ACCLAIM ENTERTAINMENT INC, DEF 14A, 1997-08-27

ACCLAIM ENTERTAINMENT INC
DEF 14A, 1997-08-27
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<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/ No fee required

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 Club, 3
Glen Cove Road, Glen Cove, New York, on Wednesday, September 17, 1997, 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 increase from 15,000,000 to
25,000,000 the number of shares with respect to which options may be
granted under the Company's 1988 Stock Option Plan;

3. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the year ending August 31, 1997; and

4. To transact such other business as may properly be brought before
the meeting.

Only stockholders of record at the close of business on July 25, 1997 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 25, 1997

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
SEPTEMBER 17, 1997

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 Club,
3 Glen Cove Road, Glen Cove, New York, on Wednesday, September 17, 1997, 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
August 27, 1997.

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 July 25, 1997 shall
be entitled to one vote for each share then held. There were issued and
outstanding on said date 49,713,668 shares of Common Stock.

<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth certain information as of July 25, 1997
(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) ............. 7,648,151 14.6%
One Acclaim Plaza
Glen Cove, NY 11542
James Scoroposki (3)(4) ................. 7,102,451 13.5
One Acclaim Plaza
Glen Cove, NY 11542
The Capital Group Companies, Inc. (5) ... 6,949,400 13.9
333 South Hope Street
Los Angeles, CA 90071
Merrill Lynch & Co., Inc. (6) ........... 6,868,611 13.7
World Financial Center
North Tower
250 Vesey Street
New York, NY 10281
TCI GameCo Holdings, Inc. (3) ........... 4,348,795 8.7
Terrace Tower II
5619 DTC Parkway
Englewood, CO 80111
Bernard J. Fischbach (7) ................ 331,276 *
1925 Century Park East
Suite 1260
Los Angeles, CA 90067
Robert H. Groman (8) .................... 100,000 *
196 Peachtree Lane
Roslyn Heights, NY 11577
Michael Tannen (8) ...................... 94,875 *
90 Riverside Drive, #5B
New York, NY 10024

James Scibelli (9) ...................... 44,500 *
2936 Bay Drive
Merrick, NY 11566
Bruce W. Ravenel (10) ................... 10,250 *
5619 DTC Parkway
Englewood, CO 80111
Kenneth L. Coleman ...................... 0 0
2011 North Shoreline Blvd.
Mountain View, CA 94043
</TABLE>

<PAGE>

- ------------------

* 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 2,827,500 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 2,827,500 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 the benefit of his children. Each of Mr. Scoroposki and Mr. G.
Fischbach 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.

(5) Information in respect of the beneficial ownership of The Capital Group
Companies, Inc. has been derived from its Schedule 13-G, dated February 12,
1997, filed on its behalf and on behalf of Capital Research and Management
Company ('CRMC') with the Commission. The Company has been advised that (a)
CRMC is a registered investment adviser and an operating subsidiary of The
Capital Group Companies, Inc., (b) at February 12, 1997, CRMC exercised
investment discretion with respect to 3,635,000 shares of Common Stock,
which were owned by various institutional investors and (c) CRMC has no
power to direct the vote of such shares. Capital Guardian Trust Company, a
bank as defined in Section 3(a) of the Securities Act of 1933 (the
'Securities Act') and a wholly-owned subsidiary of The Capital Group
Companies, Inc., is the beneficial owner of 3,292,900 shares of Common
Stock as the result of serving as the investment manager of various
institutional accounts.

(6) Information in respect of the beneficial ownership of Merrill Lynch & Co.,
Inc. ('ML&Co.') has been derived from Amendment No. 3 to its Schedule 13-G,
dated February 14, 1997, 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.
3 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

(Footnotes continued on next page)

<PAGE>

(Footnotes continued from previous page)

MLAM acts as investment adviser), which has an interest that relates to
greater than 5% of the Common Stock.

(7) Represents 175,000 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.
(8) Represents shares issuable upon exercise of options.
(9) Includes 37,500 shares issuable upon exercise of options.
(10) Does not include 4,348,795 shares held by TCI Sub. Mr. Ravenel is an
executive officer of TCI Internet Services, Inc., a subsidiary of TCI and
an affiliate of TCI Sub. Includes (i) 6,250 shares issuable on exercise of
options and (ii) 2,000 shares held by Mr. Ravenel's wife, as to which
shares Mr. Ravenel disclaims beneficial ownership.
(11) Includes 150,000 shares issuable on exercise of options.
(12) Includes 6,218,625 shares issuable upon exercise of warrants and options.

<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 and Chief Executive 55 1987
Officer of the Company
James Scoroposki............. Co-Chairman of the Board, Senior Executive Vice 49 1987
President, Secretary and Treasurer of the
Company
Kenneth L. Coleman........... Senior Vice President, Silicon Graphics, Inc. 54 1997
Bernard J. Fischbach......... Attorney 52 1987
Robert H. Groman............. Attorney 54 1989
Bruce W. Ravenel............. Senior Vice President & Chief Operating Officer of 47 1995
TCI Technology Ventures, Inc.
James Scibelli............... President of Roberts & Green, Inc. 47 1993
Michael Tannen............... Chief Executive Officer and President of Kinnevik 57 1989
Media Ventures, Inc.
</TABLE>

Gregory E. Fischbach, a founder of the Company, has been Chief Executive
Officer of the Company since its formation, a member of the Board of Directors
since 1987 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, a member of the Board of Directors since 1987,
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.'

Kenneth L. Coleman was appointed to the Board of Directors in July 1997.
Mr. Coleman is currently Senior Vice President, Customer and Professional
Services, for Silicon Graphics Computer Systems in Mountain View, California.
For more than the past five years, Mr. Coleman has held several positions at
Silicon Graphics, Inc.

Bernard J. Fischbach has been a member of the Board of Directors since 1987
and 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.'

Robert H. Groman has been a member of the Board of Directors since 1989 and
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.'

Bruce W. Ravenel has been a member of the Board of Directors since 1995 and
is currently President and Chief Executive Officer of TCI.Net, Inc. located in
Englewood, Colorado. Since January 1996, Mr. Ravenel has also served as
President and Chief Operating Officer of TCI Internet Services, Inc. and Senior
Vice President for Internet Services of TCI Communications, Inc., both
wholly-owned subsidiaries of Tele-Communications, Inc. ('TCI'), in which
capacity he has been responsible for all Internet-related business activities of
TCI. From 1994 to 1996, Mr. Ravenel was Senior Vice President and Chief
Operating Officer of TCI Technology Ventures, Inc. ('TCI Technology'), a
division of TCI, and, from 1991 to 1994, he served as Senior Vice President of
TCI Technology.

5
<PAGE>
James Scibelli has been a member of the Board of Directors since 1993 and
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.

Michael Tannen has been a member of the Board of Directors since 1989 and
is currently Chief Executive Officer of Tannen Media Ventures located in New
York, New York. Since 1988, Mr. Tannen has 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.
In 1992, Mr. Tannen also became Chief Executive Officer of Television Holdings
International, S.A., a wholly-owned subsidiary of A.B. Kinnevik.

The Board of Directors has an Audit Committee, the members of which are
Messrs. Coleman, Groman, Scibelli and Tannen. 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, 1996, the Audit
Committee met on two occasions.

The Board of Directors also has a Compensation and Stock Option Committee
(the 'Compensation Committee'), the members of which are Messrs. Coleman 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, 1996, the Compensation Committee met on
one occasion.

The Board of Directors also has an Executive Committee (the 'Executive
Committee'), which was established in November 1996, the members of which are
Messrs. B. Fischbach, Groman, Scibelli, Scoroposki and Tannen. The Executive
Committee has such powers as may be assigned to it by the Board of Directors
from time to time. It is currently charged with meeting with the management of
the Company and monitoring management efforts in respect of the Company's plans
for fiscal 1997.

During the fiscal year ended August 31, 1996, the Board of Directors met,
or acted by unanimous written consent, on nine 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.

<PAGE>

EXECUTIVE OFFICERS

Set forth below is certain information describing the Company's other
executive officer:

J. Mark Hattendorf, age 46, has been the Executive Vice President and Chief
Financial and Accounting Officer of the Company since July 1996. From October
1995 to June 1996, Mr. Hattendorf served as Senior Vice President and Chief
Financial Officer of Prodigy Services Company, an online consumer services
company. From September 1993 to October 1995, Mr. Hattendorf served as Senior
Vice President and Chief Financial Officer of Herbalife International Inc., a
nutritional direct selling organization. From 1991 to 1993, Mr. Hattendorf
served as a full time financial consultant to Canal+, a French entertainment
company engaged, among other things, in international satellite television
broadcasting.

Anthony Williams, age 39, has been Executive Vice President of the Company
since July 1996. Prior to such time and for more than the preceding five years,
Mr. Williams held a variety of positions with the Company. See 'Employment
Contracts, Termination of Employment and Change-in-Control Arrangements.'

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 four
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, 1996, 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 1996 $775,000 $ 0 150,000 $19,000
Co-Chairman and 1995 775,000 2,775,000 150,000 17,000
Chief Executive Officer 1994 775,000 2,685,000 300,000 14,500
James Scoroposki 1996 500,000 0 150,000 5,100
Co-Chairman, Senior 1995 500,000 2,350,000 150,000 4,600
Executive Vice President, 1994 483,000 2,685,000 300,000 4,300
Treasurer and Secretary
Robert Holmes (1) 1996 605,000 0 0 6,000
President and Chief 1995 550,000 2,350,000 325,000 6,000
Operating Officer 1994 500,000 1,467,000 450,000 5,400
J. Mark Hattendorf 1996 250,000 0 165,000 0
Executive Vice President
and Chief Financial
and Accounting Officer
Anthony Williams (1) 1996 225,000 0 0 2,100
Executive Vice President 1995 225,000 45,000 140,000 2,000
1994 200,000 100,000 200,000 1,800
</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) See also 'Employment Contracts, Termination of Employment and
Change-in-Control Arrangements.'

7
<PAGE>
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.

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, 1996.

<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 PRICE ($/SH) DATE ($) ($)
- ------------------------- ---------- ---------- ------------ ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Gregory E. Fischbach..... 150,000 3.7% $7.50 07/23/2006 $ 860,215 $ 2,036,123
James Scoroposki......... 150,000 3.7 7.50 07/23/2006 860,215 2,036,123
Robert Holmes............ 0 N/A N/A N/A N/A N/A
J. Mark Hattendorf(1).... 39,999 1.0 7.50 07/23/2006 229,385 542,953
125,001 3.1 6.38 07/23/2006 856,852 1,836,784
Anthony Williams......... 0 N/A N/A N/A N/A N/A
All Stockholders(2) 255,697,943 647,988,790
</TABLE>

- ------------------
(1) On October 28, 1996, the Company granted to Mr. Hattendorf options to
purchase an aggregate of 165,000 shares of Common Stock at an exercise price
of $3.94 per share, which options were granted in lieu of, and subject to
the cancellation of, the options referred to above.

(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, 1996 by the Named
Executive Officers and the value at August 31, 1996 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 1,365,000/300,000 $ 5,807,814/93,750
James Scoroposki......... 0 0 1,365,000/300,000 $ 5,807,814/93,750
Robert Holmes(2)......... 0 0 1,342,085/316,667 $ 4,505,771/0
J. Mark Hattendorf(3).... 0 0 0/165,000 $ 0/243,751
Anthony Williams(2)...... 0 0 377,166/165,334 $ 1,034,375/0
</TABLE>

- ------------------
(1) Fair market value of securities underlying the options at fiscal year end
minus the exercise price of the options.

(2) See also 'Employment Contracts, Termination of Employment and
Change-in-Control Arrangements.'

(3) On October 28, 1996, the Company granted to Mr. Hattendorf options to
purchase an aggregate of 165,000 shares of Common Stock at an exercise price
of $3.94 per share, which options were granted in lieu of, and subject to
the cancellation of, the options referred to above.

8
<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.'

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. Gregory Fischbach's employment as President
and Chief Executive Officer and for Mr. Scoroposki's employment as Senior
Executive Vice President, Secretary and Treasurer, for terms expiring in August
2000.

The agreements with Messrs. Gregory 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. Gregory Fischbach and Scoroposki with $2 million term
life insurance and disability insurance.

If the employment agreement of either of Messrs. Gregory 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.
Gregory 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. Robert Holmes for his
employment as President and Chief Operating Officer, which provides for a
current annual base salary of $605,000. 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 the 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 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. In October 1996, Mr. Holmes relinquished his roles as President and
Chief Operating Officer, but remains an employee of the Company under the
existing agreement in principle as a special advisor to the Board reporting to
Mr. Gregory Fischbach. On February 3, 1997, Mr. Holmes resigned his position as
a director of the Company and of its subsidiaries. The Company has had
discussions with Mr. Holmes with respect to negotiating his severance from the
Company.

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. In July
1996, Mr. Williams relinquished his roles as Chief Financial and Accounting
Officer, but retains his role as Executive Vice President under the terms of the
existing agreement in principle. The agreement expires on August 31, 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

<PAGE>

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) one year's base salary and (ii)
two times the bonus paid to him for the fiscal year immediately preceding any
termination of his employment. The Company has had discussions with Mr. Williams
with respect to negotiating his severance from the Company.

Each of the agreements with Messrs. Gregory 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 (including all applicable taxes on
such indemnification payment).

Each of the agreements with Messrs. Gregory 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. Gregory 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.

The Company has an employment agreement with Mr. Hattendorf for his
employment as Chief Financial Officer of the Company, which provides for a
current annual base salary of $275,000. Under the agreement with Mr. Hattendorf,
if his employment is terminated for any reason other than for cause, Mr.
Hattendorf is entitled to receive severance benefits equal to the total of (i)
nine months of his then-applicable base salary and (ii) the cost of outplacement
services (not to exceed $7,500).

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 8 and 17.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee are Michael Tannen and James
Scibelli, who are intended to be 'non-employee directors' within the meaning of
Rule 16b-3(b)(3)(i) promulgated under the Exchange Act and 'outside directors'
within the contemplation of section 162(m)(4)(C)(i) of the Internal Revenue Code
of 1986, as amended.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The Company believes that, during the fiscal year ended August 31, 1996,
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 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 historical 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 future success.
Therefore, the primary

<PAGE>

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 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

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 two 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 and to the Company's

<PAGE>

other executive officers and its other employees by the Compensation Committee
based on the recommendation of the Co-Chairmen of the Board 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. The current agreement with the Chief Executive
Officer, which expires in August 2000, 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, if any, 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, 1996, 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 400,000 shares in
any single year.

Unlike most large media and entertainment companies, no pension plan 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 compared to competitor companies during
the five years preceding the execution of the current agreement;

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
Kenneth Coleman James Scibelli

<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, 1996.

[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

<TABLE>
<S> <C>
Value of $100 invested over five years:

Acclaim Entertainment, Inc. Common Stock............................................................... $ 263.50
The Nasdaq Stock Market (US Companies) Index........................................................... $ 217.15
Dow Jones Entertainment and Leisure-Recreational Products and Services Index........................... $ 193.07
</TABLE>

<PAGE>

AMENDMENT TO THE COMPANY'S
1988 STOCK OPTION PLAN

The Company currently has in effect the Plan, pursuant to which 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. The Plan has only approximately
400,000 shares remaining available for grant which, the Board of Directors
believes, is inadequate for future requirements. 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 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.

The Plan currently authorizes the Company to grant options 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. In addition, options may 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.

The Board of Directors unanimously adopted and recommends that the
stockholders approve an increase of 10,000,000 in the number of shares with
respect to which options may be granted pursuant to the Plan, thus increasing
the shares of Common Stock subject to the Plan from 15,000,000 to 25,000,000.

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 INCREASE IN THE
NUMBER OF SHARES SUBJECT TO THE PLAN DISCUSSED ABOVE.

If the proposed amendment to the Plan is not approved, the Plan will
continue to remain in effect in its present form.

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.

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. Coleman 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. If the proposed increase in the number of
shares subject to the Plan is adopted, such amount will be increased to
25,000,000 shares.

14
<PAGE>
The closing sale price of the Common Stock on The Nasdaq Stock Market's
National Market on July 25, 1997 was $4.38 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 July 25, 1997, approximately 700 employees persons were
eligible to receive options and options had been granted to approximately 670
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 400,000 shares of Common Stock.

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. In addition,
options may 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.

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.

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 Internal Revenue Code of 1986, as amended (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.

<PAGE>

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.

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 (compensation) 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 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. However, for
purposes of the alternative minimum tax, the spread on the exercise of an
incentive stock option will be considered as part of the optionee's income.

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 (compensation)
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.

16
<PAGE>
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.
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.

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, 1996, subject to approval by the stockholders of the proposed
increase from 15,000,000 to 25,000,000 shares in the number of shares subject to
the Plan, 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(1) PRICE
- ------------------------------ ----------------------------------- ---------------- --------------
<S> <C> <C> <C>
Gregory Fischbach............. Chief Executive Officer -0- N/A
James Scoroposki.............. Senior Executive Vice President,
Secretary and Treasurer -0- N/A
J. Mark Hattendorf(2)......... Executive Vice President and Chief
Financial and Accounting Officer -0- N/A
Robert Holmes................. President, Chief Operating Officer
and General Manager -0- N/A
Anthony Williams.............. Executive Vice President -0- N/A
All executive officers as a
group
(5 persons)(2).............. -0- N/A
All non-employee directors as
a group (6 persons)(3)...... -0- N/A
All employees (except
executive officers) as a
group(4).................... -0- N/A
</TABLE>

- ------------------
(1) For information with respect to options granted to the Named Executive
Officers in the year ended August 31, 1996 under the Plan as currently in
effect, see page 8.

(2) In February 1997, the Compensation Committee granted Mr. Hattendorf options
to purchase 150,000 shares at an exercise price of $4.88 per share, subject
to stockholder approval of the proposed amendment to the Plan.

(3) In February 1997, the Compensation Committee granted Mr. Bernard Fischbach
options to purchase 200,000 shares at an exercise price of $4.88 per share,
subject to stockholder approval of the proposed amendment to the Plan.

(4) In February 1997, the Compensation Committee granted certain employees
options to purchase an aggregate of 4,100,000 shares at an exercise price of
$4.88 per share, subject to stockholder approval of the proposed amendment
to the Plan. In addition, in April 1997, the Compensation Committee (i)
granted to certain employees options to purchase an aggregate of 225,000
shares at an exercise price of $3.38 per share and (ii) granted to certain
employees, other than directors, options to purchase an aggregate of
3,621,000 shares at an exercise price of $3.38 per share (which options were
granted in lieu of previously granted options whose exercise price was
higher than $3.38 per share), subject to stockholder approval of the
proposed amendment to the Plan.

<PAGE>

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE
PROPOSAL TO INCREASE THE NUMBER OF SHARES SUBJECT TO THE PLAN.

SELECTION OF AUDITORS

At the recommendation of the Audit Committee, the Board of Directors has
selected KPMG Peat Marwick LLP to serve as auditors of the Company for the
fiscal year ending August 31, 1997. Although stockholder ratification of the
Board of Directors' action in this respect is not required, the Board of
Directors considers it desirable for stockholders to pass upon the selection of
auditors and, if the stockholders disapprove of the selection, intends to
consider the selection of other auditors for the current fiscal year. UNLESS
OTHERWISE INDICATED, THE ACCOMPANYING FORM OF PROXY WILL BE VOTED FOR THE
RATIFICATION OF THE APPOINTMENT OF THE AUDITORS.

Representatives of KPMG Peat Marwick LLP are expected to be present at the
Meeting, will have an opportunity to make a statement if they so desire and will
be available to respond to appropriate questions from stockholders.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE
RATIFICATION OF THE APPOINTMENT OF THE AUDITORS.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

On July 24, 1996, at the recommendation of its Audit Committee (the 'Audit
Committee'), the Board of Directors of the Company adopted a resolution (i) not
to retain GT as the Company's independent auditors for the fiscal year ending
August 31, 1996 and (ii) to engage KPMG as the Company's independent auditors
for the fiscal year ending August 31, 1996. GT was so advised on July 25, 1996.

The reports of GT on the Company's Consolidated Financial Statements as of
and for the two years ended August 31, 1995 and 1994 did not contain an adverse
opinion or a disclaimer of opinion nor were they qualified or modified as to
uncertainty, audit scope or accounting principles, except that the report of GT
on the Company's financial statements for the fiscal year ended August 31, 1995
contains a modification as to uncertainty relating to the eventual outcome of
certain class action lawsuits in which the Company and certain of its officers
and directors have been named as defendants.

During the Company's two most recent fiscal years ended August 31, 1995 and
in the interim period from September 1, 1995 through July 24, 1996 there were no
disagreements with GT on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of GT, would have caused them
to make reference thereto in their report(s) on the Company's financial
statements for such fiscal year(s) or for such interim period, except:

(a) A matter, which was resolved to GT's satisfaction, in respect of
the timing of the recognition of certain revenues from nonrefundable,
recoupable exclusivity fees, which had been included in revenues for the
fourth quarter of fiscal 1995 in the October 1995 announcement by the

Company of its financial results for fiscal 1995. The Audit Committee
and/or senior management of the Company, on the one hand, and GT, on the
other hand, had several discussions in respect of such matter. The matter
was resolved by the Company revising such announced financial results to
exclude such revenues from its financial results for fiscal 1995.

(b) A matter, which was resolved to GT's satisfaction, in respect of
the balance sheet presentation of a $19 million loan from Midland Bank plc.
As of August 31, 1995, the Company did not meet a financial ratio covenant
in the loan agreement relating to such loan. The Company's senior
management and GT discussed this matter, which was resolved by the Company
reclassifying the $19 million loan from long term debt to current
liabilities.

In addition, GT proposed several audit adjustments that were not recorded
by the Company because they were considered by the Company and GT to be
immaterial to the Company's consolidated financial statements for fiscal 1995
taken as a whole.

<PAGE>

During the Company's two most recent fiscal years ended August 31, 1995 and
the interim period from September 1, 1995 through July 24, 1996, there were no
'reportable events' as defined in Item 304(a)(1)(v) of Regulation S-K
('Regulation S-K') promulgated under the Securities Exchange Act of 1934, except
as follows:

By letter dated April 15, 1996, GT advised the Company that they had
noted certain internal control structure matters that related to
significant deficiencies in the design or operation of the Company's
internal control structure, relating to the quality and depth of financial
management, analysis of significant estimates, lack of internal audit
function and accounting for capitalized software costs, that, in their
judgment, could adversely affect the Company's ability to record, process,
summarize and report financial data consistent with the assertions of
management in the Company's financial statements.

In May 1996, KPMG was retained to conduct a review of certain internal
controls to identify and assist the Company to implement any additional
necessary steps to strengthen its internal controls.

A member of the Audit Committee and/or senior management has discussed the
subject matter of each item described above with GT, and the Company has
authorized GT to respond fully to all inquiries of KPMG concerning the subject
matter thereof.

In response to the Company's draft Form 8-K filing presented to GT, the
Company received the following letter dated July 31, 1996 from GT which was
filed as an Exhibit to the Company's Form 8-K filed with the Securities and
Exchange Commission:

Securities and Exchange Commission
Washington, D.C. 20549
Re: Acclaim Entertainment, Inc.
File No. 0-16986

Dear Sir or Madam:

We have read Item 4 of the Form 8-K of Acclaim Entertainment, Inc. We
believe it should be supplemented and, in part, amended to reflect the
following:

With regard to the interim period from September 1, 1995 through July
24, 1996, we were not engaged to perform timely reviews of the fiscal 1996
quarterly consolidated financial statements of the Registrant. On July 17,
1996, however, we were engaged to perform a review of the quarterly
consolidated financial statements of the Registrant for each of the first
three quarters of the fiscal year ending August 31, 1996 in respect of the
Registrant's filing on Form S-3 on behalf of certain selling shareholders.
On July 25, 1996, the Registrant orally advised us of our termination as
their independent accountants. In connection with such review, certain
matters, which were still pending at the time of our termination, may have
resulted in additional disagreements and/or reportable events had we
completed our procedures. These matters included the following:

o the recognition and/or disclosure of a settlement offer
pertaining to the Lazer-Tron class action litigations.

o the recoverability assessment pertaining to excess of costs over
net assets acquired attributable to Acclaim Comics, Inc.

o the findings of the 'internal controls audit' being conducted by
KPMG Peat Marwick.

With regard to reportable events, we had issued our Internal Control
Structure/Reportable Conditions letter dated April 15, 1996 (an initial draft of
which was provided to the Registrant on January 25, 1996) summarizing reportable
conditions and recommendations which specifically addressed the Registrant's
quality and depth of financial management, analysis of significant estimates,
lack of internal audit function and accounting for capitalized software costs.
Further, the reportable conditions discussed therein are those that we had noted
as of December 8, 1995 in conjunction with our audit of the Registrant's
consolidated financial statements as of and for the year ended August 31, 1995;
we have not updated our procedures regarding such matters since that date. We
have not discussed with the Audit Committee the subject matter of our Internal
Control Structure/Reportable Conditions letter, despite our requests to the
Registrant to meet with the Audit Committee for that purpose.

With regard to the subject matter of the disagreements set forth in Item 4
which are contained in more detail in our Report to the Audit Committee dated
April 15, 1996 (an initial draft of which was provided to the

<PAGE>

Registrant on January 18, 1996), please be advised that we had a telephonic
discussion on December 4, 1995 with the Audit Committee addressing only
disagreements that had occurred through that date.

In connection with the Registrant's filing on Form S-3 referred to above,
we requested the Proxy Statement for the upcoming Annual Shareholders' meeting
which would be incorporated by reference in the Form S-3, thereby forming a part
of the registration statement. Professional standards require that we read such
information. We were informed by the Registrant as recently as July 23, 1996
that the Proxy Statement was not available for our review. On July 24, 1996,
through EDGAR, we independently obtained a copy of such requested Proxy
Statement and learned that the Registrant had filed such Proxy Statement with
the Securities and Exchange Commission on July 18, 1996. We viewed this as a
restriction placed by the Registrant on information requested by us during the
conduct of our procedures.

With regard to the Registrant's retention of KPMG Peat Marwick to conduct
an 'internal controls audit,' we did not discuss this matter with the
Registrant's Audit Committee and/or senior management. However, as described in
our Report to the Audit Committee dated April 15, 1996 (an initial draft of
which was provided to the Registrant on January 18, 1996), we were informed by
management that the Registrant's legal counsel retained KPMG Peat Marwick to
assist in responding to the Securities and Exchange Commission's Division of
Enforcement. Further, we have no knowledge as to the specific matters on which
KPMG Peat Marwick was consulted.

* * * * *

With regard to the following statements made by the Registrant in Item 4 of
Form 8-K dated July 24, 1996, we have no basis for agreeing or disagreeing with:

o the first sentence of Item 4 with respect to the July 24, 1996 Board
of Directors resolution.

o the last sentence to the first paragraph of Item 4 with respect to
the Registrant's press release and any information contained
therein.

o the last sentence to the second subparagraph (b) of the third
paragraph of Item 4 with respect to the matter referred to in such
paragraph being resolved with the bank.

o the sixth paragraph of Item 4 with respect to the May 1996 retention
of KPMG to conduct an 'internal controls audit.'

Very truly yours,

GRANT THORNTON LLP

In response to GT's letter of July 31, 1996, the Company notes the
following:

(a) Notwithstanding the fact that GT was not retained to perform
formal reviews of the Company's financial statements for the first, second
and third quarters of fiscal 1996, GT provided the Company with extensive
advice and consultation regarding the appropriate presentation of such
quarterly financial statements and also advised on the accounting theories
and methodologies applied; and

(b) In connection with GT's review of the Company's quarterly
financial statements for each of the first three quarters of fiscal 1996 in
respect of the Company's Registration Statement on Form S-3, GT advised the
Company on Tuesday, July 23, 1996, that it had completed its review
procedures, that there were no outstanding issues for further discussion
and that GT would release its consent in connection with the Form S-3. In
addition, on Tuesday, July 23, 1996, the Company delivered to GT its
management representation letter, which generally signifies the completion
of the review procedure. The Company delivered to GT a copy of the Proxy
Statement relating to its annual meeting of stockholders to be held on
August 7, 1996. On July 24, 1996, the Company was advised by GT that, upon
review of the Proxy Statement, GT noted that auditors had not yet been
retained for fiscal 1996 and accordingly, GT would not release its consent
unless they were appointed as the Company's auditors for fiscal 1996. GT
subsequently raised the matters discussed in GT's letter, which are
disputed by the Company as indicated above.

20
<PAGE>
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, 1997. For the fiscal year ended August 31, 1996, the commissions paid
by the Company to these sales representative organizations amounted to
approximately $515,000. 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 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 August 31,
1997. For the fiscal year ended August 31, 1996, payments made by the Company to
The Crescent Club amounted to approximately $83,000.

The firm of Fischbach, Perlstein, Liebermann & 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, 1997. Payments made by

the Company for said services amounted to approximately $858,000 for the fiscal
year ended August 31, 1996.

The firm of Groman, Ross and 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, 1997. Payments made by the Company for
said services amounted to approximately $43,000 for the fiscal year ended August
31, 1996.

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 April 22, 1998 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, 1996
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 25, 1997

<PAGE>
ACCLAIM ENTERTAINMENT, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 17, 1997

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, September 17, 1997, at 9:30 A.M. at The Metropolitan Club, 3 Glen
Cove Road, Glen Cove, New York. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSALS 1, 2 AND 3.

1. ELECTION OF DIRECTORS
/ / FOR all nominees / / WITHHOLD AUTHORITY to vote
for all nominees

Gregory E. Fischbach, James Scoroposki, Kenneth Coleman, Bernard J. Fischbach,
Robert H. Groman, Bruce W. Ravenel, James Scibelli and Michael Tannen.

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 proposed amendment to the Company's 1988 Stock Option Plan as
set forth in the accompanying Proxy Statement.

/ / FOR / / AGAINST / / ABSTAIN
<PAGE>

3. RATIFICATION of the appointment of KPMG Peat Marwick LLP as independent
auditors for the year ending August 31, 1997.

/ / FOR / / AGAINST / / ABSTAIN

4. The proxy is authorized to transact such other business as may properly come
before the meeting.

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: ________________________ , 1997
______________________________________
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.