
<PAGE>
 
                                  Exhibit 99.2



                               December 29, 1995


Francis D.R. Coleman, Esq.
7132 Gillis Road
Victor, New York 14564

Dear Mr. Coleman:

          Upon your acceptance of the terms and conditions set forth in this
Release and Settlement Agreement ("Agreement"), ACC Corp. ("ACC") will provide
you with the specified consideration.  For purposes of this Agreement, "ACC"
shall also mean and include any subsidiary or affiliate of ACC Corp.

          Your signing of this Agreement is an acknowledgment that pursuant to
this Agreement, you have received, or will receive, benefits from ACC to which
you were not otherwise entitled, the receipt and sufficiency of which you
acknowledge by signing this Agreement.  This Agreement is intended to settle
fully and finally all claims, controversies, disputes and other matters between
you and ACC, its officers, directors, employees and agents.

          Effective as of December 21, 1995,  your employment with ACC ended.
You will thereafter no longer be authorized to act on behalf of ACC or to incur
any expenses or obligations in the name of ACC.  As of December 21, 1995, no
other payment will be due to you from ACC, except as expressly provided for in
this Agreement.

1.      SEVERANCE PACKAGE:
        ------------------

        (a)  SALARY:
             -------

          In consideration of your release, your covenants and the other
          terms of this Agreement, ACC will, upon the effective date of this
          Agreement, pay you the sum of $165,000, representing one year's salary
          of $130,000 plus an additional sum of $35,000.  ACC will pay $9,500 of
          the foregoing amount into your account under ACC's 401(k) Plan.  The
          balance will be paid directly to you.

          This payment is and shall be treated as severance pay, and shall be
          paid in the same manner and in the same amounts as the salary that you
          received for the year immediately preceding the termination of your
          employment.  ACC shall withhold from your severance pay federal,
          state, local and FICA taxes.  No
<PAGE>
 
                                     - 2 -




          taxes, except FICA, will be withheld with respect to the $9,500
          contributed to your 401(k) account.  This severance pay includes  all
          your accrued vacation pay.

     (b)  BENEFITS:
          ---------

             ACC will make an additional contribution to your 401(k) account in
          the amount of $3,900 (3% of your total base salary of $130,000).

             In lieu of your health/dental insurance, cellular telephone
          allowance, long distance allowance, officer reimbursement allowance
          and all other employee benefits of any nature, including disability
          insurance, ACC shall pay to you the sum of $13,800.  Said payment
          shall be reported to the applicable taxing authorities as compensation
          to the same extent as it had been previously (with $6,100 being the
          total cost for one year of COBRA coverage equivalent to the
          health/dental coverage you now have, $2,400 cellular telephone
          allowance, $300 long distance allowance and $5,000 officer
          reimbursement allowance and compensation for disability insurance
          premiums).

     (c)  SUPPLEMENTARY BENEFITS:
          -----------------------

          In addition to the foregoing benefits set forth in subparagraph (b)
          above, you will be entitled to the following benefits without regard
          to any new employment you may obtain:

          i.   Outplacement Allowance of $15,000, payable upon the effective
               date of this Agreement
          ii.  Annual incentive plan - 1995 - $52,000.00 payable upon the
               effective date of this Agreement

          iii. Transfer of Company Car (Volvo) - Prior to 12/27/96, the
               Company will buy out the existing lease and purchase the 1995
               Volvo company car for you.  Until such time as that buy-out is
               accomplished, ACC will continue to pay the lease, insurance and
               service payments in place at this time.  The decision as to when
               prior to 12/27/96 the buy-out will be accomplished shall rest
               exclusively with ACC

          iv.  Accelerated vesting of all current unvested stock options that
               would otherwise have vested through 1/3/97.  These options will
               vest as of the effective date of this Agreement and you may
               exercise them at any time through March 31, 1996.  (See attached
               Schedule "A.")

     (d)  ENTIRE PACKAGE:
          ---------------

             You acknowledge and represent that you have received or will
          receive pursuant to this Agreement all compensation, both monetary and
<PAGE>
 
                                     - 3 -

          non-monetary, including but not limited to wages, bonuses, benefits,
          overtime pay, supplements, vacation and holiday pay, sick pay,
          disability pay and all other sums of money, stock options, stock
          appreciation rights or similar rights to which you are entitled from
          ACC through December 21, 1995, except as may be specifically set forth
          or provided for in this Agreement.  This Agreement shall not operate
          to waive any benefits due to you as a result of retirement, the New
          York Workers' Compensation Law and the New York Unemployment Insurance
          Law.  You will also be reimbursed for authorized expenses incurred
          before December 21, 1995.

     (e)  PAYMENT:
          --------

             All payments required by ACC shall be made on the eighth (8th) day
          (or first business day thereafter) after your execution and delivery
          of this Agreement.

2.   RETURN OF PROPERTY:
     -------------------

     Upon your receipt of the sums set forth in paragraph 1(a) above, you will
     return all property and materials which belong to ACC (whether or not such
     materials were prepared by ACC) and which are in your possession or over
     which you exercise any control, including, but not limited to all
     proprietary documents, data, records, computer hardware, computer software
     and documentation, notebooks, or other information pertaining to ACC's
     business and operations, and you agree not to keep copies thereof in any
     form.  ACC will make available such non-confidential records and documents
     as you may reasonably request from time to time as may be necessary for you
     to file any tax returns, applications, or reports or to respond to any
     litigation in which you may be involved against third parties.
     Notwithstanding the foregoing, for the sum of $1.00 you may purchase from
     ACC your (i) personal computer equipment; (ii) Casio and software; and
     (iii) dictaphone.

3.   FUTURE CONDUCT:
     ---------------

     (a)  FUTURE CONDUCT:
          ---------------

     Except to the extent required by law, you agree that you will not,
     at any time after the date hereof, disclose to any person,
     corporation, partnership or other entity whatsoever any non-public
     business plans, procedures, pricing and marketing structure and
     strategies, programs, forms, confidential information, trade secrets
     or other data and information relating to ACC learned by you at any
     time during your employment with ACC.
<PAGE>
 
                                     - 4 -

     (b)  CONFIDENTIALITY:
          ----------------
     
     Except to the extent required by law, you understand and agree that
     as a condition of the payment and agreements described in this
     Agreement, the terms of this Agreement shall be kept confidential by
     you, except that you may disclose the terms of this Agreement to your
     spouse, attorney and/or accountant if he or she also agrees to keep
     this Agreement and its terms confidential.
     
     (c)  DISPARAGEMENT:
          --------------
     
     You and ACC agree to refrain from making any statements, whether
     verbal or written, which disparage you or ACC or any subsidiary or
     affiliate thereof, its employees, management, products, policies or
     services.
     
     (d)  RE-EMPLOYMENT:
          --------------
     
     You covenant and agree at any time after the date of this
     Agreement, not to apply for or otherwise seek employment with ACC or
     any wholly-owned subsidiary or affiliate thereof and do hereby waive
     any and all rights you may have to do so.

4.   MISCELLANEOUS:
     --------------

     (a) Notwithstanding the release provided in paragraphs 5(a) and (b)
         below, if either party breaches this Agreement, the other party
         retains all rights or remedies provided in law or in equity by reason
         of said breach.

     (b) You acknowledge that this is our entire agreement and supersedes all
         prior agreements, understandings, discussions, negotiations and
         undertakings, whether written or oral, between the parties with
         respect thereto, including any rights of the parties under the
         Employment Continuation Incentive Agreement in effect on the date of
         your termination, but does not supersede the agreements between you
         and ACC concerning indemnification. You further acknowledge that the
         headings in this Agreement are for convenience only and have no
         bearing on the meaning of this Agreement.

     (c) This Agreement shall not in any way be construed as an admission by
         ACC that it or its officers, directors, employees or advisors have
         acted wrongfully with respect to you or that you have any rights
         whatsoever against ACC, its officers, directors employees, or
         advisors.  Similarly, this Agreement shall not in any way be construed
         as an admission by you of any wrongdoing.
<PAGE>
 
                                     - 5 -

        (d) You have consulted with the law firm of  Sullivan & Cromwell, New
            York, New York, regarding this Agreement before signing it.

        (e) You have carefully read and fully understand all the terms of this
            Agreement and are freely and voluntarily entering into this
            Agreement without coercion. In addition, you have been given a draft
            of this Agreement and will have at least twenty-one (21) days to
            consider its terms although you may sign it at any time during the
            21 day period. You have carefully considered the terms set forth in
            this Agreement. You understand that this Agreement may be revoked by
            you within seven (7) days of its execution by you and that this
            Agreement shall not become effective or enforceable until this
            revocation period has passed.

5.      RELEASES:
        ---------

        (a) As a material inducement to ACC to enter into this Agreement and in
            consideration for the above, you agree to forever release, acquit,
            covenant not to sue and discharge ACC, and its subsidiaries,
            affiliates, employees, officers, representatives, attorneys,
            directors and shareholders and their predecessors, successors and
            assigns from and against any and all charges, complaints, claims,
            liabilities, obligations, promises, agreements, controversies,
            damages, actions, causes of action, suits, rights, demands, costs,
            losses, debts and expenses of any nature whatsoever, known or
            unknown, suspected or unsuspected and all claims for attorney's
            fees, costs, disbursements, and expert witness fees which you now
            have, own or hold or claim to have, own or hold or which you owned
            or claimed to have owned or held, including, but not limited to
            those relating to or arising out of:

            (1)  your employment with ACC;

            (2)  your termination of employment with ACC;

            (3)  claims relating to wages, payments and benefits except as
                 excluded herein;

            (4)  the New York Labor Law, the New York State Human Rights Law,
                 the New York State Lawful Activities Act (section 201-d of the
                 New York Labor Law), Section 740 of the New York Labor Law
                 ("Whistleblower Statute"), Title VII of the Civil Rights Act of
                 1964, Title IX of the Civil Rights Act of 1964, the Civil
                 Rights Act of 1991, the Equal Pay Act, the Employee Retirement
                 Income Security Act of 1974, the Age Discrimination in
                 Employment Act of 1967, as amended, the Older Workers Benefit
                 Protection Act of 1990, the Rehabilitation Act of 1973, the
                 Fair Labor Standards Act, the Occupational Safety and
<PAGE>
 
                                     - 6 -

               Health Act, the Americans with Disabilities Act, Federal
               Executive Order 11246 and all amendments thereto, the Family and
               Medical Leave Act, New York Civil Rights Law (S)(S) 70-a, and all
               regulations pertaining to all such laws;

           (5) any other federal, state or local law, rule or regulation; and

           (6) all tort claims and all claims of wrongful or unjust
               termination, defamation, prima facie tort, breach of or
               interference with contract, promissory estoppel, intentional
               infliction of emotional distress or breach of any express or
               implied covenant of good faith and fair dealings.

You agree that ACC shall not have any obligation to you other than as set forth
in this Agreement or as set forth in any employee benefit plan in which you are
a participant for any other monies or benefits including, but not limited to,
salary, benefits, bonus, or vacation or any obligation set forth in any
agreement of employment or other agreement with ACC, whether such agreement
shall be express or implied.  Provided, however, that this release shall not
affect or diminish your rights, as a matter of law or contract, to
indemnification from ACC.

        (b) As a material inducement to you to enter into this Agreement and in
            consideration for the above, ACC and its subsidiaries and affiliates
            agree to forever release, acquit, covenant not to sue and discharge
            you, and your predecessors, successors and assigns from and against
            any and all charges, complaints, claims, liabilities, obligations,
            promises, agreements, controversies, damages, actions, causes of
            action, suits, rights, demands, costs, losses, debts and expenses of
            any nature whatsoever, known or unknown, suspected or unsuspected
            and all claims for attorney's fees, costs, disbursements, and expert
            witness fees which ACC now has, owns or holds or claims to have, own
            or hold or which ACC owned or claimed to have owned or held,
            including, but not limited to those relating to or arising out of:
 
            (1)  your employment with ACC;

            (2)  your termination of employment with ACC;

            (3)  claims relating to wages, payments and benefits except as
                 excluded herein;

            (4)  the New York Labor Law, the New York State Human Rights Law,
                 the New York State Lawful Activities Act (section 201-d of the
                 New York Labor Law), Section 740 of the New York Labor Law
                 ("Whistleblower Statute"), Title VII of the Civil Rights Act of
                 1964, Title IX of the
<PAGE>
 
                                     - 7 -

               Civil Rights Act of 1964, the Civil Rights Act of 1991, the Equal
               Pay Act,  the Employee Retirement Income Security Act of 1974,
               the Age Discrimination in Employment Act of 1967, as amended, the
               Older Workers Benefit Protection Act of 1990, the Rehabilitation
               Act of 1973, the Fair Labor Standards Act, the Occupational
               Safety and Health Act, the Americans with Disabilities Act,
               Federal Executive Order 11246 and all amendments thereto, the
               Family and Medical Leave Act, New York Civil Rights Law (S)(S)
               70-a, and all regulations pertaining to all such laws;

           (5) any other federal, state or local law, rule or regulation; and

           (6) all tort claims and all claims of wrongful or unjust
               termination, defamation, prima facie tort, breach of or
               interference with contract, promissory estoppel, intentional
               infliction of emotional distress or breach of any express or
               implied covenant of good faith and fair dealings.

6.      ERISA CONTINGENCIES/COMPLIANCE:
        -------------------------------

        (a) Nothing herein contained, and no action taken pursuant to this
            Agreement by either party hereto, shall create, or be construed to
            create, a trust of any kind, or a fiduciary relationship between ACC
            and you or any other employee except as provided below.

        (b) In the event that this Agreement is deemed to be a welfare benefit
            plan under the Employee Retirement Income Security Act of 1974
            ("ERISA"), then:

             (1) ACC is hereby designated as the named fiduciary under the
                 Agreement. The named fiduciary shall have authority to control
                 and manage the operation and administration of the Agreement,
                 and it shall be responsible for establishing and carrying out
                 any funding policy and method consistent with the objectives of
                 the Agreement;

             (2) ACC shall make all determinations as to eligibility rights and
                 benefits under the Agreement as to any individual other than
                 you. Any decision by ACC denying a claim by an employee for
                 benefits under the Agreement shall be stated in writing and
                 delivered or mailed to such employee. Such decision shall set
                 forth the specific reasons for the denial, written to the best
                 of ACC's ability in a manner that may be understood without
                 legal counsel. In addition, ACC shall afford a reasonable
                 opportunity to such employee for a full and fair review of the
                 decision denying such claims;
<PAGE>
 
                                     - 8 -

             (3) Subject to the foregoing, ACC shall have full power and
                 authority to interpret, construe and administer the Agreement
                 as it may apply to individuals other than you. The
                 interpretation and construction of the Agreement by ACC, and
                 any action taken under it, shall be binding and conclusive upon
                 all parties in interest other than you. No officer, director,
                 or employee of ACC shall, in any event, be liable to any person
                 for any action taken or omitted to be taken in connection with
                 the interpretation, construction or administration of the
                 Agreement with respect to individuals other than you, so long
                 as such action or omission to act is made in good faith.
 
             (4) All parties to the Agreement or claiming any interest under the
                 Agreement other than you shall be bound by such amendments or
                 termination.

             (5) Provided that no interpretation, amendment or termination of
                 this Agreement shall reduce or affect in any way your rights
                 hereunder, ACC shall have the right to terminate any plan
                 created by this Agreement at any time as it may apply to anyone
                 other than you.

        Please review this Agreement carefully.  Please consult with your
attorney, if you wish.  We would like it returned to us signed by no later than
the 22nd day after it is provided to you.  If you do not return it to us,
signed, by that date, we shall assume that you have elected not to accept the
terms and conditions of this Agreement.

        Your signature below indicates your acceptance of this Agreement and
shall cause this Agreement to be binding upon you, your heirs, representatives
and assigns.  Your signature shall also signify that you have read and
understood the Agreement, have reviewed it with your attorney or have elected
not to do so.

                                       Very truly yours,

                                       ACC Corp.


                                       By:   /s/ David K. Laniak
                                           ------------------------


Accepted and Agreed to on this
29th day of December, 1995.


/s/  Francis D.R. Coleman
------------------------------
Francis D.R. Coleman              


<PAGE>
 
                                     - 9 -


                                 Schedule "A"
                                 ------------

The following schedule sets forth those options that currently are unvested but
that, as of the effective date of this Agreement, will be vested:

                       1996 Stock Option Vesting Schedule
                       ----------------------------------
<TABLE>
<CAPTION>
 
Shares Granted        Grant Date  Grant Price  96 Vesting
<S>                   <C>         <C>          <C>
 
     12,300             01/03/95        14.75       3,075
      7,500             06/03/92      10.9167       1,875
      7,500             11/30/92        18.75       1,875
     25,000             08/11/94        14.75       6,250
                                                   ------
                                                   13,075
 
                                               97 Vesting
     12,300             01/03/95        14.75       3,075
                                                   ------
                                                   16,150
</TABLE>
