Exhibit 10.2

July 15, 1997


PERSONAL AND CONFIDENTIAL


Mr. William A. Baum
8241 SW 161st Street
Miami, FL   33157

Dear Bill:

This letter confirms the terms of your employment as Senior Vice President-Chief
Financial  Officer  of  Peoples  Telephone  Company,   Inc.  ("Peoples"  or  the
"Company") and supersedes the letter dated July 7, 1997.  Your  employment  will
commence  on July  17,  1997,  although  it is  understood  that you will not be
present  in the office on a full time basis  until July 28,  1997.  The terms of
your employment will be as follows:

1. Base  Salary:  Commencing  July 28,  1997,  you will receive a base salary of
$165,000.00 per annum, which will be paid bi-monthly and reviewed annually.

2. Bonus:  You will be eligible  for an annual bonus of up to 65% of base salary
for  on-target  performance.  A  percentage  of this  will be based  on  overall
performance by Peoples and a percentage  based on achievement of personal goals,
to be  mutually  agreed  upon in advance by you and the  President  of  Peoples.
Peoples will guarantee 1997's bonus on a prorated basis. You will also receive a
sign-on bonus of $20,000.00.

3. Equity Plan: As a Company  executive,  you will be eligible for participation
in People's  Stock Option Plan.  Your  participation  in the plan will be at the
rate of 160,000 options,  according to the following tranches:  26,000 shares at
fair market value on July 17, 1997;  26,000  shares at $4.25;  26,000  shares at
$5.25;  26,000  shares at $6.25;  and  56,000  shares at $7.25.  These will vest
according to the following schedule:  52,000 shares on December 31, 1998; 52,000
shares on December 31, 1999; and 56,000 shares on December 31, 2000.

4. Savings Plan: You will be eligible to participate in People's  401(k) savings
plan,  the details of which have been  delivered  to you,  beginning  January 1,
1998.

5.  Vacation:  In addition to Company  holidays,  you will be eligible  for four
weeks' annual vacation. Vacation for 1997 will be prorated.

6.  Benefit  Plans:  You will be eligible to  participate  in People's  medical,
disability and life insurance  plans, the details of which have been provided to
you.
<PAGE>

Mr. William A. Baum
July 15, 1997
Page 2

7. Termination: Your employment may be terminated as follows:

          (a) Your employment shall terminate upon your death.

          (b) The  Company has the right to  terminate  your  employment  if, by
     reason of  Disability,  you have been  unable to perform  your duties for a
     period  of 90  consecutive  days  or  120  days  in  any  180  day  period.
     "Disability"  means  physical or mental  disability,  which  disability  is
     expected  to be of  long or  indefinite  duration  and  prevents  you  from
     performing  your  duties.  All  determinations  of  Disability  made by the
     Company pursuant to the Company's Long Term Disability Insurance Policy, if
     any, shall be determinative  of your Disability  under this letter.  If the
     Company does not have a Long Term Disability  Insurance Policy,  Disability
     shall be determined  by the  Compensation  Committee  upon the basis of the
     evidence the Compensation Committee deems appropriate.

          (c) You may terminate your employment if your health (either  physical
     or  mental)  becomes  impaired  to  an  extent  that  makes  the  continued
     performance of your duties  materially  harmful to your life or physical or
     mental health.

          (d) The Company may terminate your employment under this Agreement for
     Cause at any time.  The Company shall have "Cause" if you (i) are convicted
     of a felony;  (ii) willfully  engage in one or more acts involving fraud or
     moral turpitude;  (iii)(x) willfully  misappropriate  Company assets or (y)
     willfully engage in gross misconduct materially injurious to the Company or
     its  subsidiaries;  or (iv) if the Board of Directors  determines  that you
     have  materially  and  willfully  failed  to  perform  your  duties,   such
     determination  to be made in good faith after having given you a reasonably
     detailed  written  explanation of such failure and the  opportunity for you
     and your counsel to be heard. "Willful" means an act done, or omitted to be
     done in bad faith,  provided that you knew or reasonably  should have known
     that the action or omission  was not in the best  interest of the  Company.
     Notwithstanding  the  foregoing,  a  termination  for Cause as described in
     clause  (iii)(y) or (iv),  shall not occur unless you shall have been given
     notice of the existence of the basis for  termination  thereunder and shall
     have had 30 calendar days to cure such basis to the reasonable satisfaction
     of the Board of Directors.

          (e) The Company may  terminate  your  employment by providing you with
     written notice of such termination.

          (f) You may terminate your  employment  for "Good  Reason".  You shall
     have "Good Reason" to terminate your employment any time if, after a Change
     in Control of the  Company  (as  defined in  Exhibit  A), the  Company  (i)
<PAGE>
Mr. William A. Baum
July 15, 1997
Page 3

     assigns  to you  any  duties  that  are  inconsistent  with  the  positions
     described  in  the  first   paragraph  of  this  letter,   (ii)  diminishes
     significantly your then existing duties without your written consent, (iii)
     removes you from or fails to re-elect you to such  positions,  (iv) reduces
     your base salary or the maximum percentage of base salary payable as Bonus,
     (v)  materially  fails to comply with  Sections 1 through 6 of this letter,
     (vi)  requires  you to be based at any  office or  location  other than the
     current Miami  headquarters,  which change of location would require you to
     commute a distance from your primary  residence in excess of the greater of
     (x) 50 miles and (y) 125 percent of the distance of such  commute  prior to
     such change of  location,  or (vii) fails to obtain the  assumption  of the
     Company's  obligations  in  this  letter  by a  successor  owner  of all or
     substantially all of the assets of the Company.

          (g) A termination  of your  employment  shall be  communicated  by the
     terminating   party  by  written   notice  of   termination   ("Notice   of
     Termination")  that shall  include (i) the date such  termination  is to be
     effective;   (ii)  the  specific  termination   provision  upon  which  the
     terminating  party has relied;  and (iii)  except for a  termination  under
     paragraph  7(a),  the facts and  circumstances  claimed by the  terminating
     party that provide a basis for the termination of your employment under the
     provision  indicated in the Notice of Termination.  Any termination of your
     employment  shall,  without  further action on your part,  constitute  your
     simultaneous  resignation  from all  other  positions  and  offices  of the
     Company and its subsidiaries held by you.

     8. Compensation Upon Termination:

          (a) Upon  termination of your employment  under paragraph 7(a),  7(b),
     7(c) or 7(d),  the  Company  shall have no further  obligation  to make any
     payments to or bestow any  benefits on you after the  Termination  Date (as
     defined  below),  other than  payments  and  benefits  accrued  and due and
     payable to you prior to the Termination Date.  "Termination Date" means (i)
     if your  employment is terminated  pursuant to paragraph  7(a), the date of
     your death;  or (ii) if your employment is terminated for any other reason,
     the date specified in the Notice of Termination  which shall not be earlier
     than the date such notice is sent or given to you.

          (b) Upon  termination of your  employment by the Company without Cause
     (except in the situation where  paragraph 8(c) applies),  the Company shall
     pay you, in addition to all payments and benefits accrued,  due and payable
     prior to the  Termination  Date, a lump sum payment,  within 5 business day
     after the Termination  Date, in an amount equal to 100 percent of your base
<PAGE>
Mr. William A. Baum
July 15, 1997
Page 4

     salary as in effect on the Termination Date. The Company shall also provide
     you with all fringe benefits  enjoyed by you at the Termination  Date (on a
     basis  consistent  with the basis upon which such  benefits  were  provided
     prior to such termination)  until the second anniversary of the Termination
     Date or, to the extent  that you are not  eligible  to  participate  in any
     Company fringe benefit plans (by the terms of any such plan), the after tax
     value of  providing  such  benefits  until the  second  anniversary  of the
     Termination Date.

          (c) If after a Change in Control (i) your  employment is terminated by
     the Company without Cause or (ii) is terminated by you for Good Reason,  in
     addition to payments and benefits  accrued and due and payable to you prior
     to the  Termination  Date, the Company shall pay to you,  within 5 business
     days after the Termination Date, a lump sum payment equal to 100 percent of
     the sum of (x) your  base  salary as then in  effect  plus (y) the  maximum
     Bonus which you would have been  eligible to earn  pursuant to  paragraph 2
     hereof as if the Company and you  achieved  100 percent of the  performance
     targets for the year in which such  termination  occurs.  The Company shall
     also provide you with all fringe benefits enjoyed by you at the Termination
     Date (on a basis  consistent  with the basis upon which such  benefits were
     provided  prior to such  termination)  until the second  anniversary of the
     Termination Date or, to the extent that you are not eligible to participate
     in any Company  fringe  benefit plans (by the terms of any such plan),  the
     after tax value of providing such benefits until the second  anniversary of
     the Termination  Date. In the event it shall be determined that any payment
     or distribution by the Company  following a Change in Control (a "Payment")
     would be subject to the excise tax imposed by Section  4999 of the Internal
     Revenue Code of 1986, as amended, or any interest or penalties are incurred
     by you with respect to such excise tax (such excise tax,  together with any
     such interest and penalties,  are hereinafter  collectively  referred to as
     the "Excise  Tax"),  then you shall be  entitled  to receive an  additional
     payment (a "Gross-Up  Payment") in an amount such that after payment by you
     of all taxes  (including any interest or penalties  imposed with respect to
     such  taxes),  including,  without  limitation,  any income  taxes (and any
     interest and penalties imposed with respect thereto) and Excise Tax imposed
     upon the Gross-Up  Payment,  retain an amount of Gross-Up  Payment equal to
     the Excise Tax imposed upon the Payments.

          (d) The  Company  shall  maintain  in full force and effect  until the
     Termination  Date all group insurance plans (the "Plans") in which you were
     a participant  immediately  prior to the date of the Notice of Termination.
     If your continued participation is not permitted under the terms of a Plan,
     the  Company  shall  arrange  to  provide  you  with  alternative  benefits
     substantially similar to those provided under that Plan.
<PAGE>
Mr. William A. Baum
July 15, 1997
Page 5

          (e) For the purposes of all retirement plans of the Company applicable
     to you and in effect on the date of the Notice of Termination,  the Company
     shall provide for payment of  retirement  or death  benefits to you or your
     surviving  spouse that are  calculated to reflect  service  credits for the
     period ending on the Date of Termination, as though you were an employee of
     the Company throughout this period.

          (f) You shall not be required  to  mitigate  the amount of any payment
     provided  for in  paragraph  7(b) or 7(c) by seeking  other  employment  or
     otherwise,  nor shall the amount of any payment  provided  for in paragraph
     7(b) or 7(c) be reduced by any compensation  earned by you as the result of
     employment by another  employer after the  Termination  Date, or otherwise.
     Fifty percent (50%) of any payment  under  paragraph  7(b) or 7(c) shall be
     deemed to be in  consideration  of any covenant not to compete  between you
     and the Company.

If the foregoing  accurately reflects our mutual  understanding,  please execute
this letter in the place provided below.

Very truly yours,

PEOPLES TELEPHONE COMPANY, INC.


By: /s/ E. Craig Sanders    
    E. Craig Sanders


ACCEPTED AND AGREED TO 
as of the date first above written:



/s/ William A. Baum                                                   
William A. Baum
<PAGE>

                                    EXHIBIT A


     For  purposes of the letter  dated July 15, 1997 to which this Exhibit A is
attached, a "Change in Control" means:

     (1) the acquisition of beneficial ownership,  direct or indirect, of equity
securities  of the  Company by any  person (as that term is defined in  Sections
13(d)  and  14(d) of the  Securities  Exchange  Act of  1934,  as  amended  (the
"Exchange  Act")) which,  when combined with all other securities of the Company
beneficially owned, directly or indirectly by that person, equals or exceeds 50%
of (i) either the then  outstanding  shares of common  stock of the Company (the
"Outstanding  Company  Common  Stock") or (ii) the combined  voting power of the
then outstanding  voting securities of the Company entitled to vote generally in
the  election  of  directors  (the  "Outstanding  Company  Voting  Securities");
provided, however, that the following acquisitions shall not constitute a Change
of Control: (i) any acquisition by the Company or any of its subsidiaries,  (ii)
any  acquisition by any employee  benefit plan (or related  trust)  sponsored or
maintained by the Company or any of its subsidiaries or (iii) any acquisition by
any corporation with respect to which, following such acquisition, more than 75%
of,  respectively,   the  then  outstanding  shares  of  common  stock  of  such
corporation  and the  combined  voting  power  of the  then  outstanding  voting
securities  of such  corporation  entitled to vote  generally in the election of
directors  is  then  beneficially  owned,  directly  or  indirectly,  by  all or
substantially  all of the  individuals  and  entities  who were  the  beneficial
owners,  respectively,  of the Outstanding  Company Common Stock and Outstanding
Company Voting Securities immediately prior to such acquisition in substantially
the same proportions as their ownership,  immediately prior to such acquisition,
of  the  Outstanding   Company  Common  Stock  and  Outstanding  Company  Voting
Securities, as the case may be; or

     (2)  individuals  who,  as of the  date  hereof,  constitute  the  Board of
Directors (the "Incumbent  Board") cease for any reason to constitute at least a
majority  of the Board of  Directors;  provided,  however,  that any  individual
becoming a director subsequent to the date hereof whose election,  or nomination
for election by the Company's shareholders, was approved by a vote of at least a
majority  of  the  directors  then  comprising  the  Incumbent  Board  shall  be
considered as though such individual were a member of the Incumbent  Board,  but
excluding  for this purpose any such  individual  whose  initial  assumption  of
office  occurs as a result of either  an actual or  threatened  solicitation  to
which Rule 14a-11 of Regulation 14A  promulgated  under the Exchange Act applies
or other actual or threatened solicitation of proxies or consents; or

     (3) approval by the shareholders of the Company of a reorganization, merger
or  consolidation,  in each case, with respect to which all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding  Company Common Stock and Outstanding  Company Voting Securities
immediately  prior  to such  reorganization,  merger  or  consolidation  do not,
<PAGE>

following  such  reorganization,  merger  or  consolidation,  beneficially  own,
directly or indirectly,  more than 75% of,  respectively,  the then  outstanding
shares of common  stock and the combined  voting  power of the then  outstanding
voting  securities  entitled to vote generally in the election of directors,  as
the case may be, of the corporation  resulting from such reorganization,  merger
or  consolidation  in  substantially  the same  proportions as their  ownership,
immediately  prior  to  such  reorganization,  merger  or  consolidation  of the
Outstanding Company Common Stock and Outstanding  Company Voting Securities,  as
the case may be; or

     (4)  approval  by  the  shareholders  of  the  Company  of  (i) a  complete
liquidation or dissolution of the Company or (ii) the sale or other  disposition
of all or  substantially  all of the  assets  of the  Company,  other  than to a
corporation,  with respect to which  following  such sale or other  disposition,
more than 75% of,  respectively,  the then outstanding shares of common stock of
such  corporation and the combined voting power of the then  outstanding  voting
securities  of such  corporation  entitled to vote  generally in the election of
directors  is  then  beneficially  owned,  directly  or  indirectly,  by  all or
substantially  all of the  individuals  and  entities  who were  the  beneficial
owners,  respectively,  of the Outstanding  Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership,  immediately prior to such
sale  or  other  disposition,  of  the  Outstanding  Company  Common  Stock  and
Outstanding Company Voting Securities, as the case may be.

     The term "the sale or  disposition  by the Company of all or  substantially
all of the  assets  of the  Company"  shall  mean a sale  or  other  disposition
transaction or series of related transactions involving assets of the Company or
of any direct or indirect  subsidiary of the Company (including the stock of any
direct or indirect  subsidiary  of the Company) in which the value of the assets
or stock being sold or otherwise  disposed of (as measured by the purchase price
being paid therefor or by such other method as the Board of Directors determines
is appropriate in a case where there is no readily ascertainable purchase price)
constitutes  more than  two-thirds  of the fair market  value of the Company (as
hereinafter  defined).  The  "fair  market  value of the  Company"  shall be the
aggregate market value of the then outstanding  Company Common Stock (on a fully
diluted basis) plus the aggregated  market value of Company's other  outstanding
equity  securities.  The  aggregate  market  value of the shares of  Outstanding
Company Common Stock shall be determined by multiplying  the number of shares of
Outstanding  Company Common Stock (on a fully diluted basis)  outstanding on the
date of the execution and delivery of a definitive agreement with respect to the
transaction or series of related  transactions (the  "Transaction  Date") by the
average closing price of the shares of Outstanding  Company Common Stock for the
ten trading days  immediately  preceding  the  Transaction  Date.  The aggregate
market value of any other equity  securities  of the Company shall be determined
in a manner similar to that prescribed in the immediately preceding sentence for
determining  the  aggregate  market value of the shares of  Outstanding  Company
Common Stock or by such other method as the Board of Directors  shall  determine
is appropriate.