
<PAGE>
 
                                                                   EXHIBIT-10.29



                 SECOND AMENDED AND RESTATED SECURITY AGREEMENT


         THIS SECOND AMENDED AND RESTATED SECURITY AGREEMENT (this "Agreement"),
dated as of December __, 1997 by and between ACC CORP., a corporation  organized
under the laws of Delaware ("ACC"),  certain Domestic Subsidiaries of ACC listed
on the signature pages hereto (the "Subsidiary  Grantors" and, collectively with
ACC Corp.,  the  "Grantors")  and FIRST UNION NATIONAL BANK, a national  banking
association  organized  under the laws of the United States,  as  Administrative
Agent (the "Administrative  Agent") for the benefit of itself, and the financial
institutions (the "Lenders") as are, or may from time to time become, parties to
the Credit Agreement (as defined below).

                              STATEMENT OF PURPOSE

         ACC and  certain  of its  Subsidiaries  have  previously  executed  and
delivered to the Administrative  Agent a Security Agreement dated as of July 21,
1995,  as amended by the Amended and  Restated  Security  Agreement  dated as of
January 14, 1997 (the "First Amended and Restated Security Agreement").

         Pursuant to the Second Amended and Restated  Credit  Agreement dated as
of even date herewith (together with all amendments and other modifications,  if
any, from time to time hereafter made thereto, the "Credit Agreement"),  between
the  Grantors  and  certain   Subsidiaries   of  ACC  as  Borrowers   thereunder
(collectively,  the "Borrowers"),  the Lenders and the Administrative Agent, the
Lenders will provide  Extensions of Credit to the Borrowers as more specifically
described  in the  Credit  Agreement.  In order to induce  the  Lenders  and the
Administrative  Agent to enter into the Credit Agreement,  and as a condition to
the provision of Extensions of Credit  thereunder,  the Lenders require that the
Grantors amend and restate the First Amended and Restated Security  Agreement in
order to grant a continuing  security  interest in and to the  "Collateral"  (as
hereinafter  defined)  to  secure  the  "Secured  Obligations"  (as  hereinafter
defined).

         NOW,  THEREFORE,  in  consideration  of the premises and other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the parties hereto agree as follows:

         SECTION 1.  Definitions.  Terms defined in the Credit Agreement and not
otherwise  defined herein,  when used in this Agreement,  including its preamble
and  recitals,  shall have the  respective  meanings  provided for in the Credit
Agreement.  The following  additional terms, when used in this Agreement,  shall
have the following meanings:

         "Account Debtor" means any Person who is or may become obligated to any
Grantor under, with respect to, or on account of, an Account.
<PAGE>
 
         "Accounts"  means  all  "accounts"  (as  defined  in  the  UCC)  now or
hereafter  owned or  acquired  by any  Grantor  or in which any  Grantor  now or
hereafter has or acquires any right or interest,  and, in any event,  shall also
include,  without  limitation,  all accounts  receivable,  contract rights, book
debts,  notes, drafts and other obligations or indebtedness owing to any Grantor
arising  from the sale,  lease or exchange  of goods or other  property by it or
property to be sold, leased or exchanged,  or the performance of services by it,
or to be performed  (including,  without  limitation,  any such obligation which
might be characterized as an account, contract right or general intangible under
the  Uniform  Commercial  Code in  effect  in any  jurisdiction)  and all of any
Grantor's  rights in, to and under all  purchase  orders for goods,  services or
other property,  and all of any Grantor's rights to any goods, services or other
property  represented by any of the foregoing (including returned or repossessed
goods and unpaid sellers' rights of rescission, replevin, reclamation and rights
to stoppage  in  transit)  and all monies due to or to become due to any Grantor
under all contracts for the sale,  lease or exchange of goods or other  property
or the  performance  of services by it (whether or not yet earned by performance
on the part of such Grantor), in each case whether now in existence or hereafter
arising or acquired,  including,  without  limitation,  the right to receive the
proceeds of said purchase  orders and contracts and all collateral  security and
guarantees of any kind given by any Person with respect to any of the foregoing.

         "Accounts  Aging  Report"  means a detailed  aged trial  balance of all
Accounts  existing  as of a  specified  date,  specifying  the name,  addresses,
account  number,  face  value  and  dates of  invoices  of each  Account  Debtor
obligated on any Accounts so listed,  which report may be requested from time to
time by the Administrative Agent.

         "Collateral" means the collective reference to:

                  (i)      Accounts;

                  (ii)     Inventory;

                  (iii)    Documents;

                  (iv)     Equipment;

                  (v)      Fixtures;

                  (vi)     Instruments;

                  (vii)    General Intangibles;

                  (viii) The Collateral Account, all cash deposited therein from
         time to time,  the  investments  made  pursuant  to Section 6 and other
         monies and  property  of any kind of any Grantor in the  possession  or
         under the control of the Administrative Agent or any Lender;
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                  (ix) All books and  records  (including,  without  limitation,
         customer lists,  credit files,  computer programs,  printouts and other
         computer materials and records) of any Grantor pertaining to any of the
         Collateral;

                  (x) All other  goods and  personal  property  of any  Grantor,
         whether tangible or intangible; and

                  (xi) All products and Proceeds of all or any of the Collateral
         described in clauses (i) through (x) hereof.

         "Collateral Account" means a cash collateral account established by the
Grantors  with the  Administrative  Agent,  in the name and under the  exclusive
dominion and control of the Administrative Agent, pursuant to Section 6.

         "Copyright  License"  means any written  agreement  now or hereafter in
existence granting to any Grantor any right to use any Copyright.

         "Copyrights"  means,  collectively,  all of the  following now owned or
hereafter  created or acquired by any Grantor:  (a) all  copyrights,  rights and
interests in copyrights, works protectable by copyright, copyright registrations
and copyright  applications;  (b) all renewals of any of the foregoing;  (c) all
income,  royalties,  damages and payments now or  hereafter  due and/or  payable
under any of the foregoing or with respect to any of the  foregoing,  including,
without limitation,  damages or payments for past or future infringements of any
of  the  foregoing;   (d)  the  right  to  sue  for  past,  present  and  future
infringements of any of the foregoing;  and (e) all rights  corresponding to any
of the foregoing throughout the world.

         "Documents"  means all  "documents"  (as  defined  in the UCC) or other
receipts  covering,  evidencing  or  representing  goods  or  services,  now  or
hereafter  owned or  acquired  by any  Grantor  or in which any  Grantor  now or
hereafter has or acquires any right or interest.

         "Equipment"  means  all  "equipment"  (as  defined  in the  UCC) of any
Grantor,  wherever located, and all other machinery,  equipment and goods (other
than  Inventory) of any Grantor used or bought for use primarily in the business
of such Grantor, including all accessions, additions, attachments, improvements,
substitutions and replacements  thereto and therefor,  in all such cases whether
now owned or  hereafter  acquired by any Grantor or in which any Grantor now has
or hereafter acquires any right or interest.

         "Financing  Statements"  means the Uniform  Commercial  Code Form UCC-1
Financing Statements executed by each Grantor with respect to the Collateral and
to be  filed  in the  jurisdictions  satisfactory  to the  Administrative  Agent
pursuant to Section 5.2(c) of the Credit Agreement.
<PAGE>
 
         "Fixtures" means all "fixtures" (as defined in the UCC) of any Grantor,
whether  now owned or  hereafter  acquired,  or in which any  Grantor now has or
hereafter acquires any right or interest.

         "General  Intangibles"  means all "general  intangibles" (as defined in
the UCC) now or  hereafter  owned or  acquired  by any  Grantor  or in which any
Grantor now or  hereafter  has or acquires  any right or  interest,  and, in any
event,   shall   mean  and   include,   without   limitation,   all   rights  to
indemnification, and all rights, title and interest which any Grantor may now or
hereafter have in or under all contracts (other than contracts  described in the
definition of Accounts),  agreements  (including without limitation the Versatel
Security Documents), permits, licenses (which contracts, agreements, permits and
licenses  may be  pledged  pursuant  to the terms  thereof)  causes  of  action,
franchises,  tax refund claims, customer lists,  Intellectual Property,  license
royalties,  goodwill,  trade secrets, data bases, business records and all other
intangible property of every kind and nature.

         "Instruments"  means all "instruments",  "chattel paper" or "letters of
credit"  (each  as  defined  in  the  UCC),   including,   without   limitation,
instruments,  chattel  paper and  letters  of credit  evidencing,  representing,
arising  from or existing  in respect of,  relating  to,  securing or  otherwise
supporting  the payment of, any of the Accounts,  including (but not limited to)
promissory  notes,  drafts,  bills of  exchange  and trade  acceptances,  now or
hereafter  owned or  acquired  by any  Grantor  or in which any  Grantor  now or
hereafter has or acquires any right or interest.

         "Intellectual Property" means,  collectively,  (a) all systems software
and applications  software,  including,  but not limited to, screen displays and
formats,  program structures,  sequence and organization,  all documentation for
such  software,  including,  but  not  limited  to,  user  manuals,  flowcharts,
programmer's  notes,  functional  specifications,  and operations  manuals,  all
formulas,  processes,  ideas and know-how embodied in any of the foregoing,  and
all program materials, flowcharts, notes and outlines created in connection with
any of the foregoing, whether or not patentable or copyrightable,  (b) concepts,
discoveries,  improvements and ideas, (c) any useful information relating to the
items  described  in  clause  (a)  or  (b),  including   know-how,   technology,
engineering drawings,  reports,  design information,  trade secrets,  practices,
laboratory  notebooks,  specifications,  test procedures,  maintenance  manuals,
research,  development,   manufacturing,   marketing,  merchandising,   selling,
purchasing and accounting,  (d) Patents,  Patent rights and Patent applications,
Copyrights  and Copyright  applications,  Trademarks,  Trademark  rights,  trade
names, trade name rights,  service marks, service mark rights,  applications for
registration of Trademarks,  trade names and service marks, and Trademark, trade
name and service mark registrations and Patent Licenses,  Trademark Licenses and
Copyright Licenses,  and (e) other licenses to use any of the items described in
the  foregoing  clauses (a),  (b), (c) and (d) or any other similar items of any
Grantor necessary for the conduct of its business.

         "Inventory"  means  all  "inventory"  (as  defined  in the  UCC) now or
hereafter  owned or  acquired  by any  Grantor  or in which any  Grantor  now or
hereafter  has or acquires any right or interest,  wherever  located and, in any
event, shall mean and include, without limitation, all raw materials,  inventory
and  other  materials  and  supplies,   work-in-process,   finished  goods,  all
<PAGE>
 
accessions  thereto,  documents  therefor  and any  products  made or  processed
therefrom and all substances, if any, commingled therewith or added thereto.

         "Patent  License"  means any  written  agreement  now or  hereafter  in
existence  granting  to any Grantor  any right to use any  invention  on which a
Patent is in existence.

         "Patents"  means,  collectively,  all of the  following  now  owned  or
hereafter  created  or  acquired  by any  Grantor:  (a) all  patents  and patent
applications including all patentable inventions;  (b) all reissues,  divisions,
continuations,  renewals,  extensions  and  continuations-in-part  of any of the
foregoing; (c) all income,  royalties,  damages or payments now or hereafter due
and/or  payable  under  any of  the  foregoing  or  with  respect  to any of the
foregoing, including, without limitation, damages or payments for past or future
infringements  of any of the foregoing;  (d) the right to sue for past,  present
and  future  infringements  of  any  of  the  foregoing;   and  (e)  all  rights
corresponding to any of the foregoing throughout the world.

         "Perfection  Certificate"  means a  certificate  dated as of even  date
herewith, setting forth the corporate names, chief executive office or principal
place of business in each state and other  current  locations of  Collateral  of
each  Grantor  and such other  information  as the  Administrative  Agent  deems
pertinent to the perfection of security  interests,  completed and  supplemented
with the schedules and attachments  contemplated  thereby to the satisfaction of
the  Administrative  Agent,  and duly certified by the chief  executive or chief
financial officer of each Grantor so authorized to act.

         "Permitted Investments" means investments described in Section 10.4 of
 the Credit Agreement.

         "Permitted  Liens"  means  all such  Liens  respecting  the  Collateral
permitted pursuant to Section 10.3 of the Credit Agreement.

         "Proceeds"  means all  proceeds of, and all other  profits,  rentals or
receipts, in whatever form, arising from the collection,  sale, lease, exchange,
assignment,  licensing or other disposition of, or realization upon, Collateral,
including,  without limitation,  all claims of any Grantor against third parties
for loss of, damage to or  destruction  of, or for proceeds  payable  under,  or
unearned  premiums  with  respect to,  policies of  insurance in respect of, any
Collateral,  and any  condemnation  or requisition  payments with respect to any
Collateral  and the following  types of property  acquired  with cash  proceeds:
Accounts, Inventory, Documents, Fixtures,  Instruments,  General Intangibles and
Equipment.

         "Secured   Obligations"  means,  with  respect  to  each  Grantor,  the
Obligations of such Grantor as defined in the Credit  Agreement and any renewals
or extensions of any of such Obligations.
<PAGE>
 
         "Security  Interests" means the security  interests granted pursuant to
Section  2, as well as all other  security  interests  created  or  assigned  as
additional  security for the Secured  Obligations  pursuant to the provisions of
this Agreement.

         "Trademark  License"  means any written  agreement  now or hereafter in
existence granting to any Grantor any right to use any Trademark.

         "Trademarks"  means,  collectively,  all of the  following now owned or
hereafter created or acquired by any Grantor:  (a) all Trademarks,  trade names,
corporate names, company names, business names, fictitious business names, trade
styles,  service marks, logos, other business identifiers,  prints and labels on
which any of the  foregoing  have  appeared  or appear,  all  registrations  and
recordings  thereof,  and all  applications in connection  therewith,  including
registrations,  recordings  and  applications  in the United  States  Patent and
Trademark  Office or in any similar office or agency of the United  States,  any
state thereof or any other country or any political  subdivision of any thereof,
including without  limitation any thereof referred to on Schedule I hereto;  (b)
all reissues,  extensions and renewals of any of the foregoing;  (c) all income,
royalties, damages and payments now or hereafter due and/or payable under any of
the  foregoing  or with  respect  to any of the  foregoing,  including,  without
limitation,  damages or payments for past or future  infringements of any of the
foregoing;  (d) the right to sue for past,  present and future  infringements of
any of the foregoing;  and (e) all rights  corresponding to any of the foregoing
throughout the world.

         "UCC" means the Uniform Commercial Code as in effect on the date hereof
in the  State  of  North  Carolina;  provided  that if by  reason  of  mandatory
provisions of law, the perfection or the effect of perfection or  non-perfection
of the  Security  Interests  in  any  Collateral  is  governed  by  the  Uniform
Commercial Code as in effect in a jurisdiction other than North Carolina,  "UCC"
means the Uniform  Commercial Code as in effect in such other  jurisdiction  for
purposes  of the  provisions  hereof  relating to such  perfection  or effect of
perfection or non-perfection.

         "Versatel  Security  Documents"  means the loan and security  documents
between  ACC and  [Versatel]  executed  pursuant  to Section  10.4 of the Credit
Agreement.

         SECTION 2. The Security Interests.

         (a) In order to secure  the Credit  Agreement  in  accordance  with the
terms thereof,  and to secure the payment and  performance of all of the Secured
Obligations,  each Grantor hereby grants to the  Administrative  Agent,  for the
ratable benefit of itself and the Lenders, a continuing security interest in and
to all of  such  Grantor's  estate,  right,  title  and  interest  in and to all
Collateral  whether now or  hereafter  owned or  acquired by such  Grantor or in
which such Grantor now has or hereafter has or acquires any rights, and wherever
located.

         (b) The Security  Interests  are granted as security only and shall not
subject  the  Administrative  Agent  or  any  Lender  to,  or  transfer  to  the
Administrative  Agent  or any  Lender,  or
<PAGE>
 
in any way affect or modify,  any  obligation  or  liability of any Grantor 
with respect to any of the Collateral or any transaction in connection
therewith.

         (c) A first priority lien on  approximately  66.66% of the  outstanding
capital stock of ACC Telekommunikation GMBH shall be granted by ACC Credit Corp.
and ACC Service Corp.  as pledgors in favor of the Lenders  pursuant to a Pledge
Agreement  dated on or about the date hereof governed by the laws of the Federal
Republic of Germany.  Such Pledge Agreement shall govern the rights and remedies
of the Administrative Agent and Lenders with respect to such capital stock.

         SECTION 3. Representations and Warranties.  Each Grantor represents and
warrants as follows:

         (a) Such Grantor has the  corporate  power and  authority and the legal
right to execute and deliver, to perform its obligations under, and to grant the
Security  Interests in the Collateral  pursuant to, this Agreement and has taken
all  necessary  corporate  action  to  authorize  its  execution,  delivery  and
performance of, and grant of the Security  Interests in the Collateral  pursuant
to, this Agreement.

         (b) This Agreement constitutes a legal, valid and binding obligation of
such Grantor  enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization,  moratorium or similar
laws affecting the enforcement of creditors' rights generally.

         (c) The execution,  delivery and performance of this Agreement will not
violate any provision of any Applicable  Law or  contractual  obligation of such
Grantor and will not result in the creation or  imposition of any Lien on any of
the  properties or revenues of such Grantor  pursuant to any  Applicable  Law or
contractual obligation of such Grantor, except as contemplated hereby.

         (d) No consent or authorization  of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of any other
Person  (including,  without  limitation,  any  stockholder  or creditor of such
Grantor), is required in connection with the execution,  delivery,  performance,
validity or enforceability of this Agreement.

         (e)  No  litigation,  investigation  or  proceeding  of or  before  any
arbitrator  or  Governmental  Authority is pending or, to the  knowledge of such
Grantor after due inquiry,  threatened by or against such Grantor or against any
of its  properties  or revenues  with  respect to this  Agreement  or any of the
transactions contemplated hereby.

         (f) Such Grantor has good and marketable title to all of its respective
Collateral, free and clear of any Liens other than the Permitted Liens.
<PAGE>
 
         (g) Such  Grantor has not  performed or failed to perform any acts that
would prevent or hinder the Administrative Agent from enforcing any of the terms
of  this  Agreement.  Other  than  financing  statements  or  other  similar  or
equivalent  documents  or  instruments  with  respect  to  Permitted  Liens,  no
financing  statement,  mortgage,  security  agreement  or similar or  equivalent
document  or  instrument  covering  all or any  part of the  Collateral  of such
Grantor  is on file or of  record in any  jurisdiction.  No  Collateral  of such
Grantor is in the  possession of any Person (other than such Grantor)  asserting
any claim thereto or security interest therein,  except that the  Administrative
Agent or its designee may have  possession  of the  Collateral  as  contemplated
hereby.

         (h) All of the information set forth in the Perfection Certificate with
respect to such Grantor is true and correct as of the date hereof.

         (i) Such  Grantor  has,  contemporaneously  herewith,  delivered to the
Administrative Agent possession of all originals of all negotiable  Instruments,
documents and chattel paper constituting  Collateral  currently owned or held by
such Grantor, if any (duly endorsed in blank, if requested by the Administrative
Agent).

         (j) With  respect to any  Intellectual  Property  of Grantor  the loss,
impairment or infringement of which might have a Material Adverse Effect:

            (i)     such  Intellectual  Property is subsisting  and has not been
                    adjudged invalid or unenforceable, in whole or in part;

           (ii)     such Intellectual Property is valid and enforceable;

          (111)     such Grantor has made all necessary filings and recordations
                    to  protect  its  interest  in such  Intellectual  Property,
                    including,  without  limitation,  recordations of all of its
                    interests  in the  Patents and  Trademarks  included in such
                    Intellectual  Property  in  the  United  States  Patent  and
                    Trademark  Office and its claims to the Copyrights  included
                    in such Intellectual Property in the United States Copyright
                    Office;

           (iv)     such  Grantor  is the  exclusive  owner  of the  entire  and
                    unencumbered  right,  title  and  interest  in and  to  such
                    Intellectual  Property  and no claim  has been made that the
                    use of such  Intellectual  Property  does or may violate the
                    asserted rights of any third party; and

            (v)     such Grantor has  performed and will continue to perform all
                    acts and has paid and will continue to pay all required fees
                    and  taxes  to   maintain   each  and  every  such  item  of
                    Intellectual Property in full force and effect.

         (k)  The  Financing   Statements   executed  by  such  Grantor  are  in
appropriate  form and when  filed in the  offices  specified  in the  Perfection
Certificate, the Security Interests will constitute valid and perfected security
interests in the Collateral of such Grantor, prior to all other 
<PAGE>
 
Liens and rights of  others therein  except for the Permitted  Liens (to the
exten that a security  interest  therein may be perfected by filing  pursuant
to the UCC) and all filings and other actions necessary or desirable to perfect
and protect such Security Interests have been duly taken.

         (l) The  Inventory,  Fixtures and Equipment of such Grantor are insured
in accordance with the requirements hereof and of the Credit Agreement.


         SECTION 4. Further Assurances; Covenants.

         (a)      General.

                  (i) Each  Grantor  agrees  not to change the  location  of its
         chief  executive  office or  principal  place of  business in any state
         unless it shall have given the  Administrative  Agent  thirty (30) days
         prior   written   notice   thereof,   executed  and  delivered  to  the
         Administrative  Agent all financing  statements and financing statement
         amendments  which the  Administrative  Agent may request in  connection
         therewith.  Each Grantor  agrees not to change the  locations  where it
         keeps or holds any Collateral or any records  relating thereto from the
         applicable location described in the Perfection Certificate unless such
         Grantor  shall have given the  Administrative  Agent  thirty  (30) days
         prior  written  notice of such  change of  location  and  executed  and
         delivered to the  Administrative  Agent all  financing  statements  and
         financing  statement  amendments  which  the  Administrative  Agent may
         request in connection therewith;  provided,  that such Grantor may keep
         Inventory  at,  or  in  transit  to,  any  location  described  in  the
         Perfection  Certificate.  Each  Grantor  agrees  not to, in any  event,
         change the  location of any  Collateral  if such change would cause the
         Security  Interests  in  such  Collateral  to  lapse  or  cease  to  be
         perfected.

                  (ii) Each Grantor  agrees not to change its name,  identity or
         corporate  structure  in any  manner  unless  it shall  have  given the
         Administrative  Agent thirty (30) days prior  written  notice  thereof,
         executed  and  delivered  to the  Administrative  Agent  all  financing
         statements and financing statement  amendments which the Administrative
         Agent may request in connection therewith.

                  (iii) Each Grantor  will,  from time to time,  at its expense,
         execute,   deliver,   file  and  record  any   statement,   assignment,
         instrument,  document,  agreement  or other  paper  and take any  other
         action  (including  without  limitation  any  filings of  financing  or
         continuation  statements  under  the UCC) that from time to time may be
         necessary,  or that the Administrative Agent may reasonably request, in
         order to create,  preserve,  upgrade  in rank (to the  extent  required
         hereby),  perfect,  confirm or validate  the  Security  Interests or to
         enable  the  Administrative  Agent and the  Lenders  to obtain the full
         benefits of this Agreement,  or to enable the  Administrative  Agent to
         exercise and enforce any of its rights,  powers and remedies  hereunder
         with respect to any of the Collateral  (other than any filings with the
         United  States  Patent  and  Trademark  Office  or  the  United  States
         Copyright  Office).  Prior to the  irrevocable  payment  in full of the
         Secured Obligations,
<PAGE>
 
         each Grantor hereby authorizes the Administrative
         Agent,  upon the failure of such Grantor to so do within three Business
         Days after receipt of notice from the Administrative  Agent, to execute
         and  file  financing  statements,  financing  statement  amendments  or
         continuation  statements  without such  Grantor's  signature  appearing
         thereon. Each Grantor agrees that a carbon,  photographic,  photostatic
         or other reproduction of this Agreement or of a financing  statement is
         sufficient as a financing  statement.  Each Grantor shall pay the costs
         of,  or  incidental  to,  any  recording  or  filing  of the  Financing
         Statements  and any other  financing  statements,  financing  statement
         amendments or continuation statements concerning the Collateral.

                  (iv) If any  Collateral  exceeding  in value  $500,000  in the
         aggregate  is  at  any  time  in  the  possession  or  control  of  any
         warehouseman,  bailee (other than a carrier transporting Inventory to a
         purchaser in the ordinary course of business),  or any Grantor's agents
         or processors,  such Grantor shall notify in writing such warehouseman,
         bailee,  agent or processor of the Security  Interests  created hereby,
         shall  obtain such  warehouseman's,  bailee's,  agent's or  processor's
         agreement in writing to hold all such Collateral for the Administrative
         Agent's account subject to the Administrative Agent's instructions, and
         shall cause such warehouseman,  bailee, agent or processor to issue and
         deliver to the Administrative Agent warehouse receipts, bills of lading
         or  any  similar   documents   relating  to  such   Collateral  in  the
         Administrative Agent's name and in form and substance acceptable to the
         Administrative Agent.

                  (v) Each Grantor will cause the Administrative  Agent, for the
         ratable benefit of itself and the Lenders, to be named as loss payee on
         each insurance  policy covering risks relating to any of its Inventory,
         Fixtures and Equipment,  as reasonably  requested by the Administrative
         Agent.  Each  Grantor will deliver to the  Administrative  Agent,  upon
         request of the  Administrative  Agent, the insurance  policies for such
         insurance.  Each such insurance policy shall include  effective waivers
         by the insurer of  subrogation,  provide  that all  insurance  proceeds
         shall be  adjusted  with and  payable to the  Administrative  Agent and
         provide that no cancellation or termination  thereof shall be effective
         until at least  thirty  (30) days have  elapsed  after  receipt  by the
         Administrative  Agent of written  notice  thereof.  Each Grantor  shall
         arrange for appropriate  certifications  that the  requirements of this
         Section 4(a)(v) have been satisfied,  to be made to the  Administrative
         Agent and each insured party, as soon as  practicable,  by each insurer
         or its authorized representative with respect thereto.

                  (vi) Each Grantor will, promptly upon request,  provide to the
         Administrative  Agent all information  and evidence the  Administrative
         Agent  may  reasonably  request  concerning  the  Collateral,   and  in
         particular the Accounts,  to enable the Administrative Agent to enforce
         the provisions of this Agreement.

                  (vii) Each Grantor will comply in all material  respects  with
         all Applicable Laws applicable to the Collateral or any part thereof or
         to the operation of such Grantor's business.
<PAGE>
 
                  (viii)  Each  Grantor  will pay  promptly  when due all taxes,
         assessments  and  governmental  charges  or  levies  imposed  upon  the
         Collateral or in respect of its income or profits therefrom, as well as
         all  claims of any kind  (including,  without  limitation,  claims  for
         labor,   materials  and  supplies)  against  or  with  respect  to  the
         Collateral, except that no such charge need be paid if (A) the validity
         thereof is being  contested in good faith by  appropriate  proceedings,
         (B) such proceedings do not involve any danger of the sale,  forfeiture
         or  loss  of or  creation  of a Lien  on any of the  Collateral  or any
         interest therein and (C) such charge is adequately  reserved against on
         such Grantor's books in accordance with GAAP.

                  (ix)     No Grantor shall

                           (A) sell,  assign (by  operation of law or otherwise)
                  or  otherwise  dispose  of any of the  Collateral,  except  as
                  permitted by the Credit Agreement; or

                           (B)  create  or  suffer  to  exist  any Lien or other
                  charge  or  encumbrance  upon  or with  respect  to any of the
                  Collateral  to secure  indebtedness  of any  Person or entity,
                  except as permitted by the Credit Agreement.

         (b)      Accounts, Etc.

                  (i) Each Grantor shall use all reasonable  efforts to cause to
         be  collected  from its Account  Debtors,  as and when due, any and all
         amounts owing under or on account of each Account  (including,  without
         limitation,   Accounts  which  are  delinquent,  such  Accounts  to  be
         collected in accordance with lawful collection procedures) and to apply
         forthwith upon receipt  thereof all such amounts as are so collected to
         the  outstanding  balance  of such  Account.  The  costs  and  expenses
         (including,  without  limitation,  attorney's  fees),  of collection of
         Accounts incurred by such Grantor or the Administrative  Agent shall be
         borne by such Grantor.

                  (ii) Upon the  occurrence  and during the  continuance  of any
         Event of  Default,  upon  request  of the  Administrative  Agent or the
         Required  Lenders,  each Grantor will promptly notify (and each Grantor
         hereby authorizes the  Administrative  Agent so to notify) each Account
         Debtor in respect of any Account that such Account has been assigned to
         the  Administrative  Agent  hereunder  and that any  payments due or to
         become due in respect of such  Account  are to be made  directly to the
         Administrative Agent or its designee.

                  (iii) Each  Grantor  will  perform and comply in all  material
         respects with all of its obligations in respect of Accounts and General
         Intangibles and the exercise by the Administrative  Agent of any of its
         rights  hereunder  shall not release any Grantor from any of its duties
         or obligations.
<PAGE>
 
                  (iv) No Grantor will (A) amend, modify, terminate or waive any
         material  provision of any  agreement  giving rise to an Account in any
         manner  which could  reasonably  be expected  to  materially  adversely
         affect the value of such  Account as  Collateral,  (B) fail to exercise
         promptly and diligently each and every material right which it may have
         under each agreement giving rise to an Account (other than any right of
         termination) or (C) fail to deliver to the Administrative  Agent a copy
         of each material demand,  notice or document received by it relating in
         any way to any agreement giving rise to an Account.

                  (v) Other than in the ordinary course of business as generally
         conducted by such Grantor over a period of time,  no Grantor will grant
         any  extension of the time of payment of any of the Accounts to any one
         Account  Debtor with an  aggregate  face amount in excess of $25,000 or
         compromise,  compound  or settle the same for less than the full amount
         thereof,  release,  wholly or  partially,  any  Person  liable  for the
         payment thereof, or allow any credit or discount whatsoever thereon.

         (c) Inventory, Etc. Each Grantor hereby represents, warrants, covenants
         and agrees as follows: (i) all Inventory is, and shall be at all times,
         located at places of business  listed in the Perfection  Certificate or
         as to which such Grantor has complied  with the  provisions  of Section
         4(a)(i) hereof,  except  Inventory in transit from one such location to
         another such  location;  (ii) no Inventory is, nor shall at any time or
         times be, subject to any Lien  whatsoever,  except for Permitted Liens;
         and (iii) no  Inventory in aggregate  value  exceeding  $500,000 at any
         time is, nor shall at any time or times be, kept,  stored or maintained
         with a bailee,  warehouseman,  carrier or similar  party  (other than a
         carrier  delivering  Inventory to a purchaser in the ordinary course of
         such Grantor's  business)  unless the Required Lenders have given their
         prior written  consent and Grantor has complied with the  provisions of
         Section 4(a)(iv) hereof.

         (d)  Equipment,  Etc. Each Grantor will maintain each item of Equipment
         in the same  condition,  repair  and  working  order as when  acquired,
         ordinary wear and tear and  immaterial  impairments of value and damage
         by the elements  excepted,  and in accordance  with any  manufacturer's
         manual,  and will as quickly as  practicable  provide all  maintenance,
         service  and  repairs  necessary  for such  purpose  and will  promptly
         furnish to the Administrative Agent a statement respecting any material
         loss or damage to any of the Equipment.

         (e)   Intellectual Property.

                  (i)  Each  Grantor  shall  notify  the  Administrative   Agent
         promptly (A) of its  acquisition  after the Closing Date of any Patent,
         Patent License,  Trademark or Trademark License and (B) if it knows, or
         has  reason  to  know  of  any  adverse  determination  or  development
         (including,  without  limitation,  the  institution  of,  or  any  such
         determination  or  development  in, any proceeding in the United States
         Patent and  Trademark  Office or any court)  regarding  such  Grantor's
         ownership of any Patent or  Trademark,  its right to 
<PAGE>
 
          register the same, or to keep and maintain the same. In the event that
          any  Patent,  Patent  License,   Trademark  or  Trademark  License  is
          infringed,  misappropriated  or diluted by a third party, each Grantor
          shall notify the Administrative Agent promptly after it learns thereof
          and shall,  unless  such  Grantor and the  Administrative  Agent shall
          jointly determine that any such action would be of immaterial economic
          value, promptly sue for infringement, misappropriation or dilution and
          to recover any and all damages for such infringement, misappropriation
          or dilution,  and take such other actions as may be appropriate  under
          the circumstances to protect such Patent, Patent License, Trademark or
          Trademark  License.  In no event shall any Grantor,  either  itself or
          through any agent,  employee or licensee,  file an application for the
          registration  of any Patent or Trademark with the United States Patent
          and  Trademark  Office  or any  similar  office or agency in any other
          country or any political  subdivision thereof,  unless  simultaneously
          therewith it informs the  Administrative  Agent, and, upon issuance of
          such  Patent  or   Trademark,   executes  and  delivers  any  and  all
          agreements, instruments, documents and papers the Administrative Agent
          may  reasonably  request to evidence  the  Security  Interests in such
          Patent or Trademark and the goodwill and general  intangibles  of such
          Grantor relating thereto or represented  thereby.  Each Grantor hereby
          constitutes the Administrative  Agent its  attorney-in-fact to execute
          and file all such  writings for the  foregoing  purposes,  all acts of
          such attorney  being hereby  ratified and  confirmed,  and such power,
          being  coupled  with an  interest,  shall  be  irrevocable  until  the
          Commitments  have  terminated and the Secured  Obligations are paid in
          full.

                  (ii) Each  Grantor  shall:  (A)  preserve  and maintain in all
         material respects rights in the Intellectual Property; and (B) upon and
         after the  occurrence  of an Event of Default,  use its best efforts to
         obtain  any  consents,   waivers  or  agreements  necessary  to  enable
         Administrative  Agent to  exercise  its  remedies  with  respect to the
         Intellectual  Property.  No Grantor  shall  abandon any right to file a
         Copyright,  Patent or  Trademark  application  that is  material to the
         business of such Grantor nor shall any Grantor abandon any such pending
         Copyright,  Patent or Trademark  application,  or Copyright,  Copyright
         License, Patent, Patent License, Trademark or Trademark License without
         the prior written consent of Administrative Agent.

                  (iii) Each Grantor  hereby  assigns,  transfers and conveys to
         Administrative  Agent,  effective  upon the  occurrence  and during the
         continuance of any Event of Default, the nonexclusive right and license
         to use all  Intellectual  Property  owned  or  used  by  such  Grantor,
         together  with any  goodwill  associated  therewith,  all to the extent
         necessary to enable  Administrative  Agent to realize on the Collateral
         (including,  without limitation,  completing production of, advertising
         for sale and selling the  Collateral)  and any  successor  or assign to
         enjoy the  benefits of the  Collateral.  This right and  license  shall
         inure to the  benefit of all  successors,  assigns and  transferees  of
         Administrative  Agent  and its  successors,  assigns  and  transferees,
         whether  by  voluntary   conveyance,   operation  of  law,  assignment,
         transfer,  foreclosure,  deed in lieu of foreclosure or otherwise. Such
         right and license is granted free of charge,  without  requirement that
         any   monetary   payment   whatsoever   be  made  to  any   Grantor  by
         Administrative Agent.
<PAGE>
 
         (f)  Indemnification.  Each  Grantor  agrees  to pay,  and to save  the
Administrative  Agent and the Lenders  harmless from,  any and all  liabilities,
costs and expenses (including,  without limitation, legal fees and expenses) (i)
with respect to, or  resulting  from,  any and all excise,  sales or other taxes
which may be payable or  determined  to be  payable  with  respect to any of the
Collateral,  (ii)  with  respect  to,  or  resulting  from,  complying  with any
Applicable Law  applicable to any of the Collateral or (iii) in connection  with
any of the transactions contemplated by this Agreement (except to the extent any
such liabilities, costs and expenses result from the gross negligence or willful
misconduct of the Administrative Agent or Lenders).  In any suit,  proceeding or
action brought by the  Administrative  Agent under any Account for any sum owing
thereunder, or to enforce any provisions of any Account, each Grantor will save,
indemnify and keep the  Administrative  Agent and the Lenders  harmless from and
against all expense,  loss or damage suffered by reason of any defense,  setoff,
counterclaim,  recoupment  or reduction or liability  whatsoever  of the Account
Debtor or any other obligor thereunder,  arising out of a breach by such Grantor
of any obligation thereunder or arising out of any other agreement, indebtedness
or liability at any time owing to or in favor of such Account  Debtor or obligor
or its successors from such Grantor (except to the extent any such expense, loss
or damage  results  from the  gross  negligence  or  willful  misconduct  of the
Administrative  Agent or Lenders).  The  obligations  of each Grantor under this
Section  4(f) shall  survive the  termination  of the other  provisions  of this
Agreement.

         SECTION 5.  Reporting  and  Recordkeeping.  Each  Grantor  respectively
covenants and agrees with the Administrative Agent and the Lenders that from and
after the date of this Agreement and until the  Commitments  have terminated and
all Secured Obligations have been fully satisfied:

         (a)  Maintenance  of  Records  Generally.  Such  Grantor  will keep and
maintain  at its own cost and  expense  complete  and  accurate  records  of the
Collateral, including, without limitation, a record of all payments received and
all credits  granted with respect to the  Collateral and all other dealings with
the  Collateral.  All chattel  paper given to such  Grantor  with respect to any
Accounts  will be  marked  with the  following  legend:  "This  writing  and the
obligations  evidenced or secured hereby are subject to the security interest of
First Union  National Bank, as  Administrative  Agent".  For the  Administrative
Agent's and the Lenders'  further  security,  such Grantor  agrees that upon the
occurrence  and during the  continuation  of any Event of Default,  such Grantor
shall  deliver  and  turn  over any  such  books  and  records  directly  to the
Administrative   Agent  or  its   designee.   Such  Grantor   shall  permit  any
representative of the Administrative  Agent to inspect such books and records in
accordance  with  Section  8.11  of  the  Credit   Agreement  and  will  provide
photocopies thereof to the Administrative Agent upon its reasonable request.
<PAGE>
 
         (b)   Certain Provisions Regarding Maintenance of Records and Reporting
Re: Accounts.

                  (i) In the  event  any  amounts  due and  owing in  excess  of
         $500,000 are in dispute  between any Account  Debtor and such  Grantor,
         such Grantor shall provide the Administrative Agent with written notice
         thereof promptly after such Grantor's  learning thereof,  explaining in
         detail the reason for the dispute,  all claims related  thereto and the
         amount in controversy;  provided,  that a report of such items provided
         within ten (10) days after the end of each fiscal  quarter of ACC shall
         be deemed to be prompt delivery of such notice.

                  (ii) Such  Grantor  will  promptly  notify the  Administrative
         Agent in writing  if any  Account  arises  out of a  contract  with the
         United States of America,  or any  department,  agency,  subdivision or
         instrumentality  thereof,  or of  any  state  (or  department,  agency,
         subdivision  or  instrumentality  thereof) where such state has a state
         assignment  of  claims  act or  other  law  comparable  to the  Federal
         Assignment  of  Claims  Act,  and will  take  any  action  required  or
         requested   by  the   Administrative   Agent  or  give  notice  of  the
         Administrative  Agent's  Security  Interest in such Accounts  under the
         provisions of the Federal  Assignment  of Claims Act or any  comparable
         law or act enacted by any state or local governmental authority.

         (c) Further  Identification  of  Collateral.  Such Grantor  will, if so
requested  by the  Administrative  Agent,  furnish to the  Administrative  Agent
statements and schedules  further  identifying and describing the Collateral and
such other reports in connection with the Collateral as the Administrative Agent
may reasonably request, all in reasonable detail.

         (d)  Notices.  In  addition to the  notices  required  by Section  5(b)
hereof,  such  Grantor  will  advise  the  Administrative  Agent  promptly,   in
reasonable  detail,  (i) of any material Lien or claim made or asserted  against
any of the Collateral, (ii) of any material adverse change in the composition of
the Collateral,  and (iii) of the occurrence of any other event which could have
a material  adverse effect on the  Collateral or on the validity,  perfection or
priority of the Security Interests.

         SECTION 6. Collateral Account.

         (a)  There  is  hereby  established  with  the  Administrative  Agent a
Collateral  Account in the name and under the exclusive  dominion and control of
the  Administrative  Agent. There shall be deposited from time to time into such
account the cash  proceeds of the  Collateral  required to be  delivered  to the
Administrative  Agent  pursuant to Section  6(b) or any other  provision of this
Agreement.  Any income received by the Administrative  Agent with respect to the
balance  from time to time  standing  to the credit of the  Collateral  Account,
including any interest or capital gains on  investments of amounts on deposit in
the Collateral Account, shall remain, or be deposited, in the Collateral Account
together with any investments  from time to time made pursuant to subsection (c)
of this Section 6, shall vest in the Administrative Agent, shall 
<PAGE>
 
constitute part of the Collateral  hereunder and shall not constitute payment of
the Secured Obligations until applied thereto as hereinafter provided.

         (b) Upon the  occurrence  and  during  the  continuance  of an Event of
Default,  if requested by the Administrative  Agent, each Grantor shall instruct
all Account  Debtors and other  Persons  obligated in respect of all Accounts to
make all  payments  in  respect  of the  Accounts  either  (i)  directly  to the
Administrative  Agent (by  instructing  that such payments be remitted to a post
office  box  which  shall be in the name and under the  exclusive  dominion  and
control of the  Administrative  Agent) or (ii) to one or more other banks in any
state in the United States (by  instructing  that such payments be remitted to a
post office box which shall be in the name and under the exclusive  dominion and
control of such bank) under a Lockbox Letter  substantially in the form of Annex
I  hereto  duly   executed  by  each  Grantor  and  such  bank  or  under  other
arrangements,  in form and substance  satisfactory to the Administrative  Agent,
pursuant to which such Grantor shall have irrevocably instructed such other bank
(and such other bank shall have agreed) to remit all  proceeds of such  payments
directly to the Administrative  Agent for deposit into the Collateral Account or
as the Administrative  Agent may otherwise instruct such bank, and thereafter if
the proceeds of any Collateral  shall be received by such Grantor,  such Grantor
will promptly  deposit such proceeds  into the  Collateral  Account and until so
deposited,  all such proceeds  shall be held in trust by such Grantor for and as
the  property  of the  Administrative  Agent,  for the benefit of itself and the
Lenders  and shall not be  commingled  with any other  funds or property of such
Grantor. At any time after the occurrence and during the continuance of an Event
of  Default,  the  Administrative  Agent may itself so instruct  such  Grantor's
Account   Debtors  and  each  Grantor  hereby   constitutes   and  appoints  the
Administrative  Agent (and the  president,  any vice  president or any assistant
vice  president  of  the  Administrative   Agent  from  time  to  time)  as  its
attorney-in-fact  with full power and  authority to so instruct  such  Grantor's
Account  Debtors.  All such payments made to the  Administrative  Agent shall be
deposited in the Collateral Account.

         (c) The  balance  from  time  to time  standing  to the  credit  of the
Collateral  Account shall,  except upon the occurrence  and  continuation  of an
Event of Default, be distributed to the Grantors upon the order of the Grantors.
If  immediately  available  cash on  deposit  in the  Collateral  Account is not
sufficient to make any distribution to the Grantors  referred to in the previous
sentence of this  Section  6(c),  the  Administrative  Agent shall  liquidate as
promptly as practicable such  investments as required to obtain  sufficient cash
to make such  distribution  and,  notwithstanding  any other  provision  of this
Section 6, such distribution  shall not be made until such liquidation has taken
place.  Upon  the  occurrence  and  continuation  of an Event  of  Default,  the
Administrative  Agent shall, if so instructed by the Required Lenders,  apply or
cause to be applied  (subject to collection) any or all of the balance from time
to time standing to the credit of the Collateral Account in the manner specified
in Section 10.

         (d) Amounts on deposit in the Collateral  Account shall be invested and
reinvested  from time to time in Permitted  Investments  as the  Grantors  shall
determine,  which investments shall be held in the name and be under the control
of the Administrative Agent; provided,  that if an Event of Default has occurred
and is  continuing,  the  Administrative  Agent may and,  if  
<PAGE>
 
instructed by the Required  Lenders,  shall  liquidate any such  investments and
apply or cause to be applied the proceeds  thereof to the payment of the Secured
Obligations in the manner specified in Section 10 hereof;  and provided further,
that (i) each such  investment  shall mature within thirty (30) days after it is
acquired  by  the  Administrative  Agent  and  (ii)  in  order  to  provide  the
Administrative  Agent, for the ratable benefit of itself and the Lenders, with a
perfected security interest therein, each such investment shall be either:

                  (A) evidenced by negotiable certificates or Instruments, or if
         non-negotiable  then  issued in the name of the  Administrative  Agent,
         which  (together  with any  appropriate  instruments  of transfer)  are
         delivered  to,  and  held by,  the  Administrative  Agent or any  agent
         thereof  (which  shall  not  be any of  the  Grantors  or any of  their
         Affiliates) in the State of North Carolina; or

                  (B) in  book-entry  form and issued by the  United  States and
         subject to pledge under applicable  state law and Treasury  regulations
         and as to which (in the opinion of counsel to the Administrative Agent)
         appropriate  measures  shall  have  been  taken for  perfection  of the
         Security Interests.

         (e) Upon the  occurrence  of any Event of Default,  the  Administrative
Agent  is  authorized  at any  time  and  from  time to  time,  and  during  the
continuance thereof, without notice to the Grantors, to set off, appropriate and
apply any and all amounts on deposit in the Collateral Account, and the proceeds
thereof, against all Secured Obligations.

         SECTION 7. General Authority.

         (a) Each Grantor hereby irrevocably  appoints the Administrative  Agent
its true and lawful attorney,  with full power of  substitution,  in the name of
such Grantor, the Administrative  Agent, the Lenders or otherwise,  for the sole
use  and  benefit  of the  Administrative  Agent  and the  Lenders,  but at such
Grantor's expense, to exercise,  at any time from time to time all or any of the
following powers:

                  (i)  to  file  the  Financing  Statements  and  any  financing
         statements,  financing statement amendments and continuation statements
         referred to in Sections 4(a)(i), 4(a)(ii), and 4(a)(iii) hereof,

                  (ii) to demand, sue for, collect, receive and give acquittance
         for any  and all  monies  due or to  become  due  with  respect  to any
         Collateral or by virtue thereof,

                  (iii) to settle, compromise, compound, prosecute or defend any
         action or proceeding with respect to any Collateral,

                  (iv) to sell,  transfer,  assign or otherwise  deal in or with
         the Collateral and the Proceeds thereof, as fully and effectually as if
         the Administrative Agent were the absolute owner thereof, and
<PAGE>
 
                  (v) to extend  the time of payment  and to make any  allowance
         and other adjustments with reference to the Collateral;

provided  that the  Administrative  Agent  shall  not  take  any of the  actions
described in this Section 7 except those described in clause (i) above unless an
Event of Default shall have occurred and be  continuing  and the  Administrative
Agent shall give such Grantor not less than ten (10) days' prior written  notice
of the time and place of any sale or other  intended  disposition  of any of the
Collateral,  except any  Collateral  which is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market.  Each
Grantor agrees that any such notice constitutes "reasonable notification" within
the  meaning  of Section  9-504(3)  of the UCC (to the  extent  such  Section is
applicable).

         (b) Each Grantor hereby  ratifies all that said attorney shall lawfully
do or cause to be done by  virtue  hereof.  This  power of  attorney  is a power
coupled with an interest and shall be irrevocable.

         (c) Each Grantor also authorizes the  Administrative  Agent at any time
and from time to time, to execute,  in connection  with the sale provided for in
Section  8  hereof,  any  endorsements,  assignments  or  other  instruments  of
conveyance or transfer with respect to the Collateral.

         SECTION 8. Remedies Upon Event of Default.

         (a) If any  Event  of  Default  has  occurred  and is  continuing,  the
Administrative Agent may exercise on behalf of itself and the Lenders all rights
of a secured  party under the UCC (whether or not in effect in the  jurisdiction
where such rights are exercised) and, in addition,  the Administrative Agent may
(i) withdraw all cash, if any, in the Collateral  Account and  investments  made
with  amounts on  deposit  in the  Collateral  Account,  and apply such  monies,
investments  and other cash,  if any, then held by it as Collateral as specified
in Section 10 hereof and (ii) if there shall be no such monies,  investments  or
cash or if such monies, investments or cash shall be insufficient to pay all the
Secured  Obligations in full,  sell the Collateral or any part thereof at public
or private sale, for cash, upon credit or for future delivery, and at such price
or prices as the Administrative Agent may deem satisfactory.  The Administrative
Agent or any Lender may be the purchaser of any or all of the Collateral so sold
at any public sale (or, if the  Collateral  is of a type  customarily  sold in a
recognized  market or is of a type which is the  subject  of widely  distributed
standard price quotations or if otherwise permitted under applicable law, at any
private sale) and thereafter hold the same,  absolutely,  free from any right or
claim of whatsoever  kind.  Each Grantor will execute and deliver such documents
and  take  such  other  action  as the  Administrative  Agent  deems  reasonably
necessary  or  advisable  in order that any such sale may be made in  compliance
with law.  Upon any such sale the  Administrative  Agent shall have the right to
deliver,  assign and transfer to the  purchaser  thereof the  Collateral so sold
(without warranty). Each purchaser at any such sale shall hold the Collateral so
sold to it  absolutely,  free  from  any  claim or  right  of  whatsoever  kind,
including  any  equity or right of  
<PAGE>
 
redemption of any Grantor.  To the extent  permitted by law, each Grantor hereby
specifically waives all rights of redemption,  stay or appraisal which it has or
may have under any law now  existing or  hereafter  adopted.  The notice of such
sale shall be given to the  applicable  Grantor ten (10) days prior to such sale
and (A) in case of a public sale,  state the time and place fixed for such sale,
and (B) in the case of a private  sale,  state the day after  which  sale may be
consummated.  Any such  public  sale shall be held at such time or times  within
ordinary business hours and at such place or places as the Administrative  Agent
may fix in the notice of such sale. At any such sale the  Collateral may be sold
in one lot as an entirety or in separate parcels,  as the  Administrative  Agent
may determine.  The Administrative Agent shall not be obligated to make any such
sale pursuant to any such notice. The  Administrative  Agent may, without notice
or  publication,  adjourn  any  public or  private  sale or cause the same to be
adjourned from time to time by  announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or
for  future   delivery,   the   Collateral  so  sold  may  be  retained  by  the
Administrative  Agent until the selling price is paid by the purchaser  thereof,
but the  Administrative  Agent  shall  not incur  any  liability  in case of the
failure of such  purchaser to take up and pay for the Collateral so sold and, in
case of any such failure,  such  Collateral  may again be sold upon like notice.
The  Administrative  Agent,  instead  of  exercising  the  power of sale  herein
conferred  upon  it,  may  proceed  by a suit or suits  at law or in  equity  to
foreclose  the  Security  Interests  and sell  the  Collateral,  or any  portion
thereof,  under  a  judgment  or  decree  of a  court  or  courts  of  competent
jurisdiction. The Grantors shall remain liable for any deficiency.

         (b) For the purpose of enforcing any and all rights and remedies  under
this Agreement, the Administrative Agent may if an Event of Default has occurred
and is continuing  (i) require each Grantor to, and each Grantor  agrees that it
will, at its expense and upon the request of the Administrative Agent, forthwith
assemble  all or any part of the  Collateral  as directed by the  Administrative
Agent and make it available at a place  designated by the  Administrative  Agent
which is, in the Administrative  Agent's opinion,  reasonably  convenient to the
Administrative  Agent and such Grantor,  whether at the premises of such Grantor
or otherwise,  (ii) to the extent  permitted by applicable law,  enter,  with or
without process of law and without breach of the peace, any premise where any of
the  Collateral  is or may be located  and,  without  charge or liability to the
Administrative Agent, seize and remove such Collateral from such premises, (iii)
have  access  to and use  such  Grantor's  books  and  records  relating  to the
Collateral  and  (iv)  prior  to the  disposition  of the  Collateral,  store or
transfer  such  Collateral  without  charge  in or by  means of any  storage  or
transportation  facility  owned or leased by such  Grantor,  process,  repair or
recondition  such  Collateral  or otherwise  prepare it for  disposition  in any
manner and to the extent the  Administrative  Agent  deems  appropriate  and, in
connection  with such  preparation  and  disposition,  use  without  charge  any
Trademark,  trade name,  Copyright,  Patent or  technical  process  used by such
Grantor.

         (c)      Without  limiting the  generality of the  foregoing,  if any
Event of Default has occurred and is continuing,
<PAGE>
 
                  (i) the  Administrative  Agent  may  license,  or  sublicense,
         whether general,  special or otherwise,  and whether on an exclusive or
         non-exclusive   basis,  any  Patents  or  Trademarks  included  in  the
         Collateral  throughout  the  world  for  such  term or  terms,  on such
         conditions and in such manner as the Administrative  Agent shall in its
         sole discretion determine;

                  (ii)  the  Administrative  Agent  may  (without  assuming  any
         obligations  or  liability  thereunder),  at any time and from  time to
         time,  enforce (and shall have the exclusive right to enforce)  against
         any licensee or sublicensee  all rights and remedies of any Grantor in,
         to and under any Patent  Licenses  or  Trademark  Licenses  and take or
         refrain  from taking any action under any  thereof,  provided,  that no
         such  actions  shall  result in the failure of such Patent  Licenses or
         Trademark Licenses to remain in compliance with all Applicable Law, and
         each Grantor hereby releases the  Administrative  Agent and each of the
         Lenders from and against any claims  arising out of, any lawful  action
         so taken or  omitted  to be taken  with  respect  thereto  except  with
         respect  to  the  gross   negligence  or  willful   misconduct  of  the
         Administrative Agent or the Lenders; and

                  (iii) upon request by the  Administrative  Agent, each Grantor
         will  execute  and  deliver  to the  Administrative  Agent a  power  of
         attorney,  in form and  substance  satisfactory  to the  Administrative
         Agent,  for  the  implementation  of any  lease,  assignment,  license,
         sublicense,  grant or option,  sale or other disposition of a Patent or
         Trademark.  In the  event  of any  such  disposition  pursuant  to this
         Section,  each Grantor shall supply its know-how and expertise relating
         to the manufacture and sale of the products  bearing  Trademarks or the
         products or services made or rendered in connection  with Patents,  and
         its  customer  lists and other  records  relating  to such  Patents  or
         Trademarks  and  to  the   distribution   of  said  products,   to  the
         Administrative Agent.

         SECTION 9. Limitation  on Duty of  Administrative  Agent in Respect of
Collateral.  Beyond reasonable care in the custody thereof,  the  Administrative
Agent shall have no duty as to any Collateral in its possession or control or in
the  possession or control of any agent or bailee or any income thereon or as to
the preservation of rights against prior parties or any other rights  pertaining
thereto.  The Administrative  Agent shall be deemed to have exercised reasonable
care in the custody of the  Collateral in its  possession  if the  Collateral is
accorded  treatment  substantially  equal  to  that  which  it  accords  its own
property,  and the  Administrative  Agent shall not be liable or responsible for
any loss or damage to any of the Collateral,  or for any diminution in the value
thereof,  by  reason  of the  act or  omission  of  any  warehouseman,  carrier,
forwarding  agency,   consignee  or  other  agent  or  bailee  selected  by  the
Administrative Agent in good faith.

         SECTION 10. Application of Proceeds. Upon the occurrence and during the
continuance  of an Event  of  Default,  the  proceeds  of any sale of,  or other
realization  upon,  all or any part of the  Collateral  shall be  applied by the
Administrative Agent as follows:

                  first, to payment of the  out-of-pocket  expenses of such sale
         or other realization,  including all reasonable out-of-pocket expenses,
         liabilities and advances incurred or made 
<PAGE>
 
          by the  Administrative  Agent in connection  therewith,  and any other
          unreimbursed expenses for which the Administrative Agent or any Lender
          is to be reimbursed  pursuant to Section 14.2 of the Credit Agreement,
          or Section 4(f) or 13 hereof or any corresponding  provision of any of
          the other Loan Documents;

                  second,  to payment  of any fees  owing to the  Administrative
         Agent or any Lender under the Credit  Agreement in accordance  with the
         provisions of the Credit Agreement;

                  third,  to  ratable  payment of  accrued  but unpaid  interest
         (including  post-petition  interest) on the Secured Obligations and any
         termination  payments due in respect of any Hedging  Agreement with any
         Lender (pro rata in accordance with all such amounts due);

                  fourth, to the ratable payment of unpaid principal of the 
          Secured Obligations;

                  fifth,   to  the   ratable   payment  of  all  other   Secured
         Obligations,  until all  Secured  Obligations  shall  have been paid in
         full; and

                  finally,  to  payment  to the  applicable  Grantors  or  their
         respective   successor   or  assigns,   or  as  a  court  of  competent
         jurisdiction  may  direct,  of any  surplus  then  remaining  from such
         proceeds.

The Administrative Agent may make distribution  hereunder in cash or in kind or,
on a ratable basis, in any combination thereof.

         SECTION 11.  Concerning  the  Administrative  Agent.  The provisions of
Article  XIII  of  the  Credit  Agreement  shall  inure  to the  benefit  of the
Administrative  Agent in respect of this Agreement and shall be binding upon the
parties to the Credit  Agreement  in such  respect.  In  furtherance  and not in
derogation of the rights,  privileges and immunities of the Administrative Agent
therein set forth:

                  (a) The  Administrative  Agent is  authorized to take all such
         action  as is  provided  to be  taken  by  it as  Administrative  Agent
         hereunder and all other action  incidental  thereto.  As to any matters
         not expressly provided for herein, the Administrative Agent may request
         instructions  from the Lenders and shall act or refrain  from acting in
         accordance  with written  instructions  from the Required  Lenders (or,
         when expressly required by this Agreement or the Credit Agreement,  all
         the Lenders)  or, in the absence of such  instructions,  in  accordance
         with its discretion.

                  (b) The Administrative  Agent shall not be responsible for the
         existence,  genuineness  or value of any of the  Collateral  or for the
         validity,  perfection,  priority  or  enforceability  of  the  Security
         Interests,  whether  impaired by  operation  of law or by reason of any
         action or  omission  to act on its part  (other than any such action or
         inaction  constituting  gross  negligence  or willful  misconduct.  The
         Administrative  Agent shall 
<PAGE>
 
          have  no  duty  to  ascertain  or  inquire  as to the  performance  or
          observance of any of the terms of this Agreement by any Grantor.

         SECTION 12.  Appointment of Collateral Agents. At any time or times, in
order to comply with any legal  requirement in any  jurisdiction  or in order to
effectuate any provision of the Loan  Documents,  the  Administrative  Agent may
appoint  another bank or trust company or one or more other  Persons,  either to
act as  collateral  agent or agents,  jointly with the  Administrative  Agent or
separately,  on behalf of the  Administrative  Agent and the  Lenders  with such
power and  authority  as may be  necessary  for the  effectual  operation of the
provisions hereof and specified in the instrument of appointment  (which may, in
the  discretion  of  the  Administrative   Agent,  include  provisions  for  the
protection  of such  collateral  agent  similar to the  provisions of Section 11
hereof).

         SECTION 13.  Expenses.  In the event that any  Grantor  fails to comply
with the  provisions of the Credit  Agreement,  this Agreement or any other Loan
Document,  such that the value of any  Collateral or the  validity,  perfection,
rank or value of the Security  Interests are thereby  diminished or  potentially
diminished or put at risk, the Administrative Agent if requested by the Required
Lenders may, but shall not be required to,  effect such  compliance on behalf of
such Grantor,  and such Grantor shall reimburse the Administrative Agent for the
reasonable  costs thereof on demand.  All insurance  expenses and all reasonable
expenses of protecting,  storing, warehousing,  insuring, handling,  maintaining
and shipping the Collateral,  any and all excise, stamp, intangibles,  transfer,
property, sales, and use taxes imposed by any state, federal, or local authority
or any other Governmental  Authority on any of the Collateral,  or in respect of
the sale or other disposition thereof,  shall be borne and paid by the Grantors;
and if any  Grantor  fails  promptly to pay any portion  thereof  when due,  the
Administrative Agent or any Lender may, at its option, but shall not be required
to, pay the same and charge such Grantor's  account  therefor,  and such Grantor
agrees to reimburse the Administrative  Agent or such Lender therefor on demand.
All sums so paid or incurred by the  Administrative  Agent or any Lender for any
of the  foregoing  and any and all other sums for which any  Grantor  may become
liable  hereunder and all costs and expenses  (including  reasonable  attorneys'
fees,  legal expenses and court costs) incurred by the  Administrative  Agent or
any Lender in enforcing  or  protecting  the Security  Interests or any of their
rights or remedies  thereon shall be payable by the Grantors on demand and shall
bear  interest  (after as well as before  judgment)  until paid at the rate then
applicable to Base Rate Loans under the Credit Agreement and shall be additional
Secured Obligations hereunder.

         SECTION 14.  Notices.  All notices,  communications  and  distributions
hereunder  shall be given or made in accordance with Section 14.1 of the Credit 
Agreement.

         SECTION 15. Waivers,  Non-Exclusive Remedies. No failure on the part of
the Administrative  Agent or any Lender to exercise,  and no delay in exercising
and no course of dealing with respect to, any right under the Credit  Agreement,
this  Agreement or any other Loan Document  shall operate as a waiver thereof or
hereof; nor shall any single or partial exercise by the Administrative  Agent or
any Lender of any right under the Credit Agreement,  this Agreement or any other
Loan Document preclude any other or further exercise  thereof,  and the exercise
of 
<PAGE>
 
any rights in this Agreement,  the Credit Agreement and the other Loan Documents
are cumulative and are not exclusive of any other remedies provided by law. This
Agreement is a Loan Document executed pursuant to the Credit Agreement.

         SECTION 16.  Successors and Assigns.  This Agreement is for the benefit
of the Administrative Agent and the Lenders and their successors and assigns (as
permitted by the Credit Agreement),  and in the event of an assignment of all or
any of the Secured Obligations,  the rights hereunder,  to the extent applicable
to the indebtedness so assigned, may be transferred with such indebtedness. This
Agreement  shall be binding  on each  Grantor  and its  successor  and  assigns;
provided,  that such  Grantor  may not assign  any of its rights or  obligations
hereunder without the prior written consent of the Administrative  Agent and the
Lenders.

         SECTION  17.  Changes  in  Writing.  Neither  this  Agreement  nor  any
provision hereof may be changed,  waived,  discharged or terminated  orally, but
only in writing  signed by each  Grantor and the  Administrative  Agent with the
consent of the Required  Lenders (or, when expressly  required by this Agreement
or the Credit Agreement, all of the Lenders).

         SECTION 18.  Powers Coupled with an Interest.  All  authorizations  and
agencies  herein  contained with respect to the Collateral are irrevocable and 
powers coupled with an interest.

         SECTION 19. GOVERNING  LAW.  THIS  AGREEMENT  SHALL  BE  GOVERNED  BY,
  CONSTRUED  AND  ENFORCED  IN ACCORDANCE  WITH THE LAWS OF THE STATE OF NORTH  
CAROLINA,  WITHOUT  REFERENCE  TO THE  CONFLICTS  OR CHOICE OF LAW
PRINCIPLES THEREOF.

         SECTION 20. Consent to  Jurisdiction.  Each Grantor hereby  irrevocably
consents to the personal jurisdiction of the state and federal courts located in
Mecklenburg  County,  North Carolina,  in any action,  claim or other proceeding
arising out of or any dispute in connection with this  Agreement,  any rights or
obligations hereunder,  or the performance of such rights and obligations.  Each
Grantor  hereby  irrevocably  consents to the service of a summons and complaint
and  other  process  in  any  action,   claim  or  proceeding   brought  by  the
Administrative Agent or any Lender in connection with this Agreement, any rights
or obligations hereunder, or the performance of such rights and obligations,  on
behalf of itself or its property,  in the manner provided in Section 14.1 of the
Credit  Agreement.  Nothing  in this  Section  20 shall  affect the right of the
Administrative  Agent or any Lender to serve legal  process in any other  manner
permitted by Applicable Law or affect the right of the  Administrative  Agent or
any  Lender to bring  any  action  or  proceeding  against  any  Grantor  or its
properties in the courts of any other jurisdictions.



         SECTION 21.   Binding Arbitration; Waiver of Jury Trial.
<PAGE>
 
         (a) Binding  Arbitration.  If in the  reasonable  determination  of the
Administrative Agent and its counsel, Section 21(b) is unenforceable under North
Carolina  law unless  paired  with a binding  arbitration  provision,  then upon
demand of any party  made  within  ninety  (90) days  after  institution  of any
judicial  proceeding,  any dispute,  claim or  controversy  between a Lender (or
group of Lenders) and a Borrower (or group of  Borrowers)  (but not any dispute,
claim or controversy  among any Lenders not involving any Borrower)  arising out
of, connected with or relating to this Agreement ("Disputes"),  between or among
parties to this Agreement  shall be resolved by binding  arbitration as provided
herein. Institution of a judicial proceeding by a party does not waive the right
of that party to demand  arbitration  hereunder.  Disputes may include,  without
limitation, tort claims, counterclaims,  claims brought as class actions, claims
arising from  supplements  to this Agreement  executed in the future,  or claims
concerning any aspect of the past, present or future  relationships  arising out
of or connected with this  Agreement.  Arbitration  shall be conducted under and
governed  by  the  Commercial   Financial   Disputes   Arbitration   Rules  (the
"Arbitration Rules") of the American Arbitration  Association and Title 9 of the
U.S.  Code.  All  arbitration  hearings  shall be conducted in Charlotte,  North
Carolina.  The  expedited  procedures  set  forth  in Rule  51,  et seq.  of the
Arbitration  Rules shall be  applicable to claims of less than  $1,000,000.  All
applicable  statutes of limitation  shall apply to any Dispute.  A judgment upon
the award may be entered in any court having jurisdiction.  The panel from which
all  arbitrators  are selected  shall be comprised  of licensed  attorneys.  The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction,  state or federal, of the state where
the hearing will be conducted.

         (b) Jury Trial. EACH AGENT,  LENDER AND THE PLEDGOR HEREBY  IRREVOCABLY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION,  CLAIM
OR  OTHER  PROCEEDING  ARISING  OUT OF  ANY  DISPUTE  IN  CONNECTION  WITH  THIS
AGREEMENT,  THE NOTES OR THE OTHER LOAN  DOCUMENTS,  ANY  RIGHTS OR  OBLIGATIONS
HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.

         (c)  Preservation of Certain  Remedies.  Notwithstanding  the preceding
binding arbitration provisions, the parties hereto preserve, without diminution,
certain remedies that such Persons may employ or exercise freely,  either alone,
in conjunction with or during a Dispute.  Each such Person shall have and hereby
reserves  the right to  proceed in any court of proper  jurisdiction  or by self
help to  exercise  or  prosecute  the  following  remedies:  (i) all  rights  to
foreclose  against any real or personal property or other security by exercising
a power of sale granted in this Agreement or under applicable law or by judicial
foreclosure and sale, (ii) all rights of self help including peaceful occupation
of property  and  collection  of rents,  set off,  and  peaceful  possession  of
property, (iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration,  garnishment,  attachment, appointment of receiver and in
filing  an  involuntary  bankruptcy  proceeding,  and (iv)  when  applicable,  a
judgment by  confession  of judgment.  Preservation  of these  remedies does not
limit the power of an arbitrator to grant similar remedies that may be requested
by a party in a Dispute.
<PAGE>
 
         SECTION  22.  Severability.  If any  provision  hereof is  invalid  and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other  provisions  hereof  shall remain in full force and effect in such
jurisdiction  and shall be liberally  construed  in favor of the  Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible;  and (b) the invalidity or unenforceability of any
provisions  hereof  in  any  jurisdiction  shall  not  affect  the  validity  or
enforceability of such provision in any other jurisdiction.

         SECTION 23.   Headings.  The various  headings of this  Agreement  are
inserted for  convenience  only and shall not affect the meaning or 
interpretation of this Agreement or any provisions hereof.

         SECTION 24.       Counterparts.  This  Agreement  may  be  executed  by
  the  parties  hereto  in  several counterparts,  each of which shall be deemed
 to be an original and all of which shall  constitute  together but one and the 
same agreement.

                            [Signature Pages Follow]
<PAGE>
 
R155170.1
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed  under seal by their duly  authorized  officers,  all as of the day and
year first written above.


[CORPORATE SEAL]                    ACC CORP.

                                            By:______________________________
                                            Name:____________________________
                                            Title:___________________________


[CORPORATE SEAL]                    ACC LONG DISTANCE CORP.

                                            By:______________________________
                                            Name:____________________________
                                            Title:___________________________


[CORPORATE SEAL]                    ACC NATIONAL TELECOM CORP.

                                            By:______________________________
                                            Name:____________________________
                                            Title:___________________________


[CORPORATE SEAL]                    ACC LONG DISTANCE OF MASSACHUSETTS CORP.

                                            By:______________________________
                                            Name:____________________________
                                            Title:___________________________


[CORPORATE SEAL]                    ACC RADIO CORP.

                                            By:______________________________
                                            Name:____________________________
                                            Title:___________________________


[CORPORATE SEAL]                    ACC GLOBAL CORP.

                                            By:______________________________
                                            Name:____________________________
<PAGE>
 
                                            Title:___________________________

[CORPORATE SEAL]                    ACC NATIONAL LONG DISTANCE CORP.

                                            By:______________________________
                                            Name:____________________________
                                            Title:___________________________


[CORPORATE SEAL]                    ACC CREDIT CORP.

                                            By:______________________________
                                            Name:____________________________
                                            Title:___________________________


[CORPORATE SEAL]                    ACC SERVICE CORP.

                                            By:______________________________
                                            Name:____________________________
                                            Title:___________________________


                                            Administrative Agent:

[CORPORATE SEAL]                    FIRST UNION NATIONAL BANK,
                                            as Administrative Agent

                                            By:______________________________
                                            Name:____________________________
                                            Title:___________________________
<PAGE>
 
                                   Schedule I
                                       to
                               Security Agreement

                             Trademark Registrations


Mark               Reg. No.             Date                    Goods

Flying ACC         1,371,741            11/19/85                 Telecom.
                                                                 Services

Design             1,607,689             7/24/89                 Telecomm.
                                                                 Services

                             Trademark Applications

Mark                              Serial No.                Goods

ACC &
Design (fed)                      74/607003                 Telecomm.
                                                            Services

Digitrunk                         74/499613                 Telecomm.
                                                            Services

                               Trademark Licenses

                                      None
<PAGE>
 
R155170.1

                                     ANNEX I
                             (to Security Agreement)


                            [FORM OF LOCKBOX LETTER]

                                              _______________, 19___



[Name and Address of Lockbox Bank)

         Re:      [GRANTOR]

Ladies and Gentlemen:

         We  hereby  notify  you  that  effective  __________,   19__,  we  have
transferred  exclusive  ownership and control of our lock-box  account(s) no[s].
_____________________  (the "Lockbox Account[s]")  maintained with you under the
terms of the  [Lockbox  Agreement]  attached  hereto as Exhibit A (the  "Lockbox
Agreement[s]") to First Union National Bank, as Agent (the "Agent").

         We hereby  irrevocably  instruct you to make all payments to be made by
you out of or in  connection  with the Lockbox  Account(s)  (i) to the Agent for
credit  to  account  no.   __________   maintained   by  it  at  its  office  at
________________________  or (ii)  as you may  otherwise  be  instructed  by the
Agent.

         We also hereby notify you that the Agent shall be irrevocably  entitled
to exercise any and all rights in respect of or in  connection  with the Lockbox
Account(s),  including,  without limitation,  the right to specify when payments
are to be made out of or in connection with the Lockbox Account(s).

         All funds deposited into the Lockbox  Account(s) will not be subject to
deduction,  set-off,  banker's  lien or any  other  right in favor of any  other
person  than  the  Agent,  except  that  you may  set-off  against  the  Lockbox
Account(s)  the face  amount  of any check  deposited  in and  credited  to such
Lockbox  Account(s)  which  is  subsequently   returned  for  any  reason.  Your
compensation  for  providing the service  contemplated  herein shall be mutually
agreed  between  you and us from time to time and we will  continue  to pay such
compensation.
<PAGE>
 
         Please  confirm your  acknowledgment  of and agreement to the foregoing
instructions by signing in the space provided below.

                                                     Very truly yours,

                                     ________________________________________ 

                                      By:____________________________________
                                      Name:__________________________________
                                     Title:__________________________________

Acknowledged and agreed 
to as of this _____ day of 
__________________, 19___.

[LOCKBOX BANK]

By:___________________________
Name:_________________________
Title:________________________
<PAGE>
 
R155170.1
                                    ANNEX II
                             (to Security Agreement)

                          SECURITY AGREEMENT SUPPLEMENT


         SECURITY AGREEMENT SUPPLEMENT, dated as of _____________________,  (the
"Supplement"),  made by [INSERT NAME OF NEW  SUBSIDIARY],  a  __________________
(the "New  Grantor"),  in favor of First Union National Bank, as  Administrative
Agent (in such capacity, the "Administrative  Agent") under the Credit Agreement
(as defined in the Security Agreement referred to below) for the ratable benefit
of itself and the Lenders (as so defined).

         1. Reference is hereby made to the Second Amended and Restated Security
Agreement  dated as of  December  [__],  1997,  made by ACC  Corp.  and  certain
Subsidiaries  of ACC  Corp.  (collectively,  the  "Grantors"),  in  favor of the
Administrative  Agent (as amended,  supplemented or otherwise modified as of the
date hereof, the "Security Agreement"). This Supplement supplements the Security
Agreement, forms a part thereof and is subject to the terms thereof. Capitalized
terms used and not  defined  herein  shall have the  meanings  given  thereto or
referenced in the Security Agreement.

         2. In order to secure  the Credit  Agreement,  in  accordance  with the
terms thereof,  and to secure the payment and  performance of all of the Secured
Obligations,  the New Grantor hereby grants to the Administrative Agent, for the
ratable benefit of itself and the Lenders, a continuing security interest in and
to all of the New  Grantor's  estate,  right,  title and  interest in and to all
Collateral  whether now or hereafter  owned or acquired by the New Grantor or in
which the New  Grantor now has or  hereafter  has or  acquires  any rights,  and
wherever located (the "New Collateral").

         3. The Security  Interests  are granted as security  only and shall not
subject  the  Administrative  Agent  or  any  Lender  to,  or  transfer  to  the
Administrative  Agent  or any  Lender,  or in any  way  affect  or  modify,  any
obligation  or  liability  of the New  Grantor  with  respect  to any of the New
Collateral or any transaction in connection therewith.

         4. The New Grantor  hereby  agrees  that it is a party to the  Security
Agreement as if a signatory thereto on the Closing Date of the Credit Agreement,
and the New Grantor  shall comply with all of the terms,  covenants,  conditions
and agreements and hereby makes each  representation and warranty,  in each case
set forth  therein.  The New Grantor  agrees that  "Collateral"  as used therein
shall  include  all New  Collateral  pledged  pursuant  hereto and the  Security
Agreement and "Security Agreement" or "Agreement" as used therein shall mean the
Security Agreement as supplemented hereby.

         5. Attached hereto are (i) a Perfection  Certificate in the form of the
Perfection Certificate delivered to the Administrative Agent on the Closing Date
and (ii)  updated  Schedules 
<PAGE>
 
to the  Security  Agreement  revised to include all  required  information  with
respect to the New Grantor.

         6. The New Grantor  hereby  acknowledges  it has received a copy of the
Security Agreement and that it has read and understands the terms thereof.

         7.  The  New  Grantor  hereby  agrees  that  it  shall  deliver  to the
Administrative Agent such UCC Financing Statements and all other certificates or
other  documents  and  take  such  action  as  the  Administrative  Agent  shall
reasonably  request in order to  effectuate  the terms  hereof and the  Security
Agreement.

         IN WITNESS WHEREOF, the undersigned hereby causes this Supplement to be
executed and delivered as of the date first above written.

[CORPORATE SEAL]                    [INSERT NAME OF NEW SUBSIDIARY]


                                    By:___________________________
                                    Name:_________________________
                                    Title:________________________
