U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(Mark One)

/X/  Annual report under Section 13 or 15(d) of the Securities and
     Exchange Act of 1934

             For the fiscal year ended December 31, 1996

/    /  Transition  report  under  Section  13 or  15(d) of the  Securities  and
     Exchange Act of 1934 For the transition period from to .


                         COMMISSION FILE NUMBER 33-97876


                               USTN HOLDINGS, INC.
        (Exact name of small business issuer as specified in its charter)


       Delaware                                      36-4042177
(State or other jurisdiction                     (I.R.S. Employer
of incorporation or organization)                Identification No.)


 4501 Intelco Loop, Lacey, Washington                    98503
(Address of principal executive office)               (Zip code)

                                 (360) 493-6000
                  (Issuer's telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:  None
Securities registered under Section 12(g) of the Exchange Act:  None

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for past 90 days. Yes_X_ No__

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year. $37,887,878

Voting stock held by  non-affiliates  has no currently  quoted market value.  No
voting stock held by non-affiliates  has been sold or been the subject of bid or
ask prices in the past 60 days.

At December 31, 1996, 5,262,354 shares of  common stock, $0.01 per share par
value.

Transitional Small Business Disclosure Format (check one):  Yes /_/ No /X/

                                   -1-
<PAGE>
                         USTN HOLDINGS, INC.
                    INDEX TO 10-KSB FOR THE FISCAL
                     YEAR ENDED DECEMBER 31, 1996

                                                                          PAGE
                                                                          ----
                               PART I

ITEM 1:  DESCRIPTION OF BUSINESS                                            3

ITEM 2:  DESCRIPTION OF PROPERTY                                            4

ITEM 3:  LEGAL PROCEEDINGS                                                  5

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                5

                              PART II

ITEM 5:  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

ITEM 6:  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

ITEM 7:  FINANCIAL STATEMENTS

     USTN Holdings, Inc. Consolidated Balance Sheets -
       December 31, 1996 and 1995                                          11
     USTN Holdings, Inc. Consolidated Statements of Operations -
       Years ended December 31, 1996 and 1995                              13
     USTN Holdings, Inc. Consolidated Statements of Shareholders' Equity -
       Years ended December 31, 1996 and 1995                              14
     USTN Holdings, Inc. Consolidated Statements of Cash Flows -
       Years ended December 31, 1996 and 1995                              15
     Notes to Consolidated Financial Statements - December 31, 1996        16
     Report of Ernst & Young LLP, Independent Auditors                     25

ITEM 8:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE                                          25

                                    PART III

ITEM 9:  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT                 26

ITEM 10: EXECUTIVE COMPENSATION                                            31

ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT    33

ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                    36

ITEM 13: EXHIBITS, LIST AND REPORTS ON FORM 8-K

SIGNATURES                                                                 40

                                       -2-
<PAGE>
                                     PART I


ITEM 1:   DESCRIPTION OF BUSINESS

USTN Holdings, Inc., and its wholly-owned subsidiary Illuminet, Inc.,
(collectively referred to as ("ILLUMINET") were incorporated in the State of
Delaware on August 2, 1995 to effect the merger of U.S. Intelco Holdings, Inc.
("U.S. Intelco") and Independent Telecommunications Network, Inc. ("ITN").  In
accordance with terms of the merger, U.S. Intelco and ITN merged with and into
USTN Services, Inc. ("USTN Services") on February 23, 1996 (the "Merger").
USTN Services subsequently changed its name to Illuminet, Inc.

The Merger was accounted for as a purchase  business  combination  in accordance
with generally  accepted  accounting  principles with U.S. Intelco designated as
the acquiring company.  Accordingly,  the consolidated  statements of operations
and cash flows for the year  ended  December  31,  1995  presented  in this Form
10-KSB  represent the  stand-alone  results of operations and cash flows of U.S.
Intelco.  The  results of ITN's  operations  are  included  in the  consolidated
financial  statements  prospectively  from the date of the Merger. The pro forma
information  presented in the  Management's  Discussion  and Analysis or Plan of
Operations item reflects the combined  activities of U.S.  Intelco and ITN as if
the Merger had occurred effective January 1, 1995.

ILLUMINET is engaged in the  business of  developing,  managing and  marketing a
Signaling System 7 ("SS7") network and related products and services based on SS
technology  to the  entire  telecommunications  marketplace,  including  network
services  and other  products  and  services  to the  cellular  market.  SS7 is
a telecommunications  industry-standard system of protocols and procedures that
is used to control  telephone  communications  and provide  routing  information
in association with vertical calling  features,  such as card validation,  
Advanced Intelligent Network ("AIN") services, cellular services, 800 Number 
Portability, and Calling Name Delivery.  Additionally,  ILLUMINET provides 
advanced data base services,  billing-and-collection services, and calling card
services to a range of telephone companies as well as inter-exchange carriers
("Carriers"), operator service providers ("OSPs") and other telecommunications 
companies and providers of telecommunications services.  ILLUMINET  primarily  
provides services to companies in the  telecommunications  industry that are 
located throughout the United States and considers all of its operations as 
one segment.

COMPETITION

     The  advanced  data base,  billing  and  collection,  calling  card and SS7
network  services  offered  by  ILLUMINET  are  offered  by a  number  of  other
companies. In the area of billing-and-collection services, ILLUMINET competes
with Independent NECA Services, a New Jersey-based company. Each of the Regional
Bell Operating  Companies  ("RBOCs") created by the AT&T break-up,  Southern New
England  Telephone  Company  ("SNET"),   Sprint  Corporation   ("Sprint"),   MCI
Communications  Corporation  ("MCI"),  and GTE Corporation  ("GTE") operate line
information data bases and SS7 networks that are in competition with ILLUMINET's
services. In addition, a few state  telecommunications  associations have formed
intrastate networks to provide services to member companies. These are primarily
equal access and facilities networks;  however, their associations with carriers
could allow these statewide  associations  to offer  competing  calling card and
marketing services on a local level.

     Although  ILLUMINET's  network  may be similar  to the other SS7  networks,
ILLUMINET believes its network offers its customers significant advantages apart
from the  technology.  Since the  ILLUMINET  network  is  dedicated  to  serving
customers without competing with them, customers provide viewpoints on

                              -3-
<PAGE>
services  offered by the network and the timing of the delivery of such services
without the concern of aiding their competitors.

REGULATION

     ILLUMINET does not provide voice-grade or data telecommunications  services
to the public.  ILLUMINET  will  provide  facilities  and  services on a private
contractual  basis to other  entities in the  telecommunications  industry which
will utilize the services and  facilities in their  provision of both  regulated
and nonregulated  telecommunications  services. In as much as ILLUMINET does not
provide voice-grade or data common carrier  telecommunications  services,  it is
anticipated  that the  construction  of facilities  and provision of services by
ILLUMINET  will not be subject to regulation by the FCC or state public  utility
commissions.

SUPPLIERS

     Certain aspects of ILLUMINET's  services  incorporate  services or products
provided by third parties. For example,  Ameritech Corp. provides the data base
used in ILLUMINET's  800 data base services which allow carriers to query an 800
data base to obtain screening and routing information for originating 800 calls.
Additionally,  several  inter-exchange  carriers provide data transmission lines
that are integral to  ILLUMINET's  SS7 network.  The providers of these services
are not the only  available  sources of such services.  Consequently,  ILLUMINET
believes  that if  necessary,  such  services can be obtained  from  alternative
vendors at competitive rates.

INTELLECTUAL PROPERTY

    ILLUMINET relies on a combination of copyright, trademark, trade secret,
unfair competition and other intellectual property laws, a patent,
confidentiality procedures and contractual provisions to protect its
proprietary rights.  Such protections, however, may not be adequate to prevent
misappropriation of such rights and may not preclude competitors from
independently developing services similar to the ILLUMINET's services.  The
technology  underlying  ILLUMINET's  patent is a usage measurement  system for a
telephone signaling network. The patent will expire on January 18, 2010. As part
of a patent  settlement  arrangement,  ILLUMINET has granted UNISYS  Corporation
("UNISYS") a non-exclusive,  irrevocable, fully paid license to make, have made,
sell, offer to sell and/or use products, systems, methods and/or processes under
the patent.  The license  granted to UNISYS does not include any right of UNISYS
in or to any particular  technology of ILLUMINET which embodies the patent, such
as ILLUMINET's INMART or AMAT7 (TM) software. From time to time ILLUMINET
receives or solicits inquiries for the sale or licensing of certain of its 
assets, including the patent, which it will consider on a case-by-case basis.

EMPLOYEES

     As of December 31, 1996, ILLUMINET had 199 full time employees.

ITEM 2:   DESCRIPTION OF PROPERTY

     ILLUMINET's headquarters and a portion of its operations center are located
in Lacey,  Washington,  where it owns a 70,000 square foot facility.  The 
building, approximately  13.7  acres of land on which the  building  is 
constructed,  and certain of  ILLUMINET's  computer  hardware  and  software are
financed by Rural Telephone  Finance  Cooperative  ("RTFC").  RTFC  has a first
priority  lien on substantially all of ILLUMINET's assets,  revenues and
property,  excluding cash collected  and held on  behalf  of others  in the  
normal course of providing ILLUMINET's services.

                                   -4-
<PAGE>

     ILLUMINET  also leases 18,683 square feet of office space in Overland Park,
Kansas,  where in addition  to certain  selling  and  administrative  functions,
ILLUMINET has its Network  Surveillance and Control Center (NSCC) which operates
on a 24-hour a day basis,  7 days a week.  The lease term began  August 16, 1993
and  expires  August  15,  1998,  with an  option  to renew  the  lease  for two
additional five-year periods.

     ILLUMINET's  network  operations  include  redundant Signal Transfer Points
("STPs") facilities located in Mattoon, Illinois, and Rock Hill, South Carolina.
Additional STP facilities are currently being installed in Lacey, Washington and
Las  Vegas,  Nevada.  ILLUMINET  has  subleased  4,657  square  feet for its STP
facilities   at  Mattoon,   Illinois  in  the   headquarters   of   Consolidated
Communications,  Inc., a shareholder of ILLUMINET.  The sublease expired on July
31, 1996,  and was renewed under one of the three  additional  five-year  period
renewal  options.  ILLUMINET  leases 6,468 square feet for its STP facilities at
Rock Hill,  South  Carolina,  of which it subleases 1,243 square feet to another
party.  The lease  expired  April 30, 1996,  and was renewed  under one of three
additional  five-year  period  renewal  options.  In  February  1997,  ILLUMINET
negotiated a five-year  lease expiring in December 2001 for 600 square feet with
an unrelated party for its STP facilities at Las Vegas, Nevada.

ITEM 3:  LEGAL PROCEEDINGS

     On  February  6, 1996,  one ITN  shareholder  filed a lawsuit  in  Delaware
Chancery  Court  against  ITN and its board of  directors  alleging  breaches of
fiduciary  duty on the  part of the ITN  board  of  directors  related  to their
approval  of the  Merger  into  ILLUMINET.  In  February  1997,  this  suit  was
voluntarily dismissed without prejudice by the plaintiff.

ITEM 4:   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matter was submitted  to a vote of security  holders  during the fourth
quarter of 1996.

                                  -5-
<PAGE>
                                     PART II

ITEM 5:   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     There  are no  established  public  trading  markets  for  shares  of  USTN
Holdings,  Inc. Common Stock ("USTN Common Stock") or USTN Holdings, Inc. Series
A Preferred Stock ("USTN Series A Preferred").

     At December 31, 1996,  USTN  Holdings,  Inc. had 267 holders of USTN Common
Stock (43 of which also hold USTN Series A Preferred  Stock),  and 78 holders of
USTN Series A Preferred Stock (43 of which also hold USTN Common Stock).

     When authorized by the USTN Holdings, Inc. Board of Directors,  payments of
dividends are  restricted  under  ILLUMINET's  long-term debt  arrangements,  as
follows:  (1) approval of RTFC is required unless ILLUMINET's ratio of equity to
total assets  exceeds 40% and (2) dividends are  restricted to 75% of net income
as defined in the indenture  relating to the USTN debentures.  Dividends are not
payable to USTN Series A Preferred  Stock unless  dividends  are  declared,  set
aside or paid simultaneously to holders of USTN Common Stock. To date, no 
dividends have been declared.

ITEM 6:   MANAGEMENT'S DISCUSSION AND ANALYSIS OR
          PLAN OF OPERATIONS

BASIS OF PRESENTATION

USTN Holdings, Inc., and its wholly-owned subsidiary, Illuminet, Inc.
(formerly named USTN Services, Inc.), (collectively referred to as
("ILLUMINET"), were incorporated for the purpose of effecting the merger of
U.S. Intelco Holdings, Inc. ("U.S. Intelco") and Independent
Telecommunications Network, Inc. ("ITN") that was consummated effective
February 23, 1996 ("Merger").  The Merger was accounted for as a purchase
business combination in accordance with generally accepted accounting
principles, with U.S. Intelco designated as the acquiring company.
Accordingly, the consolidated statements of operations and cash flows for the
year ended December 31, 1995, and the balance sheet as of December 31, 1995,
represent the stand-alone results of operations and cash flows of U.S.
Intelco. The results of ITN's operations are included in the consolidated
financial statements prospectively from the date of the Merger.  The pro forma
information presented in this Management's Discussion and Analysis or Plan of
Operations reflects the combined activities of U.S. Intelco and ITN as if the
Merger had occurred effective January 1, 1995.

                                  -6-
<PAGE>
RESULTS OF OPERATIONS

Years Ended December 31, 1996 and 1995

REVENUES.  The following table summarizes ILLUMINET's services and the effect
of the Merger on ILLUMINET revenues:

                                                         1996          1995
                                                         ----          ----
Billing-and-collection services                      $ 7,895,674   $ 7,048,625
Data base services                                     7,427,696     7,468,156
Network usage measurement                                557,932     1,123,541
Other services                                           742,998     1,464,099
                                                      ----------    ----------
                                                      16,624,300    17,104,421
                                                      ----------    ----------
Services acquired by Merger:
---------------------------
  Intelligent network services                        21,408,804    20,276,749
  Wireless services                                    3,664,001     1,703,646
                                                      ----------    ----------
                                                      25,072,805    21,980,395
                                                      ----------    ----------
Pro forma revenue                                     41,697,105    39,084,816
Financial statement reporting adjustment
  for operations prior to the Merger                  (3,809,227)  (21,980,395)
                                                      ----------    ----------
Revenues per statements of operations                $37,887,878   $17,104,421
                                                      ==========    ==========

Billing-and-collection  services  revenues  for 1996  increased  primarily  as a
result of a $966,926,  or 18%, increase in clearinghouse  product line revenues.
This increase reflects a 28% increase in messages processed from 53.7 million in
1995 to 68.8  million in 1996,  due to the  addition of a large  customer in the
second quarter of 1995. Although  clearinghouse volumes are expected to increase
in 1997,  revenues are expected to remain at 1996 levels due to a fourth quarter
1996 price decrease.

Data  base  services  revenues   decreased,   reflecting  a  reduction  in  Line
Information  Data Base ("LIDB")  product line revenues  offset by an increase in
Calling Name Delivery  ("CNAM") product line revenues.  LIDB revenues  decreased
$550,810,  or 9%, in 1996,  reflecting a 10% decrease in queries  processed from
177.0 million in 1995 to 159.3 million in 1996. This was due to increased market
penetration by competing calling card service providers. CNAM revenues increased
$552,822,  or 385%, in 1996, reflecting growing market acceptance of the service
introduced in 1995.

Network usage  measurement  revenues  derived from the sale of  ILLUMINET's  SS7
network traffic tracking and measurement software products AMAT7 (RM) and CDR7
(RM) decreased in 1996 due to  finalization of sales that began in late 1995. No
new sales were completed in 1996.

Other  services  revenues  decreased  primarily  due to Personal  Communications
Services ("PCS") revenues decreasing $332,567, or 67%, in 1996. This decrease is
due to a change in focus from PCS limited  partnership  sponsorship  activities,
with the  completion of the Federal  Communications  Commission  ("FCC") C Block
broadband  radio  spectrum  license  auction,  to  new  service  offerings.   As
anticipated,  ILLUMINET's  contract to provide voice messaging  services for the
State  of  Washington  was not  renewed  in  September,  1996.  Voice  messaging
contributed  revenues of $801,283 and  $548,408  for the 1995 and 1996  periods,
respectively.  ILLUMINET's  independent  customer survey program which generated
revenues of $146,031 in the 1995 period was  discontinued  in late 1995,  as its
market cycle ended.

                                  -7-
<PAGE>
Intelligent  network services revenues for 1996 increased  primarily as a result
of a  $1,405,785,  or 42%,  increase  in trunk  signaling  and  related  service
revenues,  reflecting  new customer  growth.  800 switch and transport  revenues
increased  $333,260,  or 8%,  in 1996,  reflecting  volume  growth  from a large
customer. Network connectivity product line revenues increased $728,925, or 10%,
from growth in chargeable customer links. Offsetting the revenue growth in these
product lines, LIDB switch and transport revenues decreased $1,255,979,  or 24%,
in 1996 due to reduced prices brought on by competition.

Wireless  services  revenue  increased  primarily due to a $1,689,348,  or 101%,
increase  in 1996 in  cellular  switch  and  transport  revenues.  The  increase
reflects  customer growth and increased  utilization of the network with message
volumes  increasing  211% from  403.5  million  for the 1995  period to  1,253.9
million for the comparable 1996 period.  The growth was offset by an approximate
60%  decrease  in price due to  competition.  Other new  services  delivered  to
wireless service providers beginning in 1995 and 1996 contributed an increase in
revenues of $478,000 over 1995 levels with increases in volumes processed.

EXPENSES. ILLUMINET's primary costs are related to network expenses, followed by
personnel  costs,  depreciation  and  amortization  of  hardware,  software  and
facilities  assets,  and  software  maintenance  expenses.   Expenses  increased
$14,827,070,  or 77%,  from  $19,157,731  to  $33,984,801  for the  years  ended
December 31, 1995 and 1996,  respectively.  The increase  reflects ten months of
combined  expenses  resulting  from the Merger.  On a pro forma basis,  expenses
decreased $2,212,779, or 6%, from $39,908,494 for the 1995 period to $37,695,715
for the comparable 1996 period.

Pro forma operating expenses decreased $1,594,048,  or 13%, from $11,864,041 for
the 1995 period to $10,269,993 for the comparable 1996 period.  This decrease is
caused primarily by reduced  PCS-related  business  development costs,  software
maintenance  savings related to cost reduction  projects  completed in 1995, and
reduced personnel costs. The decrease in PCS business  development costs results
from a change in focus from PCS limited partnership sponsorship activities, with
the completion of the FCC C Block broadband radio spectrum license  auction,  to
new service  offerings  requiring a lower level of resources.  Operating expense
savings were offset by increased operating costs related to the AMAT7 and CDR7
computer software  products.  Illuminet  completed development and market 
introduction of AMAT7 and CDR7 in mid-1995 and the end of 1995, respectively.

Pro forma selling, general and administrative expenses decreased $1,490,336,  or
14%, from $10,976,647 to $9,486,311 for the 1995 and 1996 periods, respectively,
due to a reduction in personnel costs as well as expenses  related to litigation
settled  in 1995 to protect  ILLUMINET's  patent on a common  channel  signaling
usage measurement system.  Selling,  general and administrative  expense savings
are offset by  one-time  implementation  costs that  resulted  from the  Merger,
including  legal  fees  and  new  marketing  material  printing  costs.  Network
operating expenses increased $1,433,735,  or 15%, from $9,629,291 to $11,063,026
for the 1995 and 1996 periods,  respectively,  due to increased  leased  network
connectivity,  link, and LATA access charges  incurred to establish and maintain
customer connectivity to the SS7 network.

On a pro forma basis, depreciation and amortization expenses increased $791,171,
or  15%,  from   $5,384,339  to  $6,175,510  for  the  1995  and  1996  periods,
respectively,  primarily due to  depreciation  and  amortization  of capitalized
computer  software costs  associated  with the AMAT7 and CDR7  products,  and to
operating  hardware and software  placed into  production  in the second half of
1995  and  1996.  Corporate   realignment   expenses,   comprised  primarily  of
Merger-related severance expenses, decreased $1,353,301, or 66%, from $2,054,176
to $700,875 for the 1995 and 1996  periods,  respectively,  primarily due to the
completion of Merger activities in the first quarter of 1996.

                                -8-
<PAGE>
INTEREST INCOME/INTEREST EXPENSE. Interest income increased by $204,099, or 75%,
from  $271,026  for the year  ended  December  31,  1995,  to  $475,125  for the
comparable  1996 period.  This increase  resulted  primarily from an increase in
available cash balances over the two periods resulting from the Merger.

On a pro forma basis,  interest income decreased by $3,388, or 1%, from $495,918
for the 1995 period to $492,530 for the 1996 period.

Interest expense increased $873,674,  or 199%, from $439,625 for the 1995 period
to $1,313,299 for the 1996 period.  The increase reflects ten months of combined
interest expense resulting from the Merger, a higher aggregate  outstanding debt
balance resulting from two additional  twenty-year mortgage loans for a total of
approximately  $2.7 million  obtained from Rural Telephone  Finance  Cooperative
("RTFC") in March,  1995,  and a loan obtained from RTFC in October,  1995,  for
approximately $1.1 million.

On a pro forma basis, interest expense decreased $93,706, or 6%, from $1,621,437
for the 1995 period to $1,527,731 for the comparable 1996 period.

INCOME TAXES.  ILLUMINET has Federal income tax net operating loss carryforwards
available  to offset  future  taxable  income for  Federal  income tax  purposes
totaling  $20,964,492.  These carryforwards  expire in various amounts from 2006
through  2011.   ILLUMINET's   ability  to  utilize  such  net  operating   loss
carryforwards is dependent on ILLUMINET's ability to generate sufficient taxable
income from its  operations.  The current  1997 tax  provision  is  comprised of
Federal alternative minimum taxes which cannot be completely offset by tax loss
carryforwards.

EARNINGS

ILLUMINET's net income increased  $4,468,441 from a net loss of $(1,515,459) for
the year ended December 31, 1995, to net income of $2,952,982 for the comparable
1996  period.  This  increase  primarily  reflects an increase in  clearinghouse
revenues,  cellular  switch and transport  revenues,  a decrease in PCS business
development  costs,  and  the  impact  of the  Merger  on  reducing  costs  as a
percentage of revenues.

On a pro forma basis,  ILLUMINET's  net income  increased  $4,108,233 from a net
loss of  $(1,253,965)  to net income of $2,854,268  for the years ended December
31, 1995 and 1996,  respectively,  primarily  resulting  from  positive  revenue
trends offset by one-time Merger costs incurred in 1996.

ILLUMINET  believes that it will achieve  higher  earnings in the future through
new  product  and   customer   diversification   and   expansion   into  related
telecommunications markets. ILLUMINET anticipates that increased expenditures in
the  development  of services and products  will  continue over the next several
years.  While it is anticipated  that the existing primary services and products
will continue to be profitable,  overall  profitability  in the immediate future
could be negatively impacted by delays in obtaining new product revenues coupled
with  related  increases  in new  product  start-up  costs.  A general  downward
pressure on price caused by increased  competition  may also  negatively  impact
profitability.

LIQUIDITY AND CAPITAL RESOURCES

U.S. Intelco and ITN individually relied on a combination of cash generated from
operations,  debt and equity to fund their  service  development  and  expansion
activities.  Currently, ILLUMINET's operating activities are generating positive
cash flows.  However,  as ILLUMINET  broadens its services and products to those
requiring  larger  investments  coupled with longer  periods  before  subsequent
revenues are generated,  ILLUMINET  believes there may be increased  pressure on
cash generated from operations. ILLUMINET anticipates

                                -9-
<PAGE>
continued  high levels of  investment  in the  development  of new  services and
products over the next several years as ILLUMINET  processes  increased  volumes
relating to its network,  data base, and  billing-and-collection  services,  and
broadens its product base to keep pace with changing markets and customer needs.

ILLUMINET's  working  capital  (current  assets minus current  liabilities)  was
$6,458,504  as of  December  31,  1996.  ILLUMINET's  cash and  cash  equivalent
balances include $7,709,000  required as working capital to service  ILLUMINET's
clearinghouse  customers.  Such funds are  received  and  disbursed on a monthly
basis. The increase in working capital of $2,362,670 from $4,095,834 at December
31, 1995,  reflects  the increase in cash  balances  from  operating  activities
offset by an increase in liabilities  assumed in the Merger  including  accruals
for  network  expenses  and the current  portion of  long-term  debt  financing.
ILLUMINET believes that its existing cash balances, funds generated from its 
operations and borrowings available under its existing credit agreements will be
sufficient to meet existing  capital  expenditure and working capital needs for
the immediate future.

ILLUMINET's expenditures for property and equipment were $5,463,559 for the year
ended December 31, 1996.  Expenditures for property and equipment were primarily
for network equipment.

At December 31, 1996,  ILLUMINET has a secured line of credit  expiring  August,
2001, with RTFC that permits ILLUMINET to borrow up to $7,300,000, not to exceed
80% of accounts receivable.  There were no borrowings against the line of credit
at December  31,  1996.  In December,  1996,  ILLUMINET  drew against one of its
existing  mortgage  notes  totaling  $2,680,765  to finance the expansion of the
network with the purchase of additional  switching  equipment.  Additionally  at
December  31,  1996,   ILLUMINET  has  $5,188,007  of  unused  loan   facilities
established or committed with RTFC, maturing in the years 2000 and 2001.

                                -10-
<PAGE>
ITEM 7:   FINANCIAL STATEMENTS

                          USTN HOLDINGS, INC.

                     Consolidated Balance Sheets

                                                    December 31,
                                              ----------------------
     ASSETS                                       1996        1995
     ------                                   ----------------------

     Current assets:
       Cash and cash equivalents              $12,514,507   $ 6,992,206
       Accounts receivable, less
       allowance for doubtful accounts
       of $438,000 ($169,000 in 1995)          21,580,485    14,947,575
       Prepaid expenses and other                 365,735       421,465
                                              -----------    ----------

     Total current assets                      34,460,727    22,361,246
                                              -----------    ----------

     Property and equipment:
       Land                                       911,765       911,765
       Building and leasehold improvements      6,907,061     6,285,855
       Equipment and furniture                  2,472,543     1,712,803
       Network assets                          23,476,705             -
       Capitalized network costs                8,160,839             -
       Computer hardware and software          16,008,791    13,299,250
                                               ----------    ----------
                                               57,937,704    22,209,673
     Less:  Accumulated depreciation
            and amortization                   26,560,848     9,415,471
                                               ----------    ----------
        Total property and equipment           31,376,856     12,794,202
                                               ----------     ----------

     Computer software product costs,
       less accumulated amortization of
       $662,000 ($101,000 in 1995)              2,196,782      2,757,882
     Other assets, net of accumulated
       amortization of $86,000
       (none in 1995)                           2,787,968      1,400,621
                                                ---------      ---------

     Total assets                             $70,822,333    $39,313,951
                                               ==========     ==========

           See accompanying notes to consolidated financial statements.

                                   -11-
<PAGE>
                               USTN HOLDINGS, INC.

                     Consolidated Balance Sheets, Continued

                                                 December 31,
                                             ---------------------
LIABILITIES AND SHAREHOLDERS' EQUITY            1996        1995
------------------------------------         ---------------------

Current liabilities:
  Trade accounts payable                    $ 4,347,084  $  957,113
  Accrued expenses                            2,243,468   1,490,518
  Due to customers                           19,236,821  15,385,847
  Current portion of long-term debt           2,174,850     431,934
                                             ----------   ----------
     Total current liabilities               28,002,223   18,265,412
                                             ----------   ----------
Deferred income taxes                                 -      991,644
Long-term debt, less current portion         21,060,061    7,637,521
                                             ----------    ----------
     Total non-current liabilities           21,060,061     8,629,165
                                             ----------    ----------

Shareholders' equity:
   *USTN Holdings, Inc. Series A
    Convertible  Preferred  Stock,  par value $.01 per share,  authorized  4,416
    shares, issued and outstanding 2,637
    (none in 1995)                                    26             -
   *USTN Holdings, Inc. Preferred
    Stock, par value $.01 per share,
    authorized 95,584 shares, none
    issued or outstanding                               -             -
   *U.S. Intelco Holdings, Inc. Class A
    voting common stock, par value $50 per
    share, none issued or outstanding
    (466 shares in 1995)                             -            23,300
   *U.S. Intelco Holdings, Inc. Class B
    non-voting common stock, par value $.02
    per share, none issued or outstanding
    (1,208,696 shares in 1995)                        -            24,174
   *USTN Holdings, Inc. Common Stock,
    par value $.01 per share, authorized
    12,000,000 shares, issued and outstanding
    5,262,354 (none in 1995)                     52,624                 -
   Additional paid-in capital                10,701,247         4,136,159
   Retained earnings                         11,006,152         8,235,741
                                             ----------         ----------
       Total shareholders' equity            21,760,049        12,419,374
                                             ----------         ----------
Total liabilities and shareholders' equity  $70,822,333        $39,313,951
                                            ==========          ==========

            See accompanying notes to consolidated financial statements.

                                   -12-
<PAGE>
                               USTN HOLDINGS, INC.

                      Consolidated Statements of Operations

                                              Years Ended December 31,
                                              --------------------------
                                                 1996           1995
                                                 ----           ----

Revenues                                      $37,887,878    $17,104,421
                                               ----------     ----------
Expenses:
  Operating                                     9,914,192      9,547,692
  Selling, general and administrative           8,648,618      5,685,634
  Depreciation and amortization                 5,714,269      2,846,815
  Network operating                             9,357,655              -
  Corporate realignment                           350,067      1,077,590
                                                ---------      ----------
     Total expenses                            33,984,801      19,157,731
                                               ----------      ----------
Operating income (loss)                         3,903,077       (2,053,310)

Interest income                                   475,125          271,026
Interest expense                               (1,313,299)        (439,625)
                                               -----------       ----------
Income (loss) before income taxes               3,064,903        (2,221,909)

Income tax provision (benefit)                    111,921          (706,450)
                                                ----------        ----------
Net income (loss)                             $ 2,952,982        $(1,515,459)
                                                ==========         ==========
Weighted average common shares                  4,995,092          3,729,015
                                                ==========        ==========
Primary earnings (loss) per share              $      0.59       $     (0.41)
                                                ==========         ==========
Fully diluted earnings (loss) per share        $      0.57       $     (0.41)
                                                ==========         ==========

           See accompanying notes to consolidated financial statements.

                                   -13-
<PAGE>
                               USTN Holdings, Inc.

           Consolidated Statements of Shareholders' Equity

                Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
                                       U.S. Intelco Holdings, Inc.
                                  -------------------------------
                                           Common Stock               USTN Holdings, Inc.
                                  ------------------------------- ---------------------------
                                 Class A         Class B          Common   Series A Preferred   Additional
                             -------------     ------------       ---------  ----------------   Paid-In    Retained    Total
                             Shares  $        Shares     $        Shares  $      Shares   $     Capital    Earnings    Equity
                             ------  ----     --------   ----     ------  ---    ------    ---  ---------  ---------   ------
<S>                          <C>     <C>       <C>       <C>      <C>     <C>    <C>      <C>   <C>        <C>     

Balance at January 1, 1995     468   $23,400  1,208,696  $24,174       -  $ -          -  $ -   $ 4,136,159  $9,771,011  $13,954,744
Stock repurchase               (2)     (100)          -        -       -    -          -    -             -    (19,811)     (19,911)
Net loss                        -         -           -        -       -    -          -    -             - (1,515,459)  (1,515,459)
                              ----    ------    -------   ------ ------- ----      -----  ---    ----------  ----------   ----------

Balance at December 31, 1995   466    23,300  1,208,696   24,174       -    -          -    -     4,136,159   8,235,741   12,419,374
Merger dissenting shares
   repurchased                 (6)     (300)   (17,917)    (358)       -    -          -    -             -   (182,571)    (183,229)
                              ----    ------    -------   ------  ------ ----      -----   --    ----------  ----------   ----------

Total before merger on
  February 23, 1996            460    23,000  1,190,779   23,816       -    -          -    -    4,136,159    8,053,170   12,236,145
Conversion to USTN
  Holdings, Inc. stock       (460)  (23,000)(1,190,779)(23,816) 3,673,871 36,739       -    -       10,077            -            -
Purchase of Independent
  Telecommunications 
  Network, Inc.                 -         -           -       - 1,566,988 15,670   2,675   27    6,354,252            -    6,369,949
USTN Common Stock issued 
  under former stock 
  incentive plan                -         -           -       -     7,539     75       -    -       81,772            -       81,847
Conversion of USTN Series A
  Preferred Stock               -         -           -       -     3,235     33     (38)  (1)        (32)            -            -
Conversion of convertible
  redeemable subordinated 
  debentures                    -         -           -       -    10,721    107       -     -     119,019            -      119,126
Net income                      -         -           -       -         -      -       -     -           -     2,952,982   2,952,982
                             ----    ------     -------   ------ --------- -----   ----- -----  ----------     ---------
Balance at 
  December 31, 1996             -      $  -           -    $  - 5,262,354 $52,624  2,637   $26 $10,701,247   $11,006,152 $21,760,049
                             ====      ====     =======    ==== =========  ======  =====   ===  ==========    ==========  ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                  -14-
<PAGE>
                               USTN HOLDINGS, INC.

                      Consolidated Statements of Cash Flows

                                                   Years Ended December 31,
                                                   ------------------------
                                                   1996                1995


<PAGE>



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

Cash flows from operating activities:

   Cash received from customers                 $155,132,157   $118,491,711
   Interest received                                 470,997        260,986
   Cash paid to customers,
     suppliers and employees                    (143,562,818)  (115,996,915)
   Income tax refund                                 173,795              -
   Interest paid                                  (1,463,940)      (458,058)
                                                 ------------   ------------

      Net cash provided by operating activities    10,750,191      2,297,724
                                                  -----------    -----------

Cash flows from investing activities:

   Cash acquired in acquisition of Independent
     Telecommunications Network, Inc.                 613,086              -
   Cash payments in connection with
     acquisition of Independent
     Telecommunications Network, Inc.                (738,634)             -
   Investment in affiliate                           (650,000)             -
   Capital expenditures and software development   (5,463,559)    (2,387,988)
                                                   -----------    -----------

      Net cash used by investing activities        (6,239,107)    (2,387,988)
                                                   -----------    -----------

Cash flows from financing activities:

   Purchase of subordinated capital
     certificates related to notes payable           (134,038)      (319,787)
   Redemption of subordinated capital
     certificates related to notes payable                  -          31,163
   Proceeds from issuance of notes payable          2,680,765       3,724,187
   Principal payments on notes payable             (1,352,281)       (459,341)
   Acquisition of common stock                              -         (19,911)
   Payments to dissenting shareholders               (183,229)              -
                                                   -----------      ----------

      Net cash provided by financing activities      1,011,217       2,956,311
                                                   -----------       ---------

Net increase in cash and cash equivalents            5,522,301       2,866,047

Cash and cash equivalents at:

   Beginning of year                                 6,992,206       4,126,159
                                                   -----------       ---------
   End of year                                    $ 12,514,507   $   6,992,206
                                                   ===========      ==========

          See accompanying notes to consolidated financial statements.

                                     -15-
<PAGE>
                               USTN HOLDINGS, INC.

                  Notes to Consolidated Financial Statements

                                December 31, 1996


Note 1:  Summary of Significant Accounting Policies
---------------------------------------------------

Description of Business and Basis of Presentation
-------------------------------------------------

USTN Holdings, Inc., and its wholly-owned subsidiary Illuminet, Inc.,
(collectively referred to as "ILLUMINET") were incorporated in the State of
Delaware on August 2, 1995, to effect the merger of U.S. Intelco Holdings,
Inc. ("U.S. Intelco") and Independent Telecommunications Network, Inc.
("ITN").  In accordance with terms of the merger, U.S. Intelco and ITN merged
with and into USTN Services, Inc. ("USTN Services") on February 23, 1996 (the
"Merger").  USTN Services subsequently changed its name to Illuminet, Inc.
The Merger was accounted for as a purchase combination with U.S. Intelco
designated as the acquiring company.  Accordingly, references to USTN
Holdings, Inc. and ILLUMINET in the accompanying financial statements and
related notes for the periods prior to the Merger represent U.S. Intelco,
while references to USTN Holdings, Inc. and ILLUMINET for the periods after
the Merger represent the consolidated entity including the net assets and
operations of ITN (see Note 2).

ILLUMINET is engaged in the  business of  developing,  managing and  marketing a
Signaling  System 7 ("SS7")  network and related  products and services based on
SS7 technology to the entire telecommunications  marketplace,  including network
services  and other  products  and  services to the  cellular  market.  SS7 is a
telecommunications  industry-standard system of protocols and procedures that is
used to control  telephone  communications  and provide  routing  information in
association with vertical calling  features,  such as card validation,  Advanced
Intelligent Network ("AIN") services, cellular services, 800 Number Portability,
and Calling Name Delivery.  Additionally,  ILLUMINET provides advanced data base
services,  billing-and-collection services, and calling card services to a range
of telephone companies as well as interexchange carriers ("Carriers"),  operator
service providers ("OSPs") and other telecommunications  companies and providers
of  telecommunications   services.  ILLUMINET  primarily  provides  services  to
companies in the  telecommunications  industry that are located  throughout  the
United States and considers all of its operations as one segment.

ILLUMINET has its corporate headquarters and a portion of its operations located
in Lacey, Washington, a network control center and related operations located in
Overland Park, Kansas, and additional SS7 Signal Transfer Points located in Rock
Hill,  South Carolina,  and Mattoon,  Illinois.  A new SS7 Signal Transfer Point
will be located in Las Vegas, Nevada and become operational in 1997.


Principles of Consolidation
---------------------------

The consolidated  financial  statements include the financial statements of USTN
Holdings, Inc. and its subsidiaries.  All significant  intercompany balances and
transactions have been eliminated in consolidation.

                                   -16-
<PAGE>
Cash Equivalents
----------------

ILLUMINET  considers all highly liquid  investments with original  maturities of
three  months  or less at  purchase  to be cash  equivalents.  Cash  equivalents
consist of money market funds that are stated at cost which approximates  market
value. At December 31, 1996 and 1995, such  investments  include  $9,538,536 and
$5,039,027,  respectively,  invested in a money market fund consisting of direct
obligations of the U.S.  Treasury and repurchase  agreements  collateralized  by
such obligations of the U.S. Treasury.

Accounts Receivable
-------------------

One of ILLUMINET's services involves providing a clearinghouse function for toll
collected by telephone companies on behalf of other  telecommunications  service
providers.   At  December  31,  1996  and  1995,  accounts  receivable  included
$11,964,000  and  $9,779,000,  respectively,  of  such  toll  amounts  due  from
telephone companies,  and due to customers included $16,917,000 and $12,676,000,
respectively,  owed to such service  providers.  Accounts  receivable from these
companies  are  uncollateralized;  however,  uncollected  amounts  may be offset
against amounts otherwise due to service providers.

Concentration of credit risk with respect to trade receivables is limited due to
the diversity of the customer base and geographic dispersion and is evidenced by
a history of minimal customer account write-offs.

Property and Equipment and Capitalized Software
-----------------------------------------------

Property and equipment and capitalized software are stated at cost. Depreciation
and amortization are provided using the straight-line  method over the estimated
useful lives of the assets.  Estimated  useful lives for property and  equipment
are as follows:

        Corporate  headquarters building 31.5 years Capitalized network costs 10
        years Office  equipment and systems 5 to 20 years Furniture and fixtures
        5 to 15 years  Computer  equipment  and software 3 to 5 years  Leasehold
        improvements 5 years

Computer   software   product  costs   represent  costs  incurred  for  software
development related to ILLUMINET's software products, which became available for
sale in 1995. Costs incurred after the technological feasibility of the
product was established have been capitalized. Costs incurred prior to that date
were  expensed.  For the years  ended  December  31,  1996 and  1995,  ILLUMINET
recognized  $561,000 and $101,000,  respectively,  of  amortization  expense for
computer software product costs. Capitalized computer software product costs are
amortized on a product-by-product basis. The annual amortization is equal to the
greater of the amount  computed  using (a) the ratio that current gross revenues
for a product bear to the total of current and anticipated future gross revenues
for that product,  or (b) the straight-line  method over the remaining estimated
economic life of the product.  Amortization starts when the product is available
for general release to customers.

                                        -17-
<PAGE>
ILLUMINET  evaluates the net realizable  value of capitalized  software based on
estimated  future  revenue and costs  associated  with the service for which the
software is utilized.

Revenue Recognition
-------------------

ILLUMINET's  revenues are  recognized  when earned.  Computer  software  product
revenues are recognized  when all contractual  obligations  have been fulfilled.
Revenues are recorded net of amounts passed through to service providers.

Income Taxes
------------

ILLUMINET provides for income taxes under the liability method, whereby deferred
tax assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using enacted
tax rates and laws that will be in effect when the  differences  are expected to
reverse.

Earnings (Loss) Per Share
-------------------------

Earnings  (loss) per share is  computed  using the  weighted  average  number of
common  shares and dilutive  common share  equivalents  outstanding  during each
period. Other potentially dilutive securities include USTN Holdings, Inc. Series
A Preferred Stock ("USTN Series A Preferred  Stock") and convertible  redeemable
subordinated  debentures,  which if dilutive, are included in the calculation of
fully diluted earnings (loss) per share.

Use of Estimates
----------------

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
reported  amounts of revenues and expenses during the reporting  period.  Actual
results could differ from these estimates.

Reclassifications
-----------------

Certain  reclassifications  to the 1995 financial  statements  have been made to
conform to the 1996 presentation.

Note 2:  Acquisition and Corporate Realignment
----------------------------------------------

In exchange for the net assets of ITN, excluding U.S. Intelco's 36% ownership of
ITN on the  date  of the  Merger,  USTN  Holdings,  Inc.  issued  the  following
consideration and incurred the following costs:

    Fair value of USTN Common Stock issued  $5,561,778 Fair value of USTN Series
    A Preferred Stock issued 808,171 Direct and incremental merger costs 678,076
                                                            ---------
    Aggregate purchase price                               $7,048,025
                                                            =========

                                     -18-
<PAGE>
As  consideration  for  the  sale,   non-dissenting  ITN  shareholders  received
1,566,988  shares of USTN Holdings,  Inc. Common Stock ("USTN Common Stock") and
2,675 shares of USTN Series A Preferred  Stock. ITN Debentures were converted to
USTN convertible redeemable  subordinated  debentures ("USTN Debentures") having
the same  amount  of  outstanding  principal  and  interest  under the terms and
conditions  set forth in the Merger.  Payments  made to ITN  dissenters  totaled
$738,634 during the year ended December 31, 1996.

The aggregate  purchase price exceeded the fair value of the assets  acquired by
$2,506,548, and accordingly,  has been recorded as a reduction in the long-lived
assets.  The purchase price has been allocated to the acquired net assets of ITN
as of February 23, 1996, as follows:

          Cash                                            $  613,086
          Accounts receivable                              5,880,200
          Other current assets                               282,267
          Deferred tax assets                                991,644
          Network assets                                  12,178,239
          Capitalized network costs                        4,049,463
          Other property and equipment                     1,290,293
          Other assets                                     1,093,701
          Trade accounts payable and other
            current liabilities                           (5,560,523)
          Amounts due dissenting shareholders               (738,634)
          Long-term debt                                  (13,031,711)
                                                           ----------
                                                          $ 7,048,025
                                                           ==========

In 1996, ILLUMINET paid dissenting U.S. Intelco shareholders a total of $183,229
in exchange for U.S.  Intelco stock held by such  dissenters on the merger date.
The payments were recorded as a stock repurchase and retirement transaction.

Assuming that this acquisition had taken place on January 1, 1995, unaudited pro
forma results of operations would have been as follows:

                                        Year Ended December 31,
                                         ----------------------
                                         1996           1995
                                         ----------------------

Revenues                                 $41,697,105    $39,084,816
                                          ==========     ==========
Net income (loss)                        $ 2,854,268    $(1,253,965)
                                          ==========     ==========
Earnings (loss) per common share         $      0.54    $     (0.24)
                                          ==========     ==========

The pro forma  results do not  necessarily  represent  results  which would have
occurred if the acquisition had taken place on the dates indicated, nor are such
results necessarily indicative of the results of future operations.

In connection with the acquisition,  U.S. Intelco was substantially reorganized,
resulting in corporate realignment expenses totaling $350,067 and $1,077,590 for
the years ended December 31, 1996 and 1995,  respectively,  comprised  mainly of
severance costs.

                                       -19-
<PAGE>
Note 3:  Long-Term Debt
-----------------------

Long-term debt at December 31 consists of the following:

                                                       1996            1995
                                                       ----            ----
   Various secured notes payable to Rural 
    Telephone Finance Cooperative ("RTFC")
    with  variable  interest  rates ranging
    from 6.30% to 6.55% at December 31,
    1996  (6.35%  to  6.60%  at  December  31,
    1995)   payable  in  quarterly 
    installments, including interest,
    each maturing at various dates ranging
    from August, 2000, to March, 2015.           $13,328,043      $8,069,455
   Convertible redeemable subordinated
     debentures ("USTN Debentures")
     bearing interest at 7.5%, maturing
     August, 2001 (net of original issue
     discount of $220,377).                        8,248,342               -
   Convertible redeemable subordinated
     debenture deferred interest payable           1,658,526               -
                                                  ----------      ----------
                                                  23,234,911       8,069,455
   Less: current portion                          (2,174,850)       (431,934)
                                                  ----------      ----------
   Total long-term debt                          $21,060,061      $7,637,521
                                                  ==========      ==========

Additional  borrowings  available  under the various note  agreements  with RTFC
aggregate  $5,188,007 at December 31, 1996.  All of the RTFC notes have variable
interest rates that are based on RTFCs short-term  funding costs. In accordance
with the  terms  of the  loan  agreements,  ILLUMINET  purchased  lender-issued,
non-interest-bearing  subordinated capital certificates based on a percentage of
the  gross  loan  amount.  Such  certificates  are  amortized  against  the loan
principal  balance  over  the  terms  of  the  respective  loans.   Certificates
purchased, net of amortization,  totaled $1,142,012 and $777,561 at December 31,
1996 and 1995,  respectively,  are  carried at cost,  and are  included in other
long-term  assets.  The loan  agreements  contain  certain  covenants,  the most
restrictive of which requires  ILLUMINET to maintain  certain cash  flow-to-debt
service ratios.

All RTFC loans are currently  secured by a first priority lien on  substantially
all of ILLUMINET's assets,  revenues and property,  excluding cash collected and
held on behalf of others in the normal course of providing ILLUMINET's services.
Cash and cash  equivalents  not subject to the mortgage lien were  $7,709,000 at
December 31, 1996.

In August,  1996, ILLUMINET entered into a secured line of credit agreement with
RTFC that  permits  ILLUMINET to borrow up to  $7,300,000,  not to exceed 80% of
accounts  receivable for a term of five years. The line of credit bears interest
at the lesser of the prime rate plus 1.5% or RTFC's monthly line of credit rate,
and contains certain covenants, the most restrictive of which requires ILLUMINET
to maintain a zero balance in the line at least five  consecutive  business days
every 360 days after the initial advance.  There were no borrowings  outstanding
against the line of credit at December 31, 1996.

                              -20-
<PAGE>
The USTN  Debentures,  formerly ITN  Debentures  converted  in the Merger,  bear
interest  at 7.5% and are due August 15,  2001.  Interest on the  debentures  is
payable in quarterly installments,  in arrears.  Interest accrued for the period
prior to  December  31,  1995,  was  deferred  and will be paid  ratably on each
interest  payment  date  over the  remaining  term of the  debentures.  The USTN
Debentures are convertible  into the number of shares of USTN Common Stock equal
to the principal amount of the USTN Debenture at the time of conversion  divided
by the market price of USTN Common Stock at the time of  conversion  (as defined
in the  Indenture),  or if no market price exists,  on the basis of 90 shares of
USTN Common  Stock for each $1,000 in  principal  amount.  USTN  Debentures  are
subordinated to all senior debt.  USTN  Debentures are directly  associated with
USTN Series A Preferred Stock in that these securities were issued as a unit.

Maturities of the long-term debt for the years ending  December 31 are scheduled
as follows:

                  1997                 $2,174,850
                  1998                  2,287,031
                  1999                  2,415,667
                  2000                  1,582,534
                  2001                  9,422,129
             2002-2006                  2,257,174
             2007-2011                  2,420,414
             2012-2015                    675,112
                                       ----------
                                      $23,234,911
                                       ==========

Note 4:  Shareholders' Equity
-----------------------------

At  December  31,  1996,  USTN  Holdings,  Inc.  is  authorized  to  issue up to
12,100,000  shares of capital stock consisting of (i) 12,000,000  shares of USTN
Common  Stock,  par  value  $.01 per  share,  and (ii)  100,000  shares  of USTN
Preferred Stock,  par value $.01 per share.  Each share of USTN Common Stock and
USTN  Series  A  Preferred  Stock  is  entitled  to  one  vote  and  100  votes,
respectively.

Each  share of USTN  Series A  Preferred  Stock will be  convertible  into 85.12
shares of USTN Common Stock ("Conversion  Amount"),  at the option of the holder
thereof at any time that the holder elects to convert a USTN Debenture issued as
a unit with such a share.  Each share of USTN Series A  Preferred  Stock will be
convertible,  at the option of USTN Holdings, Inc., into USTN Common Stock based
on the Conversion  Amount, at such time that the USTN Debenture issued as a unit
with such share is  converted  into  shares of USTN  Common  Stock.  If the USTN
Debentures and accrued interest  thereon,  and USTN Series A Preferred Stock had
been converted at December 31, 1996, 1,150,204 shares of USTN Common Stock would
have been issued.  In the event of  liquidation,  USTN Series A Preferred  Stock
will be  entitled to $1,000 per share out of the assets of  ILLUMINET  available
for distribution to its shareholders,  but before any payment or distribution is
made to holders of USTN Common Stock or any other  series of preferred  stock of
USTN Holdings, Inc.

Payments  of  dividends  are  restricted   under   ILLUMINET's   long-term  debt
arrangements,  as follows:  (1) approval of RTFC is required unless  ILLUMINET's
ratio of equity to total assets  exceeds 40% and (2) dividends are restricted to
75% of net income as defined in the indenture  relating to the USTN  Debentures.
Dividends are not payable to USTN Series A Preferred Stock unless  dividends are
declared, set aside or paid simultaneously to holders of USTN Common Stock.

                                        -21-
<PAGE>
Note 5:  Income Taxes
---------------------

Components of the income tax provision (benefit) for the years ended December 31
are summarized as follows:


                                           1996              1995
                                           ----              ----
  Current                              $111,921         $(144,951)
  Deferred                                    -          (561,499)
                                        -------           -------
  Total income tax provision (benefit) $111,921         $(706,450)
                                        =======           =======

ILLUMINET provides for deferred taxes based on the differences between the bases
of assets  and  liabilities  for  financial  reporting  purposes  and income tax
purposes,  calculated  using  enacted tax rates as of the balance sheet date. At
December 31, 1996 and 1995,  such  differences  primarily  related to the use of
accelerated depreciation and amortization for tax purposes, accruals for certain
expenses that are not currently  deductible for tax purposes until paid, the tax
basis of certain  investments that have been written-off for financial statement
purposes,  and software  development  costs that were  capitalized for financial
statement purposes. ILLUMINET has established a valuation reserve related to tax
benefits  associated  with  capital  losses  recorded  for  financial  statement
purposes  but not yet  realized  for tax  purposes,  unused net  operating  loss
carryforwards,  and other net  deferred  tax  assets due to the  uncertainty  of
ILLUMINET's future taxable income.

The reconciliations of the income tax provision  (benefit)  calculated using the
U.S. federal statutory rates to the recorded income tax provision  (benefit) for
the years ended December 31 are summarized as follows:

                                       1996                1995
                                       ----                ----

Tax at U.S. federal statutory rate   $1,042,067       $(755,449)
Utilization of net operating loss
  carryforward                       (1,042,067)              -
Alternative minimum tax                 111,921               -
Other                                         -          48,999
                                      ---------         -------
Income tax provision (benefit)       $  111,921       $(706,450)
                                      =========         =======

                                  -22-
<PAGE>
The  components  of the  deferred tax assets  (liability)  as of December 31 are
summarized as follows:

                                       1996                1995
                                       ----                ----
Deferred tax assets:
Net operating loss carryforwards   $7,547,217         $1,758,938
Tax credit carryforwards              142,379             30,458
Allowance for doubtful accounts       157,680             57,518
Other non-deductible accruals         593,807            399,611
Valuation reserve                  (3,288,585)          (252,366)
                                    ---------          ---------
Net deferred tax assets             5,152,498          1,994,159
                                    ---------          ---------

Deferred tax liabilities:
Excess tax over book depreciation
and amortization                   (5,137,987)        (2,984,434)
Other                                 (14,511)            (1,369)
                                    ---------          ---------
Total deferred tax liabilities     (5,152,498)        (2,985,803)
                                    ---------          ---------
Deferred tax liability, net      $          -         $ (991,644)
                                    =========          =========

At December  31,  1996,  ILLUMINET  has Federal  income tax net  operating  loss
carryforwards  available to offset future  taxable income for federal income tax
purposes  totaling  $20,964,492  that expire in various  amounts in 2006 through
2011. These loss  carryforwards  may be limited under certain  provisions of the
Internal Revenue Code of 1986.

Note 6:  Statement of Cash Flows
--------------------------------

Reconciliations  of  net  income  (loss)  to  net  cash  provided  by  operating
activities for the years ended December 31 are summarized as follows:

                                       1996                      1995
                                       ----                      ----

Net income (loss)                 $  2,952,982              $(1,515,459)

Adjustments to  reconcile  net income  (loss) to net cash  provided by operating
  activities:

  Depreciation and amortization      5,714,269                 2,846,479
  Deferred income taxes                      -                  (561,499)
  Stock offering cost write-off              -                   397,737
Change in:
  Accounts receivable               (1,958,928)                 (900,280)
  Other assets                         296,698                  (580,855)
  Trade accounts payable             1,016,866                   (20,902)
  Accrued expenses                  (1,094,088)                  343,622
  Due to customers                   3,850,974                 2,288,881
  Other liabilities                    (28,582)                        -
                                    ----------                ----------
Net cash provided by
operating activities               $10,750,191                $2,297,724
                                    ==========                 =========

                                        -23-
<PAGE>
During the years ended December 31, 1996 and 1995,  ILLUMINET  redeemed  $23,248
and $84,765 respectively,  of lender-issued,  non-interest-bearing  subordinated
capital  certificates,  which were  deducted  from the mortgage  loan  principal
balance.

Note 7:  Employee Benefit Plans
-------------------------------

ILLUMINET has qualified  profit  sharing/401(k)  retirement  plans  covering all
employees  subject  to  certain  eligibility  requirements.  ILLUMINET  provides
matching   contributions   to  the  plans'  trusts  on  a  portion  of  employee
contributions  to the plans,  and also may,  at the  discretion  of the board of
directors, provide a discretionary contribution. For 1996 and 1995, contribution
expense was approximately  $788,000 and $336,000,  respectively,  reflecting the
increase in employees covered by the plans as a result of the Merger.

Note 8:  Commitments and Contingencies
--------------------------------------

ILLUMINET  assumed  non-cancelable  operating leases entered into by ITN for its
Rock  Hill,  Mattoon  and  Overland  Park  operating  facilities.   The  Mattoon
facilities are leased from one of ILLUMINET's corporate  shareholders,  formerly
an ITN shareholder, for a total of $38,000 for the period February 23, 1996, the
Merger date, to December 31, 1996.  The initial  leases for the Mattoon and Rock
Hill  facilities  expired  during  1996 and were  renewed for the first of three
five-year  optional  renewal  periods.  The lease for the Overland Park facility
expires August,  1998.  During the period February 23, 1996, the Merger date, to
December 31, 1996, ILLUMINET incurred rental costs of $321,000 on the leases.

Future  minimum lease  payments  under the  non-cancelable  leases for the years
ending December 31 are as follows:

                     1997                   $385,200
                     1998                    269,800
                     1999                     77,500
                     2000                     77,500
                     2001                     37,300
                                             -------
                                            $847,300
                                             =======

ILLUMINET is party to a contract  with the  subsidiary  of one of its  corporate
shareholders,  formerly  an  ITN  shareholder,  which  supplies  ILLUMINET  with
transmission  facilities  in the form of private  leased  lines.  Such lines are
leased from the corporate  shareholder  only if the arrangement is determined to
be the lowest  cost  after  completion  of a formal  bidding  process.  Payments
pursuant to this contract  totaled  $1,101,000 for the period February 23, 1996,
the Merger date, to December 31, 1996.

On February 6, 1996, one ITN  shareholder  filed a lawsuit in Delaware  Chancery
Court against ITN and its board of directors alleging breaches of fiduciary duty
on the part of the ITN  board of  directors  related  to their  approval  of the
Merger into ILLUMINET.  In February,  1997, this suit was voluntarily  dismissed
without prejudice by the plaintiff.
 
                                     -24-
<PAGE>

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors and Shareholders
USTN Holdings, Inc.

We have audited the accompanying  consolidated  balance sheets of USTN Holdings,
Inc.  ("USTN") as of December  31, 1996 and 1995,  and the related  consolidated
statements of  operations,  shareholders'  equity,  and cash flows for the years
then  ended.  These  financial  statements  are  the  responsibility  of  USTN's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position  of  USTN as of
December 31, 1996 and 1995, and the  consolidated  results of its operations and
its cash flows for the years then ended in conformity  with  generally  accepted
accounting principles.

/s/Ernst & Young LLP
Seattle, Washington
February 14, 1997

ITEM 8:   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE

     Effective  September 12, 1995, U.S. Intelco  engaged,  upon approval of its
Board of  Directors,  Ernst & Young LLP to  perform  an audit of,  and issue its
report with respect to U.S. Intelco's December 31, 1994 financial  statements in
response to Coopers & Lybrand  L.L.P.  ("Coopers &  Lybrand")  confirmation,  by
letter dated September 5, 1995, to U.S. Intelco that it would not consent to the
inclusion in the Merger related Proxy  Statement/Prospectus of its report on the
U.S. Intelco Financial Statements for the years ended December 31, 1994 and 1993
(which report appeared in U.S. Intelco's Special Financial Report filed with the
Securities and Exchange  Commission  pursuant to Rule 15d-2 under the Securities
Exchange  Act of 1934).  Such  report of Coopers & Lybrand  did not  contain any
adverse opinion or disclaimer of opinion, nor was it modified as to uncertainty,
audit scope or accounting principles.  Since January 1, 1993, there have been no
disagreements  between  U.S.  Intelco  and  Coopers & Lybrand  on any  matter of
accounting  principles or practices,  financial statement disclosure or auditing
scope or procedure.  A letter from Coopers & Lybrand stating that it agrees with
the statements made by USTN Holdings, Inc.
in this paragraph is included as an exhibit hereto.

                               -26-


<PAGE>
                                    PART III

ITEM 9:   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Directors

     The persons currently serving as directors of USTN Holdings, Inc. and
their ages are set forth below.

                Name                                    Age
                ----                                    ---

          Theodore D. Berns                             47
          Eugene L. Cole                                61
          Aubrey E. Judy                                59
          Kenneth L. Lein                               64
          Richard A. Lumpkin                            62
          James S. Quarforth                            42
          G. I. Ross                                    63
          David C. Southwick                            66
          James W. Strand                               50
          Gregory J. Wilkinson                          46

     Currently,  non-employee Directors receive a monthly fee of $300 except for
the Chairman of the Board of Directors who receives $500 per month. Non-employee
Directors  are also paid $300 per  meeting  per day for  attendance  at board or
committee  meetings not to exceed a total of $600 per day and are reimbursed for
their expenses incurred in attending their meetings.

     Mr. Berns has been a director of USTN Holdings, Inc. since August 1995.
Prior to that, Mr. Berns served as a director of ITN from October 1991 to
February 1996.   Mr. Berns currently serves as Chief Executive Officer of OGI
Telecomm. From 1993 to October 1995, Mr. Berns served as Director, President
and Chief Executive Officer of AdVal Communications, Inc. located in
Vancouver, Washington.  During 1993, Mr. Berns served as President and Chief
Executive Officer of TRT Communications, Inc.  From 1986 through 1992, Mr.
Berns was employed by Pacific Telecom, Inc. ("Pacific Telecom"), located in
Vancouver, Washington.  Mr. Berns served as President and Chief Operating
Officer of Pacific Telecom.  Mr. Berns also served as Manager of Legal Affairs
and Vice President and Corporation Secretary.  From 1984 to 1985, Mr. Berns
served as Vice President of Multivisions, Ltd., located in Anchorage, Alaska.
In addition, Mr. Berns is a former director of United States Telephone
Association ("USTA").

     Mr. Cole has been a director of USTN Holdings, Inc. since February 1996.
Prior to that, he was a Director of U.S. Intelco from June 1994 to February
1996.  He was a founder of U.S. Intelco Networks, Inc., and served as a
Director from its formation in 1981 to June 1994, and served as Chairman of
Intelco Network's Board of Directors from 1985 until January 1990.  Prior to
that time, Mr. Cole had served as U.S. Intelco Networks, Inc.'s Vice Chairman
of the Board of Directors beginning in August 1984, and as Vice President of
U.S. Intelco Networks, Inc. from March 1981 until August 1984.  Mr. Cole
worked at Canby Telephone Association, Canby, Oregon where in 1968, he was named
General Manager and in 1986 became President of the Canby Telephone  Association
("Canby").  Mr. Cole also served as President of CTA Service Corp. ("CTA"),  and
North  Willamette  Telecom  ("NWT") from  1986 until March 1994.  He retired 
from Canby,  CTA and NWT on May 1,  1995.  Mr.  Cole  returned  from  retirement
and currently  serves as President of Canby,  President of CTA and President of 
NWT. He served as a Director of Western Rural Telephone Association from 1976 to
1983 and served as President of that  organization from 1977 to 1978. Since 
1970, Mr. Cole has served as Director of the Oregon Independent Telephone 
Association, of which he was the President from 1980 to 1981.  From 1982 until 
1995, he served as a Trustee of the NTCA Pension Trust.  Mr. Cole served as 
director of the Board of Rural Telephone Finance Cooperative from 1990 to 
February 1993.  From November 1994 until February 1996, Mr. Cole had been a 
Director of ITN.

                                       -27-

     Mr. Judy has been a Director of USTN Holdings, Inc. since February 1996.
Prior to that, Mr. Judy served as  a director of U.S. Intelco from June 1994
to February 1996.  He was a Director of U.S. Intelco Networks, Inc. from April
1982 to June 1994.  Mr. Judy was employed with Farmers Telephone Cooperative,
Inc. in Kingstree, South Carolina, since 1964 and served as
its Executive Vice President from 1981 until his retirement in December 1993.
He served as a Director of Rural Telephone Finance Cooperative from 1987 to
1994, the South Carolina Telephone Association from 1984 to 1994, Williamsburg
First National Bank from 1984 to present, PalmettoNet, Inc. from 1985 to 1994,
and South Carolina Net, Inc. from 1992 to 1994.  Mr. Judy served on the
National Telcom Corporation Board from 1985 to 1992, and served on the NTCA
Board of Directors from 1976 to 1982, holding the offices of Secretary, Vice
President and President.

     Mr. Lein has been a Director of USTN Holdings, Inc. since February 1996.
Prior to that, Mr. Lein served as a Director of U.S. Intelco from June 1994 to
February 1996.  He was a Director of U.S. Intelco Networks, Inc. from 1987 to
June 1994.  He served as Secretary of U.S. Intelco from August 1994 to
February 1996 and served as Secretary of U.S. Intelco Networks, Inc. from May
1993 to June 1994.  Since 1974, Mr. Lein has been Manager of Winnebago
Cooperative Telephone Association ("Winnebago"), a local exchange telephone
company located in Lake Mills, Iowa.  Mr. Lein was a  Director of ITN from
1990 until the merger of ITN and U.S. Intelco in 1996. He is past President of
the Organization for the Protection and Advancement of Small Telephone
Companies ("OPASTCO").  He is a past member of the USTA Board of Directors and
has served as Secretary of the USTA Board and is a past Chairman of the USTA
Small Company Committee.  Mr. Lein is a co-founder of and past Director of
Iowa Network Services.  He presently serves on the Board of MEANS Telcom, an
independent telco owned Minnesota-based centralized equal access and long
distance company.

     Mr. Lumpkin has been a director of USTN Holdings, Inc. since February,
1996 and currently serves as Chairman of the Board and Chairman of the
Executive Committee.  Prior to that, Mr. Lumpkin served as a director of
Independent Telecommunications Network, Inc. ("ITN") from January 1989 to
February 1996 and Chairman of the Board from February 1989 to February 1996.
Since 1957, Mr. Lumpkin has been employed by Consolidated Communications Inc.
("CCI") and its affiliates.  He is currently serving as a director, Chairman
of the Board and Chief Executive Officer of CCI and as a director, Chairman of
the Board and Chief Executive Officer of CCI's seven affiliates.  Mr. Lumpkin is
currently a director of First Mid-Illinois Bancshares and First Mid-Illinois
Bank and Trust in Mattoon, Illinois, and CIPSCO, Inc. and Central Illinois
Public Service Co., Springfield, Illinois.  Since 1975, Mr. Lumpkin has been

                                   -28-
<PAGE>
affiliated with USTA.  He is a past President of that organization and is
currently serving as Assistant Treasurer.  Mr. Lumpkin is also a past
President of the Illinois Telephone Association.

     Mr. Quarforth has been a Director of USTN Holdings, Inc. since February
1996.  Prior to that, Mr. Quarforth served as a Director of ITN from January
1989 to February 1996.  Mr. Quarforth currently serves as President and Chief
Executive Officer of CFW Communications Company, Inc. ("CFW") and Chairman and
Chief Executive Officer of its affiliates, which include CFW Telephone
Company, CFW Network, Inc., CFW Cellular, Inc., CFW Communications Services,
Inc., CFW Information Services, Inc., CFW Cable, Inc., and CFW PCS, Inc.  Mr.
Quarforth is also a Director of American Telecasting, Inc. and Virginia
Financial Corporation. Mr. Quarforth is a past Director and President of the
Virginia Telecommunications Industry Association.  Mr. Quarforth is also
Chairman of the Virginia PCS Alliance, L.C.

     Mr. Ross has been a Director of USTN Holdings, Inc. since February 1996.
Prior to that, Mr. Ross was a Director of ITN from January 1989 to February
1996 and served as its Treasurer from 1990 to 1996.  Since 1970, Mr. Ross has
been President, Chief Executive Officer and a director of Lufkin-Conroe
Communications Company ("LCC"), and Chairman & CEO of its operating companies,
located in Texas. Mr. Ross has served on the Boards of the Texas Association
of Business since 1980 and First Bank of Conroe, Texas, since 1983.  In 1972,
Mr. Ross became a director and member of the Executive Committee of the Texas
Telephone Association and in 1975 its Chairman.  Mr. Ross has served as
Chairman of the Board of TECA since 1988.  Mr. Ross has been a member of the
Electronic Engineering Technical Advisory Committee at Texas A&M University
since 1974 and holds an MBA in Finance.

     Mr. Southwick has been a Director of USTN Holdings, Inc. since February
1996.  Prior to that, Mr. Southwick served as a Director of U.S. Intelco from
June 1994 to February 1996.  He served as a Director of U.S. Intelco Networks,
Inc. from 1987 to June 1994.  From 1965 until his retirement in June 1996, he
has served as President of Champlain Telephone Company ("Champlain"), an
Independent in Champlain, New York.  Mr. Southwick received his B.S. in
Business from Syracuse University.  Mr. Southwick is a past Director and
President of New York State Telephone Association and a past Director of
OPASTCO.

     Mr. Strand has been a Director of USTN Holdings, Inc. since February
1996.  Prior to that, Mr. Strand served as a member of the Board of Directors
of ITN from May 1992 to February 1996.  Since 1990, Mr. Strand has been
President of Diversified Operations and a director of Aliant Communications,
Inc. ("Aliant," formerly Lincoln Telecommunications Company)  located in
Lincoln,  Nebraska.  Mr.  Strand  has  served  on  the  Board  of  the  Cellular
Telecommunications  Industry Association (CTIA) and was elected to the Executive
Committee in 1993. He also serves as subcommittee chairman for operations in the
small operators caucus,  Vice Chairman of the CTIA Foundation and is a member of
the CTIA Technology Operations Policy Council (TOPS) of the Board of Directors.

     Mr. Wilkinson has been a Director of USTN Holdings, Inc. since  August
1995 and currently serves as Vice Chairman of the Board and Chairman of the
Audit/Finance Committee.  Prior to that, Mr. Wilkinson served as a director of
U.S. Intelco Holdings, Inc. from June 1994 to February 1996.  He was a
Director of U.S. Intelco Networks, Inc. from February 1986 to June 1994.  He
served as Treasurer of U.S. Intelco from August 1994 to February 1996 and was
Treasurer of U.S. Intelco Networks, Inc. from January 1987 to June 1994.

                                       -29-
<PAGE>
Mr. Wilkinson has been associated with Telephone & Data Systems, Inc. ("TDS"),
a communications holding company with headquarters in Madison, Wisconsin, in
various capacities since 1972.  Since January 1992, he has held the position
of Vice President and Controller with that company and was its Corporate
Controller prior thereto.  He also serves as an officer and director of
various subsidiaries of TDS and serves on various telephone industry-related
committees.  Mr. Wilkinson holds B.S., M.B.A. and J.D. degrees from the
University of Wisconsin.  He is licensed to practice law in the Wisconsin
state and federal courts.

EXECUTIVE OFFICERS

     The persons currently serving as executive officers of USTN Holdings,  Inc.
or its wholly-owned subsidiary Illuminet,  Inc., their ages, and their positions
are set forth below:

     Name                Age            Position
     ----                ---            --------

Roger H. Moore           55              President and Chief
                                         Executive Officer - USTN
                                         Holdings, Inc.
                                         President and Chief Executive
                                         Officer - Illuminet, Inc.

Daniel E. Weiss          49              Vice President,
                                         Secretary/Treasurer - USTN
                                         Holdings, Inc.
                                         Vice President - Illuminet, Inc.

Raymond E. Donnelly      63              Vice President -
                                         USTN Holdings, Inc.
                                         Vice President - Illuminet, Inc.

Bruce E. Johnson         48              Vice President - Illuminet, Inc.

David Nicol              51              Vice President - Illuminet, Inc.

     The  following  is a summary  of the  experience  of each of the  executive
officers:

     Mr. Moore has been President and Chief Executive Officer of USTN
Holdings, Inc. and Illuminet, Inc. since January 1996.  Prior to that, Mr.
Moore served as Vice President of Major Accounts of Northern Telecom from 1994
to December 1995.  He was President of Northern Telecom Japan from 1991 to
1994 and from 1989 to 1991 he was Vice President of Northern Telecom's Western
Region.  Mr. Moore has held other senior positions with Northern Telecom since
joining the company in 1985. Prior to joining Northern Telecom, Mr. Moore was,
from 1982-1985, the President of AT&T Canada.  Mr. Moore has over 30 years of
experience in the telecommunications and business systems industry.  Mr. Moore
received a Bachelor of Science degree in general science from Virginia
Polytechnic Institute.

     Mr. Weiss has been USTN Holdings, Inc. Vice President-Finance since
February, 1996 and the Company's Secretary and Treasurer since April 1996.
Mr. Weiss also serves as the Vice President-Finance for Illuminet, Inc. as
well as its Secretary and Treasurer.  Prior to that, Mr. Weiss served  as U.S.
Intelco's Vice President-Finance from May 1994 to February 1996 and as its
Assistant Treasurer from May 1994 to February 1996.  He has served as Vice
President-Finance and Assistant Treasurer of U.S. Intelco Networks, Inc. from
1986 to 1994.  Mr. Weiss also served as a director and Treasurer of U.S.
Intelco Networks, Inc.  He served as Business and Financial Manager of U.S.
Intelco Networks, Inc. from 1985 to 1986 and was Allied Data's Vice
President-Administration from 1981 to 1985 and Business Manager from 1979 to

                                     -30-
<PAGE>
1981. From 1988 to 1990, he served ITN in various capacities  including Director
and  Secretary/Treasurer.  Mr. Weiss served in various  capacities for Evergreen
State College,  Olympia,  Washington,  from 1971 to 1979,  including  Accounting
Manager,  Assistant Director of Facilities and Academic Operations Officer.  Mr.
Weiss  graduated from Western  Washington  University with a Bachelor of Science
degree in  Accounting  and is a member of the  American  Institute  of Certified
Public Accountants and the Washington Society of Certified Public Accountants.

     Mr. Donnelly has been USTN Holdings, Inc. Vice President-Marketing and
Sales since February 1996.  He also serves Illuminet, Inc. as Vice
President-Marketing and Sales. Prior to that, Mr. Donnelly was ITN's Vice
President of Marketing and Sales from November 1989 to February 1996.  Prior
to joining ITN, Mr. Donnelly was employed by Timeplex, Inc. of Woodcliff Lake,
New Jersey, for two years, where he served as Assistant Vice President in
charge of marketing and business planning.  From April 1974 to January 1987,
Mr. Donnelly was employed as a division manager, in various product line
management and development positions, with AT&T Information Systems and AT&T
Marketing in Morristown, New Jersey.  Mr. Donnelly has over 30 years of
experience in the telecommunications industry.  Mr. Donnelly earned an
undergraduate degree from the University of California,  Berkeley, and a Masters
of Business Administration (MBA) from Farleigh Dickinson University.

     Mr.  Johnson  has been  Illuminet,  Inc.'s  Vice  President-Operations  and
Engineering  since  February  1996.  Prior  to that,  he  served  as ITN's  Vice
President-Operations  and Engineering  from July 1992 to February 1996. Prior to
joining ITN,  Mr.  Johnson was  employed by NYNEX  Telecommunications  for eight
years,  where he served as Staff Director  responsible for planning,  deployment
and  compliance  testing of NYNEX's SS7 network.  From 1970 to 1984, Mr. Johnson
worked  for  New  England  Telephone  in  various   engineering  and  operations
assignments.  Mr. Johnson earned an undergraduate degree in computer science and
mathematics  from  Worcester  State  College and an MBA from the  University  of
Kansas.  Mr.  Johnson has over 27 years of experience in the  telecommunications
industry.

     Mr. Nicol has been Illuminet, Inc.'s Vice President-Product  Management and
Development  since  February  1996.  Prior  to that,  he  served  as ITN's  Vice
President Planning and Administration from February 1994 to February 1996. Prior
to ITN,  Mr.  Nicol was Chief  Operating  Officer of a  privately-held  computer
network  integrator  on  the  West  Coast,  where  he  was  instrumental  in its
acquisition by a NYSE company.  Earlier in a similar  capacity,  he had likewise
engineered  the  acquisition  of a leading  LAN/WAN  systems  integrator  in the
Midwest.  From 1987 to 1990, he was Vice President Corporate Planning for United
Telecom (now Sprint),  having served since 1984 as its Vice President Planning -
Telephone Group.  Prior to Sprint,  Mr. Nicol was a consultant to a wide variety
of  Fortune  500 and  other  companies.  Mr.  Nicol's  undergraduate  degree  in
Aeronautical  Engineering is from Ohio State  University.  He holds a masters in
Business  Economics  from Case  Institute  of  Technology,  and a  doctorate  in
Industrial  Economics and Finance from Case Western Reserve  University.  All of
his thirty year career has been in technology industry sectors, the last fifteen
directly in telecommunications.

                                       -31-
<PAGE>
ITEM 10:   EXECUTIVE COMPENSATION

     The following table sets forth for each of the last three completed  fiscal
years the compensation received by USTN Holdings, Inc.'s Chief Executive Officer
and four other most highly  compensated  executive  officers based on salary and
bonus for the last completed fiscal year.

                           Summary Compensation Table

                                                    Long-Term Compensation
                                                  -------------------------
                         Annual       Compensation   Awards         Payouts
                         -------------------------   ------         ---------
Name and Principal
   Position       Year   Salary ($)    Bonus ($)      LTIP       All Other
                                                              Compensation ($)
----------------- ----   ----------    ---------      -----   ----------------

Roger H. Moore,   1996(1)  245,565     100,000        --(4)    5,600(5)(6)
  President and
  Chief Executive
  Officer

Daniel E. Weiss,  1996     110,863    --(3)        --(4)      4,479(5)(7)
  Vice President  1995     106,074    14,500       --         9,220(8)
                  1994     102,341    11,573       --         9,540(9)

Raymond E.        1996(2)  122,062    --(3)        --(4)      5,841(5)(10)
Donnelly,
  Vice President

Bruce E. Johnson, 1996(2)  105,676    --(3)        --(4)      5,057(5)(11)
  Vice President

David Nicol,      1996(2)  103,292    --3          --(4)      4,925(5)(12)
  Vice President

------------------------
(1)  Mr. Moore was hired effective January 1, 1996.

(2)  Messrs.  Donnelly,  Johnson and Nicol were deemed hired effective  February
     23, 1996, the effective date of the Merger.

(3)  Bonus amounts for this executive for the year 1996 have not yet been
     determined.

(4)  Long-term  cash  incentive  awards  for the year  1996 that will be due and
     payable on December 31, 1998 if executive is still  employed by  ILLUMINET,
     or has not been  terminated for cause through  December 31, 1998,  have not
     yet been determined.

(5)  Retirement  trust profit sharing  contributions  for the year 1996 have not
     yet been determined and are therefore not included in this amount.

(6)  Represents $5,600 in ILLUMINET 401(k) matching contributions.

(7)  Represents $4,479 in ILLUMINET 401(k) matching contributions.

                                   -32-
<PAGE>
(8)  Includes $3,182 in U.S. Intelco 401(k) matching contributions and $6,038
     in U.S. Intelco retirement trust profit sharing contributions.

(9)  Includes $3,067 in U.S. Intelco 401(k) matching contributions and $6,473
     in U.S. Intelco retirement trust profit sharing contributions.

(10) Represents $5,841 in ILLUMINET 401(k) matching contributions.

(11) Represents $5,057 in ILLUMINET 401(k) matching contributions.

(12) Represents $4,925 in ILLUMINET 401(k) matching contributions.

                                    -33-
<PAGE>


<PAGE>



ITEM 11:   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table sets forth as of  December  31,  1996 the  beneficial
ownership  of each  class of USTN  Holdings,  Inc.'s  capital  stock held by (i)
owners of five  percent  (5%) or more of any class,  (ii) each  director of USTN
Holdings,  Inc., (iii) each executive officer named in the Summary  Compensation
Table, and (iv) all directors and executive officers of Illuminet as a group.
<TABLE>
<CAPTION>
                                                                                     Fully
                                 Shares of               Shares of                   Diluted
                                    USTN                    USTN                     Shares of                        Percent
                                   Common      Percent   Series A        Percent     USTN        Percent                of
                                    Stock        of      Preferred          of       Common        of        Total     Total
          Name                                  Class      Stock          Class      Stock (1)    Class    Votes (2)   Votes
-----------------------------    ---------    ---------  ----------      -------     ---------   -------   --------   -------
<S>                               <C>         <C>        <C>             <C>   
Aliant Communications, Inc.        136,954         2.60         156         5.92       204,741      3.19    152,554      2.76
(formerly Lincoln
Telecommunications Co.)
P.O. Box 81309
1440 M Street
Lincoln, NE 68508

CFW Communications Company, Inc.   104,000         1.98          172        6.52       180,263      2.82    121,200      2.19
401 Spring Lane
Suite 300
P.O. Box 1990
Waynesboro, VA 22980-1990

Consolidated Communications, Inc.   51,029            *          523       19.83       271,566      4.23    103,329      1.87
121 S. 17th Street
Mattoon, IL 61938

Pacific Telecom, Inc.              142,115          2.70         172        6.52       217,983      3.40    159,315      2.88
P.O. Box 9901
805 Broadway
Vancouver, WA 98668-8701

Rock Hill                           25,000             *         303       11.49       150,558      2.35     55,300      1.00
Telephone Co.
P.O. Box 470
330 E. Black St.
Rock Hill, SC 29731

Shenandoah                          61,592          1.17         136        5.16       119,131      1.86     75,192       1.36
Telephone Company
P.O. Box 459
Edinburg, VA  22824

Telephone                          621,556         11.81          --          --       621,556      9.69    621,556      11.25
& Data Systems, Inc.
Suite 4000
30 N. LaSalle St.
Chicago, IL  60602
</TABLE>

                                       -34-
<PAGE>
<TABLE>
<CAPTION>
                                    Shares of                 Shares of                 Diluted
                                       USTN                     USTN                    Shares of                           Percent
                                      Common     Percent      Series A    Percent         USTN         Percent               of
                                       Stock       of         Preferred     of           Common          of      Total      Total
           Name                                   Class         Stock      Class        Stock (1)       Class   Votes (2)   Votes
--------------------------------    ---------    --------    -----------  -------       ----------     -------  --------    -------
<S>                                 <C>          <C>         <C>          <C>            <C>           <C>      <C>         <C>

Theodore D. Berns                       1,078          *              --       --            1,078           *     1,078          *

Eugene L. Cole(3)                      20,131          *              --       --           20,131           *    20,131          *

Aubrey E. Judy                             --         --              --       --               --          --        --         --

Kenneth L. Lein(4)                     18,818          *               9        *           22,536           *    19,718          *

Richard A. Lumpkin(5)                  52,051          *             523    19.83          272,588        4.25   104,351       1.89

James S. Quarforth(6)                 104,967       1.99             176     6.67          183,290        2.86   122,567       2.22

G. I. Ross(7)                         210,063       3.99             105     3.98          254,571        3.97   220,563       3.99

David C. Southwick                         --         --              --       --               --          --        --         --

James W. Strand(8)                    137,838       2.62             156     5.92          205,625        3.21   153,438       2.78

Gregory J. Wilkinson(9)               621,556      11.81              --       --          621,556        9.69   621,556      11.25

Roger H. Moore                             --         --              --       --               --          --        --         --

Daniel E. Weiss                            --         --              --       --               --          --        --         --

Raymond E. Donnelly                     5,739          *              20        *           13,953           *     7,739          *

David Nicol                               971          *              --       --              971           *       971          *

Bruce E. Johnson                        2,381          *               7        *            5,328           *     3,081          *
                                   ----------    -------           -----  -------       ----------    --------   -------    -------
Executive Officers and
Directors as a Group                1,175,593      22.349            996    37.77        1,601,627       24.98 1,275,193      23.08
                                    =========     =======           ====   ======        =========     ======= =========     ======
</TABLE>

                                        -35-
<PAGE>
*    Less than 1%

(1)  Assumes  conversion  into shares of USTN Common Stock of all shares of each
     series  of USTN  Preferred  Stock,  and the  USTN  Debentures  and  accrued
     interest  thereon as of December 31, 1996 (assuming such interest is deemed
     principal by the holders of such USTN Debentures).

(2)  Represents  total number of votes and percentage of votes held.  Holders of
     USTN Series A Preferred Stock are entitled to 100 votes per share.

(3)  As an  executive  officer of Canby,  Mr. Cole may be deemed the  beneficial
     owner of the 20,131 shares of USTN Common Stock owned by Canby.

(4)  As an executive officer of Winnebago, Mr. Lien may be deemed the beneficial
     owner of the 18,818  shares of USTN Common Stock and 1 share of USTN Series
     A Preferred Stock owned by Winnebago.

(5)  As a director and executive  officer of CCI, Mr.  Lumpkin may be deemed the
     beneficial  owner of the 52,029  shares of USTN Common Stock and 523 shares
     of USTN Series A Preferred Stock owned by CCI.

(6)  As an executive  officer of CFW, Mr. Quarforth may be deemed the beneficial
     owner of the  104,000  shares  of USTN  Common  Stock and 172 share of USTN
     Series A Preferred Stock owned by CFW.

(7)  As a director  and  executive  officer of LCC,  Mr.  Ross may be deemed the
     beneficial  owner of the 208,930 shares of USTN Common Stock and 105 shares
     of USTN Series A Preferred Stock owned by LCC.

(8)  As a director and executive officer of Aliant, Mr. Strand may be deemed the
     beneficial  owner of the 136,954 shares of USTN Common Stock and 156 shares
     of USTN Series A Preferred Stock owned by Aliant.

(9)  As an executive  officer of TDS, Mr. Wilkinson may be deemed the beneficial
     owner of 621,556 shares of USTN Common Stock beneficially owned by TDS.

                                -36-
<PAGE>
ITEM 12:   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     ILLUMINET  provides  certain  services to companies  who have an officer or
director on the board of directors of USTN  Holdings,  Inc., or to companies who
own five percent (5%) or more of any class of USTN  Holdings,  Inc.  stock.  The
services  provided and the rates charged are the same as those provided to other
customers.  For the period  February 23, 1996,  the Merger date, to December 31,
1996,  ILLUMINET received (1) $578,000 from CCI or its affiliates,  of which Mr.
Lumpkin is a director and  executive  officer;  (2) $619,000  from Aliant or its
affiliates,  of which Mr.  Strand  is a  director  and  executive  officer;  (3)
$279,000  from LCC, of which Mr. Ross is a director and executive  officer;  (4)
$147,000 from CFW or its affiliates, of which Mr.  Quarforth is an executive 
officer;  (5) $96,000 from TDS, of which Mr. Wilkinson is an executive officer,
and (6) $194,000 from Rock Hill Telephone Company.

For  participation  in certain data base services  provided by ILLUMINET for the
period February 23, 1996, the Merger date, to December  31,1996,  ILLUMINET paid
at rates that are the same as paid to other  participants  (1) $64,000 to Aliant
or its affiliates,  of which Mr. Strand is a director and executive  officer and
(2) $129,000 to Pacific Telcom, Inc. Under the same participation  arrangements,
ILLUMINET paid TDS, of which Mr. Wilkinson is an executive officer,  $72,000 and
$71,000 for the years ended December 31, 1996 and 1995, respectively.



                                   -37-
<PAGE>
ITEM 13:   EXHIBITS, LIST AND REPORTS ON FORM 8-K

      (a)  EXHIBITS REQUIRED TO BE FILED BY ITEM 601 OF REGULATION S-B

           EXHIBIT        3.1  Certificate  of   Incorporation   of  U.S  Telnet
                          Holdings, Inc.

           EXHIBIT 3.2    Certificate of Amendment of Certificate of
                          Incorporation of U.S. Telnet Holdings, Inc. dated
                          September 21, 1995.

           EXHIBIT 3.3    Certificate of Amendment of Certificate of
                          Incorporation of USTN Holdings, Inc. dated January 23,
                          1996.

           EXHIBIT        3.4  Bylaws  of  USTN  Holdings,  Inc.  (Incorporated
                          by reference  to  Exhibit  3.2  to  USTN  Holdings,  
                          Inc.'s Registration Statement on Form S-4, No. 
                          33-97876.)

           EXHIBIT        4.1 Specimen  Common Stock  Certificate of USTN 
                          Holdings, Inc.(Incorporated  by  reference  to Exhibit
                          4.1 to USTN Holdings,  Inc.'s Registration Statement 
                          on Form S-4, No. 33-97876.)

           EXHIBIT        4.2 Specimen Common Stock  Certificate  (Incorporated
                          by reference  to  Exhibit  4.2  to  USTN  Holdings,
                          Inc.'s Registration Statement on Form S-4,
                          No.33-97876.)

           EXHIBIT 4.3    Indenture, dated August 15, 1991 between Independent
                          Telecommunications Network, Inc. and United Missouri
                          Bank, N.A., as trustee and form of 7.5% Convertible
                          Redeemable Subordinated Debentures due August 15,
                          2001 (Incorporated by reference to Exhibit 4.3 to USTN
                          Holdings, Inc.'s Registration Statement on Form S-4,
                          No. 33-97876.)

           EXHIBIT 4.3    First Supplement to Indenture between Independent
                          Telecommunications Network, Inc. and USTN Holdings,
                          Inc. and USTN Services, Inc. and UMB Bank, N.A.,
                          Trustee, dated February 12, 1996.  Supplemental to
                          Indenture dated August 15, 1991.

           EXHIBIT 4.4    Second Supplement to Indenture between USTN Holdings,
                          Inc. and USTN Services, Inc. and UMB Bank, N.A. ,
                          Trustee, dated June 24, 1996.  Supplemental to
                          Indenture dated August 15, 1991.

           EXHIBIT 4.5    Certificate of Designation of USTN Holdings, Inc.
                          Series A Convertible Preferred Stock.
  
           EXHIBIT 10.1   Office  Building  Lease  dated June 25, 1993 by
                          and between The Travelers  Insurance  Company and 
                          Independent Telecommunications   Network,   Inc.  
                          (Incorporated by reference to Exhibit 10.1 to USTN
                          Holdings, Inc.'s Registration Statement on Form S-4, 
                          No. 33-97876.)

                                          -38-
<PAGE>

           EXHIBIT 10.2   ILLUMINET 1996 Executive Long-Term Bonus Plan
 
           EXHIBIT 10.3   ILLUMINET 1996 Executive Short-Term Bonus Plan

           EXHIBIT 10.4   Employment Agreement by and between Independent
                          Telecommunications, Inc. and Bruce Johnson
                          (Incorporated by reference to Exhibit 10.5 to USTN
                          Holdings, Inc.'s Registration Statement on Form S-4,
                          No. 33-97876.)

           EXHIBIT 10.5   Employment Agreement by and between Independent
                          Telecommunications, Inc. and David J. Nicol
                          (Incorporated by reference to Exhibit 10.7 to USTN
                          Holdings, Inc.'s Registration Statement on Form S-4,
                          No. 33-97876.)

           EXHIBIT 10.6   Employment Agreement by and between Independent
                          Telecommunications, Inc. and Raymond E. Donnelly
                          (Incorporated by reference to Exhibit 10.8 to USTN
                          Holdings, Inc.'s Registration Statement on Form S-4,
                          No. 33-97876.)

           EXHIBIT 10.7   Employment Agreement by and between U.S. Intelco
                          Networks, Inc. and Kingsley W. Hill (Incorporated by
                          reference to Exhibit 10.10 to USTN Holdings, Inc.'s
                          Registration Statement on Form S-4, No. 33-97876.)
 
           EXHIBIT 10.8   Independent Telecommunications Network, Inc. 1995
                          Long-Term Bonus Plan (Incorporated by reference to
                          Exhibit 10.13 to USTN Holdings, Inc.'s Registration
                          Statement on Form S-4, No. 33-97876.)

           EXHIBIT 10.9   Independent Telecommunications Network, Inc. 1995
                          Short-Term Bonus Plan (Incorporated by reference to
                          Exhibit 10.14 to USTN Holdings, Inc.'s Registration
                          Statement on Form S-4, No. 33-97876.)

           EXHIBIT 10.10  Form of Severance Agreement and General Release by and
                          between U.S. Intelco Holdings, Inc. and Robert D. Cook
                          (Incorporated by reference to Exhibit 10.15 to USTN
                          Holdings, Inc.'s Registration Statement on Form S-4,
                          No. 33-97876.)

                                        -39-
<PAGE>

           EXHIBIT 10.11  Form of Letter Agreement of Employment by and among
                          Independent Telecommunications Network, Inc., U.S.
                          Intelco Holdings, Inc. and Roger H. Moore regarding
                          Mr. Moore's employment as President and Chief 
                          Executive Officer of USTN Holdings, Inc. (Incorporated
                          by reference to Exhibit 10.16 to USTN Holdings, Inc.'s
                          Registration Statement on Form S-4, No. 33-97876.)

           EXHIBIT 11     COMPUTATION OF EARNINGS PER SHARE

           EXHIBIT 16     LETTER ON CHANGE OF CERTIFYING ACCOUNTANT

           EXHIBIT 21     LIST OF SUBSIDIARIES AS OF DECEMBER 31, 1996

           EXHIBIT 27     FINANCIAL DATA SCHEDULE

           (b)  REPORTS ON FORM 8-K..................................NONE


                                    -40-
<PAGE>
                                   SIGNATURES

In accordance with  requirements of the Exchange Act, the Registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

                                 USTN HOLDINGS, INC.


                                 By:  /s/ Roger H. Moore
                                     ------------------------------
                                        Roger H. Moore
                                        President and Chief Executive
                                        Officer
                                 Date:  March 26, 1997


In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  Registrant and in the capacities and on the
dates indicated.

     SIGNATURE/TITLE          DATE


By: /s/ Roger H. Moore
---------------------------   March 26, 1997
Roger H. Moore,
President and Chief
Executive Officer
(Principal Executive
Officer)


By: /s/ Daniel E. Weiss
---------------------------   March 14, 1997
Daniel E. Weiss,
Vice President - Finance
(Principal Financial Officer
and Accounting Officer)


By: /s/ Richard A. Lumpkin
---------------------------   March 20, 1997
Richard A. Lumpkin,
Chairman of the Board


By: /s/ Gregory J. Wilkinson
----------------------------- March 17, 1997
Gregory J. Wilkinson,
Vice Chairman of the Board


By: /s/ Theodore D. Berns
----------------------------  March 20, 1997
Theodore D. Berns,
Director


By: 
----------------------------  March ___, 1997
Eugene L. Cole,
Director


By: /s/ Aubrey E. Judy
---------------------------   March 17, 1997
Aubrey E. Judy,
Director


By: /s/ Kenneth L. Lein
---------------------------   March 19, 1997
Kenneth L. Lein,
Director


By: /s/ James S. Quarforth
---------------------------   March 17, 1997
James S. Quarforth,
Director

                                      -41-
<PAGE>

By: 
---------------------------   March ___, 1997
G. I. Ross,
Director


By: /s/ James W. Strand
---------------------------   March 17, 1997
James W. Strand,
Director


By: /s/ David C. Southwick
---------------------------   March 18, 1997
David C. Southwick,
Director

                                    -42-
<PAGE>
                                                                     EXHIBIT 3.1

                                                        STATE OF DELAWARE
                                                       SECRETARY OF STATE
                                                 DIVISION OF CORPORATIONS
                                                FILED 01:00 PM 08/02/1995
                                                      950174119 - 2530006

                    CERTIFICATE OF INCORPORATION
                                OF
                      U.S. TELNET HOLDINGS, INC.


     U.S. TELNET HOLDINGS, INC., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:

     FIRST:  The name of the corporation is U.S. TELNET HOLDINGS, INC.

     SECOND:  The  address  of the  registered  office of the  corporation  (the
"Corporation")  in the State of Delaware is 32  Loockerman  Square,  Suite L100,
Dover,  County of Kent, Delaware 19904. The name of its registered agent at such
address is The Prentice-Hall Corporation System, Inc.

     THIRD:  The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware.

     FOURTH:  The total  number of shares of stock which the  Corporation  shall
have authority to issue is Forty-Five Million  (45,000,000)  shares of stock, of
which Fifteen Million  (15,000,000)  shares shall be Preferred  Stock, par value
$.01 per share ("Preferred Stock"), and Thirty Million (30,000,000) shares shall
be Common Stock, par value $.01 per share ("Common Stock").

     No  holder of stock of the  Corporation  shall be  entitled  as such to any
preemptive  right to subscribe for,  purchase or receive (i) any shares of stock
of the Corporation at any time held in its treasury,  or (ii) unissued shares of
stock of the Corporation, whether authorized at present or hereafter authorized,
or (iii) any issue of notes,  bonds or debentures,  whether or not,  convertible
into  any  class of stock of the  Corporation,  or (iv) any  issue of  warrants,
options  or  rights  to  subscribe  for  shares  of any  class  of  stock of the
Corporation.

     The powers,  designations,  preferences,  qualifications,  limitations, and
relative rights of the shares of each class are as follows:

Subdivision A. Preferred Stock.

     The Preferred Stock shall be issued from time to time in one or more series
with such distinctive  serial  designations and (a) may have such voting powers,
full  or  limited,  or may be  without  voting  powers,  (b) may be  subject  to
redemption  at such time or times and at such  prices,  (c) may be  entitled  to
receive  dividends  (which may be cumulative or  noncumulative)  at such rate or
rates, on such conditions, and at such times and payable in preference to, or in
such relation to, the dividends payable on any other class or classes of
series of stock,  (d) may have such rights upon the  dissolution of, or upon any
of the  assets  of,  the  Corporation,  (e) may be  made  convertible  into,  or
exchangeable for, shares of any other class or classes or of any other series of
the same or any other  class or  classes  of stock of the  Corporation,  at such
price or prices or at such rates of exchange, and with such adjustments, and (f)
shall have such other relative, participating, optional or other special rights,
qualifications,  limitations or  restrictions,  all as shall hereafter be stated
and expressed in the resolution or  resolutions  providing for the issue of such
Preferred  Stock  from time to time  adopted  by the Board of  Directors  of the
Corporation pursuant to authority to do so which is hereby vested in the Board.
<PAGE>

Subdivision B. Common Stock.

     1. Dividends and Liquidation.  Subject to those rights expressly granted to
the holders of Preferred  Stock,  the holders of Common Stock shall have (a) the
right to receive  dividends,  when and as declared by the Board of  Directors of
the Corporation  out of the assets of the Corporation  available for the payment
of  dividends  under  the  laws of the  State  of  Delaware,  and (b)  upon  any
liquidation (complete or partial), dissolution or winding up of the Corporation,
whether voluntary or involuntary, the right to receive ratably all assets of the
Corporation remaining after the payment to the holders of Preferred Stock of any
amount which such holders are entitled to receive in  preference  to the holders
of  Common  Stock  upon  such  liquidation,  dissolution  or  winding  up of the
Corporation, as provided in any Certificate of Designations, Powers, Preferences
and Rights of the Preferred Stock adopted by the Board of Directors, and subject
to any right the Preferred Stock may have to participate in the  distribution of
such assets as provided in any Certificate of Designations,  Powers, Preferences
and Rights of the Preferred Stock.

     2.  Voting.  Each share of Common Stock shall entitle the holder thereof
to one vote, in person or by proxy, at any and all meetings of the
stockholders of the Corporation, on all propositions before such meetings.

     FIFTH:  The name and address of the Incorporator is as follows:

               Name                    Address
           ---------------         ---------------------
          Michael B. Fischer       Rudnick & Wolfe
                                   203 N. LaSalle St., Suite 1800
                                   Chicago, Illinois 60601

     SIXTH:  The number of directors of the Corporation  which shall  constitute
the entire Board shall initially be sixteen (16), but such number may be changed
from time to time to a number not less than five (5) nor more than  sixteen (16)
by resolution adopted by a majority of the entire Board; provided, however, that
the number of directors  constituting the entire Board shall not be decreased by
the Board of  Directors  below the number then in office  unless  such  decrease
shall become effective at any annual meeting of stockholders to the extent terms
of office are then expiring. As used in this Article SIXTH, "entire Board" means
the total number of directors which the Corporation  would have if there were no
vacancies.  Any director or directors  may be removed from office only for cause
and only by the  vote of  eighty  percent(80%)  of the  voting  power of all the
shares of capital stock of the  Corporation  then entitled to vote  generally in
the election of directors, voting together as a single class. Any vacancy on the
Board of Directors that

<PAGE>
results for any reason, including an increase in the number of directors, may be
filled by the affirmative vote of a majority of the directors then in office.

     SEVENTH:  Any of the following actions must be approved by the holders of
two-thirds of the outstanding shares of stock entitled to vote thereon:

          (a) a plan of merger  in which the  Corporation  merges  into  another
     corporation  or in  which  one or more  corporations  (other  than  solvent
     corporations at least 90% of the  outstanding  share of each class of which
     are owned by the  Corporation)  merge  into the  Corporation,  or a plan of
     consolidation  with one or more  corporations  or a plan of mandatory share
     exchange with another corporation;

          (b)  a  sale,  lease,   exchange  or  other  disposition  of  all,  or
     substantially  all,  of the  Corporation's  property  and  assets,  with or
     without  goodwill,  if not made in the  usual  and  regular  course  of the
     Corporation's business; and

          (c)  the voluntary dissolution of the Corporation.

     EIGHTH:  The following provisions are inserted for management of the
business and conduct of the affairs of the Corporation and to define and
regulate the powers of the Corporation, the directors and the stockholders:

          (a)  Election of directors need not be by written ballot unless the
     by-laws so provide.

          (b) The Board of Directors of the Corporation shall have power without
     the assent or vote of the stockholders to make, alter,  amend,  change, add
     to or repeal the by-laws of the corporation;  to fix and vary the amount of
     capital stock or cash to be reserved for any proper  purpose;  to authorize
     and cause to be  executed  mortgages  and liens upon all or any part of the
     property of the  Corporation;  to determine the use and  disposition of any
     surplus or net profits; and to fix the times for
     the declaration and payment of dividends.

<PAGE>


          (c) The directors in their  discretion  may submit any contract or act
     for approval or ratification  at any annual meeting of the  stockholders or
     at any meeting of the  stockholders  called for the purpose of  considering
     any such act or contract, and any contract or act that shall be approved or
     be  ratified  by the vote of the  holders of a majority of the stock of the
     Corporation  which is represented in person or by proxy at such meeting and
     entitled to vote there at (provided that a lawful quorum of stockholders be
     there  represented  in person or by proxy) shall be as valid and as binding
     upon the  Corporation  and upon all the  stockholders as though it had been
     approved or ratified by every  stockholder of the  Corporation,  whether or
     not the contract or act would  otherwise be open to legal attack because of
     directors' interest, or for any other reason.

          (d) In  addition  to the powers  and  authorities  hereinbefore  or by
     statute  expressly  conferred upon them, the directors are hereby empowered
     to  exercise  all such  powers  and do all such  acts and  things as may be
     exercised or done by the Corporation; subject, nevertheless, to the
     provisions  of the statutes of  Delaware,  of this  Certificate  and to any
     by-laws from time to time made by the stockholders;  provided however, that
     no by-laws so made shall  invalidate  any prior act of the directors  which
     would have been valid if such by-law had not been made.
<PAGE>

     NINTH: The Corporation  shall to the full extent provided by Section 145 of
the Delaware General  Corporation  Law, as amended from time to time,  indemnify
all persons whom it may indemnify pursuant thereto.

     TENTH:  Whenever a  compromise  or  arrangement  is  proposed  between  the
Corporation  and  its  creditors  or  any  class  of  them  and/or  between  the
Corporation  and its  stockholders  or any class of them, any court of equitable
jurisdiction  within the State of Delaware may, on the  application in a summary
way of the  Corporation  or of any  creditor  or  stockholder  thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the  application
of trustees in  dissolution  or of any receiver or receivers  appointed  for the
Corporation under the Provisions of Section 279 of Title 8 of the Delaware Code,
order  a  meeting  of  the  creditors  or  class  of  creditors,  and/or  of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be  summoned  in such  manner  as the court  directs.  If a  majority  in number
representing  three-fourths  in value of the  creditors  or class of  creditors,
and/or of the stockholders or class of stockholders of the  Corporation,  as the
case may be, agree to any compromise or arrangement and to any reorganization of
the  Corporation  as  consequence of such  compromise or  arrangement,  the said
compromise or arrangement  and the said  reorganization  shall, if sanctioned by
the court to which the said  application  has been  made,  be binding on all the
creditors  or class of  creditors,  and/or on all the  stockholders  or class of
stockholders,  of  the  Corporation,  as  the  case  may  be,  and  also  on the
Corporation.
<PAGE>

     ELEVENTH: The Corporation reserves the right to amend, alter, change or
repeal any of the provisions  contained in its certificate of  incorporation  in
the manner now or hereafter  prescribed by statute,  and all rights conferred on
officers,  directors  and  stockholders  herein  are  granted  subject  to  this
reservation;  provided,  that the  affirmative  vote of the holders of record of
outstanding shares representing at least two-thirds (2/3rds) of the voting power
of all of the shares of capital stock of the  Corporation  then entitled to vote
generally, voting together as a single class, shall be required to amend, alter,
change or repeal  any  provision  of, or to adopt any  provision  or  provisions
inconsistent   with  Articles   SIXTH  and  SEVENTH  of  this   Certificate   of
Incorporation.

     TWELFTH:  No director of the Corporation  shall be personally liable to the
Corporation  or its  stockholders  for monetary  damages for breach of fiduciary
duty by such  director  as a  director;  provided,  however,  that this  Article
TWELFTH  shall not  eliminate or limit the liability of a director to the extent
provided by applicable law (i) for any breach of the director's  duty of loyalty
to the Corporation or its  stockholders,  (ii) for acts or omissions not in good
faith or which involve  intentional  misconduct  or a knowing  violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which the director derives an improper personal
benefit.  No amendment to or repeal of this  Article  TWELFTH  shall apply to or
have any effect on the liability or alleged  liability of any director of the
Corporation for or with respect to any acts or omissions  of such  director and 
occurring  prior to such  amendment or repeal.  If the  Delaware  General  
Corporation  Law  is  amended  to  authorize corporate  action  further  
eliminating  or limiting the  personal  liability of directors,  then  the 
liability  of a  director  of the  Corporation  shall  be eliminated or limited 
to the fullest  extent  permitted by the Delaware  General Corporation Law, as 
so amended.

     IN WITNESS WHEREOF, I have hereunto set my hand and seal.


DATED: August 2, 1995.


/s/  Michael B. Fischer


<PAGE>
                                                                     EXHIBIT 3.2
                                                               STATE OF DELAWARE
                                                              SECRETARY OF STATE
                                                     DIVISION OF CORPORATIONS
                                                    FILED 09:00 AM 01/29/1996
                                                          960026950 - 2530006
                            CERTIFICATE OF AMENDMENT

                                       OF

                          CERTIFICATE OF INCORPORATION

                                       OF
                           U.S. TELNET HOLDINGS, INC.

                 Pursuant to Section 241 of the General
                Corporation Law of the State of Delaware


     THE UNDERSIGNED, being the Chairman of the Board of Directors of U.S.

TELNET HOLDINGS, INC., A Delaware corporation, does hereby certify as follows:

     FIRST:  That the Certificate of Incorporation has been amended by

striking out Article FIRST as it now exists and inserting in lieu thereof the

following:

     FIRST:  The name of the corporation is USTN HOLDINGS, INC.

     SECOND:  That the corporation has not received any payment for any of its

stock and that this amendment has been duly adopted in accordance with the

provisions of Section 241 of the General Corporation Law of the State of

Delaware by resolutions of the board of directors.

     IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of

September, 1995.

                               /s/ Michael B. Fischer
                               ----------------------------------------
                               Assistant Secretary



<PAGE>
                                                                     EXHIBIT 3.3

                                                        STATE OF DELAWARE
                                                       SECRETARY OF STATE
                                                 DIVISION OF CORPORATIONS
                                                FILED 09:00 AM 01/29/1996
                                                      960026950 - 2530006
                        CERTIFICATE OF AMENDMENT
                                       OF
                      CERTIFICATE OF INCORPORATION
                                       OF
                               USTN HOLDINGS, INC.

                     Pursuant to Section 241 of the General
                   Corporation Law of the State of Delaware

     THE  UNDERSIGNED,  being the  Chairman  of the Board of  Directors  of USTN
HOLDINGS, INC., a Delaware corporation, does hereby certify as follows:

     FIRST:  That the Certificate of Incorporation has been amended by
striking out the first paragraph of Article FOURTH as it now exists and
inserting in lieu thereof the following:

          The total number of shares of stock which the  Corporation  shall have
          authority to issue is Twelve Million One Hundred Thousand (12,100,000)
          shares of stock, of which One Hundred Thousand  (100,000) shares shall
          be Preferred Stock, par value $.01 per share ("Preferred  Stock"), and
          Twelve Million  (12,000,000)  shares shall be Common Stock,  par value
          $.01 per share ("Common Stock").

     SECOND:  That the  corporation  has not received any payment for any of its
stock and that this  amendment  has been duly  adopted  in  accordance  with the
provisions  of  Section  241 of the  General  Corporation  Law of the  State  of
Delaware by resolutions of the board of directors.

     IN WITNESS  WHEREOF,  I have hereunto set my hand this 23rd day of January,
1996.


                               /s/ Greg Wilkinson
                              ------------------------------------------
                              Greg Wilkinson, Chairman of the Board


<PAGE>
                                                                     EXHIBIT 4.3
==============================================================================



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


                          FIRST SUPPLEMENTAL INDENTURE


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

                INDEPENDENT TELECOMMUNICATIONS NETWORK, INC.

                                       AND

                               USTN HOLDINGS, INC.

                                       AND

                               USTN SERVICES, INC.

                                       AND

                             UMB BANK, N.A., TRUSTEE



                          Dated as of February 12, 1996


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

                            SUPPLEMENTAL TO INDENTURE

                              DATED AUGUST 15, 1991

==============================================================================
<PAGE>

    FIRST   SUPPLEMENTAL   INDENTURE,   dated  as  of  February  12,  1996  (the
"Supplemental Indenture"), between INDEPENDENT TELECOMMUNICATIONS NETWORK, INC.,
a Delaware corporation (the "Company"),  USTN HOLDINGS,  INC. (f/k/a U.S. TelNet
Holdings, Inc.), a Delaware corporation ("Holdings"), USTN SERVICES, INC. (f/k/a
U.S. TelNet Services, Inc.), a Delaware corporation ("Services"),  and UMB BANK,
N.A.  (f/k/a United  Missouri Bank,  N.A.),  as Trustee (the  "Trustee"),  to an
Indenture dated as of August 15, 1991 (the "Indenture"), between the Company and
the Trustee.

     WHEREAS, the Company has heretofore executed and delivered the Indenture to
the Trustee for the authentication, delivery and administration of the Company's
$13,248,000 principal amount 7.5% convertible redeemable subordinated debentures
due August 15, 2001 (the "Securities") issued pursuant to the Indenture; and
     WHEREAS, Section 5.1 of the Indenture provides in part that the corporation
surviving  any  merger  to which  the  Company  is a party  (if  such  surviving
corporation  is not the  Company)  shall  enter  into a  supplemental  indenture
assuming  the  obligations  of the  Company  under  the  Indenture  (except  for
obligations as to conversion of the  Securities if a  supplemental  indenture is
entered into pursuant to Section 10.9 of the Indenture); and

     WHEREAS,  Section 10.9 of the Indenture provides,  among other things, that
if the  Company  is a party  to a  merger  which  reclassifies  or  changes  its
outstanding  common stock,  upon  consummation of the transaction the Securities
shall  automatically  become convertible into the kind and amount of securities,
cash or other  assets  which the  Holder  (as  defined  in the  Indenture)  of a
Security  would  have  owned  immediately  after the  merger if the  Holder  had
converted the Security immediately before the effective date of the merger; and

     WHEREAS, Section 10.9 of the Indenture also provides that concurrently with
the  consummation  of the merger,  the person  obligated to issue  securities or
deliver cash or other assets upon conversion of the Securities  shall enter into
a  supplemental  indenture so providing and further  providing  for  adjustments
which  shall be as nearly  equivalent  as may be  practical  to the  adjustments
provided for in Article 10 of the Indenture; and
<PAGE>

     WHEREAS, the Company, on August 3, 1995, entered into an Agreement and
Plan of Merger (the "Merger  Agreement") by and among the Company,  U.S. Intelco
Holdings, Inc., a Washington corporation ("USIH"),  Holdings and Services, under
which  the  Company  and USIH  shall be  merged  with  and  into  Services  (the
"Merger"); and

     WHEREAS, the Company, the Trustee,  Holdings and Services desire to execute
this Supplemental  Indenture for the purpose of complying with the provisions of
Sections 5.1 and 10.9 of the  Indenture  and the Company has  requested and does
hereby  request the Trustee to join with the  Company,  Holdings and Services in
the execution and delivery of this Supplemental Indenture; and 

     WHEREAS, all acts and things necessary to make this Supplemental Indenture,
when duly  executed and  delivered,  a valid,  binding and legal  instrument  in
accordance with its terms and for the purposes herein expressed,  have been done
and  performed by the parties  hereto;  and the  execution  and delivery of this
Supplemental  Indenture  have  been  in all  respects  duly  authorized  by said
parties;

     NOW, THEREFORE,  in consideration of the premises and other  consideration,
the receipt of which is hereby acknowledged,  the Company, the Trustee, Holdings
and  Services  mutually  covenant  and  agree,  for the equal and  proportionate
benefit  of the  respective  Holders  from  time to time of the  Securities,  as
follows:


                                    ARTICLE I

                                   DEFINITIONS

     The use of the  terms and  expressions  herein  is in  accordance  with the
definitions,   uses  and  constructions  contained  in  the  Indenture  and  the
Securities.

                                   ARTICLE II

                  ASSUMPTION OF RIGHTS AND OBLIGATIONS

     At the  Effective  Time of the Merger (as defined in the Merger  Agreement)
and  pursuant  to this  Supplemental  Indenture  and the Merger  Agreement:  (a)
Services shall assume the rights and  obligations of the Company as set forth in
the  Indenture  except for  obligations  of the Company as to  conversion of the
Securities  and (b)  Holdings  shall  assume the rights and  obligations  of the
Company as to conversion of the  Securities.  From and after the Effective Time,
all  references  in  the  Indenture  to (i)  "Securities"  shall  mean  Holdings
Securities (as defined  below),  (ii) the "Company"  shall mean Services,  (iii)
"Common  Stock" shall mean  Holdings  Common  Stock (as defined  below) and (iv)
"Series A Convertible  Preferred  Stock" shall mean Holdings  Series A Preferred
Stock as it exists as of the  Effective  Time or as it may be  constituted  from
time to time.

                             ARTICLE III

                             CONVERSION

     Pursuant to the terms and conditions of the Merger Agreement, each Security
outstanding as of the Effective Time that is not converted into Holdings  Common
Stock at the election of the Holder thereof will be automatically converted into
a 7.5%  convertible  redeemable  subordinated  debenture  due August 15, 2001 of
Holdings (a "Holdings  Security")  with the same rights and  obligations  as set
forth for Securities in the Indenture, except that Section 10.1 of the Indenture
is amended and restated in its entirety as follows: 

          SECTION  10.1  CONVERSION  PRIVILEGE.   A  Holdings  Security  may  be
converted by the Holder thereof into ninety (90) shares of Holdings Common Stock
for each One  Thousand  Dollars  ($1,000) in principal  amount of such  Holdings
Security at any time during the period set forth in  paragraph 8 of the Holdings
Securities.

          "HOLDINGS COMMON STOCK" means Common Stock of Holdings as it exists as
of the Effective Time or as it may be constituted from time to time.

                                   ARTICLE IV

                                   THE TRUSTEE

     The Trustee shall not be  responsible in any manner  whatsoever  for, or in
respect of, the validity or  sufficiency of this  Supplemental  Indenture or the
due execution hereof by the Company and Holdings,  or for, or in respect of, the
recitals and statements  contained herein,  all of which recitals and statements
are made solely by the Company and Holdings.

     No  duties,  responsibilities  or  liabilities  are  assumed,  or  shall be
construed to be assumed, by the Trustee by reason of this Supplemental Indenture
other than as set forth in the  Indenture;  and this  Supplemental  Indenture is
executed  and  accepted on behalf of the  Trustee,  subject to all the terms and
conditions  set  forth in the  Indenture,  as fully  to all  intents  as if this
Supplemental Indenture were a part of and set forth in the Indenture.

                                    ARTICLE V

                            MISCELLANEOUS PROVISIONS

          SECTION 5.1 EXECUTION OF  SUPPLEMENTAL  INDENTURE.  Except  insofar as
herein expressly provided, all the provisions, definitions, terms and conditions
of  the  Indenture,   as  supplemented  and  amended,  shall  be  deemed  to  be
incorporated  in,  and  made a part of,  this  Supplemental  Indenture;  and the
Indenture as supplemented and amended by this  Supplemental  Indenture is in all
respects ratified and confirmed;  and the Indenture, as supplemented and amended
by this Supplemental Indenture shall be read, taken and construed as one and the
same instrument.

          SECTION 5.2 CONFLICT  WITH TRUST  INDENTURE  ACT. If any  provision of
this  Supplemental  Indenture  limits,   qualifies  or  conflicts  with  another
provision which is required to be included in this Supplemental Indenture by any
of the provisions of the Trust Indenture Act, as amended from time to time, the 
required provision shall control.

          SECTION  5.3  BENEFITS  OF  SUPPLEMENTAL  INDENTURE.  Nothing  in this
Supplemental Indenture is intended, or shall be construed, to give to any person
or corporation, other than the parties hereto and the Securityholders, any legal
or  equitable  right,  remedy or claim under or in respect of this  Supplemental
Indenture, or under any covenant,  condition or provision herein contained,  all
the covenants,  conditions and provisions of this  Supplemental  Indenture being
intended  to be, and being,  for the sole and  exclusive  benefit of the parties
hereto and of the Securityholders. 
<PAGE>

          SECTION 5.4 SUCCESSORS AND ASSIGNS.  All covenants,  stipulations  and
agreements in this Supplemental  Indenture contained by or on behalf of Holdings
shall bind and (subject to the provisions of the Indenture,  as supplemented and
amended from time to time) inure to the benefit of its  successors  and assigns,
whether so expressed or not.

          SECTION  5.5  SEPARABILITY  CLAUSE.  In  case  any  provision  in this
Supplemental  Indenture or in the Holdings Securities shall be invalid,  illegal
or  unenforceable,  the validity,  legality and  enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

          SECTION 5.6 EFFECT OF HEADINGS.  The headings of the several  Articles
of this  Supplemental  Indenture  and the  Sections  thereof  are  inserted  for
convenience of reference, and shall not be deemed to be a part hereof.

          SECTION 5.7 EXECUTION AND COUNTERPARTS.  This  Supplemental  Indenture
may be executed  in any number of  counterparts,  and each of such  counterparts
when so executed  shall be deemed to be an original;  but all such  counterparts
shall together constitute but one and the same instrument.

          SECTION 5.8 GOVERNING  LAW. The internal laws of the state of Missouri
shall govern this Supplemental Indenture and the Holdings Securities.

     IN  WITNESS  WHEREOF,  the  Company  and  Holdings  have each  caused  this
Supplemental  Indenture  to be  executed  by its  Chairman  of the  Board or its
President or one of its Vice  Presidents  and its corporate  seal to be hereunto
affixed, duly attested by its Secretary or one of its Assistant Secretaries, and
UMB Bank,  N.A., as Trustee as aforesaid,  has caused the same to be executed by
its  President  or one of its  Vice  Presidents  and  its  corporate  seal to be
hereunto  affixed,  duly  attested  by its  Secretary  or  one of its  Assistant
Secretaries, as of the day and year first above written.

<PAGE>                           

                            INDEPENDENT TELECOMMUNICATIONS NETWORK, INC.

(Corporate Seal)
                                       /s/ Richard A. Lumpkin
                                 By: _______________________________________
                                     Name:  Richard A. Lumpkin
                                     Title:  Chairman
ATTEST:


/s/ Richard D. Ares
--------------------------
Name:   Richard D. Ares
Title:  Secretary


                                  USTN HOLDINGS, INC.

(Corporate Seal)
                                        /s/ Gregory J. Wilkinson
                                  By: _____________________________________
                                      Name:  Gregory J. Wilkinson
                                      Title: Treasurer
ATTEST:

/s/ Theodore D. Berns
-----------------------
Name:  Theodore D. Berns
Title:  Secretary



                                   USTN SERVICES, INC.

(Corporate Seal)
                                         /s/ Gregory J. Wilkinson
                                   By: _____________________________________
                                       Name:  Gregory J. Wilkinson
                                       Title: Treasurer
ATTEST:

/s/ Theodore D. Berns
-------------------------
Name:  Theodore D. Berns
Title:  Secretary
<PAGE>

                                   UMB BANK, N.A., as Trustee

(Corporate Seal)
                                        /s/ Frank Bramwell
                                   By:___________________________________
                                      Name:  Frank Bramwell
                                      Title: Vice President
ATTEST:

/s/ R. William Bloemicer
-------------------------
Name:  William Bloemicer
Title:  Assistant Secretary



STATE OF WASHINGTON    )
                       )  ss.
COUNTY OF THURSTON     )


     On this 12th day of February,  1996, before me appeared Richard A. Lumpkin,
to me personally known, who, being by me duly sworn, did say that he is Chairman
of Independent  Telecommunications Network, Inc., a corporation described in and
which  executed  the  foregoing  instrument,  and that the seal  affixed  to the
foregoing  instrument is the corporate seal of said  corporation,  and that said
instrument  was signed and sealed on behalf of said  corporation by authority of
its board of directors, and said Richard A. Lumpkin acknowledged said instrument
to be the free act and deed of said corporation.

                                            /s/ Cathy A. Mack
(Notarial Seal)                         ____________________________________
                                        Notary Public

My Commission Expires:

04/10/96
--------------------------

STATE OF KANSAS        )
                       )  ss.
COUNTY OF COOK         )


     On  this  12th  day of  February,  1996,  before  me  appeared  Gregory  J.
Wilkinson,  to me personally known, who, being by me duly sworn, did say that he
is  Treasurer  of USTN  Holdings,  Inc.,  a  corporation  described in and which
executed the  foregoing  instrument,  and that the seal affixed to the foregoing
instrument is the corporate seal of said  corporation,  and that said instrument
was signed and sealed on behalf of said corporation by authority of its board of
directors,  and said Gregory J. Wilkinson acknowledged said instrument to be the
free act and deed of said corporation.

                                    /s/ Lisa Allers
(Notarial Seal)                   _____________________________________
                                  Notary Public

My Commission Expires:

09/29/97
------------------------
<PAGE>                             

STATE OF KANSAS        )
                       )  ss.
COUNTY OF COOK         )

     On  this  12th  day of  February,  1996,  before  me  appeared  Gregory  J.
Wilkinson, to me personally known, who, being by me duly sworn,
did say that he is Treasurer of USTN Services,  Inc., a corporation described in
and which  executed the foregoing  instrument,  and that the seal affixed to the
foregoing  instrument is the corporate seal of said  corporation,  and that said
instrument  was signed and sealed on behalf of said  corporation by authority of
its  board of  directors,  and  said  Gregory  J.  Wilkinson  acknowledged  said
instrument to be the free act and deed of said corporation.

                                       /s/ Lisa Allers
(Notarial Seal)                    _______________________________________
                                  Notary Public

My Commission Expires:

09/29/97
------------------------


STATE OF MISSOURI  )
                   )  ss.
COUNTY OF JACKSON  )


     On this 12th day of February,  1996, before me appeared Frank Bramwell,  to
me  personally  known,  who,  being  by me duly  sworn,  did say that he is Vice
President of UMB Bank,  N.A., a national  banking  association  described in and
which  executed  the  foregoing  instrument,  and that the seal  affixed  to the
foregoing   instrument  is  the  association   seal  of  said  national  banking
association,  and that said  instrument  was signed and sealed on behalf of said
UMB,  N.A. by authority  of its board of  directors,  and said Frank  C.Bramwell
acknowledged said instrument to be the free act and deed of said Frank C.
Bramwell.

                                       /s/ Linda Wilson
(Notarial Seal)                      _______________________________________
                                     Notary Public


My Commission Expires:

07/12/96
--------------------------
<PAGE>
                                                                     EXHIBIT 4.4
==============================================================================



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


                          SECOND SUPPLEMENTAL INDENTURE


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

                               USTN HOLDINGS, INC.

                                       AND

                               USTN SERVICES, INC.

                                       AND

                             UMB BANK, N.A., TRUSTEE


                            Dated as of June 24, 1996


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


                            SUPPLEMENTAL TO INDENTURE

                              DATED AUGUST 15, 1991

=============================================================================
<PAGE>

     SECOND SUPPLEMENTAL INDENTURE, dated as of June 24, 1996 (the "Supplemental
Indenture"),  between USTN HOLDINGS, INC., a Delaware corporation  ("Holdings"),
USTN SERVICES,  INC., a Delaware  corporation  ("Services"),  and UMB BANK, N.A.
(f/k/a United Missouri Bank, N.A.), as Trustee (the "Trustee"),  to an Indenture
dated as of August 15, 1991,  between  Independent  Telecommunications  Network,
Inc. and the Trustee.

     WHEREAS, Section 2.6 of the Indenture provides that the Securities may only
be  sold  or  otherwise  transferred  together  with  the  shares  of  Series  A
Convertible  Preferred  Stock (the  "Series A Stock")  issued as a unit with the
Securities; and

     WHEREAS, the Trustee, Holdings and Services desire to permit holders of the
Securities  to transfer  the  Securities  without the Series A Stock issued as a
unit with such  Securities when the separation of the Securities from the Series
A Stock resulted from an involuntary event; and

     WHEREAS,  Section  2.6 of the  Indenture  does not  adequately  address the
situation when the occurrence of an involuntary  event results in the separation
of the Securities from the Series A Stock; and

     WHEREAS, Section 9.1 of the Indenture permits an amendment of the Indenture
without  the  consent of any  Securityholder  to cure any  ambiguity,  defect or
inconsistency in the Indenture; and

     WHEREAS, all acts and things necessary to make this Supplemental Indenture,
when duly  executed and  delivered,  a valid,  binding and legal  instrument  in
accordance with its terms and for the purposes herein expressed,  have been done
and  performed by the parties  hereto;  and the  execution  and delivery of this
Supplemental Indenture have been in all respects duly
authorized by said parties;

     NOW, THEREFORE,  in consideration of the premises and other  consideration,
the receipt of which is hereby acknowledged,  the Trustee, Holdings and Services
mutually  covenant  and agree,  for the equal and  proportionate  benefit of the
respective Holders from time to time of the Securities, as follows:

                                  ARTICLE I

                                 DEFINITIONS

     The third  paragraph of Section 2.6 of the Indenture is hereby  deleted and
replaced in its entirety with the following language:
<PAGE>
     "The  Securities  may only be sold or otherwise  transferred as a unit with
the  Series A Stock  issued as a unit with the  Securities;  PROVIDED,  HOWEVER,
that, if Securities  held by a  Securityholder  are separated  from the Series A
Stock  due  to the  redemption  of the  Series  A  Stock  by  the  Company,  the
cancellation  of Series A Stock by  operation  of law or the  occurrence  of any
event that is  involuntary on the part of the  Securityholder  (as determined by
Holdings and Services in their discretion),  then such  Securityholder  (and any
transferee of the  Securities)  shall be permitted to transfer  such  Securities
without the Series A Stock  issued as a unit with such  Securities  upon written
notice to the Trustee,  Holdings and Services." Prior to the  authentication  of
any  Security,  the Company and Holdings  shall provide the Trustee with written
certification of the transferability of such Security pursuant to this Section.

                                   ARTICLE II

                                   THE TRUSTEE

     The Trustee shall not be  responsible in any manner  whatsoever  for, or in
respect of, the validity or  sufficiency of this  Supplemental  Indenture or the
due  execution  hereof by  Holdings or  Services,  or for, or in respect of, the
recitals and statements  contained herein,  all of which recitals and statements
are made solely by Holdings and Services.

     No  duties,  responsibilities  or  liabilities  are  assumed,  or  shall be
construed to be assumed, by the Trustee by reason of this Supplemental Indenture
other than as set forth in the  Indenture;  and this  Supplemental  Indenture is
executed  and  accepted on behalf of the  Trustee,  subject to all the terms and
conditions  set  forth in the  Indenture,  as fully  to all  intents  as if this
Supplemental Indenture were a part of and set forth in the Indenture.

                              ARTICLE III

                       MISCELLANEOUS PROVISIONS


     SECTION 3.1  EXECUTION OF SUPPLEMENTAL INDENTURE.  Except insofar as
herein expressly provided, all the provisions, definitions, terms and
conditions of the Indenture, as supplemented and amended, shall be deemed to
be incorporated  in, and made a part of, this  Supplemental  Indenture;  and the
Indenture as supplemented and amended by this  Supplemental  Indenture is in all
respects ratified and confirmed;  and the Indenture, as supplemented and amended
by this Supplemental Indenture shall be read, taken and construed as one and the
same instrument.

     SECTION 3.2 CONFLICT  WITH TRUST  INDENTURE  ACT. If any  provision of this
Supplemental  Indenture  limits,  qualifies or conflicts with another  provision
which is required to be included in this  Supplemental  Indenture  by any of the
provisions  of the Trust  Indenture  Act,  as  amended  from  time to time,  the
required provision shall control.

                                -2-
<PAGE>

      SECTION  3.3  BENEFITS  OF   SUPPLEMENTAL   INDENTURE.   Nothing  in  this
Supplemental Indenture is intended, or shall be construed, to give to any person
or corporation, other than the parties hereto and the Securityholders, any legal
or  equitable  right,  remedy or claim under or in respect of this  Supplemental
Indenture, or under any covenant,  condition or provision herein contained,  all
the covenants,  conditions and provisions of this  Supplemental  Indenture being
intended  to be, and being,  for the sole and  exclusive  benefit of the parties
hereto and of the Securityholders.

     SECTION  3.4  SUCCESSORS  AND  ASSIGNS.  All  covenants,  stipulations  and
agreements in this Supplemental  Indenture contained by or on behalf of Holdings
or Services  shall bind and  (subject to the  provisions  of the  Indenture,  as
supplemented  and  amended  from  time to  time)  inure  to the  benefit  of its
successors and assigns, whether so expressed or not.

    SECTION 3.5 SEPARABILITY  CLAUSE. In case any provision in this Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity, legality and
enforceability  of the remaining  provisions shall not in any way be affected or
impaired thereby.

     SECTION 3.6 EFFECT OF  HEADINGS.  The  headings of the several  Articles of
this   Supplemental   Indenture  and  the  Sections  thereof  are  inserted  for
convenience of reference, and shall not be deemed to be a part hereof.

     SECTION 3.7 EXECUTION AND COUNTERPARTS.  This Supplemental Indenture may be
executed in any number of counterparts,  and each of such  counterparts  when so
executed  shall be deemed to be an  original;  but all such  counterparts  shall
together constitute but one and the same instrument.

     SECTION 3.8  GOVERNING LAW.  The internal laws of the state of Missouri
shall govern this Supplemental Indenture.

     IN  WITNESS   WHEREOF,   Holdings  and  Services   have  each  caused  this
Supplemental  Indenture  to be  executed  by its  Chairman  of the  Board or its
President or one of its Vice  Presidents  and its corporate  seal to be hereunto
affixed, duly attested by its Secretary or one of its Assistant Secretaries, and
UMB Bank,  N.A., as Trustee as aforesaid,  has caused the same to be executed by
its  President  or one of its  Vice  Presidents  and  its  corporate  seal to be
hereunto affixed, duly attested by its Secretary or one of its Assistant
Secretaries, as of the day and year first above written.

                                   -3-
<PAGE>
                                    USTN HOLDINGS, INC.

(Corporate Seal)
                                         /s/ Daniel E. Weiss
                                    By:_________________________________
                                       Name:  Daniel E. Weiss
                                       Title: Vice President - Finance and
                                              Secretary/Treasurer
ATTEST:

/s/ Cathy Mack
-------------------
Name:  Cathy Mack
Title:  Assistant Secretary



                                    USTN SERVICES, INC.

(Corporate Seal)
                                          /s/ Daniel E. Weiss
                                    By:__________________________________
                                       Name:  Daniel E. Weiss
                                       Title: Vice President - Finance and
                                              Secretary/Treasurer
ATTEST:

/s/ Cathy Mack
-------------------------
Name:  Cathy Mack
Title:  Assistant Secretary



                                    UMB BANK, N.A., as Trustee

(Corporate Seal)
                                         /s/ Frank C. Bramwell
                                    By:___________________________________
                                       Name:  Frank C. Bramwell
                                       Title: Vice President
ATTEST:

/s/ R. William Bloemicer
--------------------------
Name: R. William Bloemicer
Title:  Assistant Secretary

                                  -4-
<PAGE>

STATE OF WASHINGTON     )
                        )  ss.
COUNTY OF THURSTON      )


     On this 24th day of June,  1996,  before me appeared Daniel E. Weiss, to me
personally known, who, being by me duly sworn, did say that he is Vice President
- Finance of USTN Holdings,  Inc., a corporation described in and which executed
the foregoing instrument,  and that the seal affixed to the foregoing instrument
is the corporate seal of said  corporation,  and that said instrument was signed
and sealed on behalf of said corporation by authority of its board of directors,
and said Daniel E. Weiss  acknowledged  said  instrument  to be the free act and
deed of said corporation.


                                    /s/ Cathy A. Mack
(Notarial Seal)                    _____________________________________
                                  Notary Public

My Commission Expires:

04/10/00
-------------------------



STATE OF WASHINGTON     )
                        )  ss.
COUNTY OF THURSTON      )


     On this 24th day of June,  1996,  before me appeared Daniel E. Weiss, to me
personally known, who, being by me duly sworn, did say that he is Vice President
- Finance of USTN Services,  Inc., a corporation described in and which executed
the foregoing instrument,  and that the seal affixed to the foregoing instrument
is the corporate seal of said  corporation,  and that said instrument was signed
and sealed on behalf of said corporation by authority of its board of directors,
and said Daniel E. Weiss  acknowledged  said  instrument  to be the free act and
deed of said corporation.



                                       /s/ Cathy A. Mack
(Notarial Seal)                       _____________________________________
                                      Notary Public

My Commission Expires:

04/10/00
-------------------------

                                    -5-
<PAGE>

STATE OF MISSOURI  )
                   )  ss.
COUNTY OF JACKSON  )


     On this 19th day of June, 1996, before me appeared Frank C. Bramwell, to me
personally known, who, being by me duly sworn, did say that he is Vice-President
of UMB  Bank,  N.A.,  a  National  Banking  Association  described  in and which
executed the  foregoing  instrument,  and that the seal affixed to the foregoing
instrument is the association  seal of said national  banking  association,  and
that said  instrument was signed and sealed on behalf of said UMB Bank,  N.A. by
authority of its board of  directors,  and said Frank C.  Bramwell  acknowledged
said instrument to be the free act and deed of said UMB Bank, N.A.

                                         /s/ Linda Wilson
(Notarial Seal)                         ____________________________________
                                        Notary Public


My Commission Expires:

07/12/00
-----------------------


                                -6-
<PAGE>
                                                                     EXHIBIT 4.5
                                                        STATE OF DELAWARE
                                                       SECRETARY OF STATE
                                                 DIVISION OF CORPORATIONS
                                                FILED 09:00 AM 10/06/1995
                                                      950231014 - 2530006

                       CERTIFICATE OF DESIGNATION
                                   OF
                  SERIES A CONVERTIBLE PREFERRED STOCK
                             ($.01 PAR VALUE)
                                   OF
                            USTN HOLDINGS, INC.


Pursuant to Section 151 of the Delaware General Corporation Law

1.   DESIGNATION

     The designation of the series of Preferred Stock created by this Resolution
     shall be the Series A Convertible  Preferred Stock (hereinafter called this
     "Series")  and the  number  of  shares  constituting  this  Series  is Four
     Thousand Four Hundred and Sixteen (4,416).

2.   DIVIDENDS

     Dividends  shall be  declared,  set aside and paid on this Series only upon
     resolution of the Board of Directors of the  Corporation;  provided that no
     dividends  may be  declared,  set  aside  or  paid on  this  Series  unless
     dividends are declared,  set aside or paid simultaneously to holders of the
     common stock of the Corporation.


3.   LIQUIDATION PREFERENCE

     In the event of  voluntary  or  involuntary  liquidation,  dissolution,  or
     winding-up of the affairs of the Corporation,  whether complete or partial,
     the  holders of the shares of this  Series  shall be  entitled to and shall
     receive total cash payments equal to One Thousand  Dollars  ($1,000.00) per
     share  (the  "Liquidation  Preference  Amount")  out of the  assets  of the
     Corporation available for distribution to its stockholders,  but before any
     payment  or  distribution  is made to  holders  of the shares of the common
     stock or of any other series of preferred stock of the Corporation. If upon
     the  occurrence  of such event the assets and  property  to be  distributed
     among the  holders  of this  Series,  shall be  insufficient  to permit the
     payment to such holders of this Series of the full  Liquidation  Preference
     Amount,  then the entire  remaining  assets and property of the Corporation
     legally available for distribution  shall be distributed  ratably among the
     holders of this Series.

4.   VOTING RIGHTS

     The holders of shares of this Series shall be entitled to one hundred (100)
     votes per share with respect to all matters  submitted to the Corporation's
     shareholders  for  decision  and will be entitled to vote  separately  as a
     Series with respect to the approval of the sale,  lease,  exchange or other
     disposition of all or substantially all of the  Corporation's  property and
     assets,  or the merger or consolidation of the Corporation with or into any
     other corporation or entity, if such approval is required by law.

5.   CONVERSION

    (a)  Each share of this Series shall be convertible into 85.12 shares of the
         common  stock,  $.01 par value,  of the  Corporation  (the  "Conversion
         Amount"),  at the  option of the  holder  thereof  at any time that the
         holder   elects  to  convert   the   Corporation's   7.5%   Convertible
         Subordinated Debenture due August 15, 2001 (the "Debenture") issued
         as a unit with such share.

    (b)  Each share of this Series  shall be  convertible,  at the option of the
         Corporation, into the Conversion Amount, at any time that the Debenture
         issued as a unit with such  share is  converted  into  shares of common
         stock, $.01 par value, of the Corporation.

    (c)  In  the  event  the  corporation   shall  at  any  time  subdivide  the
         outstanding  shares of common stock, or shall issue a stock dividend on
         its  outstanding   common  stock,   the  Conversion   Amount  shall  be
         proportionately  increased,  and in case the  Corporation  shall at any
         time combine the outstanding shares of common stock, the Conversion


<PAGE>



         Amount  in  effect  immediately  prior  to such  combination  shall  be
         proportionately  decreased,  effective  at the close of business on the
         date of such subdivision,  dividend or combination, as the case may be.
         In the  event  the  Corporation  merges  or  otherwise  reorganizes  or
         consolidates with any other corporation or corporations,  the holder of
         any  share of this  Series  shall  have the right to  receive  from any
         surviving  corporation  preferred stock with the same or  substantially
         identical  rights,  privileges  and  preferences  as the shares of this
         Series;  provided,  however,  that an  aggregate of  two-thirds  of the
         holders of this Series may elect not to receive  such  preferred  stock
         from the surviving corporation, in which case no holders of this Series
         shall be entitled to receive such preferred stock.

    (d)  The holder of any share of this Series may exercise the conversion
         rights as to such share by delivering to the Corporation during
         regular business hours, at the principal office of the Corporation,
         the certificate or certificates for the shares to be converted, duly
         endorsed for transfer to the Corporation (if required by the
         Corporation), and accompanied by written notice stating that the
         holder elects to convert such shares. Conversion shall be deemed to
         have been effective on the date when such delivery is made, and
         such date is referred to herein as the Conversion Date.  As promptly
         as practicable thereafter, the Corporation shall issue and deliver to
         or upon the written order of such holder, at such office, a
         certificate or certificates for the number of shares of common stock
         to which such holder is entitled.  The holder shall be deemed to have
         become a shareholder of common stock of record on the applicable
         Conversion bate unless the transfer books of the Corporation are
         closed on that date, in which event such holder shall be deemed to
         have become a shareholder of common stock of record on the next
         succeeding date on which the transfer books are open.

    (e)  In the event the Corporation elects to exercise its right to convert
         any shares of this Series pursuant to paragraph (b) above, the
         Corporation shall notify the holder of such shares of the
         Corporation's election to convert and the number of shares to be
         converted.  Upon receipt of such notice the holder shall deliver to
         the Corporation during regular business hours, at the principal
         office of the Corporation, their certificate or certificates for the
         shares to be converted, duly endorsed for transfer to the Corporation
         (if required by the Corporation).  As promptly as practicable
         thereafter, the Corporation shall issue and deliver to such holder a
         certificate or certificates for the number of shares of common stock
         to which such holder is entitled.  The shares of this Series shall he
         deemed converted as of the mailing of the notice of conversion,
         however, such holder shall not be deemed to have become a shareholder
         of common stock of record until his certificate or certificates for
         the shares to be converted have been delivered to the Corporation.
         The holder shall be deemed to have become a shareholder of common
         stock of record on such delivery date unless the transfer books of
         the Corporation are closed on that date; in which event such holder
         shall be deemed to have become a shareholder of common stock of
         record on the next succeeding date on which the transfer books are
         open.

    (f)  The Corporation  shall at all times reserve and keep available,  out of
         its  authorized  but unissued  common stock,  solely for the purpose of
         effecting the conversion of the shares of this Series,  the full number
         of shares of common stock deliverable upon the conversion of all shares
         of this series from time to time outstanding.

  (g)  All shares of common  stock  which may be issued upon  conversion  of the
       shares of this Series will upon  issuance by the  Corporation  be validly
       issued,  fully paid and non-assessable and free from all taxes, liens and
       charges with respect to the issuance thereof.

6.    TRANSFER

      A  holder  may  transfer  shares  of the  Series  only as a unit  with the
Debentures issued in connection with such shares.

     IN WITNESS WHEREOF, USTN Holdings, Inc. has caused this Certificate to be
signed this 9th day of October, 1995.


                                   USTN HOLDINGS, INC.

                                   By: /s/ Michael B. Fischer
                                       ------------------------------------
                                   Its:  Asst. Secretary
<PAGE>
                                                                    EXHIBIT 10.2

                          USTN HOLDINGS, INC.

                               ILLUMINET

                    1996 EXECUTIVE LONG-TERM BONUS PLAN



Preamble

     This  Illuminet,  Inc.  Executive  Long-Term  Bonus Plan (the "Plan") is an
unfunded  bonus and  deferred  compensation  arrangement  for a select  group of
management or highly compensated personnel.

                                    ARTICLE I

                                   DEFINITIONS

     "Eligible  Comp" means the base salary for the  Participant as of the first
day of the Performance Measurement Period.

     "Beneficiary" means the person or entity designated by a Participant on the
most recently dated Beneficiary  Designation Form signed by such Participant and
delivered to the Committee.

     "Beneficiary Designation Form" means the form designated by the Committee
from time to time as the document to be used by  Participants to select a person
or entity to receive  any  payments  due such  Participant  in the event of such
Participant's death prior to the date of such payment.

     "Board" means the Board of Directors of the Company.

     "Bonus" means the bonus  calculated  for a Participant  in accordance  with
Article II and paid in accordance with Article III.

     "Committee" means the Personnel Committee of the Board.

     "Company" means  Illuminet, Inc.,  a Delaware corporation.

     "Disability" means mental or physical disability (i) of at least six months
which, in the determination of a physician  selected by the Company,  prevents a
Participant  from engaging in the principal duties of his employment or (ii) has
qualified the individual for coverage under the Company's  long-term  disability
insurance plan.

     "Fiscal year" or "year" (unless otherwise  specified) means the fiscal year
of the Company as now constituted or as it may be changed hereafter from time to
time.

      "Participant"  means  an  employee  of the  Company,  or of a  Subsidiary,
designated by the Committee for  participation in the benefits of the Plan, or a
person  who was such at the time of his/her  retirement,  death,  disability  or
resignation and who retains,  or whose  Beneficiaries  retain benefits under the
Plan in accordance with its terms.

     "Performance  Measurement Period" shall mean the fiscal year of the company
as now constituted, beginning January 1 of each calendar year.

     "Performance  Measurement  Area"  means the  performance  criteria by which
Bonuses shall be determined.

     "Plan" means this Executive  Long-Term Bonus Plan as it may be amended from
time to time.

     "Retirement"  means retirement at or after attaining age 60 or such earlier
age as may be approved for a Participant by the Committee.

     "Stretch Point" means the maximum  achievable value for which a Participant
will be given credit for any quantifiable Performance Measurement Area.

     "Subsidiary"  means an  entity  of which  the  Company  owns,  directly  or
indirectly, at least a majority of the voting securities or interests.

     "Target Point" means the projected achievable value for which a Participant
will be given credit for any quantifiable Performance Measurement Area.

                                   ARTICLE II
                        DESIGNATION OF PARTICIPANTS AND
                         CALCULATION OF BONUS AMOUNTS

Section 2.01 Committee Designations.

     (a)  The Committee  shall meet  before  the  beginning  of each Performance
          Measurement Period and designate:

     (1)  The name of each Participant.

     (2)  The Performance Measurement Areas either for the Plan as a whole or an
          individual  Participant,  in each case for the purpose of  determining
          the  amount  of  each   Participant's   Bonus  for  that   Performance
          Measurement Period;

     (3)  The  percentage  of Base  Salary  to which the  Stretch  Point and the
          Target  Point  shall  be  applied  for  each   Participant   for  that
          Performance Measurement Period;

     (4)  The Stretch  Point and Target  Point for the Plan as a whole or for an
          individual Participant for that Performance Measurement Period; and

     (5)  The formula by which a  Participant's  Performance  Measurement  Areas
          shall be  evaluated  in  determining  what the  total  Bonus  for each
          Participant shall be.

Section  2.02   Calculation  of  Bonus.  The  Committee  shall  determine  which
established performance criteria have been achieved by each Participant, whether
a  Participant  has achieved the Stretch Point or Target Point for any criteria,
and the  calculation  of the Bonus  pursuant to the formula  designated for each
Participant.  This  will  occur  90 days  after  the  close  of the  Performance
Measurement Period (fiscal year).

In no event  will any bonus be earned or  payable  under  this Plan  unless  the
Company's  earnings  before  interest,  taxes,  depreciation,  and  amortization
(EBITDA)  equals  at  least  80%  of  the  Company's  budgeted  EBITDA  for  the
Performance Measurement Period.

Section 2.03 Election.  Each  participant  may make an irrevocable  election for
his/her  Bonus  for any  Performance  Measurement  Period  to be paid in Cash or
Shares.

An annual  valuation of the Company's  shares will be conducted by the committee
and all  Plan  Participants  will be  notified  in  writing  of such  valuation.
Participant's  payment  election  will be required  within 10  business  days of
receipt of the valuation notice.

If a Participant  elects to have the Bonus paid in Shares,  the number of Shares
credited to a Participant's  account pursuant to Article 111 shall be the amount
of the Bonus divided by (i) the closing sale price of the Company's common stock
on the first trading day of that Performance  Measurement  Period as reported by
the  NASDAQ  Stock  Market  or, if the  common  stock is  traded  on a  national
securities  exchange then as reported by that exchange or (ii) if the Shares are
not publicly traded, the value per Share as determined by a market
price  valuation  as of the  beginning  of the  Performance  Measurement  Period
performed  by an  independent  third  party  approved by the Board or if no such
valuation has been  performed  within the preceding  15-month  period,  then the
value per Share  shall be  determined  by the Board as of the  beginning  of the
Performance  Measurement  Period. If no election is made, the Bonus will be paid
in cash.

Section 2.04 Mid-Period  Termination.  In the event a  Participant's  employment
terminates prior to the end of a Performance Measurement Period, other than in a
manner  resulting in a forfeiture under Section 3.06, such  Participant's  Bonus
shall be  calculated  based on the  results  of the Bonus  calculation  for that
Participant through such date of termination, extrapolated to a full Performance
Measurement  Period basis,  and then prorated for the portion of the Performance
Measurement  Period prior to  termination.  Such prorated Bonus shall be paid in
accordance with the terms of Section 3.01.

                                   ARTICLE III

                        PAYMENT OF BONUS AND FORFEITURES

Section 3.01 Payment Terms. At the end of each Performance  Measurement  Period,
Bonuses  shall  be  calculated  and  credited  to a  Participant's  account,  as
described in Section 3.02. Bonuses will be paid no later than the 90th day after
the date on which the  Participant  becomes vested under Section 3.05.  Interest
will begin to accrue from the close of the Performance Measurement Period of the
Long Term Plan, at the actual rate, if any, earned on the company's cash account
at it's primary financial institution.

Section 3.02  Participant  Account.  The Committee  shall cause an account to be
kept in the name of each  Participant and each  Beneficiary  which shall reflect
the dollar value of any Bonus payable to such  Participant or Beneficiary  under
the Plan.

Section 3.03 Contingent  Interest.  Until and except to the extent that deferred
benefits  hereunder  are  distributed  to  or  vested  in  the  Participants  or
Beneficiaries  from time to time in  accordance  with this Plan or orders of the
Committee,   the  interest  of  each  Participant  and  Beneficiary  therein  is
contingent only and is subject to forfeiture as provided in Section 3.05.  Title
to and beneficial  ownership of any assets,  whether cash or investments,  which
the Company may set aside or earmark to meet its  contingent or vested  deferred
obligations hereunder,  shall at all times remain in the Company; no Participant
or Beneficiary  shall under any  circumstances  acquire any property interest in
any  specific  assets of the Company;  and no assets shall secure the  Company's
obligations hereunder.

Section 3.04  Beneficiaries.  Each Participant shall have the right to designate
Beneficiaries  who are to  succeed  to his or her  contingent  right to  receive
future  payments  hereunder  in the event of his or her death by delivery to the
Committee of a Beneficiary Designation Form. In case of a failure of designation
or the  death  of a  designated  Beneficiary  without  a  designated  successor,
distribution shall be made to the Participant's estate.

Section 3.05 Cliff Vesting; Forfeiture.

     (a)  A  Participant  shall vest in his or her Bonus payment two years after
          the end of the Performance Period.

     (b)  The contingent right of a Participant or Beneficiary to receive future
          unvested payments  hereunder shall be forfeited upon the occurrence of
          any one or more of the following events:

         (1)  if the Participant is discharged for Cause (as defined in
              Section 3.05(e)) from employment by the Company or a Subsidiary;
              or

         (2)  if the Participant shall voluntarily terminate employment with
              the Company.

     (c)  Upon death,  disability or termination from employment  without Cause,
          all amounts in a Participant's  account shall  immediately vest and be
          non-forfeitable,  and shall be paid  within 90 days after such  death,
          disability, or termination without cause.

     (d)  The  Committee  may at any time and from time to time order all or any
          part  of the  value  of  the  contingent  right  of a  Participant  or
          Beneficiary  to  receive  future  payments  to be vested and no longer
          subject to forfeiture,  and may order payment of the amounts so vested
          on dates specified in such orders, if it finds such action appropriate
          under the circumstances.

     (e)  "Cause" means any one of the following:

          (1)  Indictment  or  conviction  of a  crime  which  in the  sole  and
               absolute  discretion  of  the  Board  reflects  adversely  on the
               Company's public image; or

          (2)  Failure to perform in a manner satisfactory to the Board the
               duties and responsibilities of the Participant's position; or

          (3)  Any breach of the Participant's fiduciary duty to the Company
               deemed significant by the Board in its sole and absolute
               discretion; or

          (4)  The Board determines that a material breach by the Participant of
               any written employment  agreement he may have with the Company or
               a Subsidiary has occurred.

Section 3.06 Change in Control.  No forfeiture  under Section  3.05(b)(2)  shall
occur in the event a Participant  voluntarily  terminates employment between the
time that a Change in Control occurs and the end of the fiscal year within which
such  Change  in  Control  occurs.  A  Change  in  Control  shall  mean  (i) the
acquisition  by a third party not currently a shareholder  of the Company of 30%
or more of the voting power of the Company;  (ii) the merger or consolidation of
the Company with  another  entity and the Company is not the  surviving  entity;
(iii) the sale of  substantially  all of the assets of the Company,  or (iv) any
other event which the Board  determines  constitutes  a change in control of the
Company.

                                   ARTICLE IV

                                 ADMINISTRATION

Section 4.01 Books and Records; Expenses. The books and records to be maintained
for the purpose of the Plan shall be maintained by the officers and employees of
the Company at its expense  and  subject to the  supervision  and control of the
Committee.  All expenses of administering  the Plan shall be paid by the Company
from the  general  funds of the  Company  and shall not be charged  against  any
Participant account.

Section  4.02  Attachment.  To the  extent  permitted  by law,  the right of any
Participant or any Beneficiary in any benefit or to any payment  hereunder shall
not be subject in any manner to  attachment or other legal process for the debts
of such Participant or Beneficiary; and any such benefit or payment shall not be
subject to anticipation, alienation, sale, transfer, assignment or encumbrance.

Section 4.03 No Fiduciary Relationship. Nothing contained herein shall be deemed
to  create a trust of any  kind or  create  any  fiduciary  relationship.  Funds
invested  hereunder  shall continue for all purposes to be a part of the general
funds of the Company,  and no person other than the Company shall,  by virtue of
the provisions of this Plan, have any interest in such funds. To the extent that
any person  acquires a right to receive  payments  from the  Company  under this
Plan,  such right shall be no greater  than the right of any  unsecured  general
creditor of the Company.

Section 4.04 No  Liability.  No member of the Board or of the  Committee  and no
officer or employee of the Company  shall be liable to any person for any action
taken or omitted  in  connection  with the  administration  of this Plan  unless
attributable  to his own fraud or willful  misconduct;  nor shall the Company be
liable to any person for any such action unless attributable to fraud or willful
misconduct on the part of a director, officer or employee of the Company.

                                    ARTICLE V

                        AMENDMENT OF PLAN: MISCELLANEOUS

Section 5.01 Amendment. The Plan may be amended in whole or in part from time to
time by the  Board  of  Directors  of the  Company.  In the  event  the  Plan is
terminated  or amended in such a way as to eliminate a Bonus for any  particular
Participant during the course of a Performance  Measurement Period, all Bonuses,
if any, for such Participants shall nevertheless be determined at the end of the
Performance  Measurement  Period,  but shall be prorated  for the period of time
prior to such amendment or termination, and shall be paid in accordance with the
terms of this Plan.

Section 5.02  Notice.  Each  Participant  shall be given a copy of this Plan and
notice  and a copy  of  every  amendment  shall  be  given  in  writing  to each
Participant.

Section 5.03 No Guarantee of Employment.  Nothing contained in this Plan shall
be deemed to give any Participant the right to be retained in the service of
the  Company or to  interfere  with the right of the  Company to  discharge  any
Participant,  for or without Cause, at any time,  regardless of the effect which
such discharge shall have upon such individual as a Participant in the Plan.

Section 5.04 Governing Law.  This plan shall be construed in accordance with
the laws of the State of Washington.

Section 5.05  Interpretation of Plan. The Committee shall have sole and absolute
discretion and authority to interpret all provisions of this Plan and to resolve
all  questions  arising  under  this  Plan;  including,   but  not  limited  to,
determining  whether any person is eligible under this Plan,  whether any person
shall receive any payments pursuant to this Plan, and the amount of any payments
to  be  made  pursuant  to  this  Plan.   Any   interpretation,   resolution  or
determination of the Committee shall be final and binding upon all concerned and
shall not be subject to review.

Section 5.06 Rights  Non-transferable.  Any right to receive a Bonus pursuant to
this Plan shall not be transferable by the Participant  other than pursuant to a
Beneficiary Designation Form.

Section 5.07 Section 16 Compliance.  With respect to persons  subject to Section
16 of the Exchange Act, transactions under this Plan are intended to comply with
all  applicable  conditions of Rule 16b-3 or its  successors  under the Exchange
Act. To the extent any provision of the Plan or action by the Committee fails to
so comply,  it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee.

Section  5.08  Taxes:  Withholding,.  In the  event  a  Participant  receives  a
distribution  of  Shares  as  payment  of  a  Bonus  which  is  taxable  to  the
Participant, the taxable amount will be based on the fair value of the Shares at
the time of  payment.  In order to pay any  applicable  federal,  local or state
income taxes on such  distribution,  the Participant may request the Company (i)
to convert a portion  of the  Shares  then  being  distributed  to cash,  at the
valuation  of those  Shares  as  determined  by the Board as of the date of such
conversion;  or (ii) to withhold a specified amount from other cash compensation
which the Participant may receive.

<PAGE>

                                                                    EXHIBIT 10.3
                         USTN HOLDINGS, INC.

                             ILLUMINET

                      1996 SHORT-TERM BONUS PLAN

Preamble

     This  Illuminet,  Inc.,  Bonus  Plan  (the  "Plan")  is an  unfunded  bonus
compensation  arrangement for a select group of management or highly compensated
personnel.

                                    ARTICLE I

                                   DEFINITIONS

     "Eligible Compensation" means the base salary for the Participant as of the
first day of the Performance Measurement Period.

     "Beneficiary" means the person or entity designated by a Participant on the
most recently dated Beneficiary  Designation Form signed by such Participant and
delivered to the Committee.

     "Beneficiary  Designation  Form" means the form designated by the Committee
from time to time as the document to be used by  Participants to select a person
or entity to receive  any  payments  due such  Participant  in the event of such
Participant's death prior to the date of such payment.

     "Board" means the Board of Directors of the Company.

     "Bonus"  means the annual bonus paid to a Participant  in  accordance  with
Article II.

     "Committee" means the Personnel Committee of the Board.

     "Company" means Illuminet, Inc., a Delaware corporation and its corporate
successors.

     "Disability" means mental or physical disability (i) of at least six months
which in the  determination of a physician  selected by the Company,  prevents a
Participant from engaging in the principal duties of his employment or (ii) that
has  qualified  the  individual  for  coverage  under  the  Company's  long-term
disability insurance plan.

     "Fiscal year" or "year" (unless otherwise  specified) means the fiscal year
of the Company as now constituted or as it may be changed hereafter from time to
time.

     "Participant"  means  an  employee  of  the  Company,  or of a  Subsidiary,
designated by the Committee for  participation in the benefits of the Plan, or a
person  who was such at the time of his/her  retirement,  death,  disability  or
resignation and who retains,  or whose  Beneficiaries  retain benefits under the
Plan in accordance with its terms.

     "Performance  Measurement Period" shall mean the fiscal year of the company
as now constituted, beginning January 1 of each calendar year.

<PAGE>
     "Performance  Measurement  Area"  means the  performance  criteria by which
Bonuses shall be determined.

     "Plan" means this  Short-Term  Bonus Plan as it may be amended from time to
time.

     "Retirement"  means retirement at or after attaining age 60 or such earlier
age as may be approved for a Participant by the Committee.

     "Stretch Point" means the maximum  achievable value for which a Participant
will be given credit for any quantifiable performance criteria.

     "Subsidiary"  means an  entity  of which  the  Company  owns,  directly  or
indirectly, at least a majority of the voting securities or interests.

     "Target Point" means the projected achievable value for which a Participant
will be given credit for any quantifiable performance measurement area.

                                   ARTICLE II

                         DESIGNATION OF PARTICIPANTS AND
                          CALCULATION OF BONUS AMOUNTS

Section 2.01 Committee Designations.  The Committee shall meet before the
beginning of each fiscal year and specify:

     (a)  The name of each Participant for that fiscal year;

     (b)  The performance criteria for determining the amount of each
          Participant's Bonus for that fiscal year;

     (c) The percentage of Base Salary to which the Stretch Point and the Target
         Point shall be applied for each Participant for that fiscal
         year;

     (d)  The Stretch Point and Target Point for each Participant; and

     (e)  The formula by which a  Participant's  performance  criteria  shall be
          evaluated  in  determining  what the total Bonus for each  Participant
          shall be.

Section  2.02   Calculation  of  Bonus.  The  Committee  shall  determine  which
established performance criteria have been achieved by each Participant, whether
a  Participant  has achieved the Stretch Point or Target Point for any criteria,
and the  calculation  of the Bonus  pursuant to the formula  designated for each
Participant.  This  will  occur  90 days  after  the  close  of the  Performance
Measurement Period (fiscal year).

In no event  will any bonus be earned or  payable  under  this Plan  unless  the
Company's  earnings  before  interest,  taxes,  depreciation,  and  amortization
(EBITDA)  equals at least 80% of the  Company's  budgeted  EBITDA for the fiscal
year ending December 31, 1996.

Section 2.03 Mid-Period  Termination.  In the event a  Participant's  employment
terminates prior to the end of a Performance Measurement Period, other than in a
manner  resulting in a forfeiture under Section 3.06, such  Participant's  Bonus
shall be  calculated  based on the results of the Bonus  calculation  for 
that  Participant  through  such  date of  termination,  extrapolated  to a full
Performance  Measurement  Period basis, and then prorated for the portion of the
Performance  Measurement Period prior to termination.  Such prorated Bonus shall
be paid in accordance with the terms of Section 3.01.

                                   ARTICLE III

                      PAYMENT OF BONUS AND FORFEITURES

Section 3.01 Payment Terms. If a Participant continues to meet the provisions of
Section  3.04,  Bonuses will be paid in cash no later than 90 days after the end
of the fiscal  year.  If, for  whatever  reason,  the bonus  payment is not made
within this 90 day time period,  the cash shall earn  interest  beginning on the
91st day at the actual rate,  if any,  earned on the  Company's  cash account at
it's primary financial institution.  Upon death,  disability,  or termination of
employment by the Company without Cause (as defined in Section  3.04(d)),  Bonus
shall be paid within 90 days of the end of the fiscal year, after calculation of
all amounts under Article II,  prorated for the portion of the fiscal year prior
to the death,  disability or  termination  of the  Participant.  Upon death of a
Participant, an estate can elect early payment of a Bonus based upon projections
approved by the Committee for a full fiscal year calculation of the Bonus.

Section 3.02 Contingent  Interest.  Until and except to the extent that deferred
benefits  hereunder  are  distributed  to  or  vested  in  the  Participants  or
Beneficiaries  from time to time in  accordance  with this Plan or orders of the
Committee,   the  interest  of  each  Participant  and  Beneficiary  therein  is
contingent only and is subject to forfeiture as provided in Section 3.04.  Title
to and beneficial  ownership of any assets,  whether cash or investments,  which
the  Company  may  set  aside  or  earmark  to meet  its  contingent  or  vested
obligations hereunder,  shall at all times remain in the Company; no Participant
or Beneficiary  shall under any  circumstances  acquire any property interest in
any  specific  assets of the Company;  and no assets shall secure the  Company's
obligations hereunder.

Section 3.03  Beneficiaries.  Each Participant shall have the right to designate
Beneficiaries  who are to succeed to his/her  contingent right to receive future
payments hereunder in the event of his/her death by delivery to the Committee of
a Beneficiary Designation Form. In case of a failure of designation or the death
of a designated  Beneficiary without a designated successor,  distribution shall
be made to the Participant's estate.

Section 3.04 Forfeiture.

     (a)  The  contingent  right of a  Participant  or  Beneficiary  to  receive
          payments  hereunder  shall be forfeited upon the occurrence of any one
          or more of the following events:

          (1)  if the Participant is discharged for Cause (as defined in
               Section 3.04(d)) from employment by the Company or a
               Subsidiary;

          (2)  if the Participant shall voluntarily terminate employment with
               the Company.
<PAGE>
     (b)  The  Committee  may at any time and from time to time order all or any
          part  of the  value  of  the  contingent  right  of a  Participant  or
          Beneficiary  to receive a Bonus to be vested and no longer  subject to
          forfeiture,  and may order  payment of the  amounts so vested on dates
          specified in such orders,  if it finds such action  appropriate in the
          circumstances.

     (c)  Upon death,  disability or termination from employment  without Cause,
          all Bonus amounts due to a  Participant  for the portion of the fiscal
          year prior to such event shall immediately vest and be on-forfeitable,
          and shall be paid in accordance with Section 3.01.

     (d)  "Cause" means any one of the following:

           (1)  Indictment  or  conviction  of a crime  which  in the  sole  and
                absolute  discretion  of the  Board  reflects  adversely  on the
                Company's public image; or

           (2)  Failure to perform in a manner satisfactory to the Board the
                duties and responsibilities of the Participant

           (3)  Any breach of the Participant's fiduciary duty to the Company
                deemed significant by the Board in its sole and absolute
                discretion; or

           (4)  The Board  determines  that a material breach by the Participant
                of any written employment agreement he may have with the Company
                or a Subsidiary has occurred.

Section 3.05 No Fiduciary Relationship. Nothing contained herein shall be deemed
to  create a trust of any kind or  create  any  fiduciary  relationship.  To the
extent  that any person  acquires a right to receive  payments  from the Company
under this Plan,  such right shall be no greater than the right of any unsecured
general creditor of the Company.

Section  3.06  Change  in  Control.  In  the  event  a  Participant  voluntarily
terminates  employment  between the time that a Change in Control  occurs,  such
Participant shall not be entitled to receive any Bonus under this Plan. A Change
in Control  shall mean (i) the  acquisition  by a third  party not  currently  a
shareholder  of the Company of 30% or more of the voting  power of the  Company;
(ii) the merger or  consolidation  of the Company  with  another  entity and the
Company is not the surviving entity;  (iii) the sale of substantially all of the
assets of the  Company,  or (iv) any  other  event  which  the Board  determines
constitutes a change in control of the Company.
<PAGE>
                              ARTICLE IV

                            ADMINISTRATION

Section 4.01 Books and Records; Expenses. The books and records to be maintained
for the purpose of the Plan shall be maintained by the officers and employees of
the Company at its expense  and  subject to the  supervision  and control of the
Committee.  All expenses of administering  the Plan shall be paid by the Company
from the  general  funds of the  Company  and shall not be charged  against  any
Participant account.

Section  4.02  Attachment.  To the  extent  permitted  by law,  the right of any
Participant or any Beneficiary in any benefit or to any payment  hereunder shall
not be subject in any manner to  attachment or other legal process for the debts
of such Participant or Beneficiary; and any such benefit or payment shall not be
subject to anticipation, alienation, sale, transfer, assignment or encumbrance.

Section 4.03 No  Liability.  No member of the Board or of the  Committee  and no
officer or employee of the Company  shall be liable to any person for any action
taken or omitted  in  connection  with the  administration  of this Plan  unless
attributable  to his own fraud or willful  misconduct;  nor shall the Company be
liable to any person for any such action unless attributable to fraud or willful
misconduct on the part of a director, officer of employee of the Company.

                                    ARTICLE V

                      AMENDMENT OF PLAN; MISCELLANEOUS

Section 5.01 Amendment. The Plan may be amended in whole or in part from time to
time by the Board of  Directors.  In the event the Plan is terminated or amended
in such a way as to eliminate a Bonus for any Participant during the course of a
fiscal year,  the Bonus,  if any, for such  Participant  shall  nevertheless  be
determined  at the end of the fiscal year,  but shall be prorated for the period
of time prior to such amendment or termination,  and shall be paid in accordance
with the terms of this Plan.

Section 5.02 Notice.  Notice of every such amendment shall be given in writing
to each Participant.

Section 5.03 No Guarantee of Employment. Nothing contained in this Plan shall be
deemed to give any  Participant  the right to be  retained in the service of the
Company  or to  interfere  with  the  right  of the  Company  to  discharge  any
Participant,  for or without Cause, at any time,  regardless of the effect which
such discharge shall have upon such individual as a Participant in the Plan.

Section 5.04 Governing Law.  This Plan shall be construed in accordance with
the laws of the State of Kansas.

Section 5.05  Interpretation of Plan. The Committee shall have sole and absolute
discretion and authority to interpret all provisions of this Plan and to resolve
all  questions  arising  under  this  Plan;  including,   but  not  limited  to,
determining  whether any person is eligible under this Plan,  whether any person
shall receive any payments pursuant to this Plan, and the amount of any payments
to be made  pursuant  to this Plan.  Any  interpretation,  resolution  or 
determination of the Committee shall be final and binding upon all concerned and
shall not be subject to review.

 <PAGE>
                                                                      EXHIBIT 11
                               USTN HOLDINGS, INC.

                   COMPUTATION OF EARNINGS PER SHARE

                                                           Years Ended
                                                           December 31,
                                                    1996              1995
                                                    ----------------------
Primary:

Average common shares
  outstanding                                       4,995,092    3,729,015
                                                    =========    =========

Net income (loss)                                  $2,952,982  $(1,515,459)
                                                    =========    =========

Per share amount                                   $     0.59  $     (0.41)
                                                    =========    =========

Fully diluted:

Primary average common shares
  outstanding                                          4,995,092    3,729,015
Assumed conversion of USTN Debentures                    787,097            -
Assumed conversion of USTN
  Series A Preferred Stock                               190,095            -
                                                       ---------     ---------

Totals                                                 5,972,284    3,729,015
                                                       =========    =========

Net income (loss)                                     $2,952,982   (1,515,459)
Add USTN Debenture
  interest, net of federal
  income tax effect                                      446,958            -
                                                       ---------    ----------

Totals                                                $3,399,940  $(1,515,459)
                                                      ==========   ===========

Per share amount                                        $   0.57  $     (0.41)
                                                         ========  ===========
<PAGE>
                                                                      EXHIBIT 16
                               USTN HOLDINGS, INC.

               LETTER ON CHANGE OF CERTIFYING ACCOUNTANT


March 18, 1997

Securities and Exchange Commission 450 5th Street N.W.
Washington, D.C. 20549

Gentlemen:

We have read the statements made by USTN Holdings,  Inc. (copy attached),  which
we understand will be filed with the Commission as part of the Form 10-KSB filed
by USTN Holdings,  Inc.  under the caption  "CHANGES IN AND  DISAGREEMENTS  WITH
ACCOUNTANTS  ON  ACCOUNTING  AND  FINANCIAL   DISCLOSURE."  We  agree  with  the
statements concerning our Firm set forth in the attached copy.

Very truly yours,

/s/Coopers & Lybrand L.L.P.
Seattle, Washington

<PAGE>

ITEM 8:   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE

Effective  September 12, 1995, U.S. Intelco engaged,  upon approval of its Board
of  Directors,  Ernst & Young LLP to  perform  an audit of, and issue its report
with  respect to U.S.  Intelco's  December  31,  1994  financial  statements  in
response to Coopers & Lybrand  L.L.P.  ("Coopers &  Lybrand")  confirmation,  by
letter dated September 5, 1995, to U.S. Intelco that it would not consent to the
inclusion in the Merger related Proxy  Statement/Prospectus of its report on the
U.S. Intelco Financial Statements for the years ended December 31, 1994 and 1993
(which report appeared in U.S. Intelco's Special Financial Report filed with the
Securities and Exchange  Commission pursuant to Rule 15d- 2 under the Securities
Exchange  Act of 1934).  Such  report of Coopers & Lybrand  did not  contain any
adverse opinion or disclaimer of opinion, nor was it modified as to uncertainty,
audit scope or accounting principles.  Since January 1, 1993, there have been no
disagreements  between  U.S.  Intelco  and  Coopers & Lybrand  on any  matter of
accounting  principles or practices,  financial statement disclosure or auditing
scope or procedure.  A letter from Coopers & Lybrand stating that it agrees with
the  statements  made by USTN Holding,  Inc. in this paragraph is included as an
exhibit hereto.
<PAGE>
                                                                      EXHIBIT 21

                               USTN HOLDINGS, INC.

                              LIST OF SUBSIDIARIES
                            AS OF DECEMBER 31, 1996


Illuminet, Inc.
U.S. Intelco Wireless Communications, Inc., a Washington corporation
U.S.I. Gateway, Inc., a Delaware corporation

<PAGE>