<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ACCLAIM ENTERTAINMENT, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
ACCLAIM ENTERTAINMENT, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of ACCLAIM ENTERTAINMENT, INC. (the
'Company'), a Delaware corporation, will be held at The Metropolitan, 3 Glen
Cove Road, Glen Cove, New York, on Wednesday, August 7, 1996, at 9:30 A.M., for
the following purposes:
1. To elect eight directors to serve for a term of one year and until
their respective successors shall be elected and shall qualify;
2. To consider and act upon a proposal to amend the Company's 1988
Stock Option Plan by (i) increasing from 300,000 to 400,000 the maximum
number of shares with respect to which options may be granted to a single
participant in any one calendar year and (ii) providing for the
discretionary grant of options to non-employee directors who render
services to the Company and who are not members of the Company's Stock
Option and Compensation Committee; and
3. To transact such other business as may properly be brought before
the meeting.
Only stockholders of record at the close of business on June 24, 1996 are
entitled to notice of and to vote at the meeting.
By order of the Board of Directors,
JAMES SCOROPOSKI
Secretary
Glen Cove, New York
July 18, 1996
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL ENSURE THAT YOUR SHARES WILL BE
VOTED. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED WITHIN THE UNITED STATES.
<PAGE>
ACCLAIM ENTERTAINMENT, INC.
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
AUGUST 7, 1996
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of ACCLAIM ENTERTAINMENT, INC. (the
'Company'), a Delaware corporation, for use at the Annual Meeting of
Stockholders of the Company (the 'Meeting') to be held at The Metropolitan, 3
Glen Cove Road, Glen Cove, New York, on Wednesday, August 7, 1996, at 9:30 A.M.,
and at any adjournments thereof.
Stockholders who execute proxies retain the right to revoke them at any
time by notice in writing to the Secretary of the Company, by revocation in
person at the Meeting or by presenting a later-dated proxy. Unless so revoked,
the shares represented by proxies will be voted at the Meeting in accordance
with the directions given therein. Stockholders vote at the Meeting by casting
ballots (in person or by proxy) which are tabulated by a person who is appointed
by the Board of Directors before the Meeting to serve as inspector of election
at the Meeting and who has executed and verified an oath of office. Abstentions
and broker 'non-votes' are included in the determination of the number of shares
present at the Meeting for quorum purposes but are not counted in the
tabulations of the votes cast on proposals presented to stockholders. A broker
'non-vote' occurs when a nominee does not have discretionary voting power with
respect to that item and has not received instructions from the beneficial
owner.
The principal executive offices of the Company are located at One Acclaim
Plaza, Glen Cove, New York 11542. The approximate date on which this Proxy
Statement and the enclosed form of proxy will be first sent to stockholders is
July 18, 1996.
Stockholders of record of the common stock, par value $0.02 per share (the
'Common Stock'), of the Company at the close of business on June 24, 1996 shall
be entitled to one vote for each share then held. There were issued and
outstanding on said date 49,612,423 shares of Common Stock.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as of June 24, 1996
(except as otherwise indicated) with respect to the number of shares of Common
Stock beneficially owned by each person who is known to the Company to
beneficially own more than 5% of the Common Stock, the number of shares of
Common Stock beneficially owned by each director of the Company and certain
executive officers of the Company, and the number of shares of Common Stock
beneficially owned by all executive officers and directors of the Company as a
group. Except as otherwise indicated, each such stockholder has sole voting and
investment power with respect to the shares beneficially owned by such
stockholder.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND NATURE OF COMMON STOCK
NAME AND ADDRESS BENEFICIAL OWNERSHIP(1) OUTSTANDING
- ---------------------------------------- ----------------------- ------------
<S> <C> <C>
Gregory E. Fischbach (2)(3) ............ 7,498,151 14.3%
One Acclaim Plaza
Glen Cove, New York 11542
James Scoroposki (3)(4) ................ 6,877,451 13.2
One Acclaim Plaza
Glen Cove, NY 11542
TCI GameCo Holdings, Inc. (3) .......... 4,348,795 8.8
Terrace Tower II
5619 DTC Parkway
Englewood, CO 80111
Merrill Lynch & Co., Inc. (5) .......... 6,711,177 13.4
World Financial Center
North Tower
250 Vesey Street
New York, NY 10281
The Capital Group Companies, Inc. (6) .. 2,865,800 5.8
333 South Hope Street
Los Angeles, CA 90071
Robert Holmes (7) ...................... 1,684,210 3.3
One Acclaim Plaza
Glen Cove, NY 11542
Bernard J. Fischbach (8) ............... 287,526 *
1925 Century Park East
Suite 1260
Los Angeles, CA 90067
Robert H. Groman (9) ................... 81,250 *
196 Peachtree Lane
Roslyn Heights, NY 11577
Michael Tannen (9) ..................... 76,125 *
90 Riverside Drive, #5B
New York, NY 10024
James Scibelli (10) .................... 25,750 *
2936 Bay Drive
Merrick, NY 11566
Bruce W. Ravenel (11) .................. 1,000 *
5619 DTC Parkway
Englewood, CO 80111
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND NATURE OF COMMON STOCK
NAME AND ADDRESS BENEFICIAL OWNERSHIP(1) OUTSTANDING
- ---------------------------------------- ----------------------- ------------
<S> <C> <C>
Anthony R. Williams (12) ............... 397,166 *
One Acclaim Plaza
Glen Cove, NY 11542
All executive officers and directors as 16,579,801 29.1%
a group ..............................
(9 persons) (11) (13)
</TABLE>
- ------------------
* Less than 1% of class.
(1) Includes shares issuable upon exercise of warrants and options which are
exercisable within the next 60 days.
(2) Includes 2,677,500 shares issuable upon exercise of warrants and options,
36,276 shares held as co-trustee of trusts for the benefit of Mr.
Scoroposki's children and 156,276 shares settled by Mr. G. Fischbach in
trust for the benefit of his children. Each of Mr. G. Fischbach and Mr.
Scoroposki has agreed to vote, or cause to be voted, all shares of Common
Stock beneficially owned by him in the manner in which all shares of Common
Stock beneficially owned by the other are voted on all matters presented to
a vote of stockholders at any annual or special meeting of the Company's
stockholders.
(3) Messrs. G. Fischbach and Scoroposki and TCI GameCo Holdings, Inc. ('TCI
Sub'), an indirect wholly owned subsidiary of Tele-Communications, Inc.
('TCI'), have entered into a voting agreement pursuant to which they have
agreed to vote all shares beneficially owned by each of them in favor of
those individuals nominated by the Board of Directors of the Company for
election to the Board of Directors at any annual or special meeting of the
stockholders of the Company at which directors are being elected provided
that, subject to certain exceptions, such nominees include Messrs. G.
Fischbach and Scoroposki (or their designees or successors) and one
individual proposed by TCI Sub.
(4) Includes 2,677,500 shares issuable upon exercise of warrants and options,
156,276 shares held as co-trustee of trusts for the benefit of Mr. G.
Fischbach's children and 36,276 shares settled by Mr. Scoroposki in trust
for agreed to vote, or cause to be voted, all shares of Common Stock
beneficially owned by him in the manner in which all shares of Common Stock
beneficially owned by the other are voted on all matters presented to a
vote of stockholders at any annual or special meeting of the Company's
stockholders.
(5) Information in respect of the beneficial owner of Merrill Lynch & Co., Inc.
('ML&Co.') has been derived from Amendment No. 2 to its Schedule 13-G,
dated February 13, 1996, filed on its behalf and on behalf of Merrill Lynch
Group, Inc. ('ML Group'), Princeton Services, Inc, ('PSI'), Merrill Lynch
Asset Management, L.P. d/b/a Merrill Lynch Asset Management ('MLAM') and
Merrill Lynch Technology Fund, Inc. ('MLTF') with the Securities and
Exchange Commission (the 'Commission'). Based solely on such Amendment No.
2 to Schedule 13-G, ML&Co., ML Group and PSI are parent holding companies,
MLAM is a registered investment adviser and MLTF is a registered investment
company (for which MLAM acts as investment adviser), which has an interest
that relates to greater than 5% of the Common Stock.
(6) Information in respect of the beneficial ownership of The Capital Group
Companies, Inc. has been derived from an Amendment to its Schedule 13-G,
dated February 9, 1996, filed on its behalf and on behalf of Capital
Research and Management Company ('CRMC') with the Commission. The Company
has been advised that CRMC is a registered investment adviser and an
operating subsidiary of The Capital Group Companies, Inc.
(7) Includes 1,342,085 shares issuable upon exercise of options.
(8) Represents 131,250 shares issuable upon exercise of options and 156,276
shares held as co-trustee of trusts for the benefit of Mr. G. Fischbach's
children.
(9) Represents shares issuable upon exercise of options.
(10) Includes 18,750 shares issuable upon exercise of options.
(11) Does not include 4,348,795 shares held by TCI Sub. Mr. Ravenel is an
executive officer of TCI Technology, a subsidiary of TCI and an affiliate
of TCI Sub.
(12) Includes 377,166 shares issuable on exercise of options.
(13) Includes 7,381,626 shares issuable upon exercise of warrants and options.
3
<PAGE>
ELECTION OF DIRECTORS
Eight directors will be elected at the Meeting to serve for a term of one
year and until their respective successors shall have been elected and shall
qualify. The election of directors requires the affirmative vote of a plurality
of the shares of Common Stock present in person or by proxy at the Meeting.
UNLESS OTHERWISE INDICATED, THE ACCOMPANYING FORM OF PROXY WILL BE VOTED FOR THE
PERSONS LISTED BELOW. At this time, the Board of Directors knows of no reason
why any nominee might be unable to serve. There is no arrangement or
understanding between any director and any other person pursuant to which such
person was selected as a director except for the selection of Bruce W. Ravenel,
as discussed below.
<TABLE>
<CAPTION>
PRINCIPAL YEAR BECAME
NAME OF NOMINEE OCCUPATION AGE A DIRECTOR
- ------------------------- ------------------------- ----- ------------
<S> <C> <C> <C>
Gregory E. Fischbach..... Co-Chairman of the Board 54 1988
and Chief Executive
Officer of the Company
James Scoroposki......... Co-Chairman of the Board, 48 1988
Senior Executive Vice
President, Secretary and
Treasurer of the Company
Robert Holmes............ President, Chief 43 1989
Operating Officer and
General Manager of
the Company
Bernard J. Fischbach..... Attorney 51 1988
Michael Tannen........... Chief Executive Officer 56 1989
and President of
Kinnevik Media Ventures,
Inc.
Robert H. Groman......... Attorney 53 1989
James Scibelli........... President of Roberts & 46 1993
Green, Inc.
Bruce W. Ravenel......... Senior Vice President & 46 1995
Chief Operating Officer
of TCI Technology
Ventures, Inc.
</TABLE>
Gregory E. Fischbach, a founder of the Company, has been Chief Executive
Officer of the Company since its formation and Co-Chairman of the Board since
March 1989. Mr. Fischbach was also President of the Company from its formation
to January 1990. From June 1986 until January 1987, he was President of
RCA/Ariola International, responsible for the management of its record
operations outside the U.S. and in charge of its seventeen operating
subsidiaries.
James Scoroposki, a founder of the Company, has been Senior Executive Vice
President since December 1993, Co-Chairman of the Board since March 1989 and
Secretary and Treasurer of the Company since its formation. Mr. Scoroposki was
also Chief Financial Officer of the Company from April 1988 to May 1990 and
Executive Vice President of the Company from formation to November 1993. Since
December 1979, he has also been the President and sole shareholder of Jaymar
Marketing Inc. ('Jaymar'), a sales representation organization. See 'Certain
Relationships and Related Transactions.'
Robert Holmes was named President of the Company in January 1990. Mr.
Holmes was Senior Vice President from April 1987 to January 1990. He has been
General Manager of the Company since April 1987 and Chief Operating Officer
since March 1989. From 1983 to 1987, he served in a variety of positions at
Activision, Inc., an international home computer and video game software
company.
Bernard J. Fischbach has been engaged in the private practice of law in Los
Angeles, California since 1976 with Fischbach, Perlstein, Lieberman & Yanny and
its predecessor firms. See 'Certain Relationships and Related Transactions.'
4
<PAGE>
Michael Tannen has, since 1988, been the President and Chief Executive
Officer of InterVision, Inc., a subsidiary of Millicom Incorporated, a company
involved in publishing, television production and home video distribution and
sales, and Chief Executive Officer of Kinnevik Media Ventures, Ltd., a media
service subsidiary of A.B. Kinnevik, a Swedish conglomerate engaged, among other
things, in international satellite television broadcasting, cable television
networks and cellular mobile telephone and paging operations.
Robert H. Groman has, for more than the preceding five years, been a
partner in the general practice law firm of Groman, Ross & Tisman, P.C. (and its
predecessor firms) located in Long Island, New York. See 'Certain Relationships
and Related Transactions.'
James Scibelli has, since March 1986, served as president of Roberts &
Green, Inc., a New York financial consulting firm offering a variety of
financial and investment consulting services. Mr. Scibelli is also a director of
Boardwalk Casino, Inc., which owns and operates a hotel and casino, and of
B.U.M. International, Inc., a factory outlet based retailer of contemporary
men's, women's and children's casual apparel and accessories.
Bruce W. Ravenel has, since 1994, served as Senior Vice President and Chief
Operating Officer of TCI Technology Ventures, Inc. ('TCI Technology'), an
indirect wholly-owned subsidiary of TCI, and has been responsible for
operational management of its investment, new services and technology
development activities. From 1991 to 1994, Mr. Ravenel was Senior Vice President
of TCI Venture Capital, a division of TCI, and from July 1989 to October 1991,
he served as Director of Strategic Alliance Management for US WEST, Inc.
The Board of Directors has an Audit Committee, the members of which are
Messrs. Tannen, Groman and Scoroposki. The Audit Committee has such powers as
may be assigned to it by the Board of Directors from time to time. It is charged
with recommending to the Board of Directors the engagement or discharge of
independent public accountants, reviewing the plan and results of the auditing
engagement with the officers of the Company, and reviewing with the officers of
the Company the scope and nature of the Company's internal accounting controls.
During the fiscal year ended August 31, 1995, the Audit Committee met on one
occasion.
The Board of Directors also has a Compensation and Stock Option Committee
(the 'Compensation Committee'), the members of which are Messrs. Tannen and
Scibelli. The Compensation Committee has such powers as may be assigned to it by
the Board of Directors from time to time. It is charged with determining
compensation packages for the Chief Executive Officer and the Senior Executive
Vice President of the Company, establishing salaries, bonuses and other
compensation for the Company's executive officers and with administering the
Company's 1988 Stock Option Plan (the 'Plan') and the Company's 1995 Restricted
Stock Plan and recommending to the Board of Directors changes to the Plan.
During the fiscal year ended August 31, 1995, the Compensation Committee met on
one occasion.
During the fiscal year ended August 31, 1995, the Board of Directors met,
or acted by unanimous written consent, on eleven occasions. All of the directors
attended at least 75 percent of the aggregate number of Board meetings and
meetings of committees of which such director is a member.
Messrs. Gregory E. and Bernard J. Fischbach are brothers. There is no
family relationship among any other directors or executive officers of the
Company.
Mr. Ravenel was elected as a director of the Company in February 1995 in
connection with the sale by the Company of 4,348,795 shares of its common stock
to TCI Sub in February 1995. In addition, in February 1995, Messrs. G. Fischbach
and Scoroposki entered into a voting agreement with TCI Sub pursuant to which
each party agreed to vote all shares beneficially owned by it in favor of those
individuals nominated by the Board of Directors of the Company for election to
the Board of Directors at any annual or special meeting of the stockholders of
the Company at which directors are to be elected provided that, subject to
certain exceptions, such nominees include Messrs. G. Fischbach and Scoroposki
(or their designees of successors) and one individual proposed by TCI Sub. There
is no other arrangement or understanding pursuant to which any person has been
elected as a director or executive officer of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE
ELECTION OF THE EIGHT NOMINEES TO THE COMPANY'S BOARD OF DIRECTORS.
5
<PAGE>
EXECUTIVE OFFICERS
Set forth below is certain information describing the Company's other
executive officer:
Anthony Williams, age 37, was named Executive Vice President and Chief
Financial and Accounting Officer of the Company in October 1992. From May 1990
to October 1992, Mr. Williams was Vice President, Finance, and Chief Financial
Officer of the Company. Mr. Williams was Director, Finance and Operations, of
the Company from April 1988 to May 1990.
There is no arrangement or understanding between any executive officer and
any other person regarding selection as an executive officer.
The executive officers of the Company are elected annually by the Board of
Directors and hold office until their respective successors are elected and
qualify.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes all plan and non-plan compensation awarded
to, earned by or paid to the Company's Chief Executive Officer and its three
other executive officers (together, the 'Named Executive Officers') who were
serving as executive officers during and at the end of the last completed fiscal
year ended August 31, 1995 for services rendered in all capacities to the
Company and its subsidiaries for each of the Company's last three fiscal years:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES ALL OTHER
---------------------------------- UNDERLYING COMPENSATION*
NAME AND SALARY BONUS OPTIONS -------------
PRINCIPAL POSITION YEAR $ $ # $
- ------------------------------ ---- -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Gregory E. Fischbach 1995 $775,000 $2,775,000 150,000 $17,000
Co-Chairman and 1994 775,000 2,685,000 300,000 14,500
Chief Executive Officer 1993 776,000 1,683,000 150,000 13,900
James Scoroposki 1995 500,000 2,350,000 150,000 4,600
Co-Chairman, Senior 1994 483,000 2,685,000 300,000 4,300
Executive Vice President, 1993 483,000 1,683,000 150,000 4,000
Treasurer and Secretary
Robert Holmes 1995 550,000 2,350,000 325,000(1) 6,000
President and Chief 1994 500,000 1,467,000 450,000 5,400
Operating Officer 1993 400,000 841,000 150,000 5,000
Anthony Williams 1995 225,000 45,000 140,000 2,000
Executive Vice President 1994 200,000 100,000 200,000 1,800
and Chief Financial 1993 175,000 85,000 100,000 1,800
and Accounting Officer
</TABLE>
- ------------------
* Represents dollar value of insurance premiums paid by the Company during the
fiscal year with respect to term life insurance for the benefit of the Named
Executive Officers.
(1) Includes 25,000 shares underlying options granted subject to stockholder
approval of certain amendments to the Plan. See 'Amendments to the Company's
1988 Stock Option Plan.'
No restricted stock awards, stock appreciation rights or long-term
incentive plan awards (all as defined in the proxy regulations promulgated by
the Securities and Exchange Commission) were awarded to, earned by, or paid to
the Named Executive Officers during any of the Company's last three fiscal
years.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to grants of stock
options to purchase Common Stock pursuant to the Plan granted to the Named
Executive Officers during the fiscal year ended August 31, 1995.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
--------------------------------------------------- REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES -----------------------------
GRANTED IN FISCAL EXERCISE EXPIRATION 5% 10%
NAME (#) YEAR (1) PRICE ($/SH) DATE ($) ($)
- ------------------------- ---------- ---------- ------------ ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Gregory E. Fischbach 150,000 9.6% $13.75 02/28/'05 $ 1,297,500 $ 3,286,500
James Scoroposki 150,000 9.6 13.75 02/28/'05 1,297,500 3,286,500
Robert Holmes(1) 325,000 20.9 13.75 02/28/'05 2,811,250 7,120,750
Anthony Williams 140,000 9.0 13.75 02/28/'05 1,211,000 3,067,400
All Stockholders(2) 730,609,406 1,851,367,915
</TABLE>
- ------------------
(1) Includes 25,000 shares underlying options granted subject to stockholder
approval of certain amendments to the Plan. See 'Amendments to the Company's
1988 Stock Option Plan.'
(2) These figures were calculated assuming that the price of the 46,008,149
shares of Common Stock issued and outstanding on August 31, 1995 increased
from $25.25 per share (the market price of a share of Common Stock on August
31, 1995) at compound rates of 5% and 10% per year for ten years. The
purpose of including this information is to indicate the potential
realizable value at the assumed annual rates of stock price appreciation for
the ten-year option term for all of the Company's stockholders.
AGGREGATE OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to each exercise of
stock options during the fiscal year ended August 31, 1995 by the Named
Executive Officers and the value at August 31, 1995 of unexercised stock options
held by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED VALUE FISCAL YEAR-END FISCAL YEAR-END
ON EXERCISE REALIZED(1) (#) ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------- --------------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Gregory E. Fischbach..... 0 $ 0 1,215,000/300,000 $ 25,470,939/3,337,500
James Scoroposki......... 0 0 1,350,000/300,000 $ 28,585,939/3,337,500
Robert Holmes(2)......... 0 0 1,083,752/575,000 $ 21,863,774/6,947,500
Anthony Williams......... 0 0 283,166/259,334 $ 5,248,007/3,087,931
</TABLE>
- ------------------
(1) Fair market value of securities underlying the options at fiscal year end
minus the exercise price of the options.
(2) Includes options to purchase 25,000 shares granted subject to stockholder
approval of certain amendments to the Plan. See 'Amendments to the Company's
1988 Stock Option Plan.'
7
<PAGE>
DIRECTORS' COMPENSATION
Directors who are not also employees of the Company receive a $10,000
annual fee, reimbursement of expenses for attending meetings of the Board and
generally receive an annual grant of options to purchase 18,750 shares under the
Plan. See 'Certain Relationships and Related Transactions.' In addition, if
certain amendments to the Plan are approved, additional options may be granted
under the Plan to non-employee directors who render services to the Company and
who are not also members of the Compensation Committee. See 'Amendments to the
Company's 1988 Stock Option Plan.'
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
The Company has employment agreements with each of Gregory Fischbach and
James Scoroposki, providing for Mr. G. Fischbach's employment as Chief Executive
Officer and for Mr. Scoroposki's employment as Senior Executive Vice President,
Secretary and Treasurer, for terms expiring in August 1999.
The agreements with Messrs. G. Fischbach and Scoroposki provide for annual
base salaries of $775,000 and $500,000, respectively, for the term of the
agreements. In addition, each of the agreements provides for annual bonus
payments to Mr. Fischbach in an amount equal to 3.25% of the Company's net
pre-tax profits for each fiscal year and to Mr. Scoroposki in an amount equal to
2.75% of the Company's net pre-tax profits for each fiscal year. The agreement
with Mr. Scoroposki specifically allows him to devote that amount of his
business time to the business of certain sales representative organizations
controlled by him as does not interfere with the services to be rendered by him
to the Company. The sales representative organizations under his control have
officers and employees who oversee the operations of such organizations. Mr.
Scoroposki attends board meetings of such companies but has no active
involvement in their day to day operations. Under the agreements, the Company
provides each of Messrs. G. Fischbach and Scoroposki with $2 million term life
insurance and disability insurance.
If the employment agreement of either of Messrs. G. Fischbach or Scoroposki
is terminated within one year after occurrence of a change in control of the
Company (other than a termination for cause) or if either of Messrs. G.
Fischbach or Scoroposki terminates his employment agreement upon the occurrence
of both a change in control of the Company and a change in the circumstances of
his employment, he would be entitled to receive severance benefits in an amount
equal to the total of (i) three years' base salary and (ii) three times the
largest bonus paid to him for the three fiscal years immediately preceding any
such termination of his employment.
The Company has an agreement in principle with Mr. Holmes for his
employment as President and Chief Operating Officer, which provides for a
current annual base salary of $550,000. The term of the agreement expires on
August 31, 1999. The agreement guarantees Mr. Holmes a 10% annual increase in
his base salary for the term of the agreement. In addition, the agreement
provides for annual bonus payments equal to 2.75% of the Company's net pre-tax
profits for each fiscal year. The Company provides Mr. Holmes with a $2 million
term life insurance policy and disability insurance.
Under the agreement with Mr. Holmes, if his employment is terminated within
one year after occurrence of a change in control of the Company (other than a
termination for cause) or if he terminates his agreement upon the occurrence of
both a change in control of the Company and a change in the circumstances of his
employment, he would be entitled to receive severance benefits in an amount
equal to the total of (i) three years' base salary and (ii) three times the
largest bonus paid to him for the three fiscal years immediately preceding any
such termination of his employment.
The Company also has an agreement in principle with Mr. Williams for his
employment as Executive Vice President and Chief Financial and Accounting
Officer, which provides for a current annual base salary of $225,000. The
agreement expires in August 1999. Mr. Williams is also entitled to a bonus in an
amount to be determined at the discretion of the Board of Directors if the
Company achieves certain financial performance objectives. The Company provides
Mr. Williams with a $1 million term life insurance policy and disability
insurance. If Mr. Williams' employment is terminated within one year after the
occurrence of a change in control of the Company (other than a termination of
cause) or if he terminates his agreement upon the occurrence of both a change in
control of the Company and a change in the circumstances of his employment, he
would be entitled
8
<PAGE>
to receive severance benefits in an amount equal to the total of (i) one year's
base salary and (ii) two times the bonus paid to him for the fiscal year
immediately preceding any such termination of his employment.
Each of the agreements with Messrs. G. Fischbach, Scoroposki, Holmes and
Williams provides that, in the event of a change in control of the Company, all
options theretofore granted to each of them shall vest and become immediately
exercisable and the Company has agreed to indemnify each of them against any
excise taxes imposed on such executive by section 4999(a) of the Internal
Revenue Code of 1986, as amended (the 'Code') (including all applicable taxes on
such indemnification payment).
Each of the agreements with Messrs. G. Fischbach, Scoroposki, Holmes and
Williams prohibits disclosure of proprietary and confidential information
regarding the Company and its business to anyone outside the Company both during
and subsequent to employment. In addition, the employees agree, for the duration
of their employment with the Company and for one year thereafter, not to engage
in any competitive business activity, nor to persuade or attempt to persuade any
customer, software developer, licensor, employee or other party with whom the
Company has a business relationship to sever its ties with the Company or reduce
the extent of its relationship with the Company.
In addition, at the end of their respective terms, if the agreements with
each of Messrs. G. Fischbach, Scoroposki, Holmes and Williams are not renewed on
substantially similar terms, the employee would be entitled to receive severance
benefits in an amount equal to the total cash compensation paid to him during
the 12-month period immediately preceding such termination of his employment.
BENEFIT PLANS
The Company does not have a pension plan. For information with respect to
options granted to executive officers of the Company under the Company's 1988
Stock Option Plan, see pages 7 and 17.
COMPLIANCE WITH REPORTING REQUIREMENTS
The Company believes that, during the fiscal year ended August 31, 1995,
all filing requirements under Section 16(a) of the Securities Exchange Act of
1934 (the 'Exchange Act') applicable to its officers, directors and greater than
ten percent beneficial owners were complied with on a timely basis.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Michael Tannen and James
Scibelli, who are intended to be 'disinterested persons' within the meaning of
Rule 16b-3(c)(2)(i) promulgated under the Exchange Act and 'outside directors'
within the contemplation of section 162(m)(4)(C)(i) of the Code.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is charged with developing a corporate
compensation philosophy, determining compensation packages for the Chief
Executive Officer and the Senior Executive Vice President and administering the
Plan. The Compensation Committee is also responsible for determining, based on
recommendations made by the Chief Executive Officer and Senior Executive Vice
President, compensation packages for other executive officers of the Company.
The Compensation Committee recognizes the critical role that the current
executive officers have played in the significant growth and success of the
Company. Further, the Compensation Committee recognizes that the services of
these same executive officers are crucial to the Company's continued success.
Therefore, the primary objective of each executive's compensation package is to
provide a remuneration opportunity that will motivate and retain the key
executives of the Company in order to further ensure the Company's future.
Based on this belief, the Compensation Committee has adopted the following
basic principles for compensating the executive, management and employee group:
o the current executive team must be kept intact;
o compensation plans should reward individual and corporate achievement;
o shift a portion of fixed compensation expenses to variable compensation
expenses; and
9
<PAGE>
o short and long-term incentives must be effectively balanced to satisfy
both the short and long-term needs of the Company.
Periodically, the Compensation Committee reviews the financial performance
and related executive pay levels of a select group of companies in the media and
entertainment industries. It is the goal of the Compensation Committee that
salaries for its top executives be in the 50th to 75th percentile range. If
warranted by the profitability of the Company, the Compensation Committee
believes that executives should have an opportunity to exceed the 75th
percentile. To date, the effective mixing of annual bonuses based on pre-tax
profits and stock options has contributed significantly to the retention,
motivation and success of the Company's executive team.
The Compensation Committee is also aware that, with the convergence of
various segments of the telecommunications, consumer electronics/computer, media
and entertainment industries and the growth of interactive technologies, a
number of large telecommunications, consumer electronics/computer, media and
entertainment companies have entered or are actively considering entering the
Company's market. Based on the potential opportunities in the growing
multi-media market, these organizations have the incentives and ability to make
a substantial investment in the Company's line of business. To penetrate this
market quickly, it would be necessary for them to recruit experienced key
executives. Considering the limited pool of executives with the necessary
experience, the Compensation Committee is concerned that the Company's current
executives would be sought after by such competitors.
In order to assess the risk of potential competing pay packages that may be
offered to the Company's executives by large telecommunications, consumer
electronics/computer, media and entertainment companies, the Compensation
Committee has conducted research regarding compensation practices at a select
group of these companies.
Based on this research and the Compensation Committee's own knowledge of
compensation packages for comparable positions at other companies, both public
and private, the Compensation Committee devised pay packages that consist of
three components, each designed to achieve a distinctive objective:
Base Salary provides regular compensation for services rendered at a
sufficient level to retain and motivate its executive officers.
Annual Bonus provides an incentive and reward for short-term financial
success. For the top three executives, annual bonuses are based solely on the
Company's net pre-tax profits. This eliminates Compensation Committee discretion
in determining annual bonuses. For all other employees, annual bonuses are
determined based on the recommendation of the President of the Company and are
based primarily on net pre-tax profits but include an opportunity for adjustment
based on experience, scope, level of responsibility and individual performance.
Stock Options have and continue to be an integral part of the pay package
of executives as well as all employees. Options have kept the Company's key
management team in place since the Company's inception and have provided a
unique compensation opportunity. The Compensation Committee believes that stock
options, which are designed to focus attention on stock values, are the most
effective way of aligning the long-term interests of executives, managers and
employees with those of the Company's stockholders. Options are customarily
granted at prices equal to the fair market value at the date of grant, are not
exercisable until the first anniversary of the date of grant and do not become
fully exercisable until the third anniversary of the date of grant. Options
generally remain exercisable during employment until the tenth anniversary of
the date of grant, which provides executives an incentive to increase
stockholder value over the long term since the full benefit of the options
cannot be realized unless stock price appreciation occurs over a number of
years. Options are generally granted to the Co-Chairmen of the Company by the
Compensation Committee, to the President by the Compensation Committee based on
the recommendation of the Co-Chairmen of the Board of the Company and to the
Company's other executive officer and its other employees by the Compensation
Committee based on the recommendation of the President of the Company.
Compensation of Chief Executive Officer
The Compensation Committee and the Board of Directors recognize the unique
skills and experience of the Chief Executive Officer. The goal of the
Compensation Committee in developing a pay package for the Chief Executive
Officer was to provide a significant incentive to motivate and retain his
services for a significant term.
10
<PAGE>
The current agreement with the Chief Executive Officer, which has a five-year
term expiring in August 1999, provides:
Salary
A base salary of $775,000 per year with no increase in base salary provided
during the term of the agreement. Increases in compensation will come solely as
a result of increases in the Company's pre-tax profits and increases in stock
market prices as described below.
Annual Bonus
An annual bonus of 3 1/4% of net pre-tax profits will be paid to the Chief
Executive Officer. The Compensation Committee believes that the bonus structure
provides the Chief Executive Officer with sufficient incentive.
Stock Options
Stock option grants are determined annually and options will generally vest
equally over a three year period. In the fiscal year ended August 31, 1995, the
Chief Executive Officer received options to purchase 150,000 shares, which will
vest equally over a three-year period. Under the Plan, in no event will the
Chief Executive Officer receive options to purchase more than 300,000 shares in
any single year.
Unlike most large media and entertainment companies, no retirement program
is provided for the Company's executives. The Compensation Committee believes
that these programs at other companies are substantial. It believes, however,
that compensation is more effectively used by the application of the components
described above.
In setting the above compensation package a number of factors were
considered, including:
o the total return to stockholders during the last five years compared to
competitor companies;
o the unique skills and experience of the Chief Executive Officer;
o total compensation of key executives at a select group of entertainment
and media companies; and
o the importance of the Chief Executive Officer to the continued growth and
success of the Company and the need to provide him with a significant
incentive to motivate and retain his services for a five-year period.
Compensation Committee
Michael Tannen James Scibelli
11
<PAGE>
PERFORMANCE GRAPH
The following performance graph is a line graph comparing the yearly change
in the cumulative total stockholder return on the Common Stock against the
cumulative return of The Nasdaq Stock Market (US Companies) Index and the Dow
Jones Entertainment and Leisure-Recreational Products and Services Index for the
five fiscal years ended August 31, 1995.
[PERFORMANCE CHART]
Dow Jones
Entertainment &
Leisure-Recreational
Products & Svcs
Acclaim
Entertainment NASDAQ-U.S.
Aug-90 100.00 100.00 100.00
Sep-90 73.61 95.76 90.52
Oct-90 55.56 95.47 86.95
Nov-90 45.83 106.67 95.25
Dec-90 54.17 108.04 99.37
Jan-91 40.98 115.28 110.39
Feb-91 59.03 125.60 121.01
Mar-91 49.31 123.66 129.10
Apr-91 45.14 120.00 129.92
May-91 36.81 125.02 135.89
Jun-91 36.81 114.14 127.81
Jul-91 34.03 118.80 135.16
Aug-91 51.39 119.27 141.88
Sep-91 52.43 117.71 142.40
Oct-91 52.78 125.34 147.12
Nov-91 47.22 119.81 142.19
Dec-91 51.39 127.71 159.55
Jan-92 59.72 138.36 168.88
Feb-92 78.48 144.52 172.71
Mar-92 89.59 139.32 164.56
Apr-92 70.83 138.73 157.50
May-92 72.22 141.89 159.55
Jun-92 72.22 140.40 153.31
Jul-92 93.06 143.02 158.74
Aug-92 98.61 140.38 153.89
Sep-92 126.39 143.19 159.61
Oct-92 141.67 143.24 165.89
Nov-92 168.06 154.69 179.09
Dec-92 201.39 155.89 185.69
Jan-93 241.67 171.21 190.97
Feb-93 188.89 173.00 183.85
Mar-93 213.89 173.49 189.17
Apr-93 205.56 163.45 181.10
May-93 287.50 176.98 191.92
Jun-93 331.94 173.67 192.80
Jul-93 345.83 172.31 193.03
Aug-93 437.48 186.40 203.01
Sep-93 489.56 189.80 209.05
Oct-93 479.14 204.15 213.76
Nov-93 408.31 199.32 207.39
Dec-93 354.15 196.71 213.17
Jan-94 368.73 200.09 219.63
Feb-94 427.08 199.30 217.63
Mar-94 262.49 181.14 204.23
Apr-94 235.40 175.05 201.58
May-94 291.65 184.47 202.09
Jun-94 270.30 175.77 194.72
Jul-94 253.12 181.29 198.71
Aug-94 283.32 184.67 211.37
Sep-94 283.32 177.56 210.84
Oct-94 289.57 178.72 214.94
Nov-94 260.40 174.86 207.79
Dec-94 239.57 180.74 208.43
Jan-95 234.37 189.03 209.59
Feb-95 237.49 199.32 220.62
Mar-95 289.57 203.51 227.05
Apr-95 249.99 208.14 234.34
May-95 284.37 217.41 240.47
Jun-95 307.28 219.02 259.57
Jul-95 395.81 226.15 278.28
Aug-95 420.81 223.33 284.01
Value of $100 invested over five years:
<TABLE>
<S> <C>
Acclaim Entertainment, Inc. Common Stock.......................... $420.81
The Nasdaq Stock Market (US Companies) Index...................... $284.01
Dow Jones Entertainment and Leisure-Recreational Products and
Services Index.................................................. $223.33
</TABLE>
12
<PAGE>
AMENDMENTS TO THE COMPANY'S
1988 STOCK OPTION PLAN
The Company currently has in effect the Plan, which was approved by the
stockholders of the Company on May 31, 1988. Amendments to the Plan were
approved by the stockholders of the Company in May 1990, May 1992, January 1993,
February 1994 and January 1995, respectively. Under the Plan, the Company may
grant to eligible persons incentive stock options ('ISOs') within the meaning of
Section 422(b) of the Code or non-incentive stock options ('NISOs').
The Plan currently authorizes the Company to grant options to purchase an
aggregate of 15,000,000 shares of Common Stock to employees and directors of,
and consultants to, the Company. Directors who are not also employees of the
Company receive a non-discretionary annual grant (in August) of options to
purchase 18,750 shares under the Plan at the fair market value of a share of
Common Stock on the date of grant.
The Board of Directors believes that amending the Plan to allow for options
thereunder to be granted on a discretionary basis to non-employee directors who
render services to the Company and who are not also members of the Compensation
Committee will provide the Company with additional flexibility in providing
compensation to such persons. The Board of Directors unanimously approved a
grant of options to purchase 75,000 shares at $10.875 to Mr. Bernard Fischbach
in consideration of services rendered by him to the Company, subject to
stockholder approval of the foregoing amendment to the Plan.
Effective for taxable years of the Company beginning after 1993, the
Omnibus Budget Reconciliation Act of 1993 (the '1993 Act') generally prohibits
the Company from deducting compensation of a 'covered employee' to the extent
the compensation exceeds $1 million per year. For this purpose, 'covered
employee' means each of the Named Executive Officers. Certain 'performance
based' compensation including, under certain circumstances, stock option
compensation, will not be subject to, and will be disregarded in applying, the
$1 million deduction limitation. The intent of the Compensation Committee is
that stock options granted under the Plan will qualify as performance based
compensation under the 1993 Act. Accordingly, certain changes were made to the
Plan last year, including the addition of a maximum of 300,000 shares with
respect to which options may be granted to any single participant under the Plan
in any calendar year. As part of his compensation, the Compensation Committee
determined to grant Mr. Holmes options to purchase an aggregate of 325,000
shares in April 1995, subject to approval by the stockholders of an increase
from 300,000 to 400,000 in the maximum number of shares with respect to which
options may be granted under the Plan to any single participant in a calendar
year. The Compensation Committee approved an increase from 300,000 shares to
400,000 shares in the maximum number of shares with respect to which options may
be granted under the Plan to any single participant in a calendar year.
The Board of Directors unanimously adopted and recommends that the
stockholders approve an amendment to the Plan authorizing (i) options thereunder
to be granted on a discretionary basis to non-employee directors who render
services to the Company and who are not also members of the Compensation
Committee and (ii) an increase from 300,000 to 400,000 shares in the maximum
number of shares with respect to which options may be granted thereunder to a
single participant in any one calendar year.
The affirmative vote of holders of a majority of the shares of Common Stock
present in person or by proxy at the Meeting is required for approval of the
foregoing amendments to the Plan. UNLESS OTHERWISE INDICATED, THE ACCOMPANYING
FORM OF PROXY WILL BE VOTED FOR THE PROPOSAL TO EFFECT THE AMENDMENTS TO THE
PLAN DISCUSSED ABOVE.
If the proposed amendments to the Plan are not approved, the Plan will
continue to remain in effect in its present form, the grant to Mr. Holmes will
be limited to options to purchase an aggregate of 300,000 shares and the
discretionary grant of options to purchase 75,000 shares of Common Stock to Mr.
Bernard Fischbach will be void.
NATURE AND PURPOSE OF THE PLAN
The purpose of the Plan is to induce individuals to remain in the employ or
service of the Company and its subsidiaries and to attract new employees. The
Board of Directors believes that stock options are an integral part of the
compensation packages to be offered to the Company's executives and managers and
that the grant of
13
<PAGE>
stock options, which align the interests of the recipients with those of the
Company's stockholders, is an effective method to attract and retain employees
in an industry characterized by a high level of employee mobility and aggressive
recruiting of the services of a limited number of skilled personnel.
DURATION AND MODIFICATION
The Plan will terminate not later than May 31, 1998. The Board of Directors
may at any time terminate the Plan or make such modifications to the Plan as it
may deem advisable. However, the Board may not, without approval by the
stockholders of the Company, increase the number of shares of Common Stock as to
which options may be granted under the Plan, change the manner of determining
option prices, change the class of persons eligible to participate in the Plan
or extend the period during which an option may be granted or exercised.
ADMINISTRATION OF THE PLAN
The Plan is administered by the Compensation Committee consisting of two
non-employee directors. The members of the Compensation Committee are appointed
annually by, and serve at the pleasure of, the Board of Directors, and the
members of the Compensation Committee will not be compensated for serving on the
Compensation Committee. Currently, the Compensation Committee is comprised of
Messrs. Tannen and Scibelli.
The Compensation Committee has discretion to determine the participants
under the Plan, the terms and provisions of the respective option grants (which
need not be identical), including the price at which and period during which
options will be exercisable, the number of shares subject to each option, and
whether an option shall be an ISO or a NISO, but will not have discretion to
determine any of the foregoing with respect to the annual grant of options to
non-employee directors, which is non-discretionary in nature.
SECURITIES SUBJECT TO THE PLAN; MARKET PRICE
15,000,000 shares of Common Stock are available for issuance upon exercise
of options granted under the Plan.
The closing sale price of the Common Stock on The Nasdaq Stock Market's
National Market on June 24, 1996 was $10.4375 per share.
ELIGIBILITY AND EXTENT OF PARTICIPATION
The Plan provides for discretionary grants of options to participants
(including any director or officer who is also an employee) and to consultants
to the Company. As of June 24, 1996, approximately 1,000 persons were eligible
to receive options and options had been granted to approximately 700 such
persons pursuant to the Plan.
No single participant (including any director or officer who is also an
employee) may receive options under the Plan in any one calendar year to
purchase more than 300,000 shares of Common Stock. If the proposed amendment to
the Plan to increase the maximum number of shares with respect to which options
may be granted from 300,000 to 400,000 shares is approved, Mr. Holmes will
receive options to purchase an aggregate of 325,000 shares.
Directors who are not also employees of the Company receive an annual grant
(in August) of options to purchase 18,750 shares under the Plan at the fair
market value of a share of Common Stock on the date of grant. If the proposed
amendment to the Plan to allow for options thereunder to be granted on a
discretionary basis to non-employee directors who render services to the Company
and who are not also members of the Compensation Committee is approved, Mr.
Bernard Fischbach will receive options to purchase 75,000 shares.
EXERCISE OF OPTIONS
Unless otherwise provided by the Compensation Committee at the time an
option is granted (and in all events in the case of the annual grant of options
to non-employee directors), an option will be exercisable one-third after the
first anniversary of the date of grant, two-thirds after the second anniversary
of the date of grant and in full after the third anniversary of the date of
grant.
14
<PAGE>
An option may be exercised by a written notice with respect to a specified
number of shares and payment of the exercise price for the number of shares so
specified. The exercise price of an option may be paid in cash or in shares of
Common Stock. The initial per share exercise price for an ISO may not be less
than the fair market value thereof on the date of grant, or 110% of such fair
market value with respect to a participant who, at such time, owns stock
representing more than 10% of the total combined voting power of all classes of
stock of the Company. The initial per share exercise price for a NISO may not be
less than 85% of the fair market value thereof on the date of grant. No NISO may
be granted to any person who is or may reasonably become a 'covered employee'
under Section 162(m) of the Code at a price below fair market value on the date
of grant. The initial per share exercise price for the options granted to
non-employee directors is the fair market value of the Common Stock on the date
of grant.
No option granted pursuant to the Plan may be exercised more than 10 years
after the date of grant, except that ISOs granted to participants who own more
than 10% of the total combined voting power of all classes of stock of the
Company at the time the ISO is granted may not be exercised after five years
after the date of grant. No participant may be granted ISOs which are
exercisable for the first time in any one calendar year with respect to Common
Stock having an aggregate fair market value in excess of $100,000 on the date of
grant. No option granted under the Plan is transferable by the optionee other
than by death.
Generally, an option may be exercised only while the recipient is in the
active employ or service of the Company, or within 90 days after termination of
a participant's employment or service as a director by reason of retirement or
disability, or within one year after termination of employment by reason of
death.
In the event of the death of an optionee, each option granted to him shall
become immediately exercisable in full, provided such option is exercised before
the earlier of the expiration of one year from the date of such optionee's death
or the date specified in such option.
In the event that an optionee leaves the employ or ceases to serve as a
director of the Company or its subsidiaries, whether by reason of retirement
(voluntarily or otherwise) or as a result of disability, each option granted to
him shall become immediately exercisable in full, provided such option is
exercised before the earlier of 90 days from the date of such retirement or
disability or the date specified in such option.
In the event that an optionee leaves the employ or ceases to serve as a
director of the Company or its subsidiaries for any reason other than death,
retirement or disability, each option granted to him shall generally terminate
immediately.
If the fair market value of the Common Stock declines below the option
price of any option (other than options granted to non-employee directors), the
Compensation Committee (with the prior approval of the Board of Directors) may
adjust, reduce, or cancel and regrant such option or take any similar action it
deems to be for the benefit of the optionee in light of such declining value.
The number of shares available for grant under the Plan and covered by each
option granted thereunder will be adjusted in the event of a stock dividend,
reorganization, recapitalization, stock split-up, combination of shares, sale of
assets, merger or consolidation in which the Company is the surviving
corporation or, as may be determined by the Board of Directors, in the event of
any other change affecting the number or kind of the Company's outstanding
Common Stock. In the event of the dissolution or liquidation of the Company, the
Board may, in its discretion, accelerate the exercisability of all outstanding
options and terminate the same within a reasonable time thereafter.
15
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES OF ISSUANCE AND EXERCISE OF OPTIONS
The following discussion of the Federal income tax consequences of the
granting and exercise of options under the Plan, and the sale of Common Stock
acquired as a result thereof, is based on an analysis of the Code, as currently
in effect, existing laws, judicial decisions and administrative rulings and
regulations, all of which are subject to change. In addition to being subject to
the Federal income tax consequences described below, an optionee may also be
subject to state and/or local income tax consequences in the jurisdiction in
which he or she works and/or resides.
Non-Incentive Stock Options
No income will be recognized by an optionee at the time a NISO is granted.
Ordinary income will be recognized by an optionee at the time a NISO is
exercised, and the amount of such income will be equal to the excess of the fair
market value on the exercise date of the shares issued to the optionee over the
exercise price. This ordinary income will also constitute wages subject to the
withholding of income tax and the Company will be required to make whatever
arrangements are necessary to ensure that the amount of the tax required to be
withheld is available for payment in money.
Capital gain or loss on a subsequent sale or other disposition of the
shares of Common Stock acquired upon exercise of a NISO will be measured by the
difference between the amount realized on the disposition and the tax basis of
such shares. The tax basis of the shares acquired upon the exercise of the
option will be equal to the sum of the exercise price of an option and the
amount included in income with respect to the option.
If an optionee makes payment of the exercise price by delivering shares of
Common Stock, he generally will not recognize any gain with respect to such
shares as a result of such delivery, but the amount of gain, if any, which is
not so recognized will be excluded from his basis in the new shares received.
The Company will be entitled to a deduction for Federal income tax purposes
at such time and in the same amount as the amount included in ordinary income by
the optionee upon exercise of his or her NISO, subject to the usual rules as to
reasonableness of compensation and provided that the Company timely complies
with the applicable information reporting requirements.
Incentive Stock Options
In general, neither the grant nor the exercise of an ISO will result in
taxable income to an optionee or a deduction to the Company.
The sale of the shares of Common Stock received pursuant to the exercise of
an ISO which satisfies the holding period rules will result in capital gain to
an optionee and will not result in a tax deduction to the Company. To receive
incentive stock option treatment as to the shares acquired upon exercise of an
ISO, an optionee must neither dispose of such shares within two years after the
option is granted nor within one year after the exercise of the option. In
addition, an optionee generally must be an employee of the Company (or a
subsidiary of the Company) at all times between the date of grant and the date
three months before exercise of the option.
If the holding period rules are not satisfied, the portion of any gain
recognized on the disposition of the shares acquired upon the exercise of an ISO
that is equal to the lesser of (a) the fair market value of the Common Stock on
the date of exercise minus the exercise price or (b) the amount realized on the
disposition minus the exercise price, will be treated as ordinary income, with
any remaining gain being treated as capital gain. The Company will be entitled
to a deduction equal to the amount of such ordinary income.
If an optionee makes payment of the exercise price by delivering shares of
Common Stock, he or she generally will not recognize any gain with respect to
such shares as a result of such delivery, but the amount of gain, if any, which
is not so recognized will be excluded from his basis in the new shares received.
However, the use by an optionee of shares previously acquired pursuant to the
exercise of an ISO to exercise an ISO will be treated as a taxable disposition
if the transferred shares were not held by the participant for the requisite
holding period.
For purposes of the alternative minimum tax, an ISO is treated as if it
were a NISO. This means, among other things, that the spread on the exercise of
an ISO will be considered as part of the optionee's income for purposes of the
alternative minimum tax.
16
<PAGE>
CERTAIN INFORMATION WITH RESPECT TO OPTIONS GRANTED
The following table sets forth, with respect to the Named Executive
Officers, all executive officers as a group, all non-employee directors as a
group, and all employees as a group (excluding executive officers), the number
of shares of Common Stock subject to options granted during the year ended
August 31, 1995 and certain related information:
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL NUMBER OF SHARES AVERAGE PER
OR SUBJECT TO SHARE EXERCISE
IDENTITY OF GROUP CAPACITIES IN WHICH SERVED OPTION PRICE
- ------------------------------ ----------------------------------- ---------------- --------------
<S> <C> <C> <C>
Gregory Fischbach............. Chief Executive Officer 150,000 $13.75
James Scoroposki.............. Senior Executive Vice President,
Secretary and Treasurer 150,000 13.75
Robert Holmes(1).............. President, Chief Operating Officer
and General Manager 325,000 13.75
Anthony Williams.............. Executive Vice President and Chief
Financial and Accounting Officer 140,000 13.75
All executive officers as a
group (4 persons)(1)........ 765,000 13.75
All non-employee directors as
a group (5 persons)(2)...... 75,000 24.00
All employees (except
executive officers) as a
group (285 persons)......... 792,119 13.91
</TABLE>
- ------------------
(1) Includes 25,000 shares underlying options granted to Mr. Holmes subject to
stockholder approval of the foregoing amendments to the Plan.
(2) Does not include 75,000 shares underlying options granted to Mr. Bernard
Fischbach at an exercise price of $10.875 subject to stockholder approval of
the foregoing amendments to the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE
PROPOSAL TO APPROVE THE AMENDMENTS TO THE PLAN.
SELECTION OF AUDITORS
Grant Thornton LLP audited the Company's financial statements for the year
ended August 31, 1995. The Company has not yet engaged independent auditors for
the fiscal year ending August 31, 1996. Representatives of Grant Thornton are
not expected to be present, to have an opportunity to make a statement or to be
available to respond to questions from stockholders, at the Meeting.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. James Scoroposki, an officer, director and principal stockholder of the
Company, is the sole stockholder, a director and president of a sales
representative organization selling interactive entertainment software and a 50%
stockholder, a director and executive vice president of another sales
representative organization selling interactive entertainment software. Such
sales representative organizations act as sales representatives for the Company,
receive commissions from the Company with respect to interactive entertainment
software sold by them and will continue to do so during the fiscal year ending
August 31, 1996. For the fiscal year ended August 31, 1995, the commissions paid
by the Company to these sales representative organizations amounted to
approximately $2,249,000. The agreements between the Company and these sales
representatives are on terms that are at least as favorable to the Company as
could have been obtained from unaffiliated third parties. In addition to
representing the Company's products, these companies also represent competitors
of the Company who distribute interactive entertainment software, and derive
most of their revenue from representing companies other than the Company.
Mr. Scoroposki is also the sole shareholder of The Crescent Club, which
provides restaurant services and related entertainment and meeting facilities to
the Company and will continue to do so for the fiscal year ending
17
<PAGE>
August 31, 1996. For the fiscal year ended August 31, 1995, payments made by the
Company to The Crescent Club amounted to approximately $98,000.
The firm of Fischbach, Perlstein, Lieberman & Yanny, of which Bernard J.
Fischbach is a partner, performs legal services for the Company and will
continue to do so for the fiscal year ending August 31, 1996. Payments made by
the Company for said services amounted to approximately $1,203,000 for the
fiscal year ended August 31, 1995.
The firm of Groman, Ross & Tisman, P.C., of which Robert H. Groman is a
partner, also performs legal services for the Company and will continue to do so
for the fiscal year ending August 31, 1996. Payments made by the Company for
said services amounted to approximately $380,000 for the fiscal year ended
August 31, 1995.
MISCELLANEOUS
Any proposal of an eligible stockholder intended to be presented at the
next Annual Meeting of Stockholders of the Company must be received by the
Company by March 20, 1997 to be eligible for inclusion in the Company's proxy
statement and form of proxy relating to such meeting.
The Board of Directors does not intend to present and knows of no others
who intend to present at the Meeting any matter or business other than that set
forth in the accompanying Notice of Annual Meeting of Stockholders. If other
matters are properly brought before the Meeting, it is the intention of the
persons named in the accompanying form of proxy to vote any proxies on such
matters in accordance with their judgment.
The Company will bear the cost of preparing, assembling and mailing the
enclosed form of proxy, this Proxy Statement and other material which may be
sent to stockholders in connection with this solicitation. Officers and regular
employees may solicit proxies by mail, telephone, telegraph and personal
interview, for which no additional compensation will be paid. The Company may
reimburse persons holding shares in their names or in the names of nominees for
their reasonable expenses in sending proxies and proxy material to their
principals.
The Annual Report to Stockholders for the fiscal year ended August 31, 1995
is being mailed to stockholders simultaneously with this Proxy Statement.
By order of the Board of Directors,
JAMES SCOROPOSKI
Secretary
Glen Cove, New York
July 18, 1996
18
<PAGE>
ACCLAIM ENTERTAINMENT, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
AUGUST 7, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints GREGORY E. FISCHBACH and JAMES SCOROPOSKI,
or either of them, attorneys and proxies, with power of substitution and
revocation, to vote, as designated below, all shares of stock which the
undersigned is entitled to vote, with all powers which the undersigned would
possess if personally present, at the Annual Meeting of Stockholders (including
all adjournments thereof) of ACCLAIM ENTERTAINMENT, INC. to be held on
Wednesday, August 7, 1996, at 9:30 A.M. at The Metropolitan, 3 Glen Cove Road,
Glen Cove, New York. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1
AND 2.
1. ELECTION OF DIRECTORS
/ / FOR all nominees / / WITHHOLD AUTHORITY to vote
for all nominees
Gregory E. Fischbach, James Scoroposki, Robert Holmes, Bernard J. Fischbach,
Michael Tannen, Robert H. Groman, James Scibelli and Bruce W. Ravenel.
STOCKHOLDERS MAY WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S) BY LINING
THROUGH OR OTHERWISE STRIKING OUT THE NAME OF SUCH NOMINEE(S).
2. APPROVAL of the amendments to the Company's 1988 Stock Option Plan as set
forth in the accompanying Proxy Statement.
/ / FOR / / AGAINST / / ABSTAIN
3. The proxy is authorized to transact such other business as may properly come
before the meeting.
<PAGE>
This proxy, when properly executed,
will be voted in the manner directed
herein by the undersigned stockholder.
If no direction is given, this proxy
will be voted FOR items 1, 2 and 3 and
in the discretion of said proxy on any
other matter which may come before the
meeting or any adjournments thereof.
Dated: ________________________ , 1996
______________________________________
Print Name
______________________________________
Signature
NOTE: When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee, custodian,
guardian or corporate officer, please
give your full title as such. If a
corporation, please sign full
corporate name by authorized officer.
If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
