EXTENSION AGREEMENT

Exhibit 10.50

EXTENSION AGREEMENT

THIS EXTENSION AGREEMENT (this “Agreement”) is entered into this as of this 4th day of August, 2004 by and among ACCLAIM ENTERTAINMENT, INC. (“AEI”), ACCLAIM DISTRIBUTION INC. (“ADI”), LJN TOYS, LTD. (“LJN”), ACCLAIM ENTERTAINMENT CANADA, LTD. (“Canada”) and ARENA ENTERTAINMENT INC. (“Arena”; together with AEI, ADI, LJN and Canada, individually, a “Borrower” and collectively, the “Borrowers”), OYSTER BAY WAREHOUSE CORP. (“Warehouse”), ACCLAIM CORPORATE CENTER 1, INC. (“Corporate”), IGUANA ENTERTAINMENT, INC. (“Iguana”), ACCLAIM ENTERTAINMENT, LTD. (“Acclaim Limited”), ACCLAIM JAPAN, LTD. (“Acclaim Japan”), ACCLAIM ENTERTAINMENT, G.m.b.H. (“Acclaim Germany”), ACCLAIM ENTERTAINMENT, S.A. (“Acclaim France”) and ANNODEUS INC. (“Annodeus”; and together with Warehouse, Corporate, Iguana, Acclaim Limited, Acclaim Japan, Acclaim Germany, and Acclaim France, each individually, a “Corporate Guarantor” and collectively, the “Corporate Guarantors”), and GMAC COMMERCIAL FINANCE LLC, as successor by merger to GMAC COMMERCIAL CREDIT LLC, formerly known as BNY Factoring LLC, and successor by merger to BNY Financial Corporation (“Lender”).

BACKGROUND

Reference is made to the Revolving Credit and Security Agreement, dated as of January 1, 1993, by and among Borrowers and Lender, as amended and restated on February 28, 1995 (as so amended and as the same may now exist or may hereafter be amended, restated, renewed, replaced, extended, substituted, supplemented or otherwise modified, the “Credit Agreement”); the Restated and Amended Factoring Agreement bearing the effective date as of February 1, 1995 (the “AEI Factoring Agreement”) by and between AEI and Lender; the Restated and Amended Factoring Agreement bearing the effective date as of January 1, 1995 (the “ADI Factoring Agreement”) by and between ADI and Lender; the Restated and Amended Factoring Agreement bearing the effective date of January 1, 1995 (the “LJN Factoring Agreement”) by and between LJN and Lender; the Restated and Amended Factoring Agreement bearing the effective date of January 1, 1995 (the “Canada Factoring Agreement”) by and between Canada and Lender; and the Restated and Amended Factoring Agreement bearing the effective date as of January 1, 1995 by and between Arena and Lender (the “Arena Factoring Agreement”; and together with the AEI Factoring Agreement, the ADI Factoring Agreement, the LJN Factoring Agreement and the Canada Factoring Agreement, as the same may now exist or may hereafter be amended, restated, renewed, replaced, extended, substituted, supplemented or otherwise modified, collectively, the “Factoring Agreements”); and to all of the notes, instruments, guarantees, agreements and other documents executed and/or delivered in connection with the Credit Agreement and the Factoring Agreements (all of the foregoing, as the same now exist, or may hereafter be

amended, restated, renewed, extended, supplemented, substituted, replaced or otherwise modified, collectively, the “Other Documents”; and together with the Credit Agreement and the Factoring Agreements, collectively, the “Loan Documents”).

Reference is further made to that certain (a) Waiver and Amendment Agreement dated May 4, 2004 (“Waiver and Amendment”) among the Borrowers, the Corporate Guarantors and Lender, pursuant to which, among other things, the Term under this Loan Document was amended to terminate on June 20, 2004 and the Borrowers agreed to pay and satisfy in full all of the Obligations on or before June 20, 2004 (the “Termination Date”); and (b) Extension Agreement dated as of June 18, 2004 among the Borrowers, the Corporate Guarantors and Lender (the “July 18, 2004 Extension Agreement”), pursuant to which, among other things, the Termination Date was extended to August 4, 2004, subject to the terms and conditions therein;

Borrowers have advised Lender that Borrowers are in active negotiations with certain financial institutions to obtain the financing to pay and satisfy in full all of the Obligations. Borrowers have further advised Lender that such negotiations and the documentation of the replacement credit facilities will not be concluded prior to the Termination Date. Borrowers have requested that Lender extend the Termination Date to August 20, 2004, and as a one-time accommodation to Borrowers, Lender has agreed to do so, subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

1. Extension of Termination Date. At the request of Borrowers, as a one-time accommodation and subject to the terms and conditions contained herein, and notwithstanding anything to the contrary set forth in the Loan Documents, Lender agrees that the Termination Date shall be extended, and is hereby amended and restated to mean, August 20, 2004. Notwithstanding anything to the contrary set forth in the Credit Agreement or in the other Loan Documents, Borrowers shall indefeasibly pay and satisfy in full all Obligations of Borrowers to Lender under the Credit Agreement and the other Loan Documents on or before August 20, 2004.

2. Conditions to Extension of Termination Date. The extension of the Termination Date set forth in the immediately preceding paragraph is conditioned on compliance by Borrowers and Guarantors with the following terms and conditions:

(a) Borrowers delivered to Lender a draft Term Sheet - Acclaim Entertainment on August 2, 2004, contemplating a $65 million Senior Secured Credit Facility to be provided to the Borrowers and Guarantors (the “Replacement Facility”) by a financial institution (the “Replacement Lender”). Borrowers shall provide Lender with frequent updates, but no less frequently than the Monday and Friday of each week, as to the status of the Borrowers’ progress in the documentation, negotiation and closing of the Replacement Facility. Borrowers shall immediately provide Lender with notice of any termination or suspension of active negotiations with respect to the Replacement Facility

or if the Replacement Lender advises Borrowers that the Replacement Lender has elected not to continue negotiation of the Replacement Facility. Borrowers’ acknowledge, confirm and agree that (i) any suspension or termination of active negotiations with respect to the Replacement Facility or (ii) if the Replacement Lender advises Borrowers that Replacement Lender elects not to continue negotiation of the Replacement Facility, shall constitute a default hereunder and an Event of Default under the Loan Documents.

(b) The Borrowers have prepared and submitted to Lender a “Domestic Forecast”, annexed hereto as Exhibit A, reflecting the Borrowers’ projected weekly cash flow through and including the week ending August 20, 2004. Borrowers will supplement the Domestic Forecast through the end of the Term upon Lender’s request and such supplement shall be in form and content satisfactory to Lender. Borrowers hereby acknowledge, confirm and agree that the Borrowers will, on Monday of each week for the immediately prior week, submit to Lender Borrowers’ actual cash flow results for such prior week in the same format as the “Domestic Forecast”. If, for any such week, the actual weekly cash flow results for the line items identified as Ending Account Balance, GMAC Availability, Gross Total Collateral, Total Investment, Ending Balances - Net A/R Outstanding, Net Eligible A/R Outstanding, GMAC Drawdowns, Total Disbursements and Remaining Operating Cash, negatively deviate from the projections for such week set forth on Exhibit A by more than ten percent (10%), then such deviation shall constitute an Event of Default under the