B. The Employment Agreement ‘t On or about November 23, 1998, Marvel and Lee entered into a new employment ‘agreement dated as of November 1, 1998 (the “Agreement”), a copy of which is annexed to the Lipson declaration as exhibit 2. The term of Lee’s employment under the Agreement began oh Rates 1, 1998 and ends at the time of his death. Lipson declaration, exhibit 2. Under paragraph 2 of the Agreement, Lee is not required to devote more than ten (0 fifteen hours per week to Marvel’s affairs. As consideration for his services, Lee was entitled to receive an annual base salary of $810,000 for the years beginning November 1, 1998 and 1999, $850,000 for the year beginning November 1, 2000, $900,000 for the year beginning November 1, 2001 and $1,000,000 for the year beginning November 1, 2002 and each year thereafter until his death. Upon Lee’s death, the Agreement provides for Lee’s wife to receive survivor payments in an amount equal to 50% of Lee’s base salary as of the time of his death through the time of her death (currently $500,000), and for Lee’s daughter thereafter to receive survivor payments of $100,000 per year for five years. Lee also received 150,000 valuable stock options under paragraph 4(c) of the Agreement which Lee has alread, exercised for a net gain of approximately $1.4 million. Lipson declaration, 4 13 and exhibit 2 at 4 4(c). Paragraph 4(f) of the Agreement, the fulchym of the dispute in this litigation, Provided for Lee to be paid a participation in certain profits derived by Marvel from profits | tenerated by movie and television productions uilizing Marvel characters. That paragraph (the “Profit Participation Provision”) provides, in relevant part In addition, you shall be paid a participation equal to 10% of the profits derived during your life by Marvel (including subsidiaries and affiliates) from the profits of any live action or animated television or movie (including ancillary rights) 6 5‘ productions utilizing Marvel characters. This participation is not to be derived from the fee charged by Marvel for the licensing of the product or of the characters for merchandise or otherwise. (Emphasis added] Lipson declaration, exhibit 2 at 4(f). Under the Profit Participation Provision, Lee only becomes entitled to payment when, in the case of a production undertaken by Marvel itself, profits are generated ot, in the case where Marvel has licensed a third party to produce a movie or television series, when Marvel's agreement with the third patty producer entitles Marvel to participate in the third party Producer’s profits, the third party producer realizes profits and remits payment thereof to Marvel, and when the amount paid to Marvel exceeds the costs incurred by Marvel in connection with the entire transaction with such third party producer. Based on these cti Lee has not become entitled to receive any payments under the Profit Participation Provision. Lipson declaration, { 15. C. Marvel's Merchandising Activities During the period commencing November 1, 1998, licensing the use of its ness activities. characters for merchandise has continued to be one of Marvel's principal bu Between November 1, 1998 and today, Marvel has entered into over a thousand merchandising agreements pursuant to which it has licensed the right o use its characters to a third party in connection with toys, games and puzzles, gifts and collectibles, apparel and accessories, interactive games, arcade games and electronics, stationary and school products, health and ‘ beauty products, snack foods and beverages, sporting goods, party supplies and amusement destinations throughout the world. Merchandising has generated hundreds of millions of dollars : in revenue to Marvel during this period. Lipson declaration, 16.D. The Commencement of this Action, the Discovery Dispute and the Instant Motion Lee commenced the instant action against Marvel and Marvel Character 3, Inc. | (“Characters”) on November 12, 2002.° The gravamen of the complaint, which is annexed to the Lipson declaration as exhibit 3, is the alleged breach by Marvel of the Agreement by failing to pay Lee the amounts owed to him pursuant to the Profit Participation Provision.’ Marvel answered the complaint on or about January 3, 2003, denying that it breached the Agreement in any way. Lipson declaration, exhibit 4 In connection with discovery, Lee propounded various document requests and interrogatories to Marvel in which Lee requested that Marvel produce and identify, inter alia, all documents concerning Marvel’s merchandising agreements and payments received by Marvel in connection with merchandising relating to movie and television productions. Because the plain language of the Agreement shows that Lee has no right to be paid a participation derived from the licensing of Marvel’s characters for merchandise, regardless of whether such merchandising * On September 18, 2003, Lee and Marvel enterci into a stipulation dismissing the action with prejudice with respect to Characters. The stipulation was so-ordered by the Court on October 16, 2003. Lipson declaration, exhibit 5 “ In is first cause of action, Lee seeks damages as a result of Marvel’s alleged breach of the Profit Participation Provision and of paragraph 2(c) of the Agreement, which Lee contends entitles him to be named executive producer or co-executive producer of any movie and i television productions utilizing Marvel characters. Lipson declaration, exhibit 3 at $f] 34-37. In his second cause of action, Lee seeks damages as a result of Marvel's alleged breach of a duty of good faith and fair dealing. Id. at $¥ 38-43. In his third cause of action, Lee seeks an order. directing Marvel to comply with its alleged obligation to pay him any amounts supposedly owed to him pursuant to the Agreement and to provide Lee with an accounting. Jd. at 44-46, In his fourth cause of action, Lee seeks a declaration of his rights regarding the participation payable to him under the Agreement, id, at §§ 47-50. :