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                                                                    EXHIBIT 10.2


                              EMPLOYMENT AGREEMENT


            THIS AGREEMENT (together with all exhibits hereto, the "Agreement"),
made in New York, New York on August 18, 1998, between GT INTERACTIVE SOFTWARE
CORP., a Delaware corporation having its executive offices and principal place
of business in New York, New York (the "Company"), and JACK J. CAYRE, the
undersigned individual ("Executive").


            IN CONSIDERATION of the mutual covenants and agreements hereinafter
set forth, the Company and Executive agree as follows:

            1.    Agreement Term.

                  The term of this Agreement shall be the three-year period
commencing on August 18, 1998 and ending on August 17, 2001 (the "Agreement
Term").

            2.    Employment.

                  (a) Employment by the Company. Executive agrees to be employed
by the Company for the Agreement Term upon the terms and subject to the
conditions set forth in this Agreement. Executive shall serve as Executive
Vice-President, Mass Market and Product Acquisition, of the Company and shall
have such duties as are set forth in Schedule A.

                  (b) Performance of Duties. Throughout the Agreement Term,
Executive shall faithfully and diligently perform Executive's duties in
conformity with the directions of the Company and serve the Company to the best
of Executive's ability. Executive shall devote Executive's entire working time,
attention and energies to the business and affairs of the Company, subject to
three weeks' vacation per year and personal and sick leave in accordance with
Company policy. Executive shall have the title set forth in Section 2(a) hereof
and shall report to such person as is determined by the Chief Executive Officer
of the Company.

                  (c) Place of Performance. During the Agreement Term, Executive
shall be based at the Company's principal executive offices in New York, New
York and, in this regard, Executive shall maintain Executive's personal
residence in such city or such other location(s) within reasonable access to
Executive's place of employment.
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            3.    Compensation and Benefits.

                  (a) Base Salary. The Company agrees to pay to Executive for
employment hereunder a base salary ("Base Salary") at the annual rate of
$300,000 for the year ended December 31, 1998, subject to annual review during
the Agreement Term and increases in such Base Salary of not less than five (5)
percent per year, but otherwise in the discretion of the Company.

                  (b) Benefits and Prerequisites; Bonus. (i) Executive shall be
entitled to participate in, to the extent Executive is otherwise eligible under
the terms thereof, the benefit plans and programs, and receive the benefits and
perquisites, generally provided to executives of the same level and
responsibility as Executive. Nothing in this Agreement shall preclude the
Company from terminating or amending from time to time any employee benefit plan
or program. Except as otherwise provided in this Agreement, Executive may
receive bonuses and be entitled to receive stock options at the sole discretion
of the Board of Directors, provided, that Executive shall participate in the
Company's senior executive bonus plan with a target bonus of 40% of Base Salary.

                        (ii) Executive shall receive an allowance of $2,000 per 
month toward rental and/or expenses of owning/leasing and maintaining an 
automobile.

                  (c) Travel and Business Expenses. Upon submission of itemized
expense statements in the manner specified by the Company, Executive shall be
entitled to reimbursement for reasonable travel and other reasonable business
expenses duly incurred by Executive in the performance of Executive's duties
under this Agreement in accordance with the policies and procedures established
by the Company from time to time for executives of the same level and
responsibility as Executive.

                  (d) Life Insurance. The Company shall pay for and maintain a
term life insurance policy on Executive's life, payable to his estate or other
beneficiary directed by Executive, in the face amount of $1,000,000, and shall
reimburse Executive for all taxes payable by him, if any, as a result of such
premium payment, net of any taxes payable by him as a result of such
reimbursement. Executive shall provide documentation reasonably satisfactory to
the Company to support such reimbursement of taxes.

                  (e) No Other Compensation or Benefits; Payment. The
compensation and benefits specified in Sections 3 and 5 of this Agreement shall
be in lieu of any and all other compensation and benefits. Payment of all
compensation and benefits to Executive hereunder shall be made in accordance
with the relevant Company policies in effect from time to time, including normal
payroll practices, and shall be subject to all applicable employment and
withholding taxes.


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                  (f) Cessation of Employment. In the event Executive shall
cease to be employed by the Company for any reason, then Executive's
compensation and benefits shall cease on the date of such event, except as
otherwise provided herein or in any applicable employee benefit plan or program.

            4.    Exclusive Employment; Noncompetition.

                  (a) No Conflict; No Other Employment. During the period of
Executive's employment with the Company, Executive shall not: (i) engage in any
activity which conflicts or interferes with or derogates from the performance of
Executive's duties hereunder nor shall Executive engage in any other business
activity, whether or not such business activity is pursued for gain or profit,
except that Executive shall be entitled to attend to personal affairs and
investments in a manner which does not unreasonably interfere with his
responsibilities hereunder, and except as otherwise approved in advance in
writing by the Chief Executive Officer or the Board of Directors of the Company;
or (ii) accept any other full-time or substantially full-time employment,
whether as an executive or consultant or in any other capacity, and whether or
not compensated therefor.

                  (b) No Competition. Without limiting the generality of the
provisions of Sections 2(b) or 4(a), during a period ending on the later of (i)
the end of the Agreement Term, (ii) the end of the Severance Period described in
Section 5(d)(i) hereof if severance payments are required to be made to the
Executive under any provision of Section 5(d), and (iii) the end of any period
during which payments are made to the Executive under Section 5(c) hereof;
Executive shall not, directly or indirectly, own, manage, operate, join,
control, participate in, invest in or otherwise be connected or associated with,
in any manner, including as an officer, director, employee, partner, consultant,
advisor, agent, proprietor, trustee or investor, any Competing Business;
provided, however, that if Executive's employment hereunder is terminated by the
Company under Section 5(d) or Executive voluntarily resigns for Good Reason as
provided in Section 5(d), then the provisions of this Section 4(b) shall remain
in effect only so long as (and during the period in which) the Company continues
to pay to Executive amounts as severance pursuant to Section 5(d).

            For purposes of this Section 4(b), the term "Competing Business"
shall mean any business or venture which develops, manufactures, publishes,
licenses, sells, distributes or supplies entertainment, educational or
"edutainment" computer software or video games for commercial use, whether for
retail distribution, by direct marketing, electronically, by license to others,
or otherwise; or any other business which is substantially similar to the whole
or any significant part of the business conducted by the Company, provided that
ownership of 2% or less of the stock or other securities of a corporation, the
stock of which is listed on a national securities exchange or is quoted on The


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NASDAQ Stock Market, shall not constitute a breach of this Section 4, so long as
Executive does not in fact have the power to control, or direct the management
of, or is not otherwise associated with, such corporation. Notwithstanding
anything in this Agreement to the contrary, if the Executive's employment with
the Company shall not have terminated prior to the happening of a Change of
Control (as defined in Section 5(d)(iii) hereof), then the Executive's
obligation pursuant to this Section 4(b) shall be limited to a period equal to
the greater of (A) two (2) years from the date of the happening of such Change
of Control, and (B) the period during which Executive remains in the employ of
the Company or its successor and parent company, if any.

                  (c) No Solicitation of Employment. During the Agreement Term
and for a period of two years thereafter, Executive shall not solicit or
encourage any other employee to leave the Company for any reason.

                  (d) Company Customers. Executive shall not, during the period
which is coincident with the Executive's obligation not to compete under Section
4(b) hereof, directly or indirectly, contact, solicit or do business with (i)
Wal-Mart Corporation, Target Stores, Caldor, Phar-mor, Best Buy, Office Depot,
Comp U.S.A., Kmart, or any of their respective affiliated operations, for the
purpose of selling entertainment, educational or "edutainment" computer
software, video games or any other product (which is an integral product in a
material product line of the Company) then sold by the Company to such customers
or proposed to be sold to such customers at the time of termination of
Executive's employment hereunder; (ii) any "customers" (as defined below) of the
Company for the purpose of selling entertainment, educational or "edutainment"
computer software, video games or any other product (which is an integral
product in a material product line of the Company) then sold by the Company to
such customers or proposed to be sold to such customers at the time of
termination of Executive's employment hereunder; or (iii) any supplier, licensor
or licensee of the Company (or any such supplier, licensor or licensee solicited
by the Company within eight months prior to the expiration or termination of
this Agreement) with respect to licensing computer software, video games or
other intellectual property (which is related to computer software, video games
or any other material product line of the Company) from such person.

For the purposes of the provisions of this Section 4(d), "customer" shall
include any entity that purchased computer software, video games or any other
product from the Company within eight months prior to the termination of
Executive's employment hereunder, without regard to the reason for such
termination. The term "customer" also includes any former customer or potential
customer of the Company which the Company has solicited within eight months
prior to such termination, for the purpose of selling computer software or any
other product then sold by the Company.


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            5.    Termination of Employment.

                  (a) Termination. The Company may terminate Executive's
employment for Cause (as defined below), in which case the provisions of Section
5(b) shall apply. The Company may also terminate Executive's employment in the
event of Executive's Disability (as defined below), in which case the provisions
of Section 5(c) shall apply. The Company may also terminate the Executive's
employment for any other reason by written notice to Executive, in which case
the provisions of Section 5(d) shall apply. If Executive's employment is
terminated by reason of Executive's death, retirement or voluntary resignation,
the provisions of Section 5(b) shall apply.

                  (b) Termination for Cause; Termination by Reason of Death or
Retirement or Voluntary Resignation. In the event that Executive's employment
hereunder is terminated during the Agreement Term (x) by the Company for Cause
(as defined below), (y) by reason of Executive's death or retirement or (z) by
reason of Executive's voluntary resignation (other than voluntary resignation
with Good Reason (as hereinafter defined) or following a Change of Control as
permitted by Section 5(d)(iii))), then the Company shall pay to Executive,
within thirty (30) days of the date of such termination, only the Base Salary
and car allowance through such date of termination. For purposes of this
Agreement, "Cause" shall mean (i) conviction of any crime (whether or not
involving the Company) constituting a felony in the jurisdiction involved; (ii)
engaging in any substantiated act involving moral turpitude; (iii) gross neglect
or misconduct in the performance of Executive's duties hereunder; (iv) willful
failure or refusal to perform such material duties as may be delegated to
Executive commensurate with Executive's position and responsibilities as set
forth in Section 2 hereof; or (v) breach of any material provision of this
Agreement by Executive; provided, however, that with respect to clause (iii),
clause (iv) and clause (v), Executive shall have received written notice from
the Company setting forth the manner in which he has been grossly negligent or
engaged in misconduct, he has willfully failed to perform his duties prior to
such notice or has materially breached any provision of this Agreement, and
Executive shall not have cured such gross neglect, misconduct, willful failure
or refusal to perform or breach, to the extent curable, within 10 business days
of such notice; provided, however, Executive's good faith inability to perform
shall not constitute Executive's willful failure to perform or a material breach
of any provision of this Agreement. For purposes hereof, the term "Good Reason"
shall mean (i) the modification of Executive's duties or responsibilities as set
forth on Schedule A, or the assignment to Executive of a position or title other
than, Executive Vice-President, Mass Merchant and Product Acquisition of the
Company or its successor and parent company, if any, or (ii) any requirement
that the Executive report to any person other than President of the Value Price
and Distribution


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Division, the President and Chief Operations Officer or the Chief Executive
Officer of the Company or its successor and parent company, if any, or (iii) any
requirement that Executive perform services in any office of the Company or any
successor or parent company located more than 30 miles from the Company's
executive offices in New York City at the date hereof, or (iv) the failure by
the Company, or its successor or parent company, if any, to pay compensation or
provide benefits or perquisites to Executive as and when required by the terms
of this Agreement.

                  (c) Disability. If, as a result of Executive's incapacity due
to physical or mental illness, Executive shall have been absent from Executive's
duties hereunder on a full time basis for either (i) one hundred twenty (120)
days within any three hundred sixty-five (365) day period, or (ii) ninety (90)
consecutive days, and within thirty (30) days after written notice of
termination is given shall not have returned to the performance of Executive's
duties hereunder on a full time basis, the Company may terminate Executive's
employment hereunder for "Disability". In that event, the Company shall pay to
Executive, within thirty (30) days, of the date of such termination, only the
Base Salary and car allowance through such date of termination. During any
period that Executive fails to perform Executive's duties hereunder as a result
of incapacity due to physical or mental illness (a "Disability Period"),
Executive shall continue to receive the compensation and benefits provided by
Section 3 hereof until Executive's employment hereunder is terminated; provided,
however, that the amount of compensation and benefits received by Executive
during the Disability Period shall be reduced by the aggregate amounts, if any,
payable to Executive under disability benefit plans and programs of the Company
or under the Social Security disability insurance program covering the same
period of time.

            In addition, in the event that the Company shall terminate this
Agreement pursuant to this Section 5(c), the Company shall thereafter pay to
Executive or his estate, severance pay equal to the Base Salary that Executive
would have otherwise received if the terms of this Agreement were in effect
during a period of two years following the date of such termination, commencing
with the date of such termination and payable at the times and in the amounts
such Base Salary would have been so paid, reduced by the aggregate amounts, if
any, payable to Executive under disability benefit plans and programs of the
Company or under the Social Security disability insurance program covering the
same period of time.

                  (d) Termination By Company For Any Other Reason; Voluntary
Resignation for Good Reason; Change of Control.

                        (i) In the event that (A) Executive's employment 
hereunder is terminated by the Company during the Agreement Term for any reason 
other than as provided in Sections 5(b) or 5(c) hereof, or (B) Executive 
voluntarily resigns for


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Good Reason, as defined in Section 5(b), then the Company shall pay to
Executive, within thirty (30) days of the date of such termination or
resignation, the Base Salary and car allowance through such date of termination
or resignation and, in lieu of any further compensation and benefits for the
balance of the Agreement Term, severance pay equal to the Base Salary that
Executive would have otherwise received if the terms of this Agreement were in
effect during a period equal to the greater of (A) the remainder of the
Agreement Term, and (B) two years from the date of such termination or
resignation (the "Severance Period"), plus an amount per annum for the remainder
of the Severance Period (pro-rated where appropriate for part of a year, if any)
equal to 40% of such Base Salary in lieu of bonus, in each case from the
effective date of such termination or resignation, commencing with such date of
termination or resignation and payable at the times and in the amounts such Base
Salary would have been so paid and, in the case of such amount in lieu of bonus,
one half thereof on each July 1 and January 1 following the date of such
termination or resignation. Under such circumstances, except as set forth below,
for the balance of the Severance Period, Executive shall also continue to
participate in and receive the benefits and perquisites provided for in Sections
3(b) and 3(c) hereof (excluding any bonus (other than the amount in lieu of
bonus provided for in this Section 5(d)) and stock options) to the same extent
as if Executive's employment hereunder had not been terminated or he had not
resigned; provided, however, that in the event that Executive shall breach
Sections 4 or 6 hereof, in addition to any other remedies the Company may have
in the event Executive breaches this Agreement, the Company's obligation
pursuant to this Section 5(d) to continue such salary, benefits and perquisites
shall cease and Executive's rights thereto shall terminate and shall be
forfeited.

                        (ii) In addition to any severance amounts payable 
hereunder, in the event (A) the Executive's employment is terminated by the
Company or its successor or parent company, if any, for any reason other than
properly for Cause as provided in Section 5(b), (B) Executive's employment is
terminated for Disability, (C) Executive dies or (D) Executive voluntarily
resigns for Good Reason, as defined in Section 5(b), then all options previously
granted to Executive pursuant to the Company's 1995 Stock Incentive Plan, 1997
Stock Incentive Plan or otherwise shall immediately vest and be exercisable by
Executive in full, and Executive (or his estate in the event of death) shall
thereafter be entitled to exercise such options until the earlier of (x) the
expiration date of the options pursuant to the applicable stock option agreement
by and between the Company and Executive or (y) the expiration of three months
following such termination, except that such three month period shall be
increased to one year if the termination is by reason of Executive's death or
Disability.


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                        (iii) Upon the happening of a Change of Control, as 
hereinafter defined, then all options previously granted to Executive pursuant
to the Company's 1995 Stock Incentive Plan, 1997 Stock Incentive Plan or
otherwise shall immediately vest and be exercisable by Executive in full, and
Executive shall thereafter be entitled to exercise such options until the
earlier of (A) the expiration date of such options pursuant to the applicable
stock option agreement by and between the Company and Executive, or (B) the
expiration of three months from the termination of Executive's employment with
the Company or any subsidiary or successor for any reason whatsoever following
such Change of Control, except that such three month period shall be increased
to one year if the termination is by reason of Executive's death or Disability.
In addition, if, following a Change of Control, (1) there occurs Good Reason, as
defined in Section 5(b), (2) Executive is not an Executive Vice-President of the
Company or its successor and parent company, if any, with responsibilities
similar to those set forth on Schedule A, or (3) Executive's employment is
terminated by the Company or its successor or parent company, if any, for any
reason other than as provided in Sections 5(b) or (c), then in any such case, at
any time within ninety (90) days of any event specified in clauses (1) or (2),
Executive may voluntarily resign from employment with the Company or its
successor and parent company, and thereupon (or following the happening of the
event specified in clause (3)), the Company and its successor and parent company
shall be obligated to make severance payments and provide benefits and
perquisites as provided in Section 5(d)(i) hereof with the same effect as if the
Company terminated the employment of Executive as contemplated by the provisions
of Section 5(d)(i) or the Executive voluntarily resigned for Good Reason;
provided that following such voluntarily resignation (or termination of
Executive's employment as specified in clause (3)) and during the applicable
Severance Period described in Section 5(d)(i) hereof (but subject to the
limitations contained in the last sentence of Section 4(b)), Executive shall be
bound by the provisions of Section 4(b) hereof so long as the Company, or its
successor and parent company, if any, continue to make the severance payments
required by this Section 5(d).

            For purposes hereof, Change of Control shall mean any of the
following occurrences:

      (1)   any "person" as such term is used in Section 13(d) and 14(d) of the
            Securities Exchange Act of 1934 ("Exchange Act") (other than (A) the
            Company or any trustee or other fiduciary holding securities under
            an employee benefit plan of the Company, (B) Joseph Cayre, Stanley
            Cayre, Kenneth Cayre and their respective spouses or children or
            trusts for such children, (C) General Atlantic Partners or any
            entity managed or controlled by General Atlantic Partners ((A), (B)
            and (C) together or individually, a "Current Owner"), or (D) any
            entity more than 50% of whose voting and equity interests are


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            owned beneficially by a Current Owner), is or becomes the
            "beneficial owner" (as defined in Rule 13d-3 under the Exchange
            Act), directly or indirectly, of securities of the Company
            representing 50% or more of the combined voting power of the
            Company's then outstanding securities (other than as a result of a
            merger or consolidation covered by clause (3)(i) below in connection
            with a merger involving the Company which would result in voting
            securities of the Company outstanding immediately prior thereto
            continuing to represent more than 50% of the combined voting power
            of the voting securities of the Company or the surviving entity (or
            its parent) outstanding immediately after such merger or
            consolidation);

      (2)   during any period of two consecutive years, individuals who at the
            beginning of such period constitute the Board of Directors of the
            Company, and any new director (other than a director designated by a
            person who has entered into an agreement with the Company to effect
            a transaction described in clause (1), (3) or (4) of this
            definition) whose election by the Board or nomination for election
            by the Company's stockholders was approved by a vote of at least
            two-thirds (2/3) of the directors then still in office who either
            were directors at the beginning of the period or whose election or
            nomination for election was previously so approved, cease for any
            reason to constitute at least a majority thereof;

      (3)   the stockholders of the Company approve a merger or consolidation of
            the Company with any other entity, other than (i) a merger or
            consolidation which would result in the voting securities of the
            Company outstanding immediately prior thereto continuing to
            represent (either by remaining outstanding or by being converted
            into voting securities of the surviving entity) more than 50% of the
            combined voting power of the voting securities of the Company or
            such surviving entity (or its parent) outstanding immediately after
            such merger or consolidation or (ii) a merger or consolidation
            effected to implement a recapitalization of the Company (or similar
            transaction) in which no "person" (as hereinabove defined) acquires
            more than 50% of the combined voting power of the Company's then
            outstanding securities; or

      (4)   the stockholders of the Company approve a plan of complete
            liquidation of the Company or an agreement for the sale or
            disposition by the Company of all or substantially all of the
            Company's assets.


                  (e) No Further Liability; Release. Payment made and
performance by the Company in accordance with this Section 5


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shall operate to fully discharge and release the Company and its directors,
officers, employees, subsidiaries, affiliates, stockholders, successors,
assigns, agents and representatives from any further obligation or liability
with respect to Executive's employment and termination of employment. Other than
paying Executive's Base Salary and car allowance through the date of termination
of Executive's employment and making any severance payment and continuing
benefits and perquisites pursuant to and in accordance with this Section 5 (as
applicable), the Company and its directors, officers, employees, subsidiaries,
affiliates, stockholders, successors, assigns, agents and representatives shall
have no further obligation or liability to Executive or any other person under
this Agreement. The Company shall have the right to condition the payment of any
severance or other amounts pursuant to Sections 5(c) or 5(d) hereof upon the
delivery by Executive to the Company of a release in form and substance
satisfactory to the Company of any and all claims Executive may have against the
Company and its directors, officers, employees, subsidiaries, affiliates,
stockholders, successors, assigns, agents and representatives arising out of or
related to Executive's employment by the Company and termination of such
employment.

            6.    Confidential Information.

                  (a) Existence of Confidential Information. The Company owns
and has developed and compiled, and will develop and compile, certain
proprietary techniques and confidential information which have great value to
its business (referred to in this Agreement, collectively, as "Confidential
Information"). Confidential Information includes not only information disclosed
by the Company to Executive, but also information developed or learned by
Executive during the course or as a result of employment with the Company, which
information shall be the property of the Company. Confidential Information
includes all information that has or could have commercial value or other
utility in the business in which the Company is engaged or contemplates
engaging, and all information of which the unauthorized disclosure could be
detrimental to the interests of the Company, whether or not such information is
specifically labelled as Confidential Information by the Company. By way of
example and without limitation, Confidential Information includes any and all
information developed, obtained, licensed by or to or owned by the Company
concerning trade secrets, techniques, know-how (including designs, plans,
procedures, merchandising, marketing, distribution and warehousing know-how,
processes, and research records), software, computer programs, and any other
intellectual property created, used or sold (through a license or otherwise) by
the Company, Electronic Data Information know-how and processes, innovations,
discoveries, improvements, research, development, test results, reports,
specifications, data, formats, marketing data and plans, business plans,
strategies, forecasts, unpublished financial information, orders, agreements and
other forms of documents, price and cost information,


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merchandising opportunities, expansion plans, store plans, budgets, projections,
customer, supplier, licensee, licensor and subcontractor identities,
characteristics, agreements and operating procedures, and salary, staffing and
employment information. Notwithstanding the foregoing, Confidential Information
shall not include information which (a) is or becomes generally available to the
public or is now or later enters the public domain other than as a result of a
disclosure by Executive, (b) was available to Executive on a non-confidential
basis prior to the date of this Agreement, (c) becomes available to Executive
from a source other than the Company, its agents or representatives (or former
agents or representatives) or (d) is required to be disclosed pursuant to law;
provided, that Executive shall provide the Company with prompt notice of such
required disclosure to, and Executive shall fully cooperate with the Company to,
enable the Company to seek a protective order; provided, further, that in the
case of (c) above, the source of such information was not bound by a
confidentiality agreement with the Company.

                  (b) Protection of Confidential Information. Executive
acknowledges and agrees that in the performance of duties hereunder the Company
discloses to and entrusts Executive with Confidential Information which is the
exclusive property of the Company and which Executive may possess or use only in
the performance of duties for the Company. Executive also acknowledges that
Executive is aware that the unauthorized disclosure of Confidential Information,
among other things, may be prejudicial to the Company's interests, an invasion
of privacy and an improper disclosure of trade secrets. Executive shall not,
without the prior written consent of the Chief Executive Officer, directly or
indirectly, use, make available, sell, disclose or otherwise communicate to any
corporation, partnership, individual or other third party, other than in the
course of Executive's assigned duties and for the benefit of the Company, any
Confidential Information, either during the Agreement Term or thereafter. In the
event Executive desires to publish the results of Executive's work for or
experiences with the Company through literature, interviews or speeches,
Executive will submit requests for such interviews or such literature or
speeches to the Chief Executive Officer of the Company at least fourteen (14)
days before any anticipated dissemination of such information for a
determination of whether such disclosure is in the best interests of the
Company, including whether such disclosure may impair trade secret status or
constitute an invasion of privacy. Executive agrees not to publish, disclose or
otherwise disseminate such information without the prior written approval of the
Chief Executive Officer of the Company.

                  (c) Delivery of Records, Etc. In the event Executive's
employment with the Company ceases for any reason, Executive will not remove
from the Company's premises without its prior written consent any records,
files, drawings, documents, equipment, materials and writings received from,
created for or


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belonging to the Company, including those which relate to or contain
Confidential Information, or any copies thereof. Upon request or when employment
with the Company terminates, Executive will immediately deliver the same to the
Company.


            7.    Assignment and Transfer.

                  (a) Company. This Agreement shall inure to the benefit of and
be enforceable by, and may be assigned by the Company to, any purchaser of all
or substantially all of the Company's business or assets, any successor to the
Company or any assignee thereof (whether direct or indirect, by purchase,
merger, consolidation or otherwise). The Company will require any such
purchaser, successor or assignee to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such purchase, succession or assignment had taken
place.

                  (b) Executive. Executive's rights and obligations under this
Agreement shall not be transferable by Executive by assignment or otherwise, and
any purported assignment, transfer or delegation thereof shall be void;
provided, however, that if Executive shall die, all amounts then payable to
Executive hereunder shall be paid in accordance with the terms of this Agreement
to Executive's devisee, legatee or other designee or, if there be no such
designee, to Executive's estate.

            8.    Miscellaneous.

                  (a) Other Obligations. Executive represents and warrants that
neither Executive's employment with the Company nor Executive's performance of
Executive's obligations hereunder will conflict with or violate or otherwise are
inconsistent with any other obligations, legal or otherwise, which Executive may
have.

                  (b) Nondisclosure; Other Employers. Executive will not
disclose to the Company, or use, or induce the Company to use, any proprietary
information, trade secrets or confidential business information of others.
Executive represents and warrants that Executive has returned all property,
proprietary information, trade secrets and confidential business information
belonging to all prior employers.

                  (c) Cooperation. Following termination of employment with the
Company, Executive shall cooperate with the Company, as reasonably requested by
the Company, to affect a transition of Executive's responsibilities and to
ensure that the Company is aware of all matters being handled by Executive.

                  (d) No Duty to Mitigate. Executive shall be under no duty to
mitigate with respect to any severance or other amounts payable pursuant to
Sections 5(c) or 5(d) hereof.


                                     - 12 -
<PAGE>   13
                  (e) Protection of Reputation. During the Agreement Term and
thereafter, Executive and the Company each agree that he or it will take no
action which is intended, or would reasonably be expected, to harm the other's
reputation or which would reasonably be expected to lead to unwanted or
unfavorable publicity to the other.

                  (f) Governing Law. This Agreement, including the validity,
interpretation, construction and performance of this Agreement, shall be
governed by and construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed in such state without regard
to such state's conflicts of law principles. All actions and proceedings
relating directly or indirectly to this Agreement shall be litigated in any
state court or federal court located in New York, New York. The parties hereto
expressly consent to the jurisdiction of any such court and to venue therein and
consent to the service of process in any such action or proceeding by certified
or registered mailing of the summons and complaint therein directed to Executive
at the address as provided in Section 8(m) hereof and to the Company's
designated agent for service of process (which initially shall be GT Interactive
Software Corp., 417 Fifth Avenue, New York, New York 10016, Attention:
Secretary, which agent may be changed by the Company upon thirty (30) days'
prior written notice to Executive).

                  (g) Entire Agreement. This Agreement (including the Exhibits
hereto) and that certain side letter, of even date herewith, from the Company to
Executive contains the entire agreement and understanding between the parties
hereto in respect of the subject matter hereof and supersedes, cancels and
annuls any prior or contemporaneous written or oral agreements, understandings,
commitments and practices between them respecting the subject matter hereof,
including all prior employment agreements, if any, between the Company and
Executive, which agreement(s) hereby are terminated and shall be of no further
force or effect.

                  (h) Amendment. This Agreement may be amended only by a writing
which makes express reference to this Agreement as the subject of such amendment
and which is signed by Executive and, on behalf of the Company, by its duly
authorized officer.

                  (i) Severability. If any term, provision, covenant or
condition of this Agreement or part thereof, or the application thereof to any
person, place or circumstance, shall be held to be invalid, unenforceable or
void, the remainder of this Agreement and such term, provision, covenant or
condition shall remain in full force and effect, and any such invalid,
unenforceable or void term, provision, covenant or condition shall be deemed,
without further action on the part of the parties hereto, modified, amended and
limited to the extent necessary to render the same and the remainder of this
Agreement valid, enforceable and lawful. In this regard, Executive


                                     - 13 -
<PAGE>   14
acknowledges that the provisions of Sections 4 and 6 are reasonable and
necessary for the protection of the Company.

                  (j) Construction. The headings and captions of this Agreement
are provided for convenience only and are intended to have no effect in
construing or interpreting this Agreement. The language in all parts of this
Agreement shall be in all cases construed according to its fair meaning and not
strictly for or against the Company or Executive. The use herein of the word
"including," when following any general provision, sentence, clause, statement,
term or matter, shall be deemed to mean "including, without limitation". As used
herein, "Company" shall mean the Company and its subsidiaries and any purchaser
of, successor to or assignee (whether direct or indirect, by purchase, merger,
consolidation or otherwise) of all or substantially all of the Company's
business or assets which is obligated to perform this Agreement by operation of
law, agreement pursuant to Section 7 hereof or otherwise. As used herein, the
words "day" or "days" shall mean a calendar day or days.

                  (k) Nonwaiver. Neither any course of dealing nor any failure
or neglect of either party hereto in any instance to exercise any right, power
or privilege hereunder or under law shall constitute a waiver of any other
right, power or privilege or of the same right, power or privilege in any other
instance. All waivers by either party hereto must be contained in a written
instrument signed by the party to be charged and, in the case of the Company, by
its duly authorized officer.

                  (l) Remedies for Breach. The parties hereto agree that
Executive is obligated under this Agreement to render personal services during
the Agreement Term of a special, unique, unusual, extraordinary and intellectual
character, thereby giving this Agreement peculiar value, and, in the event of a
breach or threatened breach of any covenant of Executive herein, the injury or
imminent injury to the value and the goodwill of the Company's business could
not be reasonably or adequately compensated in damages in an action at law.
Accordingly, Executive expressly acknowledges that the Company shall be entitled
to specific performance, injunctive relief or any other equitable remedy against
Executive, without the posting of a bond, in the event of any breach or
threatened breach of any provision of this Agreement by Executive (including
Sections 4 and 6 hereof). Without limiting the generality of the foregoing, if
Executive breaches Sections 4 or 6 hereof, such breach will entitle the Company
to enjoin Executive from disclosing any Confidential Information to any
Competing Business, to enjoin such Competing Business from receiving Executive
or using any such Confidential Information and/or to enjoin Executive from
rendering personal services to or in connection with such Competing Business.
The rights and remedies of the parties hereto are cumulative and shall not be
exclusive, and each such party shall be entitled to pursue all legal and
equitable rights and remedies and to secure


                                     - 14 -
<PAGE>   15
performance of the obligations and duties of the other under this Agreement, and
the enforcement of one or more of such rights and remedies by a party shall in
no way preclude such party from pursuing, at the same time or subsequently, any
and all other rights and remedies available to it.

                  (m) Notices. Any notice, request, consent or approval required
or permitted to be given under this Agreement or pursuant to law shall be
sufficient if in writing, and if and when sent by certified or registered mail,
return receipt requested, with postage prepaid, to Executive's residence (as
reflected in the Company's records or as otherwise designated by Executive on
thirty (30) days' prior written notice to the Company) or to the Company's
principal executive office, attention: President (with copies to the General
Counsel), as the case may be. All such notices, requests, consents and approvals
shall be effective upon being deposited in the United States mail. However, the
time period in which a response thereto must be given shall commence to run from
the date of receipt on the return receipt of the notice, request, consent or
approval by the addressee thereof. Rejection or other refusal to accept, or the
inability to deliver because of changed address of which no notice was given as
provided herein, shall be deemed to be receipt of the notice, request, consent
or approval sent.

                  (n) Assistance in Proceedings, Etc. Executive shall, without
additional compensation, during and after expiration of the Agreement Term, upon
reasonable notice and at reasonable times, furnish such information and proper
assistance to the Company as may reasonably be required by the Company in
connection with any legal or quasi-legal proceeding, including any external or
internal investigation, involving the Company or any of its affiliates or in
which any of them is, or may become, a party.

                  (o) Insurance and Indemnification. Executive shall be covered
under any director and officer insurance policy obtained by the Company, if any,
and shall be entitled to benefit from any officer indemnification arrangements
adopted by the Company, if any, to the same extent as other senior executive
officers of the Company (including the right to such coverage or benefit
following Executive's employment to the extent such policy or benefit covers
former employees); provided, however that Executive acknowledges and agrees that
the Company shall not be obligated, in any way, to obtain such insurance
coverage or to adopt any such indemnification arrangements for such officers.

                  (p) Survival. This Agreement and the respective obligations,
rights and benefits of the Company and the Executive as set forth herein shall
survive the cessation or termination of Executive's employment with the Company
and the termination of the Agreement Term in accordance with the terms set forth
herein. In addition, the provisions of Sections 3(d) and 5(d)(iii) hereof shall
survive the expiration of the Agreement Term if Executive remains employed by
the Company, but only until such employment


                                     - 15 -
<PAGE>   16
is terminated by the Company, by the Executive, or for any other reason.

            IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed on its behalf by an officer thereunto duly authorized and Executive has
duly executed this Agreement, all as of the date and year first written above.


GT Interactive Software Corp.           EXECUTIVE:



By: /s/ HARRY Z. GLANTZ                 /s/ JACK J. CAYRE
    -----------------------------       -----------------------------
Name: Harry Z. Glantz                   Jack J. Cayre
Title: VP, Human Resources


                                     - 16 -
<PAGE>   17
                                                                      Schedule A


                          Duties and Responsibilities


      Subject to the direction of the person to whom he reports, Executive shall
have the following direct responsibility with respect to the Company's
mass-merchant operations:

         Product acquisition, third party sales' relationships with mass
merchants, and merchandising (including inventory planning and product pricing).


                                     - 17 -