,000 in
original principal amount or less shall be redeemed in part. If any Note is to
be redeemed in part only, the notice of redemption relating to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will
 
                                       67
<PAGE>   72
 
be issued and delivered to the Depositary, or, in the case of Definitive Notes,
issued in the name of the Holder thereof in each case upon cancellation of the
original Note and will be available at the offices of the paying agent. On and
after the redemption date, interest ceases to accrue on the Notes or portions
thereof called for redemption. The Luxembourg Stock Exchange will be informed of
the number of outstanding Notes after any Optional Redemption.
 
REDEMPTION FOR TAXATION REASONS
 
     The Notes may be redeemed, at the option of the Company in whole but not in
part, at any time upon giving not less than 30 nor more than 60 days' notice to
the Holders (which notice shall be irrevocable), at a redemption price equal to
the aggregate principal amount thereof, plus Liquidated Damages, if any, to the
date fixed by the Company for redemption (a "Tax Redemption Date"), and all
Additional Amounts (see "-- Withholding Taxes"), if any, then due and which will
become due on the Tax Redemption Date as a result of the redemption or
otherwise, if the Company determines that, as a result of (i) any change in, or
amendment to, the laws or treaties (or any regulations or rulings promulgated
thereunder) of The Netherlands (or any political subdivision or taxing authority
of The Netherlands) affecting taxation which becomes effective on or after the
Issue Date, or (ii) any change in position regarding the application,
administration or any new or different interpretation of such laws, treaties,
regulations or rulings (including a holding, judgment or order by a court of
competent jurisdiction), which change, amendment, application or interpretation
becomes effective on or after the Issue Date, the Company is, or on the next
Interest Payment Date would be, required to pay Additional Amounts, and the
Company determines that such payment obligation cannot be avoided by the Company
taking reasonable measures. Notwithstanding the foregoing, no such notice of
redemption shall be given earlier than 90 days prior to the earliest date on
which the Company would be obligated to make such payment or withholding if a
payment in respect of the Notes were then due. Prior to the publication or,
where relevant, mailing of any notice of redemption of the Notes pursuant to the
foregoing, the Company will deliver to the Trustee an opinion of an independent
tax counsel of recognized standing to the effect that the circumstances referred
to above exist. The Trustee shall accept such opinion as sufficient evidence of
the satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.
 
CERTAIN COVENANTS
 
  LIMITATION ON INDEBTEDNESS
 
     (a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness; provided, however, that if no Default
or Event of Default shall have occurred and be continuing at the time, or would
occur as a consequence, of the Incurrence of any such Indebtedness, the Company
may Incur Indebtedness if immediately thereafter the ratio of (i) the aggregate
principal amount of Indebtedness of the Company and its Restricted Subsidiaries
on a consolidated basis outstanding as of the Transaction Date to (ii) the pro
forma Consolidated Cash Flow (the "Indebtedness to Consolidated Cash Flow
Ratio") for the preceding two full fiscal quarters multiplied by two, determined
on a pro forma basis as if any such Indebtedness had been Incurred and the
proceeds thereof had been applied at the beginning of such two fiscal quarters,
would be greater than zero and less than or equal to 5.0 to 1.
 
     (b) Notwithstanding the foregoing, (except for Indebtedness under
subsection (vii) below) the Company and (except for Indebtedness under
subsections (v), (vi) and (x) (A) below) any Restricted Subsidiary may Incur
each and all of the following:
 
         (i) Indebtedness (other than Acquired Indebtedness) Incurred to finance
the cost (provided that such Indebtedness is Incurred at any time on or before,
or within 90 days following, the incurrence of such cost) (including the cost of
design, development, construction, acquisition, installation or integration) of
assets used in the Permitted Business or Equity Interests of (A) a Restricted
Subsidiary that owns principally such assets from a Person other than the
Company or a Restricted Subsidiary of the Company or (B) any Person that is
principally engaged in the Permitted Business, that would become a Restricted
Subsidiary and owns principally such assets; provided that (x) any such
Indebtedness of a Restricted Subsidiary must be
 
                                       68
<PAGE>   73
 
Incurred under one or more Credit Facilities, under one or more Capitalized
Leases or from the vendor of the assets, property or services acquired with the
proceeds of such Indebtedness, (y) the amount of such Indebtedness of a
Restricted Subsidiary may not exceed the Fair Market Value of the assets so
acquired and (z) the amount of such Indebtedness of the Company, Incurred to
acquire Equity Interests under clauses (A) and (B) above, may not exceed the
Fair Market Value of such assets of any Restricted Subsidiary or any such Person
so acquired;
 
         (ii) Indebtedness of any Restricted Subsidiary to the Company or
Indebtedness of the Company or any Restricted Subsidiary to any other Restricted
Subsidiary; provided that any subsequent issuance or transfer of any Capital
Stock which results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any subsequent transfer of such Indebtedness not permitted by this
clause (ii) (other than to the Company or another Restricted Subsidiary) shall
be deemed, in each case, to constitute the Incurrence of such Indebtedness; and
provided, further, that Indebtedness of the Company to a Restricted Subsidiary
must be unsecured and subordinated in right of payment to the Notes;
 
         (iii) Indebtedness issued in exchange for, or the net proceeds of which
are used to refinance or refund, then outstanding Indebtedness of the Company or
a Restricted Subsidiary, other than Indebtedness Incurred under clauses (ii),
(iv), (vii), (viii) and (xii) of this paragraph, and any refinancings thereof in
an amount not to exceed the amount so refinanced or refunded (plus premiums,
accrued interest, and reasonable fees and expenses); provided that such new
Indebtedness shall only be permitted under this clause (iii) if (A) in case the
Notes are refinanced in part or the Indebtedness to be refinanced or refunded is
equal to the Notes, such new Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such new Indebtedness is issued or
remains outstanding, is expressly made equal to, or subordinate in right of
payment to, the remaining Notes, (B) in case the Indebtedness to be refinanced
is subordinated in right of payment to the Notes, such new Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which such new
Indebtedness is issued or remains outstanding, is expressly made subordinate in
right of payment to the Notes at least to the extent that the Indebtedness to be
refinanced or refunded is subordinated to the Notes, (C) the Stated Maturity of
such new Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, is no earlier than the Stated Maturity of the Indebtedness being
refinanced or refunded and (D) such new Indebtedness, determined as of the date
of Incurrence of such new Indebtedness, has a Weighted Average Life to Maturity
which is not less than the remaining Weighted Average Life to Maturity of the
Indebtedness to be refinanced or refunded; and provided, further, that in no
event may Indebtedness of the Company be refinanced or refunded by means of any
Indebtedness of any Restricted Subsidiary pursuant to this clause (iii);
 
         (iv) Indebtedness (A) in respect of performance, surety or appeal bonds
or letters of credit supporting Trade Payables, in each case provided in the
ordinary course of business, (B) under Currency Agreements and Interest Rate
Agreements; provided that such agreements do not increase the Indebtedness of
the obligor outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder, and (C) arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted Subsidiary
of the Company (other than Guarantees of Indebtedness Incurred for the purpose
of financing such acquisition by the Person acquiring all or any portion of such
business, assets or Restricted Subsidiary), in a principal amount not to exceed
the gross proceeds actually received by the Company or any Restricted Subsidiary
in connection with such disposition;
 
         (v) Indebtedness, to the extent that the net proceeds thereof are
promptly (A) used to repurchase Notes tendered in a Change of Control Offer or
(B) deposited to defease all of the Notes as described below under "Legal
Defeasance and Covenant Defeasance";
 
         (vi) Indebtedness of the Company represented by the Notes;
 
                                       69
<PAGE>   74
 
         (vii) Indebtedness represented by a Guarantee of the Notes and
Guarantees of other Indebtedness of the Company by a Restricted Subsidiary, in
each case permitted by and made in accordance with the "Limitation on Issuances
of Guarantees of Indebtedness by Restricted Subsidiaries" covenant;
 
         (viii) Indebtedness under one or more Credit Facilities, in an
aggregate principal amount at any one time outstanding not to exceed the greater
of (x) NLG 70.0 million and (y) 80.0% of Eligible Accounts Receivable at any one
time outstanding, subject to any permanent reductions required by any other
terms of the Indenture;
 
         (ix) Acquired Indebtedness; provided that the aggregate amount of such
Acquired Indebtedness (other than the Indebtedness Incurred under one or more
Credit Facilities, under one or more Capitalized Leases or from the vendor of
assets, property or services acquired with the proceeds of such Indebtedness) of
the Person that is to become a Restricted Subsidiary or be merged or
consolidated with or into the Company or any Restricted Subsidiary in the
contemplated transaction, outstanding at the time of such transaction does not
exceed the Fair Market Value of the plant, property and equipment (excluding
property, plant and equipment securing any of the Credit Facilities or vendor
financings or subject to any Capital Leases referred to in this clause (ix)) of
any Restricted Subsidiary so acquired;
 
         (x) Indebtedness of (A) the Company not to exceed, at any one time
outstanding, 2.00 times the Net Cash Proceeds from (1) the issuance and sale,
other than to a Subsidiary, of Equity Interests (other than Redeemable Stock and
excluding any Ordinary Shares issued in connection with the Recapitalization) of
the Company and (2) capital contributions made in the Company (other than by a
Subsidiary) less, in each case, the amount of such proceeds used to make
Restricted Payments as provided in clause (C)(2) of the first paragraph or
clause (iii) or (iv) of the second paragraph of the "Limitation on Restricted
Payments" covenant and (B) the Company or Acquired Indebtedness of a Restricted
Subsidiary (provided that any such Indebtedness of such Restricted Subsidiary
must be incurred under one or more Credit Facilities, under one or more
Capitalized Leases or from the vendor of the assets, property or services
acquired with the proceeds of such Indebtedness) not to exceed, at any one time
outstanding, the fair market value of any Telecommunications Assets acquired by
the Company or such Restricted Subsidiary in exchange for Equity Interests of
the Company issued after the Issue Date; provided, however, that in determining
the fair market value of any such Telecommunications Assets so acquired, if the
estimated fair market value of such Telecommunications Assets exceeds (x) $2.0
million (as estimated in good faith by the Board of Directors), then the fair
market value of such Telecommunications Assets will be determined by a majority
of the Board of Directors of the Company, which determination will be evidenced
by a resolution thereof, and (y) $10.0 million (as estimated in good faith by
the Board of Directors), then the Company will deliver the Trustee a written
appraisal as to the fair market value of such Telecommunications Assets prepared
by an internationally recognized investment banking or public accounting firm
(or, if no such investment banking or public accounting firm is qualified to
prepare such an appraisal, by an internationally recognized appraisal firm); and
provided further that such Indebtedness (other than the Indebtedness Incurred
under one or more Credit Facilities, under one or more Capitalized Leases or
from the vendor of assets, property or services acquired with the proceeds of
such Indebtedness) does not mature prior to the Stated Maturity of the Notes and
the Weighted Average Life to Maturity of such Indebtedness is longer than that
of the Notes;
 
    (xi) Indebtedness outstanding as of the Issue Date; and
 
     (xii) Indebtedness (in addition to Indebtedness permitted under clauses (i)
through (x) above) in an aggregate principal amount outstanding at any one time
not to exceed the greater of (A) NLG 100 million and (B) an amount equal to 5%
of the Company's consolidated net tangible assets as of such date.
 
     (c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, Guarantees, Liens or obligations
with respect to letters of credit supporting Indebtedness otherwise included in
the determination of such particular amount shall not be included; provided,
however, that the forgoing shall not in any way be deemed to limit the
provisions of "-- Limitation on Issuances of Guarantees of Indebtedness by
Restricted Subsidiaries". For purposes of determining compliance with this
"Limitation on Indebtedness" covenant, (A) in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in the above clauses, the Company,
 
                                       70
<PAGE>   75
 
in its sole discretion, shall classify (or from time to time reclassify) such
item of Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses and (B) the principal amount of Indebtedness
issued at a price that is less than the principal amount thereof shall be equal
to the amount of the liability in respect thereof determined in conformity with
U.S. GAAP.
 
  LIMITATION ON RESTRICTED PAYMENTS
 
     The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any distribution
on account of any Equity Interest in the Company or any Restricted Subsidiary to
the holders thereof, including any dividend or distribution payable in
connection with any merger or consolidation (other than (A) dividends or
distributions payable solely in Equity Interests (other than Redeemable Stock)
of the Company, (B) dividends or distributions made only to the Company or a
Restricted Subsidiary and (C) pro rata dividends or distributions on Capital
Stock of a Restricted Subsidiary held by Persons other than the Company or a
Restricted Subsidiary), (ii) purchase, redeem, retire or otherwise acquire for
value any Equity Interests of the Company or any Equity Interests of any
Restricted Subsidiary (other than any such Equity Interests owned by the Company
or any Restricted Subsidiary), (iii) make any principal payment or redeem,
repurchase, defease, or otherwise acquire or retire for value, in each case,
prior to any scheduled repayment, or maturity, any Indebtedness of the Company
that is subordinated in right of payment to the Notes, or (iv) make any
Investment, other than a Permitted Investment, in any Person (all such payments
or any other actions described in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments") unless, at the time of, and
after giving effect to, the proposed Restricted Payment:
 
     (A) no Default or Event of Default shall have occurred and be continuing;
 
     (B) the Company could Incur at least $1.00 of additional Indebtedness under
the first paragraph of the "Limitation on Indebtedness" covenant; and
 
     (C) the aggregate amount expended for all Restricted Payments (the amount
so expended, if other than in cash, to be determined in good faith by the Board
of Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) after the Issue Date is less than the sum of (1) Cumulative
Consolidated Cash Flow minus 150% of Cumulative Consolidated Fixed Charges plus
(2) 100% of the aggregate Net Cash Proceeds received by the Company after the
Issue Date as a capital contribution or from the issuance and sale of its Equity
Interests (other than Redeemable Stock, and excluding any Ordinary Shares issued
in connection with the Offering or the Recapitalization) to a Person (other than
a Restricted Subsidiary of the Company), plus (3) the aggregate amount by which
Indebtedness (other than any Indebtedness subordinated in right of payment to
the Notes) of the Company or any Restricted Subsidiary is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Restricted Subsidiary of the Company) subsequent to the Issue Date into Equity
Interests (other than Redeemable Stock and less the amount of any cash, or the
fair value of property, distributed by the Company or any Restricted Subsidiary
upon such conversion or exchange) and plus (4) without duplication of any amount
included in the calculation of Consolidated Net Income, in the case of repayment
of, or return of capital in respect of, any Investment constituting a Restricted
Payment made after the Issue Date, an amount equal to the lesser of the
repayment of, the return of capital with respect to, such Investment and the
cost of such Investment, in either case less the cost of the disposition of such
Investment and net of taxes.
 
     The foregoing provisions shall not prohibit: (i) the payment of any
dividend within 60 days after the date of declaration thereof if, at said date
of declaration, such payment would comply with the provisions of the Indenture;
(ii) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Indebtedness that is subordinated in right of payment to the Notes
including premium, if any, and accrued and unpaid interest, with the proceeds
of, or in exchange for, Indebtedness Incurred under clause (iii) of paragraph
(b) of the "Limitation on Indebtedness" covenant; (iii) the repurchase,
redemption or other acquisition of Equity Interests in the Company in exchange
for, or out of the Net Cash Proceeds of, a substantially concurrent capital
contribution or offering of Equity Interests (other than Redeemable Stock) in
the Company to any Person (other than a Restricted Subsidiary); (iv) the
repurchase, redemption or other
 
                                       71
<PAGE>   76
 
acquisition of Indebtedness of the Company which is subordinated in right of
payment to the Notes in exchange for, or out of the Net Cash Proceeds of, a
substantially concurrent capital contribution or offering of Equity Interests
(other than Redeemable Stock) in the Company to any Person (other than a
Restricted Subsidiary); (v) the purchase of any subordinated Indebtedness at a
purchase price not greater than 101% of the principal amount thereof following a
Change of Control pursuant to an obligation in the instruments governing such
subordinated Indebtedness to purchase or redeem such subordinated Indebtedness
as a result of such Change of Control; provided, however, that no such purchase
or redemption shall be permitted until the Company has completely discharged its
obligations described under "-- Repurchase of Notes upon a Change of Control"
(including the purchase of all Notes tendered for purchase by holders) arising
as a result of such Change of Control; (vi) repurchases of the Warrants in
accordance with the provisions set forth in the applicable warrant agreement;
and (vii) repurchases of Equity Interests of the Company from employees of the
Company or any of its Restricted Subsidiaries deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise price
of such options; provided that any payments made pursuant to this clause (vii)
may not exceed in aggregate $500,000 in any fiscal year of the Company; provided
that, in the case of clauses (ii) through (vii), no Default or Event of Default
shall have occurred and be continuing or occur as a consequence of the actions
or payments set forth therein.
 
     Each Restricted Payment permitted pursuant to the immediately preceding
paragraph (other than the Restricted Payment referred to in clause (ii) thereof)
and the Net Cash Proceeds from any capital contribution or issuance of Equity
Interests referred to in clauses (iii) and (iv), shall be included in
calculating whether the conditions of clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant have been met with respect to any
subsequent Restricted Payments. In the event the proceeds of an issuance of
Equity Interests (other than Redeemable Stock) of the Company are used for the
redemption, repurchase or other acquisition of the Notes, then the Net Cash
Proceeds of such issuance shall be included in clause (C) of the first paragraph
of this "Limitation on Restricted Payments" covenant only to the extent such
proceeds are not used for such redemption, repurchase or other acquisition of
the Notes.
 
  LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
  AFFECTING RESTRICTED SUBSIDIARIES
 
     The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Restricted Subsidiary to (i) pay dividends or make any other
distributions permitted by applicable law on any Equity Interests of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary, or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
 
     The foregoing provisions shall not prohibit any encumbrances or
restrictions: (i) existing under or by reason of any agreement in effect on the
Issue Date, and any amendments, supplements, extensions, refinancings, renewals
or replacements of such agreements; provided that the encumbrances and
restrictions in any such amendments, supplements, extensions, refinancings,
renewals or replacements are no more restrictive than those encumbrances or
restrictions that are then in effect and that are being amended, supplemented,
extended, refinanced, renewed or replaced; (ii) existing under or by reason of
applicable law; (iii) existing with respect to any Restricted Subsidiary
acquired by the Company or any Restricted Subsidiary after the Issue Date, or
the property or assets of such Restricted Subsidiary, and existing at the time
of such acquisition and not incurred in contemplation thereof, which
encumbrances or restrictions are not applicable to any Person or the property or
assets of any Person other than such Person or the property or assets of such
Person so acquired, and any amendments, supplements, extensions, refinancings,
renewals or replacements of agreements containing such encumbrances or
restrictions; provided that the encumbrances and restrictions in any such
amendments, supplements, extensions, refinancings, renewals or replacements are
no more restrictive than those encumbrances or restrictions that are then in
effect and that are being amended, supplemented, extended, refinanced, renewed
or replaced; (iv) in the case of clause (iv) of the first paragraph of this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant,
 
                                       72
<PAGE>   77
 
(A) that restrict in a customary manner the subletting, assignment or transfer
of any property or asset that is, or is subject to, a lease, purchase mortgage
obligation, license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or right
with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by the Indenture or (C) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, materially
detract from the value of property or assets of the Company or any Restricted
Subsidiary to the Company or any Restricted Subsidiary; (v) with respect to a
Restricted Subsidiary and imposed pursuant to an agreement that has been entered
into for the sale or disposition of all or substantially all of the Capital
Stock in, or property and assets of, such Restricted Subsidiary; provided that
such restriction shall terminate if such transaction is abandoned or if such
transaction is not consummated within six months of the date such agreement was
entered into; or (vi) contained in the terms of any Indebtedness or any
agreement pursuant to which such Indebtedness was issued if (A) the encumbrance
or restriction applies only in the event of a payment default or a default with
respect to a financial covenant contained in such Indebtedness or agreement, (B)
the encumbrance or restriction is not materially more disadvantageous to the
holders of the Notes than is customary in comparable financings (as determined
by the Board of Directors) and (C) the Board of Directors determines that any
such encumbrance or restriction will not materially affect the Company's ability
to make principal or interest payments on the Notes. Nothing contained in this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant shall prevent the Company or any Restricted Subsidiary
from creating, incurring, assuming or suffering to exist any Liens otherwise
permitted in the "Limitation on Liens" covenant that limit the right of the
debtor to dispose of the assets securing such Indebtedness.
 
  LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
 
     The Company will not, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue, transfer, convey, sell, lease or otherwise
dispose of any shares of Capital Stock (including options, warrants or other
rights to purchase shares of such Capital Stock) of such Restricted Subsidiary
or any other Restricted Subsidiary to any Person (other than (i) to the Company
or a Wholly Owned Restricted Subsidiary, (ii) issuances of director's qualifying
shares or sales to foreign nationals of shares of Capital Stock of foreign
Restricted Subsidiaries, in each case, to the extent required by applicable law
and (iii) Strategic Minority Capital Stock Issues), unless (A) immediately after
giving effect to such issuance, transfer, conveyance, sale, lease or other
disposition, such Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and (B) any Investment in such Person remaining after giving effect
to such issuance, transfer, conveyance, sale, lease or other disposition would
have been permitted to be made under the "Limitation on Restricted Payments"
covenant if made on the date of such issuance, transfer, conveyance, sale, lease
or other disposition (valued as provided in the definition of "Investment").
 
  LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
 
     The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction or series of
transactions (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any direct
or indirect holder (or any Affiliate of such holder) of 5% or more of any class
of Capital Stock of the Company or with any Affiliate of the Company or any
Restricted Subsidiary, unless (i) such transaction or series of transactions is
on terms that are no less favorable to the Company or such Restricted Subsidiary
than could reasonably be obtained in a comparable arm's-length transaction with
a Person that is not such a holder or Affiliate, (ii) if such transaction or
series of transactions involves aggregate consideration in excess of $2.0
million, then the Company shall deliver to the Trustee a resolution set forth in
an Officers' Certificate adopted by a majority of the Board of Directors,
including a majority of the independent, disinterested directors, approving such
transaction or series of transactions and certifying that such transaction or
series of transactions comply with clause (i) above, and (iii) if such
transaction or series of transactions involves aggregate consideration in excess
of $5.0 million, then the Company will deliver to the Trustee a written opinion
as to the fairness to the Company or such Restricted Subsidiary of such
transaction or series of transactions from a financial point of view from an
internationally recognized investment banking firm (or, if an investment banking
firm is
 
                                       73
<PAGE>   78
 
generally not qualified to give such an opinion, by an internationally
recognized appraisal firm or accounting firm).
 
     The foregoing limitation does not limit and will not apply to (i) any
transaction between the Company and any of its Restricted Subsidiaries or
between Restricted Subsidiaries; (ii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
and (iii) payment of dividends or other distributions in respect of Equity
Interests of the Company or any Restricted Subsidiary permitted by the
"Limitation on Restricted Payments" covenant.
 
  LIMITATION ON LIENS
 
     The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien (other
than Permitted Liens) on any asset or property of the Company or any Restricted
Subsidiary without making effective provisions for all of the Notes and all
other amounts due under the Indenture to be directly secured equally and ratably
with (or, if the obligation or liability to be secured by such Lien is
subordinated in right of payment to the Notes, prior to) the obligation or
liability secured by such Lien.
 
  LIMITATION ON ASSET SALES
 
     The Company will not, and will not permit any Restricted Subsidiary to,
make any Asset Sale unless (i) the Company or the Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the assets sold or disposed of and (ii) at
least 80% of the consideration received for such Asset Sale consists of cash or
Cash Equivalents or Replacement Assets or the assumption of Indebtedness which
ranks equal in right of payment to the Notes.
 
     The Company shall, or shall cause the relevant Restricted Subsidiary to,
apply the Net Cash Proceeds from an Asset Sale within 270 days of the receipt
thereof to (A) permanently repay unsubordinated Indebtedness of the Company or
Indebtedness of any Restricted Subsidiary, in each case owing to a Person other
than the Company or any of its Restricted Subsidiaries, (B) invest in
Replacement Assets, or (C) in any combination of repayment, prepayment, and
reinvestment permitted by the foregoing clauses (A) and (B).
 
     The Indenture provides that any Net Cash Proceeds from the Asset Sale that
are not invested as provided and within the time period set forth in the second
paragraph of this "Limitation on Asset Sales" covenant will be deemed to
constitute "Excess Proceeds." If at any time the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company shall, within 30 business days
thereafter, make an offer to all Holders of Notes (an "Asset Sale Offer") to
purchase on a pro rata basis the maximum principal amount of Notes, that is an
integral multiple of $1,000 that may be purchased out of the Excess Proceeds at
an offer price in cash in an amount equal to 100% of the outstanding principal
amount thereof, plus accrued and unpaid interest thereon, plus Additional
Amounts, if any, and Liquidated Damages, if any, to the date fixed for the
closing of such offer (and, in the case of Definitive Notes, subject to the
right of a Holder of record on the relevant record date to receive interest and
Liquidated Damages, if any, due on the relevant interest payment date and
Additional Amounts, if any, in respect thereof), in accordance with the
procedures set forth in the Indenture. The Company will commence an Asset Sale
Offer with respect to Excess Proceeds within thirty business days after the date
that Excess Proceeds exceeds $5.0 million by publishing or, where relevant,
mailing the notice required pursuant to the terms of the Indenture, with a copy
to the Trustee. To the extent that the aggregate amount of Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, subject to
applicable law, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the selection of such
Notes for purchase will be made by the Trustee in the same manner as the Notes
are redeemed, as described under "-- Optional Redemption." Upon completion of
any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
 
     The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder and will
comply with the applicable laws of any non-U.S. jurisdiction in which an Asset
Sale Offer is made, in each case, to the extent such laws or regulations are
 
                                       74
<PAGE>   79
 
applicable in connection with the repurchase of the Notes pursuant to an Asset
Sale Offer. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the Indenture, the Company will
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations described in the Indenture by virtue
thereof.
 
  LIMITATION ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS BY RESTRICTED
  SUBSIDIARIES
 
     The Company will not permit any Restricted Subsidiary, directly or
indirectly, to guarantee, assume or in any other manner become liable with
respect to any Indebtedness of the Company unless (i) such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a Guarantee of all of the Company's obligations under the Notes
and the Indenture on terms substantially similar to the guarantee of such
Indebtedness, except that if such Indebtedness is by its express terms
subordinated in right of payment to the Notes, any such assumption, Guarantee or
other liability of such Restricted Subsidiary with respect to such Indebtedness
shall be subordinated in right of payment to such Restricted Subsidiary's
assumption, Guarantee or other liability with respect to the Notes substantially
to the same extent as such Indebtedness is subordinated to the Notes and (ii)
such Restricted Subsidiary waives, and will not in any manner whatsoever claim
or take the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Company or any other Restricted
Subsidiary as a result of any payment by such Restricted Subsidiary under its
Guarantee; provided any Restricted Subsidiary may guarantee Indebtedness of the
Company under a Credit Facility if such Indebtedness is Incurred in accordance
with the "-- Limitation on Indebtedness" covenant.
 
     Notwithstanding the foregoing, any Guarantee of all of the Company's
obligations under the Notes and the Indenture by a Restricted Subsidiary may
provide by its terms that it will be automatically and unconditionally released
and discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's and each Restricted
Subsidiary's Equity Interests in, or all or substantially all of the assets of,
such Restricted Subsidiary (which sale, exchange or transfer is not prohibited
by the Indenture) or (ii) the release or discharge of the guarantee which
resulted in the creation of such Guarantee, except a discharge or release by or
as a result of payment under such guarantee.
 
  BUSINESS OF THE COMPANY; RESTRICTION ON TRANSFERS OF EXISTING BUSINESS
 
     The Company will not, and will not permit any Restricted Subsidiary to, be
principally engaged in any business or activity other than a Permitted Business.
In addition, the Company and any Restricted Subsidiary will not be permitted to,
directly or indirectly, transfer to any Unrestricted Subsidiary (i) any of the
licenses, permits or authorizations used in the Permitted Business of the
Company and any Restricted Subsidiary or (ii) any material portion of the
"property and equipment" (as such term is used in the Company's consolidated
financial statements) of the Company or any Restricted Subsidiary used in the
licensed service areas of the Company and any Restricted Subsidiary.
 
  PROVISION OF FINANCIAL STATEMENTS AND REPORTS
 
     The Company will file on a timely basis with the Commission, to the extent
such filings are accepted by the Commission and whether or not the Company has a
class of securities registered under the Exchange Act, (i) all annual and
quarterly financial statements and other financial information that would be
required to be contained in a filing with the Commission on Forms 20-F and 10-Q
if the Company were required to file such Forms (which financial statements
shall be prepared in accordance with U.S. GAAP), including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual financial information, a report thereon by the
Company's certified independent accountants and (ii) all current reports that
would be required to be filed with the Commission on Form 8-K if the Company
were required to file such reports. Such quarterly financial information shall
be filed with the Commission within 45 days following the end of each fiscal
quarter of the Company, and such annual financial information shall be furnished
within 90 days following the end of each fiscal year of the Company. Such annual
financial information shall include the geographic segment financial information
required to be disclosed by the Company under Item 101(d) of Regulation S-K
under the Securities Act. The Company will
 
                                       75
<PAGE>   80
 
also be required (a) to file with the Trustee, and provide to each holder,
without cost to such holder, copies of such reports and documents within 15 days
after the date on which the Company files such reports and documents with the
Commission or the date on which the Company would be required to file such
reports and documents if the Company were so required, and (b) if filing such
reports and documents with the Commission is not accepted by the Commission or
is prohibited under the Exchange Act, to supply at the Company's cost copies of
such reports and documents to any prospective holder promptly upon request. In
addition, for so long as the Notes remain outstanding and the Company is not
subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act
nor exempt from reporting under Rule 12g3-2(b) of the Exchange Act, the Company
shall furnish to the Holders and to securities analysts and prospective
investors, upon their request, any information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act and, to any beneficial holder of
Notes, information of the type that would be filed with the Commission pursuant
to the foregoing provisions, upon the request of any such holder, if and so long
as the Exchange Notes are listed on the Luxembourg Stock Exchange and the rules
of such stock exchange shall require, copies of all reports and information
described above will be available during normal business hours at the office of
the listing agent in the Luxembourg.
 
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
 
     Upon the occurrence of a Change of Control, the Company will make an offer
to purchase all or any part (equal to $1,000 aggregate principal amount and
integral multiples thereof) of the Notes pursuant to the offer described below
(the "Change of Control Offer") at a price in cash (the "Change of Control
Payment") equal to 101% of the aggregate principal amount thereof plus accrued
and unpaid interest thereon to the date of repurchase, plus Additional Amounts,
if any, and Liquidated Damages, if any, to the date of repurchase (and in the
case of Definitive Notes, subject to the right of Holders of record on the
relevant record date to receive interest and Liquidated Damages, if any, due on
the relevant interest payment date and Additional Amounts, if any, in respect
thereof). The Indenture provides that within 30 days following any Change of
Control, the Company will publish notice of such in a leading newspaper having a
general circulation in New York (which is expected to be the Wall Street
Journal) and in Amsterdam (which is expected to be Het Financieele Dagblad)
(and, if and so long as the Exchange Notes are listed on the Luxembourg Stock
Exchange and the rules of such Stock Exchange shall so require, a newspaper
having a general circulation in Luxembourg (which is expected to be the
Luxemburger Wort)) or, in the case of Definitive Notes, mail a notice to each
Holder (and if and so long as the Exchange Notes are listed on the Luxembourg
Stock Exchange and the rules of such Stock Exchange shall so require, will
publish notice in a newspaper having a general circulation in Luxembourg (which
is expected to be the Luxemburger Wort)), with a copy to the Trustee, with the
following information: (i) a Change of Control Offer is being made pursuant to
the covenant entitled "Repurchase of Notes upon a Change of Control" and all
Notes properly tendered pursuant to such Change of Control Offer will be
accepted for payment; (ii) the purchase price and the purchase date, which will
be no earlier than 30 days nor later than 60 days from the date such notice is
published, or where relevant, mailed, except as may be otherwise required by
applicable law (the "Change of Control Payment Date"); (iii) any Note not
properly tendered will remain outstanding and continue to accrue interest and
Liquidated Damages, if any; (iv) unless the Company defaults in the payment of
the Change of Control Payment, all Notes accepted for payment pursuant to the
Change of Control Offer will cease to accrue interest, as the case may be, and
to accrue Liquidated Damages, if any, on the Change of Control Payment Date; (v)
Holders electing to have any Notes purchased pursuant to a Change of Control
Offer will be required to surrender the Notes, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes completed, to the paying
agent and at the address specified in the notice prior to the close of business
on the third Business Day preceding the Change of Control Payment Date; Holders
electing to have any Notes purchased pursuant to a Change of Control Offer will
be required to surrender such Notes, with the form entitled "Option of Holders
to elect Purchase" on the reverse of the Notes completed, to any office of the
paying agent; (vi) Holders will be entitled to withdraw their tendered Notes and
their election to require the Company to purchase such Notes; provided, however,
that the Paying Agent receives, not later than the close of business on the last
day of the offer period, a facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Notes tendered for purchase, and a
statement that such Holder is withdrawing his
 
                                       76
<PAGE>   81
 
tendered Notes and his election to have such Notes purchased; and (vii) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the principal amount of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof.
 
     The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder and will
comply with the applicable laws of any non-U.S. jurisdiction in which a Change
of Control Offer is made, in each case, to the extent such laws or regulations
are applicable in connection with the repurchase of the Notes pursuant to a
Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of the Indenture, the Company
will comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations contained in the Indenture by virtue
thereof. The provisions relating to the Company's obligation to make an offer to
repurchase the Notes as a result of a Change of Control may be waived or
modified with the written consent of the Holders of a majority in principal
amount of the Notes.
 
     The Indenture provides that on the Change of Control Payment Date, the
Company will, to the extent permitted by law, (i) accept for payment all Notes
or portions thereof properly tendered pursuant to the Change of Control Offer,
(ii) deposit with the paying agent an amount equal to the aggregate Change of
Control Payment in respect of all Notes or portions thereof so tendered and
(iii) deliver, or cause to be delivered, to the Trustee for cancellation the
Notes so accepted together with an Officers' Certificate stating that such Notes
or portions thereof have been tendered to and purchased by the Company. The
Indenture will provide that the paying agent will promptly either (x) pay to the
Holder against presentation and surrender (or, in the case of partial payment,
endorsement) of the Global Notes or (y) in the case of Definitive Notes, mail to
each Holder of Notes the Change of Control Payment for such Notes, and the
Trustee will promptly authenticate and deliver to the Holder of the Global Notes
a new Global Note or Notes or, in the case of Definitive Notes, mail to each
Holder a new Definitive Note, as applicable, equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided, however, that
each new Definitive Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Company will inform the Luxembourg Stock Exchange and will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
 
     If the Company is unable to repay all of its Indebtedness that would
prohibit repurchase of the Notes or is unable to obtain the consents of the
holders of Indebtedness, if any, of the Company outstanding at the time of a
Change of Control whose consent would be so required to permit the repurchase of
Notes, then the Company will have breached such covenant. This breach will
constitute an Event of Default under the Indenture if it continues for a period
of 30 consecutive days after written notice is given to the Company by the
Trustee or the holders of at least 25% in aggregate principal amount of the
Notes outstanding. In addition, the failure by the Company to repurchase Notes
at the conclusion of the Change of Control Offer will constitute an Event of
Default without any waiting period or notice requirements.
 
     There can be no assurances that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other securities of the Company which might be outstanding
at the time). The above covenant requiring the Company to repurchase the Notes
will, unless the consents referred to above are obtained, require the Company to
repay all Indebtedness then outstanding which by its terms would prohibit such
Note repurchase, either prior to or concurrently with such Note repurchase.
 
     The existence of a Holder's right to require the Company to repurchase such
Holder's Notes upon the occurrence of a Change of Control may deter a third
party from seeking to acquire the Company in a transaction that would constitute
a Change of Control.
 
CONSOLIDATION, MERGER AND SALE OF ASSETS
 
     The Company will not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its property
and assets (as an entirety or substantially an entirety in one transaction or in
a series of related transactions) to, any Person or permit any Person to merge
with or into the
 
                                       77
<PAGE>   82
 
Company and the Company will not permit any of its Restricted Subsidiaries to
enter into any such transaction or series of transactions if such transaction or
series of transactions, in the aggregate, would result in the sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company or the Company and its Restricted
Subsidiaries, taken as a whole, to any other Person or Persons, unless: (i) the
Company will be the continuing Person, or the Person (if other than the Company)
(the "Surviving Entity") formed by such consolidation or into which the Company
is merged or that acquired or leased such property and assets of the Company
will be a corporation organized and validly existing under the laws of The
Netherlands, Germany, France, Belgium, the United Kingdom or the United States
of America, any state thereof or the District of Columbia and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, all
of the obligations of the Company with respect to the Notes and under the
Indenture, the Escrow Agreement and the Registration Rights Agreement; (ii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction on a pro forma basis, the Company, or any Person
becoming the successor obligor of the Notes, shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Company immediately
prior to such transaction; (iv) immediately after giving effect to such
transaction on a pro forma basis the Company, or any Person becoming the
successor obligor of the Notes, as the case may be, (A) prior to the third
anniversary of the Issue Date, would have an Indebtedness to Consolidated Cash
Flow Ratio no greater than such ratio immediately prior to such transaction or
(B) on or after the third anniversary of the Issue Date, could Incur at least
$1.00 of Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant; (v) the Company delivers to the Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate compliance
with clauses (iii) and (iv)) and an Opinion of Counsel, in each case stating
that such consolidation, merger or transfer and such supplemental indenture
complies with the Indenture and (vi) the Company shall have delivered to the
Trustee an opinion of tax counsel reasonably acceptable to the Trustee stating
that (A) Holders will not recognize income, gain or loss for U.S. federal or
Netherlands income tax purposes as a result of such transaction and (B) no taxes
on income (including taxable capital gains) will be payable under the tax laws
of the Relevant Taxing Jurisdiction by a Holder who is or who is deemed to be a
non-resident of the Relevant Taxing Jurisdiction in respect of the acquisition,
ownership or disposition of the Notes, including the receipt of principal of,
premium and interest paid pursuant to such Notes.
 
EVENTS OF DEFAULT
 
     The following constitute "Events of Default" under the Indenture: (a)
default for 30 days or more in the payment when due of interest on the Notes or
Additional Amounts, if any, or Liquidated Damages, if any, with respect to the
Notes; (b) default in the payment of principal of (or premium, if any, on) any
Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (c) default in the payment of principal or interest on
Notes required to be purchased pursuant to an Asset Sale Offer as described
under "Limitation on Asset Sales" or pursuant to a Change of Control Offer as
described under "Repurchase of Notes upon a Change of Control"; (d) failure to
perform or comply with the provisions described under "Consolidation, Merger and
Sale of Assets"; (e) default in the performance of or breach of any other
covenant or agreement of the Company in the Indenture or the Escrow Agreement or
under the Notes and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the holders of 25% or
more in aggregate principal amount of the Notes; (f) a default occurs on any
other Indebtedness of the Company or any Restricted Subsidiary if either (x)
such default is a failure to pay principal of such Indebtedness when due after
any applicable grace period and the principal amount of such Indebtedness is in
excess of $5.0 million or (y) as a result of such default, the maturity of such
Indebtedness has been accelerated prior to its scheduled maturity and such
default has not been cured within the shorter of (i) 60 days and (ii) the
applicable grace period, and such acceleration has not been rescinded, and the
principal amount of such Indebtedness together with the principal amount of any
other Indebtedness of the Company and its Restricted Subsidiaries that is in
default as to principal, or the maturity of which has been accelerated,
aggregates $5.0 million or more; (g) failure to pay final judgments and orders
against the Company or any Restricted Subsidiary (not covered by insurance)
aggregating in excess of $5.0 million (treating any deductibles, self-insurance
or retention as not so covered), which final judgments remain unpaid,
 
                                       78
<PAGE>   83
 
undischarged and unstayed for a period in excess of 30 consecutive days
following entry of the final judgment or order that causes the aggregate amount
for all such final judgments or orders outstanding and not paid, discharged or
stayed to exceed $5.0 million; (h) a court having jurisdiction in the premises
enters a decree or order for (A) relief in respect of the Company or any of its
Significant Subsidiaries in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any of its Significant Subsidiaries or for all or
substantially all of the property and assets of the Company or any of its
Significant Subsidiaries or (C) the winding up or liquidation of the affairs of
the Company or any of its Significant Subsidiaries and, in each case, such
decree or order shall remain unstayed and in effect for a period of 30
consecutive days; (i) the Company or any of its Significant Subsidiaries (A)
commences a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any of
its Significant Subsidiaries or for all or substantially all of the property and
assets of the Company or any of its Significant Subsidiaries or (C) effects any
general assignment for the benefit of creditors; or (j) the Company challenges
the Lien on the Escrow Collateral under the Escrow Agreement prior to such time
as the Escrow Collateral is to be released to the Company, or the Escrow
Collateral shall become subject to any Lien other than the Lien under the Escrow
Agreement.
 
     If an Event of Default (other than an Event of Default specified in clauses
(h) or (i) above) occurs and is continuing under the Indenture, the Trustee or
the Holders of at least 25% in aggregate principal amount of the Notes, then
outstanding, by written notice to the Company, may declare the principal of,
premium, if any, interest and other monetary obligations (including Additional
Amounts, if any, and Liquidated Damages, if any,) on all the then outstanding
Notes to be immediately due and payable. Upon such a declaration, such principal
of, premium, if any, interest and other monetary obligations on the Notes shall
be immediately due and payable. In the event of a declaration of acceleration
because an Event of Default set forth in clause (f) above has occurred and is
continuing, such declaration of acceleration shall be automatically rescinded
and annulled if the event of default triggering such Event of Default pursuant
to clause (f) shall be remedied or cured by the Company and/or the relevant
Restricted Subsidiaries or waived by the holders of the relevant Indebtedness
within 60 days after the declaration of acceleration with respect thereto. If an
Event of Default specified in clauses (h) or (i) above occurs, the principal of,
premium, if any, accrued interest and other monetary obligations on the Notes
then outstanding shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
Holders of at least a majority in principal amount of the outstanding Notes by
written notice to the Company and to the Trustee, may waive all past defaults
and rescind and annul a declaration of acceleration and its consequences if (i)
all existing Events of Default, other than the nonpayment of the principal of,
premium, if any, interest and other monetary obligations on the Notes that have
become due solely by such declaration of acceleration, have been cured or waived
and (ii) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction. For information as to the waiver of defaults,
see "-- Amendment, Supplement and Waiver".
 
     Holders of 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 of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Indenture will provide that the Trustee may
withhold from Holders of Notes notice of any continuing Default (except a
Default relating to the payment of principal, premium, if any, interest,
Additional Amounts, if any, or Liquidated Damages, if any) if it determines that
withholding notice is in their interest. The Indenture will further provide that
the Trustee shall have no obligation to accelerate the Notes if in the best
judgment of the Trustee acceleration is not in the best interest of the Holders.
 
     The Indenture requires that the Company delivers annually an Officers'
Certificate to the Trustee certifying that a review has been conducted of the
activities of the Company and the Company's performance under the Indenture and
that the Company has fulfilled all obligations thereunder or, if there has been
a default in the fulfillment of any such obligation, specifying each such
default and the nature and status thereof. The Company will also be obligated to
notify the Trustee of any default or defaults in the performance
 
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<PAGE>   84
 
of any covenants or agreements under the Indenture within five business days of
becoming aware of any such default.
 
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
 
     No director, officer, employee, incorporator or stockholder of the Company
shall have any liability for any obligations of the Company under the Notes or
the Indenture or for any claim based on, in respect of, or by reason of such
obligations or their creation. Each Holder of the 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 and release may not be
effective to waive liabilities under the U.S. federal securities laws, and it is
the view of the Commission that such a waiver is against public policy.
 
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
 
     The obligations of the Company under the Indenture will terminate (other
than certain obligations) and will be released upon payment in full of all of
the Notes. The Company may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") and cure all then existing Events of Default except for (i) the
rights of holders of outstanding Notes to receive payments in respect of the
principal of, premium, if any, interest, Additional Amounts, if any, and
Liquidated Damages, if any, on such Notes when such payments are due or on the
redemption date solely out of the trust created pursuant to the Indenture, (ii)
the Company's obligations with respect to Notes concerning issuing temporary
Notes, or, where relevant, registration of such 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 with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment on other indebtedness, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
 
     In order to exercise either Legal Defeasance or Covenant Defeasance with
respect to the Notes,
 
     (i) the Company must irrevocably deposit, or cause to be irrevocably
deposited, with the Trustee, in trust, for the benefit of the Holders of the
Notes, cash in U.S. dollars, U.S. Government Securities or a combination thereof
and, in such amounts as will be sufficient, in the opinion of an internationally
recognized firm of independent public accountants, to pay the principal of,
premium, if any, interest, Additional Amounts, if any, and Liquidated Damages,
if any, due on the outstanding Notes on the stated maturity date or on the
applicable redemption date, as the case may be, of such principal, premium, if
any, interest, Additional Amounts, if any, and Liquidated Damages, if any, due
on the outstanding Notes;
 
     (ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee (A) an opinion of counsel in the United States reasonably acceptable
to the Trustee confirming that, subject to customary assumptions and exclusions,
(1) the Company has received from, or there has been published by, the U.S.
Internal Revenue Service a ruling or (2) since the Issue Date, there has been a
change in the applicable U.S. federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel in the United States
shall confirm that, subject to customary assumptions and exclusions, the Holders
of the outstanding Notes will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such Legal Defeasance and will be
subject to U.S. 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 and (B) an opinion of counsel in The Netherlands reasonably acceptable
to the Trustee to the effect that (1) Holders will not recognize income, gain or
loss for Netherlands income tax purposes as a result of such Legal Defeasance
and will be subject to Netherlands 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 and
 
                                       80
<PAGE>   85
 
(2) payments from the defeasance trust will be free and exempt from any and all
withholding and other income taxes of whatever nature imposed or levied by or on
behalf of The Netherlands or any political subdivision thereof or therein having
the power to tax;
 
     (iii) in the case of Covenant Defeasance, the Company shall have delivered
to the Trustee (A) an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that, subject to customary assumptions and
exclusions, the Holders of the outstanding Notes will not recognize income, gain
or loss for U.S. federal income tax purposes as a result of such Covenant
Defeasance and will be subject to such 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 and (B) an opinion of counsel in The Netherlands
reasonably acceptable to the Trustee to the effect that (1) Holders will not
recognize income, gain or loss for Netherlands income tax purposes as a result
of such Covenant Defeasance and will be subject to Netherlands 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 and (2) payments from the
defeasance trust will be free and exempt from any and all withholding and other
income taxes of whatever nature imposed or levied by or on behalf of The
Netherlands or any political subdivision thereof or therein having the power to
tax;
 
     (iv) no Default or Event of Default shall have occurred and be continuing
with respect to certain Events of Default on the date of such deposit;
 
     (v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under any material agreement or
instrument to which the Company is a party or by which the Company is bound;
 
     (vi) the Company shall have delivered to the Trustee an opinion of counsel
to the effect that, as of the date of such opinion and subject to customary
assumptions and exclusions 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 under any applicable
Netherlands and U.S. federal or state law, and that the Trustee has a perfected
security interest in such trust funds for the ratable benefit of the Holders;
 
     (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 defeating, hindering, delaying or defrauding any creditors of the Company or
others; and
 
     (viii) the Company shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel in the United States (which opinion of
counsel may be subject to customary assumptions and exclusions) each stating
that all conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance, as the case may be, have been complied with.
 
SATISFACTION AND DISCHARGE
 
     The Indenture will be discharged and will cease to be of further effect as
to all Notes issued thereunder when either (i) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust and thereafter repaid to the Company) have been delivered to
the Trustee for cancellation; or (ii) (A) all such Notes not theretofore
delivered to such Trustee for cancellation have become due and payable by reason
of the making of a notice of redemption or otherwise or will become due and
payable within one year and the Company has irrevocably deposited or caused to
be deposited with such Trustee as trust funds in trust an amount of money
sufficient to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation for principal, premium, if
any, and accrued and unpaid interest and Additional Amounts, if any, and
Liquidated Damages, if any, to the date of maturity or redemption; (B) no
Default with respect to the Indenture or the Notes shall have occurred and be
continuing on the date of such deposit or shall occur as a result of such
deposit and such deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which the Company is a party
or by which it is bound; (C) the Company has paid, or caused to be paid, all
sums payable by it under such Indenture; and (D) the Company has delivered
irrevocable instructions to the Trustee under such Indenture to apply the
deposited
 
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<PAGE>   86
 
money toward the payment of such Notes at maturity or the redemption date, as
the case may be. In addition, the Company must deliver an Officers' Certificate
and an opinion of counsel to the Trustee stating that all conditions precedent
to satisfaction and discharge have been satisfied.
 
WITHHOLDING TAXES
 
     All payments made by the Company on the Notes (whether or not in the form
of Definitive Notes) will be made without withholding or deduction for, or on
account of, any present or future taxes, duties, assessments or governmental
charges of whatever nature (collectively, "Taxes") imposed or levied by or on
behalf of The Netherlands or any jurisdiction in which the Company or any
Surviving Entity is organized or is otherwise resident for tax purposes or any
political subdivision thereof or any authority having power to tax therein or
any jurisdiction from or through which payment is made (each a "Relevant Taxing
Jurisdiction"), unless the withholding or deduction of such Taxes is then
required by law. If any deduction or withholding for, or on account of, any
Taxes of any Relevant Taxing Jurisdiction, shall at any time be required on any
payments made by the Company with respect to the Notes, including payments of
principal, redemption price, interest or premium, the Company will pay such
additional amounts (the "Additional Amounts") as may be necessary in order that
the net amounts received in respect of such payments by the Holders of the Notes
or the Trustee, as the case may be, after such withholding or deduction, equal
the respective amounts which would have been received in respect of such
payments in the absence of such withholding or deduction; except that no such
Additional Amounts will be payable with respect to:
 
     (i) any payments on a Note held by or on behalf of a Holder or beneficial
owner who is liable for such Taxes in respect of such Note by reason of the
Holder or beneficial owner having some connection with the Relevant Taxing
Jurisdiction (including being a citizen or resident or national of, or carrying
on a business or maintaining a permanent establishment in, or being physically
present in, the Relevant Taxing Jurisdiction) other than by the mere holding of
such Note or enforcement of rights thereunder or the receipt of payments in
respect thereof;
 
     (ii) any Taxes that are imposed or withheld as a result of a change in law
after the Issue Date where such withholding or imposition is by reason of the
failure of the Holder or beneficial owner of the Note to comply with any request
by the Company to provide information concerning the nationality, residence or
identity of such Holder or beneficial owner or to make any declaration or
similar claim or satisfy any information or reporting requirement, which is
required or imposed by a statute, treaty, regulation or administrative practice
of the Relevant Taxing Jurisdiction as a precondition to exemption from all or
part of such Taxes;
 
     (iii) except in the case of the winding up of the Company, any Note
presented for payment (where presentation is required) in the Relevant Taxing
Jurisdiction; or
 
     (iv) any Note presented for payment (where presentation is required) more
than 30 days after the relevant payment is first made available for payment to
the Holder.
 
     Such Additional Amounts will also not be payable where, had the beneficial
owner of the Note been the Holder of the Note, he would not have been entitled
to payment of Additional Amounts by reason of clauses (i) to (iv) inclusive
above.
 
     Upon request, the Company will provide the Trustee with documentation
satisfactory to the Trustee evidencing the payment of Additional Amounts. Copies
of such documentation will be made available to the Holders upon request.
 
     The Company will pay any present or future stamp, court or documentary
taxes, or any other excise or property taxes, charges or similar levies which
arise in any jurisdiction from the execution, delivery or registration of the
Notes or any other document or instrument referred to therein, or the receipt of
any payments with respect to the Notes, excluding any such taxes, charges or
similar levies imposed by any jurisdiction outside of The Netherlands, the
United States of America or any jurisdiction in which a Paying Agent is located,
other than those resulting from, or required to be paid in connection with, the
enforcement of
 
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<PAGE>   87
 
the Notes or any other such document or instrument following the occurrence of
any Event of Default with respect to the Notes.
 
AMENDMENT, SUPPLEMENT AND WAIVER
 
     Except as provided in the next two succeeding paragraphs, the Indenture and
the Notes issued thereunder may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Notes), and any existing Default or Event of Default and its
consequences 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 of
the outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for the Notes).
 
     The Indenture provides that without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Notes held by a nonconsenting
Holder of the Notes): (i) reduce the principal amount of the Notes whose Holders
must consent to an amendment, supplement or waiver, (ii) reduce the principal of
or change the fixed maturity of any such Note or alter or waive the provisions
with respect to the redemption of the Notes with respect to the timing or amount
of payment thereof, (iii) reduce the rate of or change the time for payment of
interest on any Note, (iv) waive a Default in the payment of principal of,
premium, if any, interest, Additional Amounts, if any, 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 of either series of
such Notes and a waiver of the payment default that resulted from such
acceleration with respect to such series of Notes), or in respect of a covenant
or provision contained in the Indenture which cannot be amended or modified
without the consent of all Holders, (v) make any Note payable in money other
than that stated in such Notes, (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of such
Notes to receive payments of principal, premium, if any, interest, Additional
Amounts, if any, or Liquidated Damages, if any, on such Notes, (vii) make any
change in the amendment and waiver provisions in the Indenture, (viii) make any
change in the provisions of the Indenture described under "-- Withholding Taxes"
that adversely affects the rights of any Holder of the Notes, (ix) amend the
terms of the Notes or the Indenture in a way that would result in the loss of an
exemption from any of the Taxes described thereunder or an exemption from any
obligation to withhold or deduct Taxes as described thereunder unless the
Company agrees to pay Additional Amounts, if any, in respect thereof, (x) modify
the provisions of the Escrow Agreement or the Indenture relating to the Escrow
Collateral in any manner adverse to the Holders or release the Escrow Collateral
from the Lien under the Escrow Agreement or permit any other obligation to be
secured by the Escrow Collateral or (xi) impair the right of any Holder of the
Notes to receive payment of principal of, interest, Liquidated Damages, if any,
on such Holder's Notes on or after the due dates therefor or to institute suit
for the enforcement of any payment on or with respect to such Holder's Notes.
 
     The Indenture provides that, notwithstanding the foregoing, without the
consent of any Holder of Notes, the Company and the Trustee together may amend
or supplement the Indenture or the Notes (i) to cure any ambiguity, omission,
defect or inconsistency, (ii) to provide for uncertificated Notes in addition to
or in place of certificated Notes, (iii) to comply with the covenant relating to
mergers, consolidations and sales of assets, (iv) to provide for the assumption
of the Company's obligations to Holders of such Notes, (v) to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, (vi) to add covenants for the benefit of the Holders or to
surrender any right or power conferred upon the Company, (vii) to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act, (viii) to provide for the
issuance of the Exchange Notes or (ix) to execute and deliver any documents
necessary or appropriate to release Liens or any Escrow Collateral as permitted
by the Escrow Agreement.
 
     The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
 
                                       83
<PAGE>   88
 
NOTICES
 
     Notices regarding the Notes will be (i) published in a leading newspaper
having a general circulation in New York (which is expected to be The Wall
Street Journal) and in Amsterdam (which is expected to be Het Financieele
Dagblad) and, if and so long as the Exchange Notes are listed on the Luxembourg
Stock Exchange and the rules of such Stock Exchange shall so require, a
newspaper having a general circulation in Luxembourg (which is expected to be
the Luxemburger Wort)) or (ii) in the case of Definitive Notes, mailed to
Holders by first-class mail at their respective addresses as they appear on the
registration books of the Registrar (and, if and so long as the Exchange Notes
are listed on the Luxembourg Stock Exchange and the rules of such Stock Exchange
shall so require, published in a newspaper having a general circulation in
Luxembourg (which is expected to be the Luxemburger Wort)). Notices given by
publication will be deemed given on the first date on which publication is made
and notices given by first-class mail, postage prepaid, will be deemed given
five calendar days after mailing.
 
CONCERNING THE TRUSTEE
 
     The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, 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; provided, however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
 
     The Indenture provides that the Holders of a majority in principal amount
of the outstanding Notes issued thereunder 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 person 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 such Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
 
GOVERNING LAW
 
     The Indenture is and the Notes will be, subject to certain exceptions,
governed by and construed in accordance with the internal laws of the State of
New York.
 
ENFORCEABILITY OF JUDGMENTS
 
     Since most of the operating assets of the Company and its Subsidiaries are
outside the United States, any judgment obtained in the United States against
the Company or a Subsidiary, including judgments with respect to the payment of
principal, premium, if any, interest, Additional Amounts, if any, Liquidated
Damages, if any, redemption price and any purchase price with respect to the
Notes, may not be collectible within the United States.
 
     The Company has been informed by its Netherlands counsel, Stibbe Simont
Monahan Duhot, that in such counsel's opinion the laws of The Netherlands
applicable therein permit an action to be brought in a court of competent
jurisdiction in The Netherlands on a judgment of a United States federal court
or a court of the State of New York sitting in the borough of Manhattan in the
City of New York respecting the enforcement of the Notes and the Indenture;
subject to certain exceptions the principal of which may be summarized as
follows: a final judgment for the payment of money obtained in a United States
court, which is not subject to appeal or any other means of contestation and is
enforceable in the United States, would in principle be upheld by a Netherlands
court of competent jurisdiction when asked to render a judgment in accordance
with such final judgment by a United States court, without substantive
re-examination or relitigation on the merits of the subject matter thereof;
provided that such judgment has been rendered by a court of competent
jurisdiction, in accordance with rules of proper procedure, that it has not been
rendered in
 
                                       84
<PAGE>   89
 
proceedings of a penal or revenue nature and that its content and possible
enforcement are not contrary to public policy or public order of The
Netherlands.
 
CERTAIN DEFINITIONS
 
     Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
terms as well as any other capitalized term used herein for which no definition
is provided. For purposes of the Indenture, unless otherwise specifically
indicated, the term "consolidated" with respect to any Person refers to such
Person consolidated with its Restricted Subsidiaries, and excludes from such
consolidation any Unrestricted Subsidiary as if such Unrestricted Subsidiary
were not an Affiliate of such Person. For purposes of the following definitions
and the Indenture generally, all calculations and determinations shall be made
in accordance with U.S. GAAP and shall be based upon the consolidated financial
statements of the Company and its subsidiaries prepared in accordance with U.S.
GAAP.
 
     "Acquired Indebtedness" is defined to mean Indebtedness of a Person
existing at the time such Person becomes a Restricted Subsidiary or is merged or
consolidated with or into the Company or any Restricted Subsidiary or assumed in
connection with an Asset Acquisition by the Company or a Restricted Subsidiary
and not incurred in connection with, or in anticipation of, such Person becoming
a Restricted Subsidiary, such merger or consolidation or such Asset Acquisition;
provided that Indebtedness of such Person which is redeemed, defeased, retired
or otherwise repaid at the time of or immediately upon the consummation of the
transactions by which such Person becomes a Restricted Subsidiary or is merged
or consolidated with or into the Company or any Restricted Subsidiary or such
Asset Acquisition shall not be Indebtedness.
 
     "Affiliate" is defined to mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, is defined to mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
 
     "Asset Acquisition" is defined to mean (i) any capital contribution (by
means of transfers of cash or other property to others or payments for property
or services for the account or use of others, or otherwise) by the Company or
any Restricted Subsidiary to any other Person, or any acquisition or purchase of
Equity Interests of any other Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated, merged with or into the Company
or any Restricted Subsidiary or (ii) an acquisition by the Company or any of its
Restricted Subsidiaries of the property and assets of any Person (other than the
Company or any of its Restricted Subsidiaries) that constitute substantially all
of an operating unit or line of business of such Person or which is otherwise
outside the ordinary course of business.
 
     "Asset Disposition" is defined to mean the sale or other disposition by the
Company or any of its Restricted Subsidiaries (other than to the Company or
another Restricted Subsidiary of the Company) of (i) all or substantially all of
the Equity Interests in any Restricted Subsidiary of the Company or (ii) all or
substantially all of the assets that constitute an operating unit or line of
business of the Company or any of its Restricted Subsidiaries or which is
otherwise outside the ordinary course of business.
 
     "Asset Sale" is defined to mean any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transactions) in
one transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person (other than the Company or any of its
Restricted Subsidiaries) of (i) all or any of the Equity Interests in any
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or line of business of the Company or any of its Restricted
Subsidiaries or (iii) any other property and assets of the Company or any of its
Restricted Subsidiaries outside the ordinary course of business (including the
receipt of proceeds paid on account of the loss of or damage to any property or
asset and awards of compensation for any asset taken by condemnation, eminent
domain or similar proceedings). For the purposes of this definition, the term
"Asset Sale" shall not include (a) any transaction
 
                                       85
<PAGE>   90
 
consummated in compliance with "-- Consolidation, Merger and Sale of Assets" and
the creation of any Lien not prohibited by "-- Certain Covenants -- Limitation
on Liens"; provided, however, that any transaction consummated in compliance
with such "-- Consolidation, Merger and Sale of Assets" description involving a
sale, conveyance, assignment, transfer, lease or other disposal of less than all
of the properties or assets of the Company and the Restricted Subsidiaries shall
be deemed to be an Asset Sale with respect to the properties or assets of the
Company and Restricted Subsidiaries that are not so sold, conveyed, assigned,
transferred, leased or otherwise disposed of in such transaction; (b) sales of
property or equipment that has become worn out, obsolete or damaged or otherwise
unsuitable for use in connection with the business of the Company or any
Restricted Subsidiary, as the case may be; and (c) any transaction consummated
in compliance with "-- Certain Covenants -- Limitation on Restricted Payments."
In addition, solely for purposes of "-- Certain Covenants -- Limitation on Asset
Sales," any sale, conveyance, transfer, lease or other disposition of any
property or asset, whether in one transaction or a series of related
transactions, involving assets with a Fair Market Value not in excess of $1.0
million in any fiscal year shall be deemed not to be an "Asset Sale."
 
     "Board of Directors" is defined to mean the Supervisory Board of the
Company.
 
     "Board Resolution" is defined to mean a duly authorized resolution of the
Board of Directors.
 
     "Capital Stock" is defined to mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, including, without
limitation, if such Person is a partnership, partnership interests (whether
general or limited) and 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, such partnership.
 
     "Capitalized Lease" is defined to mean, as applied to any Person, any lease
of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in conformity
with U.S. GAAP, is required to be capitalized and reflected as a liability on
the balance sheet of such Person; and "Capitalized Lease Obligation" is defined
to mean, at the time any determination thereof is to be made, the discounted
present value of the rental obligations under such lease.
 
     "Cash Equivalents" is defined to mean, (a) securities issued or directly
and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of not more than 360 days from the
date of acquisition; (b) certificates of deposit and eurodollar time deposits
with maturities of 360 days or less from the date of acquisition, bankers'
acceptances with maturities not exceeding 360 days and overnight bank deposits,
in each case with any commercial bank having capital and surplus in excess of
$500 million; provided, however, that securities deposited in the Escrow Account
may have a Stated Maturity as late as May 15, 2001; (c) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (a) and (b) entered into with any financial institution
meeting the qualifications specified in clause (b) above; (d) commercial paper
rated P-1, A-1 or the equivalent thereof by Moody's Investors Service, Inc. or
Standard & Poor's Ratings Group, respectively, and in each case maturing within
six months after the date of acquisition; (e) marketable direct obligations of
the United Kingdom, The Netherlands, Belgium, Germany or France or obligations
fully and unconditionally guaranteed by such sovereign nation (or any agency
thereof), of the type and maturity described in clauses (a) through (d) above of
foreign obligors, which have ratings described in such clauses or equivalent
ratings from comparable foreign rating agencies; and (f) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (a) through (e) above.
 
     "Change of Control" is defined to mean such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
(other than a Permitted Holder) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total
voting power of the then outstanding Voting Stock of the Company on a fully
diluted basis; (ii) individuals who at the beginning of any period of two
consecutive calendar years constituted the Board of Directors (together with any
directors who are members of the Board of Directors on the date hereof and any
new directors whose election by the Board of Directors or whose nomination for
election by the Company's stockholders was approved by a vote of at least two
thirds of the members of the Board of Directors then still in office who either
were members of the Board of Directors at the beginning of such period or whose
election or nomination for
 
                                       86
<PAGE>   91
 
election was previously so approved) cease for any reason to constitute a
majority of the members of such Board of Directors then in office; (iii) 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 to any such "person" or "group"
(other than to a Restricted Subsidiary); or (iv) the merger or consolidation of
the Company with or into another corporation or the merger of another
corporation with or into the Company with the effect that immediately after such
transaction any such "person" or "group" of persons or entities shall have
become the beneficial owner of securities of the surviving corporation of such
merger or consolidation representing a majority of the total voting power of the
then outstanding Voting Stock of the surviving corporation;
 
     "Consolidated Cash Flow" is defined to mean with respect to any Person for
any period, the (i) Consolidated Net Income of such Person for such period plus,
to the extent deducted in computing such Consolidated Net Income (and without
duplication) Consolidated Fixed Charges, (ii) any provision for taxes (other
than taxes (either positive or negative) attributable to extraordinary and non
recurring gains or losses or sales of assets), (iii) any amount attributable to
depreciation and amortization expense and (iv) all other non-cash items reducing
Consolidated Net Income (excluding any non-cash charge to the extent that it
requires or represents an accrual of, or reserve for, cash charges in any future
period), less all non-cash items increasing Consolidated Net Income (excluding
any items which represent the reversal of an accrual of, or reserve for,
anticipated cash charges at any prior period), all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries in accordance
with U.S. GAAP; provided, however, that there shall be excluded therefrom the
Consolidated Cash Flow of (if positive) of any Restricted Subsidiary (calculated
separately for such Restricted Subsidiary in the same manner as provided above)
that is subject to a restriction which prevents the payment of dividends or the
making of distributions to the Company or another Restricted Subsidiary to the
extent of such restriction.
 
     "Consolidated Fixed Charges" is defined to mean, with respect to any Person
for any period, Consolidated Interest Expense plus dividends declared and
payable on Preferred Stock.
 
     "Consolidated Interest Expense" is defined to mean with respect to any
Person for any period, the aggregate amount of interest in respect of
Indebtedness (including capitalized interest, amortization of original issue
discount on any Indebtedness and the interest portion of any deferred payment
obligation) calculated in accordance with U.S. GAAP; all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with Interest Rate Agreements;
and interest on Indebtedness that is Guaranteed or secured by such Person or any
of its Restricted Subsidiaries), less the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by such Person and its Restricted Subsidiaries during such
period; excluding, however, any amount of such interest of any Restricted
Subsidiary to the extent the net income of such Restricted Subsidiary is
excluded in the calculation of Consolidated Net Income pursuant to the last
proviso of such definition.
 
     "Consolidated Net Income" is defined to mean with respect to any Person for
any period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period determined on a consolidated basis and in
conformity with U.S. GAAP; provided that the following items shall be excluded
in computing Consolidated Net Income (without duplication): (i) the net income
(or loss) of any Restricted Subsidiary accrued prior to the date it becomes a
Restricted Subsidiary or is merged into or consolidated with such Person or any
of its Restricted Subsidiaries or all or substantially all of the property and
assets of such Restricted Subsidiary are acquired by such Person or any of its
Restricted Subsidiaries; (ii) any gains or losses (on an after-tax basis) but
not losses attributable to Asset Sales; (iii) all extraordinary gains and gains
from Currency Agreements or Interest Rate Agreements and gains from the
extinguishment of debt; (iv) the net income (or loss) of any other Person (other
than net income (or loss) attributable to a Restricted Subsidiary) in which such
other Person (other than such Person or any of its Restricted Subsidiaries) has
a joint interest, except to the extent of the amount of dividends or other
distributions actually paid to such Person or any of its Restricted Subsidiaries
by such other Person during such period; (v) net gains attributable to write-ups
of assets or write-downs of liabilities (determined after taking into account
losses attributable to write-downs of assets or write-ups of liabilities up to
but not in excess of such gains); and (vi) the cumulative effect of
 
                                       87
<PAGE>   92
 
a change in accounting principles after the Issue Date; and provided, further,
that there shall be further excluded therefrom the net income (but not the net
loss) of any Restricted Subsidiary (calculated separately for such Restricted
Subsidiary in the same manner as provided above) that is subject to a
restriction which prevents the payment of dividends or the making of
distributions to the Company or another Restricted Subsidiary to the extent of
such restriction.
 
     "Consolidated Net Worth" is defined to mean, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of such Person and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of
determination), less any amounts attributable to Redeemable Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory notes receivable from the sale
of Equity Interests in the Company or any of its Restricted Subsidiaries, each
item to be determined in conformity with U.S. GAAP (excluding the effects of
foreign currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
 
     "Credit Facilities" is defined to mean one or more senior credit
agreements, senior loan agreements or similar senior facilities with banks or
other institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
 
     "Cumulative Consolidated Cash Flow" is defined to mean, for the period
beginning on the Issue Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Cash Flow of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with U.S. GAAP.
 
     "Cumulative Consolidated Fixed Charges" is defined to mean, for the period
beginning on the Issue Date through and including the end of the last fiscal
quarter (taken as one accounting period) preceding the date of any proposed
Restricted Payment, Consolidated Fixed Charges of the Company and its Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with U.S. GAAP.
 
     "Currency Agreement" is defined to mean any foreign exchange contract,
currency swap agreement and any other arrangement or agreement designed to
provide protection against fluctuations in currency values.
 
     "Default" is defined to mean any event that is, or after notice or passage
of time or both would be, an Event of Default.
 
     "Eligible Accounts Receivable" is defined to mean the accounts receivables
(net of any reserves and allowances for doubtful accounts in accordance with
U.S. GAAP) of any Person that are not more than 60 days past their due date and
that were entered into in the ordinary course of business on normal payment
terms as shown on the most recent consolidated balance sheet of such Person
filed with the Commission, all in accordance with U.S. GAAP.
 
     "Equity Interests" is defined to mean 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).
 
     "Escrow Account" is defined to mean the account established by the Escrow
Agent pursuant to the terms of the Escrow Agreement for the deposit of the U.S.
Government Securities purchased by, or purchased at the direction of, the
Company with a portion of the net proceeds from the Offering.
 
     "Escrow Agent" is defined to mean United States Trust Company of New York,
as escrow agent under the Escrow Agreement.
 
     "Escrow Agreement" is defined to mean the Escrow Agreement, dated as of the
date of the Indenture, among the Escrow Agent, the Trustee and the Company,
governing the disbursement of funds from the Escrow Account.
 
     "Escrow Collateral" is defined to mean all funds and securities in the
Escrow Account and the proceeds thereof.
 
                                       88
<PAGE>   93
 
     "Fair Market Value" is defined to mean, with respect to any asset or
property, the price (after taking into account any liabilities relating to such
assets) which could be negotiated in an arm's-length free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of
which is under any compulsion to complete the transaction; provided, however,
that the Fair Market Value of any such asset or assets shall be determined
conclusively by the Board of Directors acting in good faith, which determination
shall be evidenced by a resolution of such Board delivered to the Trustee.
 
     "Guarantee" is defined to mean any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof) of any other Person; provided that
the term "Guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
 
     "Incur" is defined to mean, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an Incurrence of Indebtedness by reason of the
acquisition of more than 50% of the Equity Interests in any Person; provided
that neither the accrual of interest shall be considered an Incurrence of
Indebtedness.
 
     "Indebtedness" is defined to mean, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person,
whether or not contingent (A) in respect of borrowed money, (B) evidenced by
bonds, debentures, notes or other similar instruments or letters of credit or
other similar instruments (including reimbursement obligations with respect
thereto), (C) representing the balance deferred and unpaid of the purchase price
of property or services, which purchase price is due more than six months after
the date of placing such property in service or taking delivery and title
thereto or the completion of such services, except Trade Payables, (D)
representing Capitalized Lease Obligations, (ii) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness, (iii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person, (iv) the maximum fixed redemption or
repurchase price of Redeemable Stock of such Person at the time of determination
and (v) to the extent not otherwise included in this definition, obligations
under Currency Agreements and Interest Rate Agreements. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and, with respect to
contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation; provided (x) that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with U.S. GAAP and (y) that Indebtedness shall not include any
liability for federal, state, local or other taxes.
 
     "Interest Rate Agreement" is defined to mean any interest rate swap
agreement, interest rate cap agreement, interest rate insurance, and any other
arrangement or agreement designed to provide protection against fluctuations in
interest rates.
 
     "Investment" in any Person is defined to mean any direct or indirect
advance, loan or other extension of credit (including, without limitation, by
way of Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with U.S. GAAP, recorded
as accounts receivable on the balance sheet of such Person or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other tangible or intangible property to others or any payment for any property
or services for the account or use of others), or any purchase or acquisition of
Equity Interests, bonds, notes, debentures, or other similar instruments issued
by, any other Person. For purposes of the definition of "Unrestricted
Subsidiary," the "Limitation on Restricted Payments" covenant and the
"Limitation on Issuance and Sale of Capital Stock of Restricted Subsidiaries"
covenant described above, (i) "Investment" shall include (a) the Fair Market
Value of the assets (net of liabilities) of any Restricted Subsidiary of the
Company at the time that such Restricted Subsidiary of the Company is designated
an Unrestricted
 
                                       89
<PAGE>   94
 
Subsidiary and shall exclude the Fair Market Value of the assets (net of
liabilities) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary of the Company and (b) the Fair
Market Value, in the case of a sale of Equity Interests in accordance with the
"Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries" covenant such that a Person no longer constitutes a Restricted
Subsidiary, of the remaining assets (net of liabilities) of such Person after
such sale, and shall exclude the fair market value of the assets (net of
liabilities) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary of the Company and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its Fair Market Value at the time of such transfer.
 
     "Issue Date" is defined to mean the date on which the Notes were originally
issued under the Indenture.
 
     "Lien" is defined to mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind in respect of an asset, whether or not
filed, recorded or otherwise perfected under applicable law (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof, any sale with recourse against the seller or any Affiliate
of the seller, or any option or other agreement to sell or give any security
interest).
 
     "Most Recent Balance Sheet" is defined to mean, with respect to any Person,
the most recent consolidated balance sheet of such Person reported on by a
recognized firm of independent accountants without qualification as to scope.
 
     "Net Cash Proceeds" is defined to mean, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or Cash Equivalents,
including payments in respect of deferred payment obligations (to the extend
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or Cash Equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) and proceeds from the conversion of other property
received when converted to cash or Cash Equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) taxes paid or payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing agreements), (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary of the Company as a reserve
against any liabilities associated with such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as determined in conformity
with U.S. GAAP; provided that such amounts which cease to be held as reserves
shall be deemed Net Cash Proceeds; and (b) with respect to any capital
contribution or any issuance or sale of Equity Interests (other than Redeemable
Stock), the proceeds of such capital contribution, issuance or sale in the form
of cash or Cash Equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but not interest,
component thereof) when received in the form of cash or Cash Equivalents (except
to the extent (1) such obligations are financed, directly or indirectly, with
money borrowed from the Company or any Restricted Subsidiary or otherwise
financed or sold with recourse to the Company or any Restricted Subsidiary or
(2) the capital contribution or purchase of the Equity Interests is otherwise
financed, directly or indirectly, by the Company or any Restricted Subsidiary,
including through funds contributed, extended, guaranteed or otherwise advanced
by the Company or any Affiliate) and proceeds from the conversion of other
property received when converted to cash or Cash Equivalents, net of attorney's
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees incurred in connection with
such issuance or sale and net of taxes paid or payable as a result thereof.
 
     "Officers' Certificate" is defined to mean a certificate signed on behalf
of the Company by two officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company that meets the requirements set
forth in the Indenture.
 
                                       90
<PAGE>   95
 
     "Permitted Business" is defined to mean the business of (i) transmitting,
or providing services relating to the transmission of, voice, video or data
through owned or leased transmission facilities, (ii) constructing, 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 primarily
related to those identified in clause (i) or (ii) above.
 
     "Permitted Holder" is defined to collectively mean Telecom Founders B.V.,
NeSBIC Venture Fund C.V., Cromwilld Limited, Paribas Deelnemingen N.V.,
Nederlandse Participatie Maatschappij N.V. and any Affiliate of the foregoing
Persons.
 
     "Permitted Investment" is defined to mean (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to, the Company or a Restricted
Subsidiary; (ii) payroll, travel and similar advances to cover matters that are
expected at the time of such advance ultimately to be treated as expenses in
accordance with U.S. GAAP; (iii) stock, obligations or securities received in
satisfaction of judgments; (iv) Investments in any Person (the primary business
of which is related, ancillary or complementary to the business of the Company
on the date of such Investment) at any one time outstanding (measured on the
date each such Investment was made without giving effect to subsequent changes
in value) in an aggregate amount not to exceed the greater of (x) $10.0 million
and (y) 5.0% of the Company's total consolidated assets as of the end of the
most recently completed fiscal quarter; (v) Investments in Cash Equivalents;
(vi) Investments made as a result of the receipt of noncash consideration from
any Asset Sale made in compliance with the "Limitation on Asset Sales" covenant;
(vii) Investments made in the ordinary course of the telecommunications business
in the Permitted Business and on ordinary business terms in the Permitted
Business in consortia formed to construct transmission infrastructure for use
primarily in the Permitted Business, provided such Investment entitles the
Company to rights of way or rights of use on such transmission infrastructure;
(viii) Investments made in the ordinary course of the telecommunications
business and on ordinary business terms as partial payment for constructing a
network relating principally to the Permitted Business; and (ix) any Investment
in Pledged Securities.
 
     "Permitted Liens" is defined to mean (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with U.S. GAAP shall have been made; (ii) statutory Liens of
landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with U.S. GAAP shall have been made; (iii) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (iv)
easements, rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Restricted Subsidiaries; (v) Liens (including extensions and renewals thereof)
upon real or personal property of a Restricted Subsidiary purchased or leased
after the Issue Date; provided that (a) such Lien is created solely for the
purpose of securing Indebtedness Incurred by such Restricted Subsidiary in
compliance with the "Limitation on Indebtedness" covenant (1) to finance the
cost of the item of property or assets subject thereto and such Lien is created
prior to, at the time of or within six months after the later of the acquisition
and the Incurrence of such Indebtedness or (2) to refinance any Indebtedness of
a Restricted Subsidiary previously so secured, (b) the principal amount of the
Indebtedness secured by such Lien does not exceed 100% of such cost and (c) any
such Lien shall not extend to or cover any property or assets other than such
item of property or assets; (vi) any interest or title of a lessor in the
property subject to any Capitalized Lease or operating lease of a Restricted
Subsidiary which, in each case, is permitted under the Indenture; (vii) Liens on
property of, or on Equity Interests in or Indebtedness of, any Person existing
at the time such Person becomes, or becomes a part of, any Restricted
Subsidiary; provided that such Liens were not created, incurred or assumed in
contemplation of such transaction and do not extend to or cover any property or
assets of the Company or any Restricted
 
                                       91
<PAGE>   96
 
Subsidiary other than the property or assets so acquired; (viii) Liens arising
from the rendering of a final judgment or order against the Company or any
Restricted Subsidiary of the Company that does not give rise to an Event of
Default; (ix) Liens encumbering customary initial deposits and margin deposits
and other Liens that are either within the general parameters customary in the
industry or incurred in the ordinary course of business, in each case, securing
Indebtedness under Interest Rate Agreements and Currency Agreements; (x) Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business in accordance with
the past practices of the Company and its Restricted Subsidiaries prior to the
Issue Date; (xi) Liens existing on the Issue Date or securing the Notes or any
Guarantee of the Notes; (xii) Liens granted after the Issue Date on any assets
or Equity Interests in the Company or its Restricted Subsidiaries created in
favor of the Holders; (xiii) Liens created in connection with the incurrence of
any Indebtedness permitted to be Incurred under clause (iii) of paragraph (b) of
the "Limitation on Indebtedness" covenant; provided that the Indebtedness which
it refinances is secured by similar Liens; (xiv) Liens securing Indebtedness
under Credit Facilities incurred in compliance with clause (viii) of paragraph
(b) of the "Limitation on Indebtedness" covenant; and (xv) Liens with respect to
the Escrow Account arising under the Escrow Agreement.
 
     "Pledged Securities" is defined to mean the U.S. Government Securities
purchased by the Company with a portion of the net proceeds from the Offering
and deposited in the Escrow Account.
 
     "Preferred Stock" is defined to mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) which is preferred as to the payment of dividends
or distributions, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over Equity Interests of
any other class in such Person.
 
     "Pro forma Consolidated Cash Flow" is defined to mean with respect to any
Person for any period, the Consolidated Cash Flow of such Person for such period
calculated on a pro forma basis to give effect to any Asset Disposition or Asset
Acquisition (including acquisitions of other Persons by merger, consolidation or
purchase of Equity Interests) during such period as if such Asset Disposition or
Asset Acquisition had taken place on the first day of such period and income (or
losses) ceased to accrue or accrued, as the case may be, therefrom from such
date.
 
     "Public Equity Offering" is defined to mean an underwritten primary public
offering of Ordinary Shares of the Company pursuant to an effective registration
statement under the Securities Act.
 
     "Redeemable Stock" is defined to mean, with respect to any Person, any
Capital Stock which 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 (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Redeemable Stock or (iii) is redeemable or must be purchased, upon the
occurrence of certain events or otherwise, by such Person at the option of the
holder thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Notes; provided, however, that any
Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require such Person to purchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the first anniversary of the Stated Maturity of the
Notes shall not constitute Redeemable Stock if (x) the "asset sale" or "change
of control" provisions applicable to such Capital Stock are not more favorable
to the holders of such Capital Stock than the terms applicable to the Notes and
described under "-- Certain Covenants -- Limitation on Asset Sales" and "--
Repurchase of Notes upon a Change of Control" and (y) any such requirement only
becomes operative after compliance with such terms applicable to the Notes
including the purchase of any Notes tendered pursuant thereto.
 
     "Replacement Assets" is defined to mean any property, plant or equipment of
a nature or type that are used or usable in Permitted Businesses.
 
     "Restricted Subsidiary" is defined to mean, at any time, any direct or
indirect Subsidiary of the Company that is then not an Unrestricted Subsidiary.
 
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<PAGE>   97
 
     "Share Capital" is defined to mean, at any time of determination, the
stated capital of the Equity Interests (other than Redeemable Stock) and
additional paid-in capital of the Company as set forth on the Most Recent
Balance Sheet of the Company at such time.
 
     "Stated Maturity" is defined to mean, (i) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of or interest on
any debt security, the date specified in such debt security as the fixed date on
which such installment is due and payable.
 
     "Strategic Minority Capital Stock Issues" is defined to mean issuances or
sales of common stock of a Restricted Subsidiary, principally engaged in
business outside The Netherlands, to a Person which is principally engaged in
the Permitted Business and which has an equity market capitalization, a net
asset value or annual revenues of at least $500 million, which issuances or
sales do not represent more than 49% of the outstanding common stock of such
Restricted Subsidiary; provided that any such Strategic Minority Capital Stock
Issue is made to only one such Person with respect to any Restricted Subsidiary.
 
     "Subsidiary" is defined to mean, with respect to any Person (i) any
corporation, association or other business entity of which more than 50% of the
outstanding Voting Stock is at the time of determination owned, directly or
indirectly, by such Person or one or more other Subsidiaries of such Person and
(ii) any partnership, joint venture, limited liability company or similar entity
of which (A) more than 50% of the capital accounts, distribution rights, total
equity and voting interests or general or limited partnership interests, as
applicable, are owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person or a combination thereof
whether in the form of membership, general, special or limited partnership or
otherwise and (B) such Person or any Restricted Subsidiary of such Person is a
controlling general partner, co-venturer, manager or similar position or
otherwise controls such entity.
 
     "Telecommunications Assets" is defined to mean, with respect to any Person,
assets used in the Permitted Business (or Equity Interests of a Person that
becomes a Restricted Subsidiary, the assets of which consist principally of such
Telecommunications Assets) that are purchased or acquired by the Company or a
Restricted Subsidiary after the Issue Date.
 
     "Trade Payables" is defined to mean any accounts payable or any other
indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by the Company or any of its Restricted Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods and
services.
 
     "Transaction Date" is defined to mean, with respect to the Incurrence of
any Indebtedness by the Company or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
 
     "Unrestricted Subsidiary" is defined to mean (i) any Subsidiary of the
Company which at the time of determination is an Unrestricted Subsidiary (as
designated by the Board of Directors in the manner provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary, or any of its Subsidiaries, owns any Equity Interests or
Indebtedness of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (a) the Company certifies in an
Officers' Certificate that such designation complies with the covenants
described under "Limitation on Restricted Payments", (b) such Subsidiary is not
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might reasonably be
obtained in a comparable arm's-length transaction at the time from Persons who
are not Affiliates of the Company, (c) neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (1) to subscribe
for additional Equity Interests in such Subsidiary or any Subsidiary of such
Subsidiary or (2) to maintain or preserve such Subsidiary's financial condition
or to cause such Subsidiary to achieve any specified levels of operating results
and (d) such Subsidiary and its Subsidiaries has not at the time of designation,
and does not thereafter, Incur any Indebtedness other than Unrestricted
Subsidiary Indebtedness. The Board of
 
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<PAGE>   98
 
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of the Company; provided that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness under
the first paragraph of the "Limitation on Indebtedness" covenant described above
on a pro forma basis taking into account such designation and (y) no Default or
Event of Default shall have occurred and be continuing. Any such designation by
the Board of Directors shall be evidenced to the Trustee by promptly filing with
the Trustee a copy of the resolution of the Board of Directors giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
 
     "Unrestricted Subsidiary Indebtedness" is defined to mean Indebtedness of
any Unrestricted Subsidiary (i) as to which neither the Company nor any
Restricted Subsidiary is directly or indirectly liable (by virtue of the Company
or any such Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect to, such Indebtedness), and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder of any Indebtedness of the Company or any Restricted Subsidiary to
declare, a default on such Indebtedness of the Company or any Restricted
Subsidiary or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
 
     "U.S. GAAP" is defined to mean, at any date of determination, generally
accepted accounting principles as in effect in the United States of America
which are applicable at the date of determination and which are consistently
applied for all applicable periods.
 
     "U.S. Government Securities" is defined to mean direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
obligations or guarantee the full faith and credit of the United States is
pledged and are not callable or redeemable at the option of the issuer thereof.
 
     "Voting Stock" is defined to mean with respect to any Person, Capital Stock
of any class or kind ordinarily entitled to vote for the election of directors
thereof at a meeting of Stockholders called for such purpose, without the
occurrence of any additional event or contingency.
 
     "Weighted Average Life to Maturity" is defined to mean, at any date of
determination with respect to any Indebtedness, the quotient obtained by
dividing (i) (a) the sum of the products of the number of years from such date
of determination to the dates of each successive scheduled principal payment of,
or redemption or similar payment with respect to, such Indebtedness multiplied
by (b) the amount of such principal payment, by (ii) the sum of all such
principal payments.
 
     "Wholly Owned Restricted Subsidiary" is defined to mean any Restricted
Subsidiary all of the outstanding voting Equity Interests (other than directors'
qualifying shares) of which are owned, directly or indirectly, by the Company.
 
                                       94
<PAGE>   99
 
                           CERTAIN TAX CONSIDERATIONS
 
                         NETHERLANDS TAX CONSIDERATIONS
 
     The following is a summary of the principal Netherlands tax consequences
relevant to the exchange, ownership and disposition of Notes to U.S. Holders (as
defined below for the purposes of this section "Netherlands Tax
Considerations"). This summary is not exhaustive of all the possible tax
consequences that may be relevant to Holders in light of their particular
circumstances and potential investors are advised to consult their own tax
advisors in order to determine the final tax consequences of the exchange,
ownership and disposition of Notes in their own particular circumstances. In
particular, this summary does not cover all tax consequences applicable to joint
venture vehicles, such as LLC's and partnership structures.
 
     This summary is based on the tax laws of The Netherlands, as well as the
Convention between the United States of America and the Kingdom of The
Netherlands for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with respect to Taxes on Income (the "Treaty"), to the extent they were
published and effective as of September 20th, 1998. Changes made to these laws
or Treaty after that date may have retroactive effect, and may effect the tax
consequences described herein.
 
The outline is based on the assumption that the U.S. Holder:
 
     (i)   is not and has not been for at least five years, a resident or deemed
           resident of The Netherlands for purposes of Netherlands tax
           legislation; and
 
     (ii)   does not have or will not obtain an enterprise or an interest in an
            enterprise which, in whole or in part, is carried on through a
            permanent establishment or a permanent representative in The
            Netherlands and to which enterprise or part of an enterprise the
            Notes are attributable; and
 
     (iii)  is not directly entitled (the term directly means, in this context,
            not through the beneficial ownership of shares or similar
            securities) to all or a share of the profits of an enterprise that
            is managed and controlled in The Netherlands while the Notes form
            part of the assets of, or are otherwise attributable to, such
            enterprise; and
 
     (iv)  does not have or will not obtain a substantial interest (as defined
           below) or deemed substantial interest in VersaTel according to the
           criteria under Netherlands tax law currently in force or in the event
           such Holder does have such an interest, this substantial interest
           qualifies as asset of, or is otherwise attributable to an enterprise;
           and
 
     (v)   does not carry out and has not carried out employment activities on
           the territory of The Netherlands, or as director or board member of
           an entity resident in The Netherlands or as a civil servant of a
           Netherlands public body with which the holding of the Notes is
           connected; and
 
     (vi)  can obtain full benefit under the Treaty.
 
(hereinafter "U.S. Holder").
 
     With respect to point (iv) for Netherlands income and/or corporate income
tax purposes, a person (individual or corporate body as defined under
Netherlands tax law) holds among others directly or indirectly a substantial
interest, if such person owns or is deemed to own (e.g. directly and/or
indirectly via call options or Warrants) an interest of at least 5.0% in the
issued capital of a company residing in The Netherlands ("a Substantial
Interest").
 
NETHERLANDS INCOME TAX
 
     A U.S. Holder of Notes is not subject to Netherlands Corporate Income Tax
("NCIT") or Netherlands Individual Income Tax ("NIIT") under the above
assumptions.
 
INTEREST, WITHHOLDING TAX AND TAX TREATY LIMITATIONS
 
     Interest paid to a U.S. Holder that does not have a Substantial Interest is
not subject to NCIT or NIIT. Furthermore, according to article 12 of the Treaty,
interest paid to a U.S. Holder entitled to the benefits of the
 
                                       95
<PAGE>   100
 
Treaty can only be subject to NCIT or NIIT in the country of residence of the
recipient of the interest. As a result, no NCIT or NIIT will be due on interest
paid to a U.S. Holder that has a Substantial Interest, provided they can obtain
full benefit of the Treaty.
 
     The Netherlands will not levy withholding taxes on the payment of interest
under the Notes, provided that the interest payment is not dependent on the
profits of the Company. If such link can be established there is a risk that the
interest would be subject to Netherlands withholding tax as described under
"Dividend withholding tax". For this discussion it is assumed that such link
cannot be established.
 
CAPITAL GAINS
 
     Under Netherlands laws, capital gains realized upon disposition of any or
all of the Notes by a U.S. Holder are only taxable if the U.S. Holder has a
Substantial Interest or if the U.S. Holder has an enterprise or an interest in
an enterprise that is, in whole or in part, carried on through a permanent
establishment or a permanent representative in The Netherlands and to which
Netherlands enterprise, the Notes are attributable. Moreover, as a result of
article 14 of the Treaty, the right to tax capital gains realized upon
disposition of any or all of the Notes by a U.S. Holder entitled to the benefits
of the Treaty, is allocated to the United States, unless allocable to a
Netherlands enterprise referred to above.
 
NET WEALTH TAX
 
     A U.S. Holder of the Notes will not be subject to Netherlands net wealth
tax in respect thereof provided that:
 
          (i) such U.S. Holder is not an individual or, if he or she is an
     individual, provided that the Holder is neither a resident of The
     Netherlands nor deemed to be a resident of The Netherlands; and
 
          (ii) the U.S. Holder does not have an enterprise or an interest in an
     enterprise that is, in whole or in part, carried on through a permanent
     establishment or a permanent representative in The Netherlands and to which
     enterprise or part of an enterprise, as the case may be, to which
     enterprise the Notes are attributable; and
 
          (iii) such U.S. Holder is not directly entitled (the term directly
     means, in this context, not through the beneficial ownership of shares or
     similar securities) to all or a share of the profits of an enterprise that
     is managed and controlled in The Netherlands while the Notes form part of
     the assets of, or are otherwise attributable to, such enterprise.
 
GIFT, ESTATE OR INHERITANCE TAXES
 
     No gift, estate or inheritance taxes will arise in The Netherlands in
respect of the transfer of a Note by way of gift by a person who is neither a
resident nor a deemed resident of The Netherlands, or on the death of such
person, provided that:
 
          (i) the transfer is not construed as a gift made by or on behalf of a
     person who is a resident or a deemed resident of The Netherlands; and
 
          (ii) the Notes do not form part of the assets of, and are not
     otherwise attributable to, an enterprise owned by the donor or the deceased
     or in which the donor or the deceased owned an interest and which in whole
     or in part is carried on through a permanent establishment or a permanent
     representative in The Netherlands; and
 
          (iii) such Notes form part of the assets of, and are not otherwise
     attributable to an enterprise that is managed and controlled in The
     Netherlands and to which all or a share of the profits thereof the holder
     of a Note is directly entitled (the term directly means, in this context,
     not as the beneficial owner of shares or similar securities).
 
                                       96
<PAGE>   101
 
                            U.S. TAX CONSIDERATIONS
 
     The following discussion, subject to the limitations set forth herein,
describes the material U.S. federal income tax considerations relevant to the
acquisition, ownership and disposition of Exchange Notes in general and in the
context of the Exchange Offer and is the opinion of Shearman & Sterling, special
tax counsel to the Company. This summary is based on the Internal Revenue Code
of 1986, as amended (the "Code"), existing and proposed Treasury regulations,
revenue rulings, administrative interpretations and judicial decisions (all as
currently in effect and all of which are subject to change, possibly with
retroactive effect). Except as specifically set forth herein, this summary deals
only with Exchange Notes held as capital assets by a U.S. Holder (as defined
below) within the meaning of Section 1221 of the Code. This summary does not
discuss all of the tax consequences that may be relevant to holders in light of
their particular circumstances or to holders subject to special tax rules, such
as insurance companies, financial institutions, dealers in securities or foreign
currencies, tax-exempt investors, persons holding the Exchange Notes as part of
a short-sale, hedging transaction, "straddle," conversion transaction or other
integrated transaction, U.S. Holders owning 10% or more of the stock of the
Company, or U.S. Holders whose functional currency (as defined in Section 985 of
the Code) is not the U.S. dollar. Persons considering the acquisition of the
Exchange Notes should consult with their own tax advisors with regard to the
application of the U.S. federal income tax laws to their particular situations
as well as any tax consequences of purchasing, holding and disposing of the
Exchange Notes, including the applicability and effect of the laws of any state,
local or foreign jurisdiction.
 
     As used in this section "U.S. Tax Considerations," the term "U.S. Holder"
means a beneficial owner of a Exchange Note who or that is for U.S. federal
income tax purposes (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, (iii) an
estate the income of which is subject to U.S. federal income taxation regardless
of its source, or (iv) a trust if both: (A) a U.S. court is able to exercise
primary supervision over the administration of the trust, and (B) one or more
U.S. persons have the authority to control all substantial decisions of the
trust.
 
GENERAL
 
  EXCHANGE OFFER
 
     An exchange of Notes for Exchange Notes pursuant to the Exchange Offer will
not be a taxable event for U.S. federal income tax purposes and a U.S. Holder
will have the same tax basis and holding period in the Exchange Notes as the
Notes.
 
THE NOTES
 
     Under applicable authorities, the Exchange Notes should be treated as
indebtedness for U.S. federal income tax purposes. In the unlikely event the
Exchange Notes are treated as equity, the amount of any actual or constructive
Company distributions on any such Exchange Note would first be taxable to the
holder as dividend income to the extent of the issuer's current and accumulated
earnings and profits, and next would be treated as a return of capital to the
extent of the holder's tax basis in the Exchange Note, with any remaining amount
treated as gain from the sale of an Exchange Note. Moreover, in such event a
U.S. Holder would be subject to special U.S. federal income tax rules if the
Company were classified as a "passive foreign investment company" for U.S.
federal income tax purposes. This discussion assumes that the Exchange Notes
will constitute indebtedness of the Company for U.S. federal income tax
purposes.
 
  PAYMENT OF INTEREST
 
     Interest on the Exchange Notes will generally be taxable to a United States
Holder as ordinary income at the time it is paid or accrued in accordance with
the U.S. Holder's method of accounting for tax purposes. In addition to interest
on the Exchange Notes, a U.S. Holder will be required to include in income
Additional Amounts, if any, and withholding tax withheld by The Netherlands or
any other Relevant Taxing Jurisdiction from interest payments, if any,
notwithstanding that such withheld tax would not in fact be received by such
U.S. Holder. Thus, a U.S. Holder may be required to report income in an amount
greater than the cash
 
                                       97
<PAGE>   102
 
received with respect of payments made on the Exchange Notes. A U.S. Holder may
be entitled to deduct or credit the amount of any applicable withholding tax,
subject to applicable limitations in the Code. The rules governing the foreign
tax credit are complex. Interest income on the Exchange Notes generally will
constitute foreign source income and generally will be considered "passive"
income (or "high withholding tax interest" if the applicable withholding tax is
imposed at a rate of 5% or more) or "financial services" income for foreign tax
credit purposes. Prospective investors should consult their own tax advisors
concerning the application of the foreign tax credit rules to their particular
circumstances.
 
  DISPOSITIONS
 
     Upon the sale, exchange or retirement of an Exchange Note, a U.S. Holder
will recognize taxable gain or loss in an amount equal to the difference, if
any, between such holder's adjusted tax basis in such Exchange Note and the
amount realized on such sale, exchange or retirement. Gain or loss recognized by
a U.S. Holder on the sale, exchange or retirement of an Exchange Note generally
will be capital gain or loss (except with respect to amounts received upon a
disposition attributable to accrued but unpaid interest, which will be taxable
as ordinary income). Gain realized by a U.S. Holder on the sale, exchange or any
other disposition of an Exchange Note will generally be treated as United States
source income. Under current law it is unclear whether a loss would be treated
as United States source or foreign source.
 
     As a result of certain limitations on the U.S. foreign tax credit under the
Code, a U.S. Holder may not be able to claim a U.S. foreign tax credit for
Netherlands withholding taxes, if any, imposed on the proceeds received upon the
sale, exchange, repurchase by the Company or other disposition of Exchange
Notes. Prospective investors should consult their own tax advisors concerning
the application of the U.S. foreign tax credit rules to their particular
situations.
 
     For certain noncorporate taxpayers (including individuals), such gain will
be eligible to be taxed at a preferential rate if the U.S. Holder's holding
period for the Exchange Notes exceeds one year. Prospective investors should
consult their own tax advisors with respect to the effect of the capital gains
provisions of the Code. The deductibility of capital losses is subject to
limitations.
 
BACKUP WITHHOLDING
 
     "Backup" withholding and information reporting requirements may apply to
certain payments of principal and interest on an Exchange Note and to certain
payments of proceeds of the sale or retirement of an Exchange Note. The Company,
its agent, a broker, the Trustee or any paying agent, as the case may be, will
be required to withhold tax from any payment that is subject to backup
withholding at a rate of 31.0% of such payment if the U.S. Holder fails to
furnish his taxpayer identification number (social security number or employer
identification number), to certify that such U.S. Holder is not subject to
backup withholding, or to otherwise comply with the applicable requirements of
the backup withholding rules. Certain U.S. Holders (including, among others, all
corporations) are not subject to the backup withholding and reporting
requirements. Any amounts withheld under the backup withholding rules from a
payment to a U.S. Holder generally may be claimed as a credit against such
holder's U.S. federal income tax liability provided that the required
information is furnished to the Internal Revenue Service.
 
                                       98
<PAGE>   103
 
                              PLAN OF DISTRIBUTION
 
     Based on positions taken by the staff of the Commission set forth in
no-action letters issued to Exxon Capital Holdings Corp. and Morgan Stanley &
Co. Inc., among others, the Company believes that Exchange Notes issued pursuant
to the Exchange Offer in exchange for Outstanding Notes may be offered for
resale, resold and otherwise transferred by holders thereof (other than any
holder which is (i) an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act, (ii) a broker-dealer who acquired Notes directly from
the Company, or (iii) broker-dealers who acquired Notes as a result of
market-making or other trading activities) without compliance with the
registration and prospectus delivery provisions for the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business, and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes, provided that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer
will be subject to a prospectus delivery requirement with respect to resales of
such Exchange Notes. To date, the staff of the Commission has taken the position
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to transactions involving an exchange of securities
such as the exchange pursuant to the Exchange Offer (other than a resale of an
unsold allotment from the sale of the Outstanding Notes to the Initial Purchaser
thereof) with the Prospectus contained in the Registration Statement. Pursuant
to the Registration Rights Agreement, the Company has agreed to permit
Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use this Prospectus in connection with the
resale of such Exchange Notes. The Company has agreed that, for a period of 180
days after the Exchange Offer has been consummated, it will make this
Prospectus, and any amendment or supplement to this Prospectus, available to any
broker-dealer that requests such documents in the Letter of Transmittal.
 
     Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer". In
addition, each holder who is a broker-dealer and who receives Exchange Notes for
its own account in exchange for Outstanding Notes that were acquired by it as a
result of market-making activities or other trading activities, will be required
to acknowledge that it will deliver a prospectus in connection with any resale
by it of such Exchange Notes.
 
     Holders who tender Outstanding Notes in the Exchange Offer with the
intention to participate in a distribution of the Exchange Notes may not rely
upon the Exxon Capital Holdings Corp., the Morgan Stanley & Co. Inc. or similar
no-action letters.
 
     The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes 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 at 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 Exchange Notes. 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.
 
     The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Outstanding Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act, as
set forth in the Registration Rights Agreement.
 
                                       99
<PAGE>   104
 
                                 LEGAL MATTERS
 
     Certain legal matters regarding the validity of the Exchange Notes offered
hereby and the United States federal income tax consequences of the Exchange
Offer will be passed upon for the Company by Shearman & Sterling. Certain
matters of Netherlands corporate law will be passed upon for the Company by
Stibbe Simont Monahan Duhot, Amsterdam, The Netherlands.
 
                              INDEPENDENT AUDITORS
 
     The financial statements of VersaTel as of December 31, 1997 and 1996, and
for each of the two years in the period ended December 31, 1997 included in this
Prospectus, have been audited by Arthur Andersen, independent auditors, as set
forth in their report appearing elsewhere herein.
 
                             AVAILABLE INFORMATION
 
     The Company has filed with the Commission a Registration Statement on Form
F-4 under the Securities Act with respect to the Exchange Notes offered hereby.
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 Commission. For further information with respect to the Company and the
Exchange Notes, reference is made to the Registration Statement. Statements
contained in this Prospectus as to the contents of certain documents are not
necessarily complete, and, in each instance, reference is made to the copy of
the document filed as an exhibit to the Registration Statement, and each such
statement is qualified in its entirety by such reference.
 
     As a result of the Exchange Offer, the Company will become subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith will be required to file reports and other information with the
Commission. Such financial information shall include annual reports containing
consolidated financial statements and notes thereto, together with an opinion
thereon expressed by an independent public accounting firm, as well as quarterly
reports containing unaudited consolidated financial statements for the first
three quarters of each fiscal year. The Registration Statement, as well as such
other information, when so filed, can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; and at the Commission's regional offices
at Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661-2511, and Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can also be obtained from the Commission at prescribed
rates through its Public Reference Section at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. In addition, the Company will file periodic
reports and other filings with the Commission through its Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system, which will be publicly
available through the Commission's site on the Internet's World Wide Web located
at http://www.sec.com. The Company will also make such reports available to
prospective purchasers of the Exchange Notes, securities analysts and broker-
dealers upon their request. The Company will make available such reports at the
office of the paying agent in Luxembourg. As a foreign private issuer, the
Company is exempt from certain provisions of the Exchange Act prescribing the
furnishing and content of proxy statements to shareholders and relating to
short-swing profits reporting and liability.
 
                                       100
<PAGE>   105
 
                          GENERAL LISTING INFORMATION
 
LISTING
 
     Application has been made to list the Exchange Notes on the Luxembourg
Stock Exchange. The Articles of Association of the Company and the legal notice
relating to the issue of the Notes will be deposited prior to the listing with
the Registrar of the District Court in Luxembourg (Greffier en Chef du Tribunal
d'Arrondissement a Luxembourg), where such documents are available for
inspection and where copies thereof can be obtained upon request. As long as the
Exchange Notes are listed on the Luxembourg Stock Exchange, an Agent for making
payments on, and transfers of, the Exchange Notes will be maintained in
Luxembourg.
 
COMMENTS
 
     The Company has obtained all necessary consents, approvals and
authorizations in connection with the issue of the Notes. The issue of the Notes
was authorized by resolutions of the Supervisory Board on the Company passed on
May 20, 1998.
 
NO MATERIAL CHANGE
 
     Except as disclosed in this Prospectus, there has been no material change
in the financial position of the Company since June 30, 1998 and no material
adverse change in the financial position or prospects of the Company since June
30, 1998.
 
LITIGATION
 
     The Company is not involved in any litigation or arbitration proceedings
which relate to claims or amounts which are material in the context of the issue
of the Notes or that may have, or have had during the 12 months preceding the
date of this Prospectus, a material adverse effect on the financial position of
the Company, nor, so far as any of them is aware, is any such proceeding pending
or threatened.
 
AUDITORS
 
     The consolidated accounts of the Company for the two years ended December
31, 1997 have been prepared in accordance with United States generally accepted
accounting principles ("U.S. GAAP") and have been audited by Arthur Andersen in
accordance with U.S. GAAP. The unaudited consolidated interim accounts for the
six months ended June 30, 1997 and 1998 were prepared in accordance with U.S.
GAAP. Arthur Andersen has given and not withdrawn its written consent to the
issue of this Prospectus with the inclusion in it of their report in the form
and context in which it is included.
 
DOCUMENTS AVAILABLE
 
     Copies of the following documents may be inspected at the specified office
of the Paying and Transfer Agent in Luxembourg.
 
     - Articles of Association of the Company;
 
     - the Registration Rights Agreement relating to the Outstanding Notes;
 
     - the Indenture relating to the Notes (which includes the form of the Note
       certificates); and
 
     - the Escrow Agreement.
 
     In addition, copies of the most recent consolidated financial statements of
the Company for the preceding financial year, and any interim quarterly
financial statements published by the Company, will be available at the
specified office of the Paying and Transfer Agent in Luxembourg for as long as
the Exchange Notes are listed on the Luxembourg Stock Exchange.
 
                                       101
<PAGE>   106
 
CLEARING SYSTEMS
 
     The Notes distributed pursuant to Regulation S and represented by the
Regulation S Global Certificate have been accepted for clearance through the
facilities of Euroclear and Cedel. Relevant trading information is set forth
below. The ISIN number for the Notes distributed pursuant to Regulation S is
USN93195 AA8 9.
 
     The CUSIP number for the Notes distributed pursuant to Rule 144A
represented by the 144A Global Note is 925301 AA 1.
 
     The CUSIP number for the Exchange Notes is 925301 AB9.
 
NOTICES
 
     All notices shall be deemed to have been given upon (i) the mailing by
first class mail, postage prepaid, of such notices to Holders of the Notes at
their registered addresses as recorded in the Register; and (ii) so long as the
Exchange Notes are listed on the Luxembourg Stock Exchange and it is required by
the rules of the Luxembourg Stock Exchange, publication of such notice to the
Holders of the Notes in English in a leading newspaper having general
circulation in Luxembourg (which is expected to be the Luxembourg Wort) or, if
such publication is not practicable, in one other leading English language daily
newspaper with general circulation in Europe, such newspaper being published on
each Business Day in morning editions, whether or not is shall be published in
Saturday, Sunday or holiday editions.
 
                                       102
<PAGE>   107
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Public Accountants....................   F-2
Balance Sheets as of December 31, 1996 and 1997.............   F-3
Statements of Operations for the years ended December 31,
  1996 and 1997.............................................   F-4
Statements of Shareholders' Equity for the years ended
  December 31, 1996 and 1997................................   F-5
Statements of Cash Flows for the years ended December 31,
  1996 and 1997.............................................   F-6
Notes to Financial Statements...............................   F-7
Balance Sheets as of June 30, 1997 and 1998.................  F-14
Statements of Operations for the six month periods ended
  June 30, 1997 and 1998....................................  F-15
Statements of Cash Flows for the six month periods ended
  June 30, 1997 and 1998....................................  F-16
Notes to Interim Financial Statements.......................  F-17
</TABLE>
 
                                       F-1
<PAGE>   108
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To VersaTel Telecom B.V.,
 
     We have audited the balance sheets as of December 31, 1996 and 1997 of
VERSATEL TELECOM B.V. and the statements of operations, shareholders' equity and
cash flows for the years then ended. 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 auditing standards generally
accepted in The Netherlands which do not differ in any significant respect from
United States 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 presentation. We believe that our audit provides a
reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of VersaTel Telecom B.V. as of
December 31, 1996 and 1997 and the result of its operations and its cash flows
for the years then ended, in conformity with United States generally accepted
accounting principles.
 
                                          ARTHUR ANDERSEN
 
Amsterdam, The Netherlands
May 20, 1998.
 
                                       F-2
<PAGE>   109
 
                             VERSATEL TELECOM B.V.
 
                                 BALANCE SHEETS
                           DECEMBER 31, 1996 AND 1997
 
<TABLE>
<CAPTION>
                                                                 1996          1997
                                                              ----------    -----------
                                                                 NLG            NLG
<S>                                                           <C>           <C>
                                        ASSETS
Current Assets:
  Cash......................................................   4,290,119      1,345,981
  Current portion of restricted cash........................     100,000         75,980
  Accounts receivable, net of allowance for doubtful
     accounts of NLG 30,000 and NLG 65,000, respectively....   1,209,224      1,804,373
  Inventory.................................................     135,411        417,572
  Prepaid expenses and other................................      32,472      1,995,251
                                                              ----------    -----------
     Total current assets...................................   5,767,226      5,639,157
                                                              ----------    -----------
Restricted Cash, net of current portion.....................      53,157         72,932
                                                              ----------    -----------
Property and Equipment, net.................................   2,339,550     13,619,207
                                                              ----------    -----------
          Total assets......................................   8,159,933     19,331,296
                                                              ==========    ===========
 
                         LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable..........................................   1,957,993     20,674,434
  Due to related parties....................................     217,987        248,525
  Accrued liabilities.......................................   1,652,704      7,690,886
  Current portion of deferred income........................          --         98,434
  Current portion of capital lease obligations..............     252,895        278,661
                                                              ----------    -----------
     Total current liabilities..............................   4,081,579     28,990,940
                                                              ----------    -----------
Deferred Income, net of current portion.....................          --        341,648
                                                              ----------    -----------
Capital Lease Obligations, net of current portion...........     327,013        107,813
                                                              ----------    -----------
Subordinated Convertible Shareholder Loans..................   3,605,000      8,105,000
                                                              ----------    -----------
Shareholders' Equity:
  Ordinary Shares, NLG 0.10 par value, 44,550,000 shares
     authorized, 8,910,000 issued and outstanding at
     December 31, 1996 and 9,579,643 issued and outstanding
     at December 31, 1997...................................     891,000        957,964
  Additional paid-in capital................................   4,603,975      6,037,011
  Accumulated deficit.......................................  (5,348,634)   (25,209,080)
                                                              ----------    -----------
     Total shareholders' equity.............................     146,341    (18,214,105)
                                                              ----------    -----------
          Total liabilities and shareholders' equity........   8,159,933     19,331,296
                                                              ==========    ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
                                       F-3
<PAGE>   110
 
                             VERSATEL TELECOM B.V.
 
                            STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
 
<TABLE>
<CAPTION>
                                                                 1996          1997
                                                              ----------    -----------
                                                                 NLG            NLG
<S>                                                           <C>           <C>
OPERATING REVENUES..........................................   6,428,178     18,895,766
OPERATING EXPENSES:
  Cost of Revenues..........................................   4,953,829     17,405,302
  Selling, general and administrative.......................   5,485,159     17,526,930
  Depreciation..............................................     453,165      3,236,784
                                                              ----------    -----------
     Total operating expenses...............................  10,892,153     38,169,016
                                                              ----------    -----------
     Operating loss.........................................  (4,463,975)   (19,273,250)
                                                              ----------    -----------
OTHER INCOME (EXPENSES):
  Foreign currency exchange losses, net.....................          --        (52,618)
  Interest income...........................................       3,980         20,686
  Interest expense -- third parties.........................     (24,584)       (41,283)
  Interest expense -- related parties.......................    (248,882)      (513,981)
                                                              ----------    -----------
                                                                (269,486)      (587,196)
                                                              ----------    -----------
          Net loss..........................................  (4,733,461)   (19,860,446)
                                                              ==========    ===========
NET LOSS PER SHARE (Basic and Diluted)......................       (0.95)         (2.20)
Weighted average number of shares outstanding...............   5,004,247      9,042,094
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
                                       F-4
<PAGE>   111
 
                             VERSATEL TELECOM B.V.
 
                       STATEMENTS OF SHAREHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
 
<TABLE>
<CAPTION>
                                                   NUMBER OF               ADDITIONAL
                                                    SHARES      ORDINARY    PAID-IN     ACCUMULATED
                                                  OUTSTANDING    SHARES     CAPITAL       DEFICIT        TOTAL
                                                  -----------   --------   ----------   -----------   -----------
                                                                  NLG         NLG           NLG           NLG
<S>                                               <C>           <C>        <C>          <C>           <C>
Balance at December 31, 1995....................   4,950,000    495,000           --       (615,173)     (120,173)
  Shareholder contributions.....................   3,960,000    396,000    4,603,975             --     4,999,975
  Net loss......................................                     --           --     (4,733,461)   (4,733,461)
                                                   ---------    -------    ---------    -----------   -----------
 
Balance, December 31, 1996......................   8,910,000    891,000    4,603,975     (5,348,634)      146,341
  Shareholder contributions.....................     669,643     66,964    1,433,036             --     1,500,000
  Net loss......................................                     --           --    (19,860,446)  (19,860,446)
                                                   ---------    -------    ---------    -----------   -----------
 
Balance, December 31, 1997......................   9,579,643    957,964    6,037,011    (25,209,080)  (18,214,105)
                                                   =========    =======    =========    ===========   ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
                                       F-5
<PAGE>   112
 
                             VERSATEL TELECOM B.V.
 
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
 
<TABLE>
<CAPTION>
                                                                 1996          1997
                                                              ----------    -----------
                                                                 NLG            NLG
<S>                                                           <C>           <C>
Cash Flows from Operating Activities:
  Net loss..................................................  (4,733,461)   (19,860,446)
  Adjustments to reconcile net loss to net cash used in
     operating activities --
     Depreciation...........................................     453,165      3,236,784
     Restricted cash........................................          --          4,245
     Deferred income........................................          --        440,082
  Changes in other operating assets and liabilities
     Accounts receivable....................................  (1,157,287)      (595,149)
     Inventory..............................................    (113,595)      (282,161)
     Prepaid expenses and other.............................     329,947     (1,962,779)
     Accounts payable.......................................   1,753,825     18,716,441
     Due to related parties.................................     217,987         30,538
     Accrued liabilities....................................   1,530,958      6,038,182
                                                              ----------    -----------
          Net cash provided by (used in) operating
            activities......................................  (1,718,461)     5,765,737
                                                              ----------    -----------
Cash Flows from Investing Activities:
  Capital expenditures......................................  (2,569,171)   (14,516,441)
                                                              ----------    -----------
Cash Flows from Financing Activities:
  Proceeds (redemptions) from capital lease obligations.....     421,284       (193,434)
  Proceeds from subordinated convertible shareholder
     loans..................................................   3,150,000      4,500,000
  Shareholder contributions.................................   4,999,975      1,500,000
                                                              ----------    -----------
          Net cash provided by financing activities.........   8,571,259      5,806,566
                                                              ----------    -----------
Net Increase (Decrease) in Cash.............................   4,283,627     (2,944,138)
Cash, beginning of the year.................................       6,492      4,290,119
                                                              ----------    -----------
Cash, end of the year.......................................   4,290,119      1,345,981
                                                              ==========    ===========
Supplemental Disclosures of Cash Flow Information:
  Cash paid for --
     Interest (net of amounts capitalized)..................      96,189        510,208
     Income taxes...........................................          --             --
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
                                       F-6
<PAGE>   113
 
                             VERSATEL TELECOM B.V.
 
                         NOTES TO FINANCIAL STATEMENTS
 
1.  GENERAL
 
     Versatel Telecom B.V. ("VersaTel" or the "Company"), incorporated in
Amsterdam on October 10, 1995, provides international and national
telecommunication services in The Netherlands.
 
2.  FINANCIAL CONDITION AND OPERATIONS
 
     For the year ended December 31, 1997, the Company had a loss from operating
activities of NLG 19,273,250 and negative working capital of NLG 23,351,783 at
December 31, 1997. In addition, the Company had an accumulated deficit of NLG
25,209,080 as of December 31, 1997. The Company expects to incur operating
losses and net losses for the foreseeable future as it incurs additional costs
associated with the development and expansion of the Company's network, the
expansion of its marketing and sales organization and the introduction of new
telecommunications services. In addition, prices in the telecommunications
industry in Europe have declined in recent years and, as competition continues
to increase, the Company expects that prices will continue to decline.
Management of the Company believes that the Company will be able to borrow
additional financing in order to develop its network, thereby increasing its
traffic volume. Also, management believes that it is able to reduce the cost of
providing telecommunication services, commensurate with the decline of the
prices. To sustain its current level of operations and fund its negative working
capital requirements as of December 31, 1997, management has obtained necessary
financial support commitments from certain of its existing shareholders to
enable it to continue its operations through December 31, 1998. See also Note
19. (Subsequent events.)
 
3.  SIGNIFICANT ACCOUNTING PRINCIPLES
 
  (a) Basis of Financial Statements
 
     The Company maintains its accounts under Dutch tax and corporate
regulations and has made certain out-of-book memorandum adjustments to these
records presenting the accompanying financial statements in accordance with
generally accepted accounting principles in the United States ("U.S. GAAP").
 
  (b) Use of Estimates
 
     The preparation of financial statements in conformity with U.S. GAAP
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.
 
  (c) Foreign Currency Transactions
 
     The Company's functional currency is the Dutch guilder. Transactions
involving other currencies are converted into Dutch guilders using the exchange
rates which are in effect at the time of the transactions.
 
     At the balance sheet date, monetary assets and liabilities which are
denominated in other currencies are adjusted to reflect the current exchange
rates. Gains or losses resulting from foreign currency remeasurements are
reflected in the accompanying statements of operations. In 1996, these gains or
losses were not material.
 
  (d) Inventory
 
     Inventory, consisting primarily of dialers to be installed at customer
locations, is stated at the lower of cost (first-in, first-out) or market value.
Dialers installed at customer locations remain the Company's property and are
capitalized under property and equipment as telephony equipment and are
depreciated on a straight-line basis in 2 or 3 years. The cost of installing
these dialers at customer locations is also capitalized and amortized over the
lifetime of the dialers.
 
                                       F-7
<PAGE>   114
                             VERSATEL TELECOM B.V.
 
                         NOTES TO FINANCIAL STATEMENTS
 
  (e) Pensions and Post Retirement Benefit
 
     Effective January 1, 1996, the Company adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Post Retirement Benefits." Under this
Statement certain disclosures should be made related to pensions and post
retirement benefits. The Company has no pension plan or other post retirement
benefit and an analysis made by management indicated that no additional
disclosure is required.
 
  (f) Advertising expenses
 
     Advertising costs are expensed as incurred.
 
     The expenses related to direct-mail and other marketing methods are
expensed when incurred and included in the advertising expenses.
 
  (g) Recognition of Operating Revenues and Cost of Revenues
 
     Operating revenues are recognized when the service is rendered. Cost of
revenues is recorded in the same period as the revenues are recorded. In order
to properly match the cost of revenues with the associated revenues, these costs
are accrued in the balance sheet under accrued liabilities.
 
     Origination costs billed directly to customers by the PTT (applicable in
the case of the DISA code) are not included in the revenues of the Company. The
Company does reimburse these costs to its customers by means of a credit to the
customer's account. This credit is recorded as cost of revenues.
 
     The cost of telecommunication usage charged by the third party carriers to
the Company in connection with the telecommunication services rendered by the
Company to its customers, as well as other telecommunication costs, including
leased lines, are included in cost of revenues.
 
     The Company did not incur any material upfront expenses in concluding inter
connection and national and international carriers agreements. All expenses
incurred on an ongoing basis as a result of these agreements are expensed as
incurred.
 
     The expenses incurred as a result of obtaining licenses are expensed as
incurred.
 
  (h) Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information," has been issued and is
effective for fiscal years beginning after December 15, 1997. SFAS No. 131
requires certain disclosures about business segments of an enterprise, if
applicable. The adoption of SFAS No. 131 is not expected to have a significant
effect on the Company's financial statements or disclosures.
 
4.  RESTRICTED CASH
 
     Restricted cash balances of NLG 153,157 and NLG 148,912 at December 31,
1996 and 1997, respectively, include mainly amounts restricted in connection
with bank guarantees given to lessors of the Company's buildings.
 
     The restriction on cash terminates upon cancellation of the lease
agreements for the respective buildings. One of the leases will be terminated in
1998, and the restricted balance related to this lease of NLG 75,980 has been
classified under current assets. The remaining leases, which have restricted
balances of NLG 72,932, will terminate in 2001.
 
5.  PREPAID EXPENSES AND OTHER
 
     Included in this caption as of December 31, 1997 is an amount of
NLG 1,563,644 related to Tax on Value Added.
                                       F-8
<PAGE>   115
                             VERSATEL TELECOM B.V.
 
                         NOTES TO FINANCIAL STATEMENTS
 
6.  PROPERTY AND EQUIPMENT
 
     Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed on a straight-line basis over the estimated useful life
of the related asset. Property and equipment operated by the Company under a
capital lease agreement are capitalized.
 
     Listed below are the major classes of property and equipment and their
estimated useful lives in years as of December 31, 1996 and 1997:
 
<TABLE>
<CAPTION>
                                                         USEFUL LIFE      1996          1997
                                                         -----------    ---------    ----------
                                                                           NLG          NLG
<S>                                                      <C>            <C>          <C>
Leasehold improvements.................................        5           40,050       911,092
Telecommunications equipment...........................     2-10        2,375,755    14,749,839
Other..................................................      3-5          388,173     1,546,392
                                                                        ---------    ----------
  Property and equipment...............................                 2,803,978    17,207,323
  Less: Accumulated depreciation.......................                   464,428     3,588,116
                                                                        ---------    ----------
  Property and equipment, net..........................                 2,339,550    13,619,207
                                                                        =========    ==========
</TABLE>
 
     Presented under deferred income is cash received in connection with the
sublease by the company of part of its building. The received amount is released
to the income statement over the period of the sublease.
 
     The short-term portion of the deferred income is presented under short-term
liabilities.
 
7.  LONG-LIVED ASSETS
 
     Effective January 1, 1996 the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." In accordance
with SFAS No. 121, long-lived assets to be held and used by the Company are
reviewed to determine whether any events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. For long-lived
assets to be held and used, the Company bases its evaluation on such impairment
indicators as the nature of the assets, the future economic benefit of the
assets, any historical or future profitability measurements, as well as other
external market conditions or factors that may be present. If such impairment
indicators are present or other factors exist that indicate that the carrying
amount of the asset may not be recoverable, the Company determines whether an
impairment has occurred through the use of an undiscounted cash flow analysis of
assets at the lowest level for which identifiable cash flows exist. If an
impairment has occurred, the Company recognizes a loss for the difference
between the carrying amount and the estimated value of the asset. The fair value
of the asset is measured using quoted market prices or, in the absence of quoted
market prices, fair value is based on an estimate of discounted cash flow
analysis. During the years ended December 31, 1996 and 1997 the Company's
analyses indicated that there was not an impairment of its long-lived assets.
 
8.  ACCRUED LIABILITIES
 
     The accrued liabilities per December 31, 1997 and 1996 are built up as
follows:
 
<TABLE>
<CAPTION>
                                                                1997         1996
                                                              ---------    ---------
                                                                 NLG          NLG
<S>                                                           <C>          <C>
Accrued traffic cost........................................  4,733,579      905,569
Other (all individually under 5%)...........................  2,957,307      747,135
                                                              ---------    ---------
                                                              7,690,886    1,652,704
                                                              =========    =========
</TABLE>
 
                                       F-9
<PAGE>   116
                             VERSATEL TELECOM B.V.
 
                         NOTES TO FINANCIAL STATEMENTS
 
9.  CAPITAL LEASE OBLIGATIONS
 
     The Company entered into a master lease agreement with a finance company to
lease certain telecommunications and EDP equipment. Commitments for minimum
rentals under non-cancellable leases at the end of 1977 are as follows:
 
<TABLE>
<CAPTION>
                                                         CAPITALIZED LEASES
                                                         ------------------
<S>                                                      <C>      <C>          <C>    <C>
1998...................................................  NLG       298,167
1999...................................................             80,433
2000...................................................             20,315
2001...................................................             23,761
2002...................................................              3,997
                                                         ------------------
Total minimum lease payments...........................            426,673
Less amount representing interest......................             40,199
                                                         ------------------
Present value of net minimum lease payments, including
  current maturities of NLG 278,661....................  NLG       386,474
                                                          ---      -------
</TABLE>
 
Property, plant and equipment at year-end include the following amounts for
capitalized leases:
 
<TABLE>
<CAPTION>
                                                              1997              1996
                                                         --------------    --------------
<S>                                                      <C>    <C>        <C>    <C>
Telecommunications equipment...........................  NLG    819,840    NLG    770,000
Other..................................................          27,860                --
                                                         --------------    --------------
                                                                847,700           770,000
Less allowances for depreciation.......................         461,226           190,092
                                                         --------------    --------------
                                                         NLG    386,474    NLG    579,908
                                                         --------------    --------------
                                                         --------------    --------------
</TABLE>
 
10.  SUBORDINATED CONVERTIBLE SHAREHOLDER LOANS
 
     The Company had subordinated convertible shareholder loans with outstanding
balances of NLG 3,605,000 at December 31, 1996 and NLG 8,105,000 at December 31,
1997. The loans bear interest at a rate of 10.0% per annum. The loans will be
repaid in quarterly installments, commencing September 30, 1998 to June 30,
2001. The Company's creditors are entitled to convert NLG 3,605,000 of the
subordinated convertible shareholder loans to Ordinary Shares at a rate of NLG
7.69 per share of the outstanding principal amount in the following situations:
 
     - Default on interest payments or repayments;
 
     - Sale by the Company of (all or a portion of) the operating activities,
       without the consent of the creditor;
 
     - Bankruptcy or voluntary termination of the Company.
 
     The subordinated convertible shareholder loan obtained during 1997 of which
NLG 4,500,000 was outstanding as at December 31, 1997, can be converted by the
creditor at a rate of NLG 3.36, of the outstanding principal amount at any time
during the period between December 1, 1997 and June 20, 1998. Any unpaid amounts
as at June 20, 1998 will be automatically converted into Ordinary Shares at the
rate of NLG 3.36 per share.
 
     The subordinated convertible shareholder loans have been converted into
Ordinary Shares subsequent to December 31, 1997. See Note 19. (Subsequent
Events.)
 
                                      F-10
<PAGE>   117
                             VERSATEL TELECOM B.V.
 
                         NOTES TO FINANCIAL STATEMENTS
 
11.  NET LOSS PER SHARE
 
     In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings per Share" ("SFAS 128"). The Company adopted SFAS
128 for the year ended December 31, 1997. SFAS 128 replaced the primary earnings
per share calculation with a basic earnings per share calculation and modified
the calculation of diluted earnings per share. Adoption of SFAS 128 did not
affect the calculation of net loss per share for the Company. Diluted net loss
per share is calculated by dividing net loss by the weighted average number of
shares outstanding and dilutive stocks outstanding, calculated under the
treasury stock method. Because the Company has operating losses since inception,
options are anti-dilutive.
 
12.  EMPLOYEE BENEFIT PLANS
 
  (a) 1997 Stock Option Plan
 
     In December 1996, the shareholders approved the 1997 Stock Option Plan (the
"1997 Plan"). The 1997 Plan provides for the grant of options to certain key
employees of the Company to purchase depositary receipts issued for Ordinary
Shares of the Company. Under the 1997 Plan, no options may be granted with an
expiration date of more than five years after the granting of the option. The
options will be granted for free with an exercise price to be determined in the
particular grant of the option.
 
     The option holder is not entitled to retain any depositary receipts
received by the option holder as a result of the exercise of its option. Upon
exercise of its option by the option holder, the option holder is required to
offer the depositary receipts received by it to the Company or to another party
designated by the Company, at the Purchase Price (as defined in the 1997 Plan).
Unless otherwise specified in the particular grant of the option, the Purchase
Price will be the fair market value of the Ordinary Shares minus a penalty
discount. The 1997 Plan contains provisions in the event of a dispute regarding
the fair market value of the Ordinary Shares. The penalty discount, if any, is
determined by the length of employment of the particular option holder.
 
     Pursuant to the Shareholders' Agreement, Telecom Founders, Cromwilld and
NeSBIC must make available the shares underlying the depositary receipts to be
issued under the 1997 Plan.
 
     As of the date of this Prospectus, 199,000 options to purchase 199,000
depositary receipts had been granted under the 1997 Plan and the Company does
not intend to grant any more options under the 1997 Plan.
 
     The Company accounts for the 1997 Plan under APB Opinion No. 25, under
which no compensation cost has been recognized. Had compensation cost for stock
options awarded under these plans been determined consistent with FASB Statement
No. 123, the Company's net income and earnings per share would have been reduced
to the following pro forma amounts:
 
<TABLE>
<CAPTION>
                                                                              1997
                                                                           -----------
                                                                               NLG
<S>                                                           <C>          <C>
Net Loss: ..................................................  As reported  (19,860,446)
                                                              Pro forma    (19,886,957)
Net loss per share (basic and diluted):.....................  As reported        (2.20)
                                                              Pro forma          (2.20)
</TABLE>
 
     Of the 199,000 options outstanding at December 31, 1997, 149,500 have
exercise and weighted average exercise prices of NLG 1.26 and a weighted average
remaining contract life of 4.5 years. All of these options are exercisable. Of
the remaining 49,500 options outstanding at December 31, 1997, 49,500 have
exercise and weighted average exercise prices of NLG 0.59 and a weighted average
remaining contract life of 4.0 years. All of these options are exercisable.
 
                                      F-11
<PAGE>   118
                             VERSATEL TELECOM B.V.
 
                         NOTES TO FINANCIAL STATEMENTS
 
     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for fiscal 1997: risk free rate of 5.75%; expected dividend
yield of 0.00%; expected life of 5 years; and expected volatility of 0.00%.
 
     The fair value of the depository receipts at the date of the grant equals
the exercise price of the options granted under the 1997 Stock Option Plan.
 
  (b) 1998 Stock Option Plan
 
     In March 1998, the shareholders approved the 1998 Stock Option Plan (the
"1998 Plan"). The 1998 Plan provides for the grant of options to employees to
purchase depositary receipts issued for Ordinary Shares of the Company. The
option period will commence at the date of the grant and will last five years.
The option exercise price shall be the economic value of the depositary receipt
at the date of the grant of the option. The 1998 Plan contains specific
provisions for the determination of the economic value of the depositary
receipts.
 
     The option holder is not entitled to retain any depositary receipts
received by the option holder as a result of the exercise of its option. Upon
exercise of its option by the option holder, the option holder is required to
offer the depositary receipts received by it, within one year after the end of
the option period, to the Company or to another party designated by the Company,
at a purchase price equal to the economic value of the depositary receipts.
 
     As of the date of this Prospectus 2,500,000 options to purchase 2,500,000
depositary receipts have been granted under the 1998 Plan. The exercise prices
for the 2,500,000 options granted under the 1998 Stock Option Plan were NLG 4.45
for the first tranch of 2,175,000 options (2,130,000 options granted on April
24, 1998 and 45,000 options granted on May 11, 1998) and NLG 5.10 for the second
tranch of 325,000 options (granted on June 17, 1998).
 
     The fair value of the depository receipts at the date of the grant equals
the exercise price of the options granted under the 1998 Stock Option Plan. This
value was based on recent transactions conducted on an at arm's length basis,
with third parties becoming shareholders.
 
     The depositary receipts issued under both the 1997 Plan and the 1998 Plan
will be administered by the Stichting Administratiekantoor Versatel.
 
13.  TAXES
 
     The Company had income tax carry-forwards of NLG 1,872,022 at December 31,
1996 and NLG 8,193,178 at December 31, 1997, which may be utilized to reduce
future income taxes payable.
 
     The income tax carry-forwards do not expire and can be utilized
indefinitely under Netherlands tax legislation. A valuation allowance has been
established for the entire amount of the Net Operating Loss carry-forwards due
to the uncertainty of its recoverability.
 
     There were no significant temporary differences which gave rise to deferred
tax assets and liabilities at December 31, 1996 or 1997.
 
14.  ADVERTISING EXPENSES
 
     The total amount of advertising expenses was NLG 3,743,285 for the year
ended December 31, 1997. The comparable expenses for the year ended December 31,
1996 amounted to NLG 1,589,815.
 
                                      F-12
<PAGE>   119
                             VERSATEL TELECOM B.V.
 
                         NOTES TO FINANCIAL STATEMENTS
 
15.  RELATED PARTY TRANSACTIONS
 
     At December 31, 1996 and 1997, the Company had various accounts payable to
and accruals outstanding relating to related parties. These relate mainly to
interest payable on the subordinated convertible shareholder loans of
approximately NLG 174,000 and NLG 199,000 at December 31, 1996 and 1997.
 
16.  CREDIT FACILITIES
 
     The Company maintains a credit facility under which it can borrow up to
NLG 100,000. As of December 31, 1996 and 1997, no amounts were outstanding under
this credit facility.
 
17.  RENT AND OPERATING LEASE COMMITMENTS
 
     Future minimum commitments in connection with rent and other operating
lease agreements are as follows at December 31, 1997:
 
<TABLE>
<S>                                           <C>
1998........................................  NLG 1,828,000
1999........................................      1,461,000
2000........................................      1,331,000
2001........................................        371,000
2002........................................          4,000
</TABLE>
 
     Rent and operating lease expenses amounted to approximately NLG 271,000 in
1996 and NLG 585,000 in 1997.
 
18.  FINANCIAL INSTRUMENTS
 
     SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments
whether or not recognized in the balance sheet. The carrying amounts reported in
the consolidated balance sheets for cash, trade receivables, accounts payable
and accrued expenses approximate fair value based on the short-term maturity of
these instruments. The carrying amount of the Company's borrowings under the
long-term debt agreements approximates fair value as the interest rates on these
long term debts approximates the current market interest rates.
 
19.  SUBSEQUENT EVENTS
 
     Subsequent to December 31, 1997 the Company received additional shareholder
contributions of NLG 35,000,000. Furthermore, subordinated convertible
shareholder loans were converted into common stock for a total amount of
NLG 8,105,000.
 
                                      F-13
<PAGE>   120
 
                             VERSATEL TELECOM B.V.
 
                                 BALANCE SHEETS
                             JUNE 30, 1997 AND 1998
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                 1997         1998
                                                              ----------   -----------
                                                                 NLG           NLG
<S>                                                           <C>          <C>
                                        ASSETS
Current Assets:
  Cash......................................................     198,257   282,445,858
  Current portion of restricted cash........................          --   166,125,984
  Accounts receivable, net of allowance for doubtful
     accounts...............................................   3,011,691     5,064,449
  Inventory.................................................     530,474       744,000
  Prepaid expenses and other................................     865,881     3,675,580
                                                              ----------   -----------
     Total current assets...................................   4,606,303   458,055,871
                                                              ----------   -----------
Restricted Cash, net of current portion.....................          --            --
                                                              ----------   -----------
Capitalized finance costs, net..............................          --    19,833,333
                                                              ----------   -----------
Property and Equipment, net.................................   5,239,060    24,665,538
                                                              ----------   -----------
     Total assets...........................................   9,845,363   502,554,742
                                                              ==========   ===========
 
                         LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable..........................................   6,174,343    19,733,139
  Due to related parties....................................          --            89
  Accrued liabilities.......................................   3,023,815    17,063,117
  Current portion of deferred income........................          --        65,622
  Current portion of capital lease obligations..............     192,366       199,509
                                                              ----------   -----------
     Total current liabilities..............................   9,390,524    37,061,476
                                                              ----------   -----------
Deferred Income, net of current portion.....................          --       325,243
                                                              ----------   -----------
Capital Lease Obligations, net of current portion...........     295,761        49,656
                                                              ----------   -----------
Long Term Loan (13 1/4% Senior Notes).......................          --   455,080,840
                                                              ----------   -----------
Subordinated Convertible Shareholder Loans..................   3,605,000            --
                                                              ----------   -----------
Prepaid Shareholder Contributions...........................          --            --
                                                              ----------   -----------
                                                               3,900,761   455,455,739
                                                              ----------   -----------
Shareholders' Equity:
  Ordinary Shares, NLG 0.10 par value, 44,550,000 shares
     authorized, 8,910,000 issued and outstanding at June
     30, 1997 and 19,427,405 issued and outstanding at June
     30, 1998...............................................     891,000     1,942,741
  Additional paid-in capital................................   4,603,975    50,786,538
  Warrants..................................................          --     3,191,122
  Accumulated deficit.......................................  (8,940,897)  (45,882,874)
                                                              ----------   -----------
     Total shareholders' equity.............................  (3,445,922)   10,037,527
                                                              ----------   -----------
     Total liabilities and shareholders' equity.............   9,845,363   502,554,742
                                                              ==========   ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
                                      F-14
<PAGE>   121
 
                             VERSATEL TELECOM B.V.
 
                            STATEMENTS OF OPERATIONS
             FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1998
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                 1997          1998
                                                              ----------    -----------
                                                                 NLG            NLG
<S>                                                           <C>           <C>
OPERATING REVENUES..........................................   8,937,522     15,750,089
OPERATING EXPENSES:
  Cost of revenues..........................................   6,328,323     13,089,945
  Selling, general and administrative.......................   5,331,408     14,274,226
  Depreciation..............................................     680,393      2,693,645
                                                              ----------    -----------
     Total operating expenses...............................  12,340,124     30,057,816
                                                              ----------    -----------
     Operating loss.........................................  (3,402,602)   (14,307,727)
                                                              ----------    -----------
OTHER INCOME (EXPENSES):
  Currency exchange loss....................................          --       (339,624)
  Interest income...........................................      20,686      1,971,741
  Interest expense -- third parties.........................     (20,726)       (99,595)
  Interest expense -- related parties.......................    (189,621)    (7,898,589)
                                                              ----------    -----------
                                                                (189,661)    (6,366,067)
                                                              ----------    -----------
     Net loss...............................................  (3,592,263)   (20,673,794)
                                                              ==========    ===========
NET LOSS PER SHARE (Basic and Diluted)......................       (0.40)         (1.58)
Weighted average number of shares outstanding...............   8,910,000     13,123,027
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
                                      F-15
<PAGE>   122
 
                             VERSATEL TELECOM B.V.
 
                            STATEMENTS OF CASH FLOWS
             FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1998
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                 1997           1998
                                                              ----------    ------------
                                                                 NLG            NLG
<S>                                                           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss..................................................  (3,592,263)    (20,673,794)
  Adjustments to reconcile net loss to net cash used in
     operating activities --
     Depreciation...........................................     680,383       2,526,978
     Amortization...........................................          --         166,667
     Restricted cash........................................     153,157    (165,977,072)
     Deferred income........................................          --         (49,217)
  Changes in other operating assets and liabilities
     Accounts receivable....................................  (1,802,467)     (3,260,076)
     Inventory..............................................    (395,063)       (326,428)
     Prepaid expenses and other.............................    (833,409)     (1,680,329)
     Accounts payable.......................................   4,216,350        (941,295)
     Due to related parties.................................    (217,987)       (248,436)
     Accrued liabilities....................................   1,371,111       9,372,231
                                                              ----------    ------------
          Net cash used in operating activities.............    (420,188)   (181,090,771)
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures......................................  (3,579,803)    (13,573,309)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Redemptions from capital lease obligations................     (91,871)       (137,309)
  Capitalized finance costs.................................          --     (20,000,000)
  Loans granted.............................................          --     446,975,840
  Issuance of shares........................................          --      48,925,426
                                                              ----------    ------------
          Net cash provided by (used in) financing
             activities.....................................     (91,871)    475,763,957
NET INCREASE (DECREASE) IN CASH.............................  (4,091,862)    281,099,877
                                                              ==========    ============
CASH, beginning of the period...............................   4,290,119       1,345,981
CASH, end of the period.....................................     198,257     282,445,858
                                                              ----------    ------------
                                                               4,091,862    (281,099,877)
                                                              ==========    ============
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
                                      F-16
<PAGE>   123
 
                             VERSATEL TELECOM B.V.
 
                     NOTES TO INTERIM FINANCIAL STATEMENTS
                          AS OF JUNE 30, 1997 AND 1998
                                  (UNAUDITED)
 
1.  FINANCIAL PRESENTATION AND DISCLOSURES
 
     In the opinion of management, the accompanying unaudited condensed interim
financial statements of Versatel Telecom B.V. (the "Company") have been prepared
in comformity with US GAAP and contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the Company's financial
position as of June 30, 1997 and June 30, 1998, and the results of operations
and cash flows for the periods indicated.
 
     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the Company's 1997 audited financial statements and
the notes related thereto. The results of operations for the six months period
ended June 30, 1998 may not be indicative of the operating results for the full
year.
 
     As of June 30, 1998, the Company was owned by five shareholders, Telecom
Founders, NeSBIC, Paribas, NPM and Cromwilld.
 
     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. It also requires that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting.
 
     SFAS No. 133 is effective for fiscal years beginning after June 15, 1999
and can not be applied retroactively. The Company has not yet quantified the
impacts of adopting SFAS No. 133 on the financial statements and have not
determined the timing of or method of our adoption of SFAS No. 133.
 
2.  FINANCIAL CONDITION AND OPERATIONS
 
     For the year ended December 31, 1997, the Company had a loss from operating
activities of NLG 19,273,250 and negative working capital of NLG 23,351,783 at
December 31, 1997. For the six-month period ended June 30, 1998, the loss from
operating activities amounted to NLG 14,307,727 and the positive working capital
at June 30, 1998 amounted to NLG 420,994,395. In addition, the Company had an
accumulated deficit of NLG 25,209,080 as of December 31, 1997 and of NLG
45,882,874 as of June 30, 1998. The Company expects to incur operating losses
and net losses for the foreseeable future as it incurs additional costs
associated with the development and expansion of the Company's network, the
expansion of its marketing and sales organization and the introduction of new
telecommunications services. In addition, prices in the telecommunications
industry in Europe have declined in recent years and, as competition continues
to increase, the Company expects that prices will continue to decline.
Management of the Company believes that the Company will be able to borrow
additional financing in order to develop its network and by that increasing
traffic volume. Also, management believes that it is able to reduce the cost of
providing telecommunication services, commensurate with the decline of the
prices. To sustain its current and future level of operations the Company issued
a private debt offering with gross proceeds of US$225,000,000 on May 20, 1998
repayable in 2008. The private debt offering consists of 13 1/4% senior notes
due 2008 and warrants to purchase 1,500,000 Ordinary Shares of the Company. The
cost in connection with the private debt offering of NLG 20.0 million have been
capitalized and are amortized over the duration of the underlying offering (10
years).
 
                                      F-17
<PAGE>   124
                             VERSATEL TELECOM B.V.
 
                     NOTES TO INTERIM FINANCIAL STATEMENTS
 
  Recapitalization
 
     To increase the equity of the Company by means of the conversion of
subordinated debt and cash contribution by its shareholders, the Company has
completed the following four part Recapitalization.
 
     In February 1998, NeSBIC converted its NLG 4.5 million bridge loan into
Ordinary Shares of the Company. In addition, Telecom Founders and NeSBIC
invested an additional NLG 7.2 million in equity capital in the Company which
was formally contributed on April 17, 1998. In addition, NeSBIC and Cromwilld
converted their subordinated convertible notes totaling NLG 3.6 million into
Ordinary Shares of the Company in April 1998. The third component included a new
equity investment by Paribas of NLG 12.8 million. In May 1998, NeSBIC, Telecom
Founders, Paribas and NPM have invested an additional NLG 15.0 million in equity
capital. Accordingly, the invested equity in the Company has increased from NLG
7.0 million to NLG 50.1 million.
 
     The conversion price of NLG 3.36 per share used for the conversion of the
1996 and 1997 loans was approved in separate shareholder resolutions, dated
March 2, 1998 and September 30, 1997, respectively.
 
     The estimated fair value at the date of the extinguishment of the
shareholder loans amounted to NLG 4.45 per share, which represented the price
paid by an unrelated party on April 8, 1998 for the Company's ordinary shares.
As the conversion took place very shortly thereafter on April 17, 1998, the
price paid by the new shareholder was deemed to be the fair value on the date of
extinguishment.
 
     Cromwilld, one of the shareholders of the Company, has objected to the
above Recapitalization. Based upon advice from the Company's legal counsel, the
impact of this objection is considered to be remote.
 
Acquisition
 
     In June 1998, the Company acquired Bizztel Telematica B.V. ("Biztell"). The
figures of Bizztel are included in the financial statements as of June 30, 1998.
The key figures of Bizztel are summarized as follows: sales NLG 32,223, total
assets NLG 415,600, total equity NLG 390,600 and the net loss for the period of
NLG 32,767.
 
                                      F-18
<PAGE>   125
 
                                    ANNEX A
                                    GLOSSARY
 
     Access costs -- The costs paid by long distance carriers to the local
telephone companies for accessing the local networks of the local telephone
companies to originate and terminate long distance calls.
 
     ADM (Add-drop multiplexer) -- A multiplexer which controls cross connect
between individual circuits by software, permitting dynamic cross connect of
individual 64 kbps circuits within an El line.
 
     Bandwidth -- The range of frequencies that can be passed through a medium,
such as glass fibers, without distortion. The greater the bandwidth, the greater
the information-carrying capacity of such medium. For fiber optic transmission,
electronic transmitting devices determine the bandwidth, not the fibers
themselves. Bandwidth is measured in Hertz (analog) or Bits Per Second
(digital).
 
     Bps -- Bits per second; the basic measuring unit of speed in a digital
transmission system; the number of bits that a transmission facility can convey
between a sending location and a receiving location in one second.
 
     Carrier pre-selection -- The ability of end users to select the long
distance or international operator of their choice prior to the time their calls
are made.
 
     Carrier selection -- The ability of end users to select on a call-by-call
basis the long distance or international operator of their choice.
 
     Closed user group -- A group of customers with some affiliation with one
another and which are treated for regulatory purposes as not being the public.
 
     Dark fiber -- Fiber that lacks the requisite electronic and optronic
equipment necessary to use the fiber for transmission.
 
     Facilities-based carrier -- A company that owns or leases its international
network facilities including undersea fiber optic cables and switching
facilities rather than reselling time provided by another facilities-based
carrier.
 
     Fiber-optic cable -- The medium of choice for the telecommunications
industry. Fiber is immune to electrical interferences and environmental factors
that affect copper wiring and satellite transmission. Fiber-optic technology
involves sending laser light pulses across glass strands in order to transmit
digital information. A strand of fiber-optic cable is as thick as a human hair
yet has more bandwidth capacity than a copper wire the width of a telephone
pole.
 
     Interconnect -- Connection of a telecommunications device or service to the
PSTN.
 
     Local loop -- That portion of the local telephone network that connects the
customer's premises to the local exchange provider's central office or switching
center. This includes all the facilities starting from the customer premise
interface which connects to the inside wiring and equipment at the customer
premise to a terminating point within the switching wire center.
 
     Mbps -- Megabits per second, a measurement of speed for digital signal
transmission expressed in millions of bits per second.
 
     NOC -- Network operations center.
 
     Nodes -- Locations within the network housing electronic equipment and/or
switches which serve as intermediate connection points to send and receive
transmission signals.
 
     Number Portability -- The ability of end users to keep their number when
changing operators.
 
     POP (Points of Presence) -- Switches owned or leased by an interexchange
carrier that is located near a local exchange carrier's switch and that enables
the interexchange carrier to access the local exchange carrier's customers
and/or services.
 
                                       A-1
<PAGE>   126
 
     PBX (Private Branch Exchange) -- A switching system within an office
building that allows calls from outside to be routed directly to the individual
instead of through a central number. A PBX also allows for calling within an
office by way of four-digit extensions.
 
     PSTN (Public Switched Telephone Network) -- A telephone network which is
accessible by the public through private lines, wireless systems and pay phones.
 
     PTT (Postal, Telephone and Telegraph Company) -- The dominant carrier or
carriers in each Member State of the EU, until recently, often, but not always,
government-owned or protected.
 
     Reseller -- A carrier that does not operate its own transmission facilities
(although it may own its own switches or other equipment), but obtains
communications services from another carrier for resale to the public for
profit.
 
     Switch -- A sophisticated computer that accepts instructions from a caller
in the form of a telephone number. Like an address on an envelope, the numbers
tell the switch where to route the call. The switch opens or closes circuits or
selects the paths or circuits to be used for transmission of information.
Switching is a process of interconnecting circuits to form a transmission path
between users. Switches allow telecommunications service providers to connect
calls directly to their destination, while providing advanced features and
recording connection information for future billing.
 
     SDH (Synchronous Digital Hierarchy) -- SDH is a set of standards for
optical communications transmission systems that define optical rates and
formats, signal characteristics, performance, management and maintenance
information to be embedded within the signals and the multiplexing techniques to
be employed in optical communications transmission systems. SDH facilitates the
interoperability of dissimilar vendors' equipment and benefits customers by
minimizing the equipment necessary for telecommunications applications. SDH also
improves the reliability of the local loop connecting customers' premises to the
local exchange provider, historically one of the weakest links in the service
delivery.
 
     Traffic -- A generic term that includes any and all calls, messages and
data sent and received by means of telecommunications.
 
     WDM (Wavelength Division Multiplexing) -- A multiplexing technique allowing
multiple different signals to be carried simultaneously on a fiber by allocating
resources according to frequency on non-overlapping frequency bands.
 
                                       A-2
<PAGE>   127
 
                   PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY
 
                      VERSATEL TELECOM INTERNATIONAL N.V.
                                 Paalbergweg 36
                           1105 BV Amsterdam-Zuidoost
                                The Netherlands
 
                              INDEPENDENT AUDITORS
 
                                ARTHUR ANDERSEN
                            Prof. W.H. Keesomlaan 8
                               1183 DJ Amstelveen
                                The Netherlands
 
                                 LEGAL ADVISERS
 
<TABLE>
<S>                                            <C>
                As to U.S. Law                                As to Dutch Law
             SHEARMAN & STERLING                        STIBBE SIMONT MONAHAN DUHOT
             599 Lexington Avenue                           Strawinskylaan 2001
        New York, New York 10022-6069                        1077 ZZ Amsterdam
                                                              The Netherlands
</TABLE>
 
            TRUSTEE, REGISTRAR, PRINCIPAL PAYING AND TRANSFER AGENT
 
                    UNITED STATES TRUST COMPANY OF NEW YORK
                            770 Broadway, 13th Floor
                            New York, New York 10003
 
                    LISTING AGENT, PAYING AND TRANSFER AGENT
 
                       KREDIETBANK, S.A. LUXEMBOURGEOISE
                              43, Boulevard Royal
                               L-2955 Luxembourg
<PAGE>   128
 
- ---------------------------------------------------------
- ---------------------------------------------------------
 
     NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS EXCHANGE
OFFER OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE
TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY THE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
 
                          ---------------------------
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                           Page
                                           ----
<S>                                        <C>
Service of Process and Enforceability of
  Civil Liabilities......................    1
Disclosure Regarding Forward-Looking
  Statements.............................    1
Presentation of Information..............    2
Summary..................................    3
Risk Factors.............................   15
Use of Proceeds..........................   28
The Exchange Offer.......................   28
Exchange Rate Information................   35
Capitalization...........................   36
Selected Financial and Other Data........   37
Management's Discussion and Analysis of
  Financial Condition and Results of
  Operations.............................   38
Business.................................   44
Management...............................   58
Security Ownership of Principal
  Shareholders and Management............   63
Certain Relationships and Related
  Transactions...........................   64
Description of the Exchange Notes........   65
Certain Tax Considerations...............   95
Plan of Distribution.....................   99
Legal Matters............................  100
Independent Auditors.....................  100
Available Information....................  100
General Listing Information..............  101
Index to Financial Statements............  F-1
Glossary.................................  A-1
</TABLE>
 
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- ---------------------------------------------------------
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                            [VERSATEL TELECOM LOGO]
 
                                    VERSATEL
 
                                    TELECOM
                               INTERNATIONAL N.V.
 
                               OFFER TO EXCHANGE
                         13 1/4% SENIOR NOTES DUE 2008
                              FOR ALL OUTSTANDING
                         13 1/4% SENIOR NOTES DUE 2008
                          ---------------------------
 
                                   PROSPECTUS
 
                          ---------------------------
                                November 5, 1998
 
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