**NOTE:
Confidential treatment has been requested for certain portions of this document.
Material that has been omitted from this document as filed on EDGAR is marked as
follows [**].**
****
 **EXHIBIT
10.37**
 **WIRELESS
DISTRIBUTION AGREEMENT**
  This
Wireless Distribution Agreement (the “Agreement”) is made as of November 1, 2004
(the “Effective Date”), by and between Playboy.com, Inc., a Delaware corporation
with offices at 730 Fifth Avenue, New York, New York 10019, U.S.A.
(“Playboy.com”), and Dwango North America Corp., a Nevada corporation with
principal offices at 200 West Mercer Street, Suite 501, Seattle, Washington
98119 (“Dwango”).
  **WHEREAS** , Playboy.com
desires to grant to Dwango, and Dwango desires to accept, certain rights to
distribute the Distributed Content to Mobile Devices in the Territory on
permitted Networks (each as defined below) in accordance with the following
terms and conditions;
  **NOW,
THEREFORE** , in
consideration of the mutual promises herein contained, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as
follows:
  1  DEFINITIONS.
  1.1 “Content
Enablers ” shall mean entities that translate, encode, localize, aggregate
and/or otherwise enable the Distributed Content to be distributed on the Mobile
Entertainment Service (as defined below) by the Telecoms under a sublicense
agreement with Dwango pursuant to Section 2.3 below.
  1.2 “Distributed
Content” shall mean (a) Dwango Created Content (if text content, in the English
language or other languages at Playboy.com’s discretion), (b) Dwango Acquired
Material (as defined below), and (c) Playboy Content, in each case as branded
with the Playboy.com Properties and distributed by Dwango in accordance with the
terms and conditions of this Agreement. All Distributed Content shall be subject
to Playboy.com’s advance written approval. “Distributed Content” does not and
will not include: (i) so-called “mobile commerce,” the sale of products or
services associated with the Playboy.com Properties, or otherwise; (ii)
minimally interactive streams of video content, whether via television broadcast
signal or otherwise, or other video programming ninety (90) minutes or longer in
a format similar to a television channel’s programming; or (iii) wager-based
gaming activities (e.g. gambling or betting).
  1.3 “Dwango
Acquired Material” shall mean Games, ring tones, audio clips, and other content
that has been specifically licensed, commissioned, or otherwise obtained by
Dwango for use as Distributed Content under the Agreement through an acquisition
of rights from a third party, all of which shall be subject to Playboy.com’s
approval prior to its inclusion within the Distributed Content. For purposes of
clarification, Dwango Acquired Content shall not include any Playboy Content or
the Playboy.com Properties.
  1.4 “Dwango
Created Content” shall mean Games, ring tones, audio clips, and other content
that has been created by Dwango for use as Distributed Content under the
Agreement, all of which shall be subject to Playboy.com’s approval prior to its
inclusion within the Distributed Content.
 
  1
  1.5 “Games”
shall mean for-fun (i.e., not involving gambling or betting of any type)
interactive games enabled for use on Mobile Devices that have either been
created by or for Dwango or licensed by Dwango from a third party, including any
modifications, additions, enhancements and upgrades thereto.
  1.6 “Mobile
Device” means a mobile, wireless device existing as of the Effective Date or
developed thereafter during the Term that (i) is intended to be mobile and not
used at a fixed location and (ii) is primarily intended to receive voice, and/or
data.. The definition of “Mobile Device” includes devices commonly referred to
as “cell phones,” “mobile phones” or “PDAs” used as mobile phones on Networks
and, for the avoidance of doubt, excludes all computers (e.g., laptops and
desktops), non-mobile television devices and other devices that function as
receivers or set-top box for a fixed display device or fixed monitor. Final
determination of acceptable Mobile Devices will be at Playboy.com’s reasonable
discretion.
  1.7 “Mobile
Entertainment Service” means Dwango’s technology platform that permits
Subscribers to browse, sample, download, play, use and purchase Games, ring
tones and other content and services that have been distributed via Networks to
Mobile Devices pursuant to this Agreement. The Mobile Entertainment Service
shall include any
modifications, additions, enhancements and upgrades to the Mobile Entertainment
Service, but shall in no event include any Playboy Content or Playboy.com
Properties. As between Playboy.com and Dwango, title to and all ownership rights
of, in and to the Mobile Entertainment Service, and any intellectual property
rights therein, are and will remain the property of Dwango during and after the
Term, which shall have the exclusive right to protect the same by copyright,
trademark, patent or otherwise.
  1.8 “Networks”
shall mean SMS, EMS, MMS, WAP, GSM, TDMA, CDMA, PDC, GPRS, UMTS or other
applicable wireless messaging (including without limitation smart messaging) or
wireless network standards primarily intended to transmit voice and data to
Mobile Devices by Telecoms. “Networks” shall specifically exclude wireless
technologies that transmit over networks primarily used for other purposes or
formats, including, but not limited to, wireless fidelity (wi-fi) Internet via
local area networks (e.g., IEEE specification 802.11a/b/g), digital television
programming, direct satellite transmission, infra-red technologies, server
message block (SMB) and Bluetooth technologies. Final determination of
acceptable Networks will be at Playboy.com’s reasonable discretion.
  1.9 “Playboy
Content” shall mean content, in any medium and whether or not Playboy-branded,
that is (a) licensed and delivered to Dwango by Playboy.com pursuant to this
Agreement, and (b) that Playboy.com’s rights and permissions department has
granted Dwango express prior written authorization to distribute hereunder as
Distributed Content. Playboy Content may include, without limitation, (i) video,
audio-visual, and audio works, (ii) photographs and still images, and (iii)
textual works, in each case similar in style and content to that displayed from
time to time at http:// www.playboy.com . For
purposes of this Agreement, Playboy Content shall include any content created by
or for Dwango from Playboy Content, such that the resulting work constitutes a
derivative work of any Playboy Content, other than solely as a result of its
branding with Playboy.com Properties. This shall include, without limitation,
any encoded, translated, dubbed or subtitled versions of Playboy
Content.
 
 
 2
  1.10    
“Playboy.com Properties” shall mean the copyrights, trademarks, trade names,
service marks and/or logos owned or used by Playboy.com and identified on Exhibit
A hereto.
  1.11    
“Subscribers” shall mean individual customers of Dwango or a Dwango sublicensee
who (a) are at least (18) years old or the minimum age necessary under law to
view applicable Playboy Content, (b) reside in the Territory, (c) pay an
applicable access, subscription or download fee specifically to receive the
Distributed Content on their Mobile Devices, and (d) complete a registration
process that includes, without limitation, acceptance of the applicable terms of
use and Privacy Policy pursuant to Section 3.5 below.
  1.12    
“Telecoms” shall mean, for purposes of this Agreement, any entity that, in its
ordinary and primary course of business, utilizes the Networks to carry the
Distributed Content via Mobile Devices to Subscribers, it being understood that
any and all Telecoms through which Dwango proposes to distribute and/or promote
the Distributed Content will be subject to Playboy.com's advance written
approval.
  1.13    
“Territory” shall mean Canada and the United States of America.
  2 LICENSE
GRANTS .
  2.1  Playboy
Content . Subject
to the terms and conditions set forth herein, Playboy.com hereby grants Dwango,
and Dwango hereby accepts, a non-exclusive (subject to Section 2.4 below),
non-sublicensable (except as provided in Section 2.3 below), non-transferable,
non-assignable, revocable, limited right and license to distribute the Playboy
Content via the Networks to Telecoms and Subscribers solely in the Territory and
during the Term. For the avoidance of doubt, Dwango shall have no right or
license to distribute any Playboy Content without Playboy.com’s express prior
written authorization.
  2.2 Playboy.com
Properties . Subject
to the terms and conditions set forth herein, Playboy.com hereby grants Dwango,
and Dwango hereby accepts, a non-exclusive (subject to Section 2.4 below),
non-sublicensable (except as provided in Section 2.3 below), non-transferable,
non-assignable right and license to use and reproduce the Playboy.com Properties
during the Term solely for the purpose of promoting and distributing Distributed
Content via the Networks to Telecoms and Subscribers in the Territory;
including, but not limited to, attaching and incorporating the Playboy.com
Properties to and into the Distributed Content.
  2.3 Sublicenses . Subject
to the terms and conditions set forth herein, Dwango may grant a non-exclusive,
non-transferable, non-assignable limited right and license to Telecoms to
promote, offer and distribute the Distributed Content to Subscribers via
Networks to Mobile Devices in the Territory; provided however, that Dwango may
only sublicense Distributed Content to such Telecoms as are approved in advance
and in writing by Playboy.com. Dwango shall ensure that each such sublicense (i)
be in a valid and binding writing; and (ii) be in accordance with this
Agreement’s terms and conditions. Furthermore, Dwango shall use commercially
reasonable efforts to ensure that each such sublicense provide that Playboy.com
is named as a third party beneficiary of such agreement. Upon request from
Playboy.com, Dwango shall verify to Playboy.com’s satisfaction that any
agreement entered into between Dwango and any sublicensee meets the requirements
set forth herein, shall provide copies of any such agreements and shall either
make any revisions Playboy.com reasonably requests or no longer sublicense
Playboy Content or Playboy.com Properties pursuant to such Agreement. Dwango
shall be primarily responsible to Playboy.com for all actions and omissions of
its sublicensees as if such actions and omissions were those of Dwango.
   3
  2.4 Limited
Exclusivity .
  2.4.1 Notwithstanding
the non-exclusive nature of the license granted herein, the parties hereby agree
that, during the Term, with the exception of Games (as defined above),
Playboy.com shall not license to any third party the right to distribute the
Playboy-branded photographs, still images, or purely textual works that are
included in the Playboy Content directly through any Telecom in the
Territory.
  2.4.2 For the
avoidance of doubt, the license granted to Dwango in Section 2.1 shall be
non-exclusive in regards to all carrier-independent distribution ( *e.g.* ,
websites, content aggregator websites, Playboy.com’s websites and any third
party distribution channel not linked to Telecoms).
  2.4.3 Notwithstanding
anything to the contrary herein, the restriction set forth in Section 2.4.1
above shall not apply to (a) incidental utilization (e.g., as decorative or
promotional presentations of small amounts of pictorial or audiovisual content
and associated captions) of the applicable items of Playboy Content but not
including any utilization on a wireless network or (b) use of Playboy.com
Properties and/or Playboy Content in connection with: (i) advertisements for
Playboy Magazine or other Playboy products and services; (ii) sales and
promotional activities for Playboy-branded goods and services; (iii) sales and
promotional activities for goods and services related to mobile commerce by
Playboy or its licensees; (iv) promotional services operated by or under license
from Playboy TV International, LLC; and/or (v) Playboy-branded services devoted
to online or wireless wagering and/or betting. Furthermore, Playboy.com shall
not be restricted in offering and/or entering into agreements with third parties
for the provision of Internet websites and non-wireless applications in the
Territory or the distribution to Mobile Devices (via Networks or otherwise) of
television signals or television-like content, nor shall Playboy.com be
restricted in pursuing any activities other than those to which the covenants in
Section 2.4.1 applies.
  3  DISTRIBUTED
CONTENT .
  3.1  Distributed
Content . The
parties agree that Playboy.com will deliver Playboy Content to Dwango in a
mutually agreed upon digital format and in accordance with a schedule to be
mutually agreed upon by the parties. Subject to Playboy.com’s approval rights in
Section 14 below and the restrictions in Section 3.2 below, during the Term
Dwango shall develop and distribute the Distributed Content to Telecoms and/or
Subscribers in the Territory via permitted Networks as contemplated in this
Agreement. Dwango shall be solely responsible for making Distributed Content
available and for designing, uploading, maintaining, and updating the same, and
will ensure that the same is refreshed at least every thirty (30) days. Dwango
shall ensure that Distributed Content is accessible only in the Territory and
for authorized purposes by using commercially reasonable measures acceptable to
Playboy.com, including the use of digital rights management systems approved by
Playboy and, where applicable, blocking all unauthorized Internet protocol
addresses. Dwango shall also be solely responsible for operating and hosting the
service described herein, as well as for customer service, transactions and
billing; provided that such services may be subcontracted to either by (i)
Telecoms in their sole discretion or (ii) Dwango to third parties approved by
Playboy.com in advance and in writing, which approval shall not be unreasonably
withheld, conditioned or delayed. For the avoidance of doubt, Dwango shall be
solely responsible for all costs and expenses and for compliance with applicable
laws, rules and regulations and with all rights of third parties (including,
without limitation, obtaining any necessary rights clearances for specific
Distributed Content) in connection with any use of the Distributed Content. In
the event that any incremental royalties or other costs must be paid (i) to any
third party (including, without limitation, to Playboy.com or its affiliates) to
obtain rights to use or distribute any Distributed Content or because of such
use or (ii) to make such content technically available to Dwango. Dwango shall
be solely responsible for payment of such incremental royalties or costs.
 
 
 4
  3.2  Compliance
with Guidelines .
Playboy.com shall have final editorial approval over all Distributed Content.
Dwango shall at all times comply (and shall cause its sublicensees at all times
to comply) with the provisions and limitations set forth in the Guidelines
attached hereto as Exhibit
B , as the
same may be amended by Playboy.com from time to time upon no less than five (5)
business days prior notice to Dwango (the “Guidelines”). Regardless, Dwango
shall not (i) supply to Playboy.com, (ii) include as Distributed Content, or
(iii) use in connection with the Playboy.com Properties or Playboy Content, any
content which contains models or performers who were less than eighteen (18)
years old (or, if older, such other age of majority under applicable law) at the
time such content was first fixed in tangible form. Any and all advertising
appearing in connection with any service featuring Distributed Content shall be
subject to Playboy.com’s prior written approval. To the extent there is any
conflict between this Agreement and the Guidelines, the terms of this Agreement
shall control.
  3.3  Consultation
Regarding Censorship . Dwango
shall forward promptly to Playboy.com any information received by it regarding
censorship by governmental agencies, Telecoms, Content Enablers, or otherwise in
connection with the Distributed Content. Dwango shall at all times consult fully
with Playboy.com and act in accordance with the reasonable determinations of
Playboy.com in response to instances of censorship.
  3.4  Minimum
Service Levels . Dwango
shall, and shall require that its sublicensees shall, take all reasonable
measures to ensure availability to Subscribers of the Distributed Content at
least ninety-nine and one half percent (99.5%) of the time per month as averaged
over any one (1) month period.
  3.5  Terms
of Use and Privacy Policy . Dwango
shall (and will require that Telecoms shall) use its best commercial efforts to
ensure that each Subscriber is at least eighteen (18) years of age (or, if
older, such other age as is applicable in the Territory according to its laws
regarding the viewing of Distributed Content) and shall post or otherwise obtain
from each Subscriber a binding terms of use agreement acceptable to Playboy.com
which at a minimum (i) forbids the unauthorized use of the Distributed Content,
(ii) identifies the required legal age of such Subscriber, and confirms that the
Subscriber is resident within the Territory. In addition, Dwango shall (and will
use its best commercial efforts to ensure that Telecoms shall) implement a
privacy policy (“Privacy Policy”) applicable to Subscribers that is no less
protective of user privacy than is required under the laws, rules, requirements
and directives of each applicable country within the Territory. Dwango shall
not, and shall require that Telecoms do not, take any action in contravention of
such Privacy Policy or of any applicable law, rule, requirement or
directive. If
Dwango and/or a Telecom violate the Privacy Policy or any applicable law, rule,
requirement or directive, in addition to any remedies provided herein, Playboy
or Dwango may require such entity to immediately cease providing Distributed
Content. Both the terms of use and Privacy Policy shall be prominently displayed
and will require an affirmative indication of consent to their terms by each
Subscriber or other user (e.g., by requiring a click of an “I Agree” button).
Playboy.com shall have the right to review the terms of use and Privacy Policy,
to require reasonable changes thereto (subject to applicable laws), and to
request certification from Dwango that it is complying with this paragraph. All
such requests shall be promptly met.
 
 
 5
  3.6  User
Data . To the
extent possible directly and/or through its agreements with Telecoms, Dwango
will collect, store and manage information regarding Subscribers and use of the
Distributed Content, including without limitation, names and e-mail addresses
(“User Data”). As between the parties, Dwango shall own and have rights to the
User Data; provided, however, that to the extent permitted under applicable
laws, regulations, any applicable Privacy Policy and any written agreements
existing as of the Effective Date, and to the extent the Subscriber given his or
her consent, Dwango shall provide User Data to Playboy.com on request, and
Playboy.com shall have the right to market to such Subscribers. During and
following the Term: (i) Dwango shall use User Data only in the distribution and
promotion of the Distributed Content and (ii) Playboy.com may use such data free
of charge.
  4  PLAYBOY.COM
PROPERTIES .
  4.1  Rights
in Playboy.com Properties; Usage . Dwango
recognizes and acknowledges that the Playboy.com Properties are internationally
well-known by the general public and are associated in the public mind with
Playboy.com’s affiliate, Playboy Enterprises International, Inc. (“PEII”), and
are marks in which PEII has acquired considerable and valuable goodwill. Dwango
acknowledges that Playboy.com and PEII have an interest in maintaining the
worldwide goodwill, recognition and standards of the Playboy.com Properties and
the Playboy Content. Consequently, Playboy.com shall have the right to require
Dwango and its sublicensees to make any changes and/or corrections with regard
to the Playboy.com Properties and/or the Distributed Content as Playboy.com may
reasonably deem necessary to maintain the quality standards and the goodwill
associated with the Playboy.com Properties. Dwango agrees, and shall use its
best commercial efforts to require its sublicensees to agree, to make and
incorporate such changes or corrections promptly upon notice from Playboy.com
and at Dwango’s sole cost and expense. Such changes and corrections shall be
made promptly after a written request identifying the requested change and/or
correction is delivered to Dwango form Playboy.com. Playboy.com acknowledges
that the Distributed Content and the use of the Playboy.com Properties on the
Networks may differ to some extent from paper-printed Playboy Content and
Playboy.com Properties. Therefore, when assessing the quality and the
reasonableness of changes and/or corrections required by Playboy.com of the
Distributed Content and the Playboy.com Properties hereunder, the creation and
use of the Distributed Content and Playboy.com Properties shall be compared with
other digital content created or used by Dwango or other content providers
operating in the same industry with Dwango.
 
 
 6
  4.2  Goodwill . Dwango
and its sublicensees will not obtain any right, title or interest in the
Playboy.com Properties or the Playboy Content by virtue of their use of the
Playboy.com Properties or Playboy Content under this Agreement and any
additional goodwill associated with the Playboy.com Properties that is created
through use of the Playboy.com Properties shall inure solely to the benefit of
PEII.
  4.3  Variations . During
and after the Term, Dwango and its sublicensees will not apply for or use any
Playboy.com Properties or service marks that include or are confusingly similar
to any of the Playboy.com Properties or any other similar marks or variations
thereto.
  4.4  Notices . Dwango
must (and must cause its sublicensees to) display on the Distributed Content
such trademark and copyright notices as requested by Playboy.com and/or as
required by applicable law. Except as expressly approved in writing by
Playboy.com and as contemplated by the last two sentences of Section 4.1 of this
Agreement, the Playboy.com Properties and any notices may not be changed,
manipulated or modified in appearance.
  5  INTELLECTUAL
PROPERTY RIGHTS .
  5.1  Ownership . Each
party hereby reserves for itself all rights not specifically granted to the
other party in this Agreement.
  5.1.1  Ownership
by Playboy.com . As
between the parties, Playboy.com shall own all right, title and interest in and
to the Playboy Content, the Playboy.com Properties and the Dwango Created
Content. Nothing contained in this Agreement shall be deemed to transfer or
convey to Dwango or its sublicensees any ownership rights whatsoever in and to
the Playboy Content, the Playboy.com Properties or the Dwango Created Content.
To the extent that Dwango is deemed to obtain any interest or ownership rights
in the Playboy.com Properties or the Playboy Content, Dwango hereby assigns,
transfers and conveys to Playboy.com, to the maximum extent permitted by
applicable law, all of Dwango’s right, title and interest therein used or
created by Dwango under or in connection with this Agreement so that Playboy.com
will be the sole owner of all rights therein. Dwango shall require the same
assignments from its sublicensees and further agrees to cooperate with
Playboy.com during and after the Term to effect and perfect all assignments.
  5.1.2  Ownership
by Dwango . As
between the parties, Dwango shall own all right, title and interest in and to
all content, products, services, specifications, documentation, software and
other materials in the Mobile Entertainment Service and any improvements and
modifications thereto, including all intellectual property rights therein, but
specifically excluding the Playboy Content, the Playboy.com Properties and
Dwango Created Content. Nothing contained in this Agreement shall be deemed to
transfer or convey to Playboy.com any ownership rights whatsoever in and to the
Dwango Acquired Material and the Mobile Entertainment Service. To the extent
that Playboy.com is deemed to obtain any interest or ownership rights in the
Mobile Entertainment Service, Playboy hereby assigns, transfers and conveys to
Dwango, to the maximum extent permitted by applicable law, all of Playboy.com’s
right, title and interest therein used by Playboy.com under or in connection
with this Agreement so that Dwango will be the sole owner of all rights therein.
 
 
 7
  5.2  Acquired
and Created Material; Enforcement .
  5.2.1  With
respect to all Dwango Acquired Material, Dwango will acquire, at its sole cost
and expense, all necessary licenses and/or assignments necessary to carry out
the distribution of the Distributed Content in accordance with the terms and
conditions of this Agreement. Each such license and/or assignment shall be
subject to Playboy.com’s prior approval. All right, title, and interest in and
to all Dwango Created Content shall automatically and immediately transfer to
Playboy.com upon its creation by Dwango.
  5.2.2  By
Playboy.com . If
Dwango becomes aware of any alleged or actual infringement of Playboy Content,
Playboy.com Properties or Dwango Created Content or any violation of the terms
of a sublicense granted pursuant to this Agreement, it shall promptly notify
Playboy.com. In the event of such actual or alleged infringement, Playboy.com
and/or its affiliates shall have the right (but not the obligation) to bring one
or more actions, at its sole expense, against the infringer in its own name or
in the name of Dwango or, in its discretion, may join Dwango as a party thereto.
Dwango shall not, under any circumstance, take any action on account of any such
infringements without first obtaining the written consent of Playboy.com. Dwango
shall cooperate in any action brought by another pursuant to this paragraph; and
to the extent possible, have its employees testify when requested and make
available relevant records, papers, information, samples, and the
like.
  5.2.3  By
Dwango . If
Playboy.com becomes aware of any alleged or actual infringement of the Dwango
Acquired Material or the Mobile Entertainment Service, it shall promptly notify
Dwango. In the event of such infringement, Dwango and/or its affiliates shall
have the right (but not the obligation) to bring one or more actions, at its
sole expense, against the infringer. If neither Dwango nor such an affiliate
pursues such an action, then, upon obtaining Dwango’s written consent,
Playboy.com may bring such an action or actions at its sole expense for any
infringement of its rights to use the Mobile Entertainment Service or the Dwango
Acquired Material as set forth above. Each of the parties shall keep the other
informed of any action it brings pursuant to this paragraph, cooperate in any
action brought by another pursuant to this paragraph; and to the extent
possible, have its employees testify when requested and make available relevant
records, papers, information, samples, and the like.
  6  MARKETING .
  6.1  Generally . Dwango
shall use its best commercial efforts to actively advertise, promote and
encourage the distribution of the Distributed Content to Telecoms and
Subscribers in the Territory via all channels reasonably available ( *e.g.* ,
carrier-independent websites, WAP portals, retail and offline channels). Dwango
and its sublicensees may produce marketing material that is based on the
Distributed Content and use such material solely for marketing purposes. All
promotional and marketing material shall comply with the Guidelines and must be
approved by Playboy.com prior to its use and/or distribution. Once Playboy.com
has approved a particular use of certain promotion and marketing material, the
approval will remain in effect for such use until the earlier of (i) the time
such approval is withdrawn with reasonable prior written notice or (ii) the
expiration of this Agreement. Additionally, Dwango shall (and shall ensure that
its sublicensees shall) cooperate with the publisher(s) of the local edition of
Playboy Magazine in the Territory and other licensees of Playboy.com, PEII or
their affiliates in applying their best efforts to leverage cross-media
synergies in exploiting their rights and maximizing revenue.
 
 
 8
  6.2  Marketing
Plan . Prior
to Dwango’s initial distribution of any Distributed Content and then again
within thirty (30) days following the end of each three (3) month quarterly
period thereafter, Dwango shall provide Playboy.com with a quarterly report
detailing Dwango’s plans for marketing the Distributed Content and promoting
ancillary Playboy businesses (e.g., the local Internet website, television
service and edition of Playboy Magazine, if applicable) through Telecoms over
Networks during the upcoming quarter and offering a forecast for its related
expenditures, new subscriptions and other information the parties may determine
to be relevant (the “Marketing Plan”). The Marketing Plan shall be subject to
Playboy.com’s prior approval. If Playboy.com determines in its reasonable
discretion that any Marketing Plan is unduly delayed or is otherwise
unsatisfactory, then it shall give notice thereof to Dwango and, if the
Marketing Plan is unsatisfactory, explain in reasonable detail its objections to
the Marketing Plan. Dwango shall modify the Marketing Plan based upon the
objections of Playboy.com, and deliver the modified Marketing Plan to
Playboy.com within fifteen (15) business days of such notice. If Playboy.com
remains reasonably unsatisfied with the Marketing Plan, it may require Dwango’s
distribution of the Distributed Content to be suspended until reasonably
satisfied with the revised Marketing Plan. Notwithstanding the foregoing,
Playboy.com’s disagreements with the revenue projections contained in a
Marketing Plan shall not be grounds for rejecting such Marketing
Plan.
  6.3  Marketing
Commitment . Dwango
shall spend the equivalent of at least One Hundred Thousand U.S. Dollars
($100,000) each and every contractual year during the Term to market and promote
the Distributed Content throughout the Territory. For the avoidance of doubt,
(a) only costs incurred from marketing efforts obtained through third parties
that are not owned by Dwango or its affiliates shall count towards this
commitment, and (b) the value of any barter arrangements shall not count towards
the commitment. All expenses actually incurred will be reflected in the
following quarter’s Marketing Plan and will be accompanied by documentation
verifying the expenditure. Playboy.com shall use its commercially reasonable
efforts to make its own marketing channels and those of its affiliates available
to Dwango at “house rates” for the promotion of Distributed Content.
  7  PAYMENTS .
  7.1  Customer
Charges .
Playboy.com and Dwango shall mutually agree upon the price for access to and/or
pay-per-view downloads of Distributed Content. Dwango will work with Telecoms to
charge Subscribers directly through their telephone or telecommunication bills
where possible. If such direct billing isn’t possible, then Dwango shall, and
will use best commercial efforts to ensure that its sublicensees shall, include
credit card billing capability at it or their sole expense and shall accept
MasterCard and Visa credit cards and any other credit cards or payment methods
commonly used in the Territory. In no event shall Dwango make (nor permit others
to make) any Distributed Content, Playboy.com Properties, or Playboy Content, or
any related content, service or application available to non-Subscribers nor to
any other end-users free of charge, except on a limited basis in advertising or
promotional material. Any barter, co-branding, promotional or similar marketing
deals with third parties require Playboy.com’s advance written approval. Once
approved, the approval will remain in effect for such use until the earlier of
(i) the time such approval is withdrawn with reasonable prior written notice or
(ii) the expiration of this Agreement.
 
 
 9
  7.2  Royalties . Dwango
shall pay to Playboy.com the following “Royalties”:
  7.2.1  A Royalty
equal to **[** ****]**
of Net Revenue (as defined below) recognized by Dwango in connection with the
distribution or other exploitation of Distributed Content from Telecoms,
Subscribers and advertisers
  7.2.2  A Royalty
in an amount to be separately agreed to by the parties on a case-by case basis
that is recognized by Dwango in connection with the distribution or other
exploitation of Distributed Content (a) from services for which Dwango provides
only certain technical backend technology, but does not provide development,
operation, maintenance or marketing or (b) by carrier-independent distribution
outlets.
  7.2.3  For
purposes of this Agreement: “Net Revenue” shall mean all revenue collected,
credited to, receivable or received by Dwango in connection with the
distribution or other exploitation of Distributed Content (“Total Revenue”),
minus documented amounts (according to industry standard) formusic publishing
and performance rights actually paid out-of-pocket by Dwango to unaffiliated
third-party content providers who provide content for ring tones as Distributed
Contentand other Dwango Acquired Content and Dwango Acquired Content as mutually
agreed upon by the parties; *provided,
however,* the
parties hereby agree to a cap of **[**]** for the maximum amount of
such fees Dwango may deduct from Total Revenue to arrive at Net
Revenue.
  7.3  Minimum
Guaranteed Royalty .
Notwithstanding revenue actually earned by Dwango, it is understood and agreed
that Dwango shall pay to Playboy.com an annual non-refundable minimum Royalty
(the “Minimum Guaranteed Royalty”) under this Agreement as follows:
  7.3.1  First
Year . During
the first year of the Term, Dwango shall pay to Playboy.com a Minimum Guaranteed
Royalty equal to Two Hundred Fifty Thousand U.S. Dollars ($250,000), payable as
follows: (i) One Hundred Twenty-Five Thousand Dollars ($125,000) payable on the
Effective Date; and (ii) One Hundred Twenty-Five Thousand Dollars ($125,000)
payable ninety (90) days thereafter.
  7.3.2  Second
Year . During
the second year of the Term, Dwango shall pay to Playboy.com a Minimum
Guaranteed Royalty equal to Two Hundred Fifty Thousand U.S. Dollars ($250,000),
payable as follows: (i) One Hundred Thousand Dollars ($100,000) payable on the
first anniversary of the Effective Date; (ii) One Hundred Thousand Dollars
($100,000) payable ninety (90) days thereafter; and (iii) Fifty Thousand Dollars
($50,000) payable ninety (90) days after that.
  7.3.3  Third
Year . During
the third year of the Term, Dwango shall pay to Playboy.com a Minimum Guaranteed
Royalty equal to Three Hundred Fifty Thousand U.S. Dollars ($350,000), payable
as follows: (i) Two Hundred Thousand Dollars ($200,000) payable on the second
anniversary of the Effective Date; and (ii) One Hundred Fifty Thousand Dollars
($150,000) payable one hundred eighty (180) days thereafter.
 
 
 **[**]
REQUESTED FOR CONFIDENTIAL TREATMENT**
 10
  7.4  Payment
of Royalties; Reports . To the
extent actual Royalties due (including, without limitation, the Royalties
pursuant to Sections 7.1 and 7.2) exceed the Minimum Guaranteed Royalty payments
(The Minimum Guaranteed Royalties shall be credited against and offset the
Royalties accordingly), other Royalty payments and reports will be due monthly.
Within forty-five (45) days following each month after the Effective Date,
Dwango shall make an accounting of all gross revenue and Net Revenue accrued
during each such month, shall accompany such accounting with a payment (pursuant
to Section 7.7 below) to Playboy.com equal to the accrued Royalty for that
month, if any, in excess of the Minimum Guaranteed Royalty previously paid for
such period and shall provide Playboy.com with a report that includes at a
minimum (i) the gross revenue and Net Revenue generated during such month, (ii)
a detailed calculation of costs and expenses incurred in arriving at gross
revenue and Net Revenue, together with documentation validating those costs and
expenses, (iii) a detailed calculation of Royalties payable to Playboy.com, and
(iv) Playboy.com’s aggregated Royalties earned and paid to date.
  7.5  Costs
and Expenses . Dwango
shall encode and otherwise produce and prepare the Distributed Content at its
sole cost and expense. Upon Playboy.com’s request, Dwango shall deliver to
Playboy.com copies of the Distributed Content and the Playboy.com Properties as
Dwango proposes to use such in connection with this Agreement as well as all
associated advertising and promotional materials. Playboy.com shall be
responsible for any costs associated with the delivery of such materials that it
requests. Unless expressly stated otherwise in this Agreement, each party shall
be responsible for any costs or expenses incurred by it in connection with its
obligations under this Agreement, unless otherwise agreed to in writing signed
by both parties.
  7.6  Taxes . Dwango
shall pay, without limitation any tax, levy, income royalty withholding tax or
charge required by any statute, law, rule or regulation now in effect or
hereafter enacted including, without limitation, sales, use, value-added,
property, royalty and excise or other similar taxes, licenses, import permits,
state, county, city or other taxes arising out of or relating to this Agreement.
Notwithstanding the foregoing, if (a) the appropriate governmental entity
imposes a withholding tax on any sums payable to Playboy.com by Dwango in
connection with this Agreement and (b) such tax is paid by Dwango on
Playboy.com’s behalf, then Dwango may deduct the amount of any such tax paid
from the Royalties due to Playboy.com, provided that Dwango provides Playboy.com
with an accounting of any and all such payments prior to such deduction.
Notwithstanding the foregoing, Playboy.com is responsible for the payment of all
income taxes due upon receipt of any payments made to it pursuant to this
Agreement.
  7.7  Method
of Payment . All
payments required to be made by Dwango hereunder shall be made by electronic
transfer of immediately available funds in United States Dollars through a bank
designated by Playboy.com. In determining the proper rate of exchange to be
applied to the payments due hereunder, it is agreed that Dwango shall calculate
Royalties on a monthly basis in local currency (with each such month considered
to be a separate accounting period for the purpose of computing the Royalties)
and that Dwango shall compute a conversion of each such monthly total into
United States currency utilizing the selling rate of exchange in effect on the
last day of each relevant calendar quarter as determined by the Bankers Trust
Company of New York City, New York (U.S.A.).
 
 
 11
  7.8  Letter
of Credit . No
later than ten (10) days after the Effective Date, Dwango shall deliver to
Playboy.com a Revolving Irrevocable Stand-By Letter of Credit (the “Letter of
Credit”) for One-Hundred Twenty-Five Thousand U.S. Dollars (US $125,000) in
favor of Playboy.com, issued by a bank approved in advance by Playboy.com,
confirmed or advised through a U.S. bank designated by Playboy.com, and on terms
and in the form and content as attached hereto as Exhibit
C or as
Playboy.com may otherwise instruct. Prior to issuing the Letter of Credit,
Dwango and/or the issuing bank shall provide a draft thereof for review and
approval to Ms. Patti Friedman at Playboy.com, Inc., 680 North Lake Shore Drive,
Chicago, Illinois 60611, telephone (312) 373-2186, fax (312) 751-2818, email:
pattif@playboy.com. Dwango shall ensure that such Letter of Credit shall remain
in effect throughout the Term and for additional periods of one (1) year from
the current or any future expiration date during the Term. Playboy.com will have
the right, at any time, to draw upon such Letter of Credit if Dwango fails to
make any payments when due as provided for under this Agreement. Conversely,
Playboy.com may, in its own discretion, cause to be instituted a new Letter of
Credit should Dwango fail to make any payment(s) as required herein. All costs
and expenses associated with such Letter of Credit, including, but not limited
to, opening, amending and drawing fees, will be borne by Dwango.
  8  AUDIT . During
the Term and for one (1) year thereafter Dwango shall maintain complete and
accurate books and records relating to this Agreement. Playboy.com shall, at its
own expense upon no less than ten (10) days notice to Dwango, have the right to
cause independent auditors, designated by Playboy.com, to audit the records of
Dwango for the purpose of verifying the accuracy of the amounts due to
Playboy.com under this Agreement; provided that Dwango shall be obligated to pay
such expenses if the auditor determines that Dwango prepared such reports
incorrectly resulting in underpayment of the Royalties by more than five percent
(5%) for the period being audited. Dwango shall immediately pay any such
underpayments to Playboy.com.
  9  TERM
AND TERMINATION .
  9.1  Term . This
Agreement shall be effective as of the Effective Date and shall continue in full
force and effect for a period of three (3) years thereafter, unless terminated
sooner in accordance herewith (the “Term”). Thereafter, the parties may renew
this Agreement in writing on mutually agreeable terms. Any such renewal period
shall be considered part of the Term.
  9.2  Termination .
  9.2.1  Either
party shall have the right to terminate this Agreement in the event of a
material breach of this Agreement by the other party that remains uncured for
thirty (30) days following written notice of the breach by such
party.
  9.2.2  Playboy.com
may, in its discretion, terminate this Agreement by giving at least thirty (30)
days’ notice if Dwango’s Net Revenues at the end of the first full year since
the initial commercial distribution of the Distributed Content are less than One
Million Dollars ($1,000,000), or if Net Revenues during and attributable to the
second full year since the initial commercial distribution of the Distributed
Content (i.e., not aggregating the first year’s Net Revenue) are less than One
Million Seven Hundred Fifty Thousand Dollars ($1,750,000).
 
 
 12
  9.2.3  Either
party may terminate this Agreement prior to the expiration of the Term in the
event that the other party (i) files in any court or agency a petition in
bankruptcy or insolvency, (ii) is served with an involuntary petition against it
that is filed in any insolvency proceeding, and such petition is not dismissed
within sixty (60) days after the filing thereof, (iii) makes an assignment for
the benefit of creditors, or (iv) breaches any material representation,
obligation or covenant contained herein, including the obligation to pay any
advance due under this Agreement, unless such breach is cured no later than
thirty (30) days from the date of receipt of notice of such breach, or if by the
nature of the breach it is not able to be so cured, it is resolved to the
non-breaching party’s satisfaction.
  9.3  Effect
of Expiration or Termination . Upon
the expiration or termination of this Agreement: (i) Dwango shall immediately
cease (and shall require that its sublicensees and all Content Enablers cease)
distribution of the Distributed Content; (ii) Dwango shall immediately cease use
of the Playboy.com Properties; (iii) all rights and licenses granted to Dwango
under this Agreement shall immediately terminate; (iv) Dwango shall immediately
notify all sublicenses of the termination of this Agreement; (v) Dwango shall
promptly return to Playboy.com or destroy all files relating to the Playboy
Content and Playboy.com Properties belonging to Playboy.com; and (vi) each party
shall promptly return to the other party all Confidential Information belonging
to such other party.
  9.4  Survival . Upon
the expiration or termination of this Agreement, the following provisions of
this Agreement shall survive: 1, 3, 4, 5, 7, 8, 9, 10, 10 11, 12, 13, 14, 15,
and 16.
  10  REPRESENTATIONS
AND WARRANTIES .
  10.1  By
Both Parties . Each
party hereto represents and warrants that it is a corporation validly existing
in good standing where incorporated, that it has the right and authority to
enter into this Agreement and perform each of its duties and obligations
hereunder, and that it has not entered into (and will not enter into during the
Term) any contract, agreement or understanding with any individual or entity
which would in any way restrict or prevent either party hereof from the
performance of its duties and obligations under this Agreement.
  10.2  By
Dwango . Dwango
represents and warrants that (a) all of the Dwango Created Content is content
that Dwango owns or has obtained the necessary rights and permissions for
assignment to Playboy.com and distribution to Subscribers in the Territory in
accordance with this Agreement; (b) the Dwango Acquired Material is content that
Dwango has obtained the necessary rights, permissions and license for the
distribution to Subscribers in the Territory in accordance with this Agreement,
(c) it will not distribute any Distributed Content outside the Territory or in a
manner which violates any applicable laws or regulations, and (d) it will comply
with all applicable laws, rules, regulations, directives and court rulings and
all of its covenants and obligations hereunder including, without limitation,
the distribution of the Distributed Content.
 
 
 13
  10.3  By
Playboy.com .
Playboy.com represents and warrants that it has full power and authority,
including the necessary intellectual property rights in and to the Playboy
Content and Playboy.com Properties, to grant the licenses to Dwango hereunder.
  10.4  Disclaimer . EXCEPT
AS EXPRESSLY PROVIDED IN THIS SECTION 10, NEITHER PARTY MAKES ANY OTHER
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE. PLAYBOY.COM DISCLAIMS ALL IMPLIED WARRANTIES. EACH PARTY EXPRESSLY
DISCLAIMS ALL OTHER WARRANTIES AND REPRESENTATIONS, WHETHER EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTIBILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
  11  INDEMNIFICATION .
  11.1  By
Dwango . Dwango
will indemnify, defend and hold Playboy.com, its parent, shareholders,
subsidiaries and affiliates and the directors, officers, shareholders, employees
and agents of each harmless against any claims, suits, losses, liabilities,
injuries or damages (including, without limitation, reasonable attorneys’ fees
and litigation expenses) arising out of or in connection with (i) any use by
Dwango or its sublicensees of the Dwango Created Content or the Dwango Acquired
Material; (ii) any use by Dwango or its sublicensees of the Playboy.com
Properties or Playboy Content in any way inconsistent with this Agreement; (iii)
any claims brought by Subscribers, Content Enablers, Telecoms or others; (iv)
any alleged action or failure to act whatsoever in regard to Dwango’s
performance of its obligations and duties under this Agreement; (v) any alleged
non-conformity to or non-compliance with any law pertaining to the Distributed
Content ; (vi) any claim by a third party charging or alleging that the
intellectual property rights of Dwango infringe the patent, copyright, trademark
or other intellectual property rights of such third party; or (vii) any breach
by Dwango of any of its representations, warranties and obligations hereunder.
  11.2  By
Playboy.com .
Playboy.com will indemnify, defend and hold Dwango, its shareholders,
subsidiaries and affiliates and the directors, officers, shareholders, employees
and agents of each harmless against any claims, suits, losses, liabilities,
injuries or damages (including, without limitation, reasonable attorneys’ fees
and litigation expenses) arising out of or in connection with (i) the authorized
use by Dwango of the Playboy.com Properties or the Playboy Content in connection
with Distributed Content in compliance with this Agreement, (ii) any alleged
action or failure to act whatsoever in regard to Playboy.com’s performance of
its obligations and duties under this Agreement; (iii) any claim by a third
party charging or alleging that the intellectual property rights of Playboy.com
infringe the patent, copyright, trademark or other intellectual property rights
of such third party; or (vii) any breach by Playboy.com of any of its
representations, warranties and obligations hereunder.
  11.3  Procedure . If a
claim is made against an indemnified party, such party will promptly notify the
indemnifying party of such claim. Failure to so notify the indemnifying party
will not relieve the indemnifying party of any liability which the indemnifying
party might have, except to the extent that such failure materially prejudices
the indemnifying party’s legal rights. The indemnified party shall cooperate
with the indemnifying party in the defense and/or settlement of the claims;
provided however, the indemnifying party shall have an opportunity to assume
control of the defense of such claim. The indemnified party may participate in
the defense of the claim at their own cost. Notwithstanding anything contained
herein, the indemnified party shall not enter into any settlement or compromise
that provides for any remedy of the claim without the prior written approval of
the indemnifying party, which approval will not be unreasonably
withheld.
 
  14
  12  CONFIDENTIALITY .
  12.1  Confidential
Information . The
parties acknowledge that, in the course of performing their duties under this
Agreement, each party (the “Receiving Party”) may obtain Confidential
Information from the other party (the “Disclosing Party”). For purposes of this
Agreement, “Confidential Information” means any business, financial, technical
or other information provided by the Disclosing Party to the Receiving Party
that is identified as, or should reasonably be understood to be (given its
content or the circumstance of its disclosure), proprietary to the Disclosing
Party. Confidential Information does not include information that the Receiving
Party can document: (i) is in or enters the public domain without breach of this
Agreement, (ii) the Receiving Party lawfully receives from a third party without
restriction on disclosure, (iii) is approved for release by written
authorization of the Disclosing Party, (iv) the Receiving Party knew prior to
receiving such information from the Disclosing Party without reference to the
Disclosing Party’s Confidential Information, or (v) is independently developed
by the Receiving Party without reference to Confidential Information of the
Disclosing Party.
  12.2  Obligations . Each
party agrees to use the Confidential Information of the other party solely to
the extent necessary to fulfill its obligations or exercise its rights
hereunder, and not for any other purpose. Each party agrees (i) that it will not
disclose to any third party or use any Confidential Information disclosed to it
by the other except as expressly permitted in this Agreement and (ii) that it
will take all reasonable measures to maintain the confidentiality of all
Confidential Information of the other party, which will in no event be less than
the measures it uses to maintain the confidentiality of its own information of
similar importance. Notwithstanding the foregoing, each party may disclose
Confidential Information (x) to the extent required by a court of competent
jurisdiction or other governmental authority or otherwise as required by law,
provided that the Receiving Party uses reasonable efforts to provide the
Disclosing Party with prior notice of such obligation in order to permit the
Disclosing Party a reasonable opportunity to take legal action to prevent or
limit the scope of such disclosure. Promptly upon receipt by Receiving Party of
a written request from the Disclosing Party for the return of Confidential
Information, all Disclosing Party’s Confidential Information and all copies
thereof in Receiving Party’s possession or control will be returned to
Disclosing Party or destroyed by Receiving Party at Disclosing Party’s
instruction.
  13  LIMITED
LIABILITY . IN NO
EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT
OR ANY MATTER RELATED HERETO, INCLUDING WITHOUT LIMITATION, LOST BUSINESS OR
LOST PROFITS, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT
SHALL PLAYBOY.COM’S LIABILITY ARISING UNDER THIS AGREEMENT EXCEED IN THE
AGGREGATE THE TOTAL ROYALTIES PAID BY DWANGO TO PLAYBOY.COM HEREUNDER.
   15
 
 14  APPROVALS
AND NOTICES .
  14.1  Approval . Dwango
will only create and distribute Distributed Content that does not jeopardize
Playboy’s brand or reputation. In furtherance of this, each specific use by
Dwango of the Playboy.com Properties must be either (i) specifically approved by
Playboy.com in advance or (ii) in strict compliance with the then-current
Guidelines and standards and practices of Playboy.com and its affiliates. Once
Playboy.com has approved a particular use of a Playboy.com Trademark, the
approval will remain in effect for such use until the earlier of (i) the time
such approval is withdrawn with reasonable prior written notice or (ii) the
expiration of this Agreement. If Playboy.com rejects the use of such requested
Distributed Content or Playboy.com Trademark, it shall use reasonable efforts to
provide an explanation to Dwango and propose methods to improve the rejected
Distributed Content or Trademark so that it satisfies Playboy.com and the
then-current Guidelines.
  14.2  Written
Consent Required . In this
Agreement, where the consent or approval of either party is required of any
action of the other party, such consent or approval shall only be effective if
granted in writing by such party. Each party shall use reasonable efforts to
review any requests for consent and grant or deny approval promptly following
receipt of the request; provided, however, that if Playboy.com fails to respond
to any approval request by Dwango, that request shall be deemed denied.
  14.3  Notice . Each
notice, request, approval, or consent (hereinafter referred to as a
“Submission”) provided for in this Agreement shall be considered effective or
received the earliest of: (i) receipt (as evidenced by recipient’s signature)
when such Submission is sent by overnight courier or mailed by certified or
registered mail with postage prepaid to the party hereto at the address set
forth below; (ii) when such Submission is sent by facsimile addressed to such
party at such address (or the following business day if sent outside normal
business hours); or (iii) when such Submission is otherwise actually received by
such party at the address indicated below:
   To Playboy.com:
    
    Playboy.com, Inc.730 Fifth AvenueNew York, NY 10019U.S.A.Attn: PresidentFacsimile:(212)
      957-2931with a copy to:
    
    Playboy Enterprises International,
      Inc.680 North Lake Shore DriveChicago, IL 60611U.S.A.Attn:General
      CounselFacsimile:(312)
      266-2042To Dwango:
    
    Dwango North America Corp.200 West Mercer Street, Suite
501Seattle, WA 98119U.S.A.Attn: Mr. Alexander U.
  ConradFacsimile: 
206-256-1442
   16
 
 14.4  Change
of Address . Each
party hereto may give written notice to the other party of some other address or
facsimile number to which Submissions shall be sent, in which event Submissions
to such party shall subsequently be sent to such address or number.
  14 .5 Reservation
of Rights .
Anything in this Agreement to the contrary notwithstanding, Playboy.com reserves
the right to revoke any notice given in accordance with this Section 14 of the
right of Dwango to distribute the Distributed Content in the event that
Playboy.com is notified of a suit or claim relating to the applicable
Distributed Content of the Playboy.com Properties.
  15 GOVERNING
LAW AND JURISDICTION . This
Agreement shall be construed in the English language and governed by the laws of
the State of New York in the United States of America, applicable to contracts
made and to be performed entirely within such jurisdiction and without giving
effect to the choice or conflict of laws, rules or principles. The parties do
not intend that any laws of or applicable to any countries within the Territory
will give Dwango any rights broader than those expressly set forth in this
Agreement. Any disputes arising out of or related to this Agreement shall be
brought exclusively in and under the jurisdiction of the state and/or federal
courts located in the City of New York, County of New York, and Dwango hereby
submits to the personal jurisdiction thereof.
  16  MISCELLANEOUS .
  16.1  Non-Competition . Neither
Dwango nor its affiliates shall own, operate (or license a third party to
operate), sponsor or promote, directly or indirectly, any service offering
adult-oriented erotic text or imagery to Mobile Devices via Networks, other than
Distributed Content pursuant to this Agreement during the Term of this
Agreement.
  16.2  No
Assignment . This
Agreement and all rights and duties hereunder shall not be assigned, mortgaged,
licensed, or otherwise transferred or encumbered by either party or by operation
of law without the prior written consent of the other party, it being understood
that no such consent shall be required should Playboy.com assign, mortgage,
license, or otherwise transfer this Agreement to one of its affiliates. Any such
purported transaction in contravention of this Section 16.2 shall be null and
void ab initio. A change in corporate control shall be deemed an assignment for
purposes of this Agreement.
  16.3  Independent
Contractors . The
rights and powers herein granted to Dwango are those of rights and powers of
Dwango only and this Agreement shall not, and is not intended to, create any
other relationship nor make, constitute or appoint Dwango an agent or employee
of Playboy.com. Dwango shall have no power to obligate or bind Playboy.com in
any manner whatsoever.
  16.4  Severability . Each
provision of this Agreement shall be severable. If, for any reason, any
provision herein is finally determined to be invalid and contrary to, or in
conflict with, any existing or future law or regulation by a court or agency
having valid jurisdiction, such determination shall not impair the operation or
affect the remaining provisions of this Agreement, and such remaining provisions
will continue to be given full force and effect and bind the parties hereto.
Each invalid provision shall be curtailed only to the extent necessary to bring
it within the requirements of such law or regulation.
 
 
 17
  16.5  Entire
Agreement; No Waiver; Not Third Party Beneficiary . This
Agreement, along with all attachments hereto, represents the entire
understanding of the parties hereto. None of the terms of this Agreement can be
waived or modified except by an express agreement in writing signed by the
parties. There are no representations, promises, warranties, covenants or
undertakings other than those contained in this Agreement. No custom or practice
of the parties hereto at variance with the terms hereof shall constitute a
waiver of either party’s right to demand exact compliance with any of the terms
herein at any time. The failure of either party hereto to enforce, or the delay
by either party hereto in enforcing, any or all of its rights under this
Agreement shall not be deemed as constituting a waiver or a modification
thereof, and either party hereto may, within the time provided by applicable
law, commence appropriate proceedings to enforce any or all of such rights.
Except as expressly provided in this Agreement, no individual or entity other
than Dwango and Playboy.com shall be deemed to have acquired any rights by
reason of anything contained in this Agreement.
  16.6  Headings;
Counterparts . The
headings used herein are for convenience only and shall not be deemed to define,
limit or construe the contents of any provision of this Agreement. The wording
of this Agreement will be deemed to be the wording chosen by the parties hereto
to express their mutual intent, and no rule of strict construction will be
applied against any such party. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original, and all of which taken
together constitute one and the same agreement.
  16.7  Force
Majeure . Except
for payment obligations, neither party to this Agreement shall be liable for its
failure to perform any of its obligations hereunder during any period in which
such performance is delayed by circumstances beyond its reasonable control,
including but not limited to: fire, act of nature, or embargo, riot, or the
intervention of any government authority, provided that as soon as reasonably
practicable prior to any such circumstance, and in any event promptly
thereafter, the affected party (i) has so notified the other in writing; (ii)
takes reasonable measures to avoid or limit the effect or duration of such
circumstances; and (iii) cooperates with the other party to reasonably alter its
obligations hereunder and/or resume performance under this Agreement as soon as
reasonably practicable. In the event that any such failure or delay persists for
at least ninety (90) days, or in the event that performance becomes illegal or
technically impossible, then either party may terminate this Agreement upon
written notice to the other.
 
 
 18
  
 **IN
WITNESS WHEREOF** , the
parties hereto, intending this Agreement to be effective as of the Effective
Date, have caused this Agreement to be executed by their respective duly
authorized officers.
   **PLAYBOY.COM,
      INC.**
    
    **DWANGO
      NORTH AMERICA CORP.**By:
      /s/ Randy Nicolau
    
    By:
      /s/ Alexander U. ConradName:
      Randy Nicolau
    
    Name:
      Alexander U. ConradTitle:
      President
    
    Title:
      President, COO
 
 
 19
  
 **EXHIBIT
A**
  **PLAYBOY.COM
PROPERTIES**
  PLAYBOYPLAYMATERABBIT HEAD DESIGN
  
 
 20
 ****
 ****
 **EXHIBIT
B**
 
 **GUIDELINES**
  I.  PURPOSE
OF GUIDELINES GENERALLY
  The
purpose of these Guidelines is to help ensure, among other things, that (i) the
service operated by you (the “Licensee”) that is the subject of the attached
Agreement (the “Service”) meets the standards of excellence in content, graphic
appeal and other qualities that the Playboy organization seeks to maintain and
which are generally found on the existing Playboy-branded websites, including,
but not limited to: www.playboy.com, www.cyber.playboy.com,
www.playboystore.com, (collectively, the “Existing Playboy Sites”); (ii) the
Playboy.com Properties are associated only with material of the type and quality
generally associated therewith; (iii) the validity and effectiveness of the
Playboy.com Properties and the Playboy Content and the rights and value therein
are fully protected; (iv) Licensee conducts its activity, both relating to the
Service and otherwise, in a way that does not jeopardize the Playboy.com
Properties or the reputation and image of any Playboy entity or activity; and
(v) the advertising found on the Service is consistent with the advertising
found on the Existing Playboy Sites.
  These
Guidelines are subject to modification and amendment from time to time in the
reasonable, good faith discretion of Playboy.com effective upon five (5)
business days written notice to Licensee. These Guidelines are in addition to,
and not in substitution for or displacement of, any other requirements or
restrictions on the use of Playboy.com Properties and Playboy Content.
  II.  CONTENT
& TRADEMARK GUIDELINES
  A.
    Prohibited
      Content.
      Except as specifically approved by Playboy.com in writing in advance of
      presentation, the Service shall not publicly present, and the Playboy.com
      Properties and the Distributed Content shall not be used in conjunction
      with, or linked to, content of the following types or nature or describing
      or portraying any of the following:
  1.
    Violence;
 2.
    Rape
      (including, but not limited to, “implicit” or “consenting” rape);
 3.
    Incest;
 4.
    Sadism;
 5.
    Bondage;
 6.
    Child
      pornography;
 7.
    Extreme
      sexual explicitness;
 8.
    Graphic
      close-ups of genitals;
 9.
    Actual
      sexually explicit conduct (no sexual intercourse,
etc.);
 10.
    Any
      material that is racially or ethnically offensive, including but not
      limited to, Nazi or anti-Semitic literature or paraphernalia; or
 11.
    Any
      content or interactivity, the presentation of which would be obscene,
      illegal or actionable under applicable
laws.
 
  21
   B.
    Use
      of Playboy.com Properties.
      Each specific use by Licensee of the Playboy.com Properties must be
      either: (i) specifically approved by Playboy.com in advance in writing; or
      (ii) in strict compliance with these
Guidelines.
  C.
    Modification
      of Playboy.com Properties.
      Licensee may modify or alter the Playboy.com Properties or combine the
      Playboy.com Properties with any other words or symbols only if, and to the
      extent that Playboy.com shall have authorized such modification or
      alteration or combination specifically in advance, in writing.
  D.
    Playboy.com
      Take-Down Rights.
      Despite conformity to these Guidelines and/or prior written approval by
      Playboy.com, Playboy.com shall be entitled to review all uses of the
      Playboy.com Properties and all uses of the Distributed Content at any time
      and in its sole discretion. Playboy.com shall be entitled to require
      alteration or termination of any specific use if it determines in its
      reasonable and good faith discretion that such action is necessary or
      appropriate. Licensee shall promptly comply with any such demand by
      Playboy.com to alter or terminate any use of the Playboy.com Properties or
      Distributed Content. Nothing in this Section shall create any obligation
      on the part of Playboy.com to identify or prevent improper uses of
      material or inclusion of improper material on the Service, nor shall
      Playboy.com or its affiliates have any liability for nonfeasance,
      negligence, or other conduct in such reviews or for failing to conduct any
      such reviews.
  E.
    Proper
      Attribution.
      Licensee shall display symbols and notices clearly and sufficiently
      indicating the trademark or copyright status and ownership of the
      Playboy.com Properties in accordance with applicable trademark and
      copyright law and practice.
  F.
    No
      Use on Other Sites.
      Except as expressly permitted hereunder, Licensee shall not use any of the
      Playboy.com Properties on or in connection with, or to permit or
      facilitate any presentation or promotion of, any website(s), media or
      service(s) other than the Service.
  G.
    Goodwill
      Associated with the Marks.
      All goodwill associated with the Playboy.com Properties shall belong to,
      and shall inure to the benefit of, PEII.
  III.  PROMOTION
AND PUBLIC RELATIONS GUIDELINES
  The
“Playboy” image has attained its present level of public respect and recognition
through the employment of good taste. Good taste involves a strong element of
sophistication. To preserve the “Playboy” image and the good taste and
sophistication of the material presented on the Service:
 
 
 22
   A.
    Licensee
      shall not commit any act that in any way detrimentally affects any
      Trademark, any Playboy Content, the Service, Playboy.com or any other
      Playboy.com affiliate.
  B.
    Playboy.com
      shall have sole reasonable discretion as to what is deemed an acceptable
      promotional activity.
  C.
    No
      promotions shall be conducted that would involve the association of the
      Service, the Playboy.com Properties, the Playboy Content, the name
      “Playboy,” or the promotion itself with any of the
    following:
  1.
    Violence;
 2.
    Rape
      (including, but not limited to, “implicit” or “consenting” rape);
 3.
    Incest;
 4.
    Sadism;
 5.
    Bondage;
 6.
    Child
      pornography;
 7.
    Extreme
      sexual explicitness;
 8.
    Graphic
      close-ups of genitals; or
 9.
    Actual
      sexually explicit conduct (no sexual intercourse, etc.);
 10.
    Firearms
      and other weapons (except weapons used for
hunting);
 11.
    Sexual
      aids and devices, including, but not limited to, dildos and vibrators (but
      excluding promotion of condoms);
 12.
    Explicit
      sexual material, including, but not limited to, X-rated videos, sexually
      oriented telephone services, explicit sex books, X-rated clothing, massage
      parlors, and sex clubs (except such products, if any, as may be licensed
      by Playboy.com);
 13.
    Drugs
      or drug paraphernalia;
 14.
    Competitors
      of Playboy.com, Licensee, any affiliate of Playboy.com, the Service, or
      the Existing Playboy Sites;
 15.
    Penthouse,
      Hustler, or any similar publications, or Penthouse.com and Hustler.com,
      and other similar websites; or
 16.
    Any
      material that is racially or ethnically offensive, including but not
      limited to, Nazi or anti-Semitic statements or paraphernalia.
 
 IV.  GUIDELINES
RELATING TO URLs
  Where
applicable to the Service being provided, Licensee may use URLs including or
based on the URLs licensed under the Agreement and including other letters,
numbers, or symbols only to the extent such modifications designate, or operate
to allow access to, interior pages of the Service or as a designation of a
“subdirectory” to identify particular pages or other locations within the
Service, and shall in no way alter the domain name. Such additional locators
must be either in a non-semantic form (i.e., either symbols or numbers), or, to
the extent they are in a semantic form, shall be a general description of the
content of such page (e.g. “story” or “picture”). No such modifications to the
URL may suggest Content that would violate the requirements of these Guidelines
or of the Agreement, nor shall any of them tarnish or otherwise dilute the brand
“Playboy” or any of the Playboy.com Properties.
 
 
 23
  V.  ENFORCEMENT
OF PLAYBOY.COM INTELLECTUAL PROPERTY RIGHTS
  If
Licensee becomes aware of any infringement of Playboy.com’s or its licensors’
rights with respect to any of the Playboy.com Properties or Distributed Content,
Licensee shall promptly notify Playboy.com of such infringement. In the event of
such infringement, Playboy.com or an affiliate designated by Playboy.com shall
have the right (but not the obligation) to bring one or more actions, at its
sole expense, against the infringer and Licensee shall cooperate at
Playboy.com’s or such affiliate’s reasonable request and expense.
  24
  **EXHIBIT****C**
  **FORM
OF LETTER OF CREDIT**
  
 DATE:
XXXXXXXXXXX
 
 IRREVOCABLE
STANDBY LETTER OF CREDIT NUMBER: XXXXXXXXXXX
  ADVISING/CONFIRMING
BANK
 BANK OF
AMERICA, N.A.
 231 S.
LASALLE STREET
 MAIL
CODE: IL1-231-17-00
 CHICAGO,
ILLINOIS 60697 U.S.A.
 SWIFT:
BOFAUS44
 
 BENEFICIARY
    APPLICANTPLAYBOY.COM, INC.
    XXXXXXXXXXXXXXX680 N. LAKE SHORE DRIVE
    XXXXXXXXXXXXXXXCHICAGO, ILLINOIS 60611 U.S.A.
    XXXXXXXXXXXXXXXATTN: PATTI FRIEDMAN
    XXXXXXXXXXXXXXXPHONE: (312) 373-2186
    XXXXXXXXXXXXXXX
  
 I. AMOUNT
 
 NOT
EXCEEDING USD XXXXXXX
 NOT
EXCEEDING XXXX AND 00/100’S US DOLLARS
 
 II. EXPIRATION
  XXXXXXXXXXXXXXX
AT THE COUNTERS OF THE CONFIRMING BANK
  WE,
[ISSUING BANK], HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER
XXXXXXXX WHICH IS AVAILABLE WITH BANK OF AMERICA, N.A., CHICAGO, ILLINOIS BY
SIGHT PAYMENT(S) AGAINST PRESENTATION OF THE FOLLOWING DOCUMENTS:
 
 1.
    THE
      ORIGINAL OF THIS LETTER OF CREDIT AND ALL AMENDMENTS THERETO, IF
      ANY.
  
 2.
    DRAFT(S)
      “AT SIGHT” DRAWN ON BANK OF AMERICA, N.A., CHICAGO, ILLINOIS, BEARING THE
      CLAUSE:
 
 “DRAWN
UNDER [ISSUING BANK] LETTER OF CREDIT NUMBER XXXXXXXX AND BANK OF AMERICA, N.A.,
CHICAGO, ILLINOIS CONFIRMATION REFERENCE NUMBER XXXXXXXX.”
 
  3.
    BENEFICIARY’S
      SIGNED STATEMENT CERTIFYING:
  
 “AMOUNTS
DUE AND OWING ________________ ARE PAST DUE AND REMAIN UNPAID AS OF THE DATE OF
THIS DRAW PURSUANT TO AGREEMENT DATED ____________ FOR/COVERING
____________________.”
 
 
 25
  
 -OR-
 
 “WE
HEREBY DEMAND PAYMENT OF USD ______________ AS WE HAVE RECEIVED NOTICE OF
NON-RENEWAL FOR THIS STANDBY LETTER OF CREDIT AND APPLICANT’S OBLIGATIONS TO US
REMAIN OUTSTANDING.”
 
 -OR-
 
 “WE
HEREBY DEMAND PAYMENT OF USD _______________ AS WE HAVE RECEIVED CONFIRMING
BANK’S NOTICE OF NON-RENEWAL OF THEIR CONFIRMATION UNDER THIS STANDBY LETTER OF
CREDIT AND APPLICANT’S OBLIGATIONS TO US REMAIN OUTSTANDING.”
 
 PARTIAL
DRAWINGS ARE PERMITTED.
 
 ALL
DOCUMENTS ARE TO BE MADE OUT IN THE ENGLISH LANGUAGE.
 
 ALL
BANKING COMMISSION AND CHARGES INCLUDING CONFIRMATION CHARGES AND RELATED
COMMUNICATION CHARGES ISSUED AT THE REQUEST OF THE BENEFICIARY ARE FOR THE
ACCOUNT OF THE APPLICANT.
 
 IT IS A
CONDITION OF THIS LETTER OF CREDIT THAT IT WILL BE AUTOMATICALLY EXTENDED
WITHOUT AMENDMENT FOR ADDITIONAL PERIODS OF ONE YEAR FROM THE CURRENT OR ANY
FUTURE EXPIRATION DATE UNLESS AT LEAST SIXTY (60) DAYS PRIOR TO THE CURRENT
EXPIRATION DATE, BANK OF AMERICA, N.A., AS THE ADVISING/CONFIRMING BANK SHALL
GIVE WRITTEN NOTICE TO BENEFICIARY BY CERTIFIED MAIL OR COURIER THAT WE ELECT
NOT TO RENEW THIS STANDBY LETTER OF CREDIT FOR ANY SUCH ADDITIONAL
PERIOD.
 
 THIS
LETTER OF CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY
CREDITS (1993 REVISION), THE INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO.
500.
 
 BANK TO
BANK INSTRUCTIONS:
  1)
    PLEASE
      ADD YOUR CONFIRMATION TO THIS CREDIT AND ADVISE BENEFICIARY
      ACCORDINGLY.
 
 2)
    “YOU
      MAY DEBIT OUR USD ACCOUNT NUMBER ___________ WITH BANK OF AMERICA, N.A.
      (SPECIFY BRANCH) FOR YOUR FEES. FOR DRAWING REIMBURSEMENT, YOU MAY DEBIT
      THE ACCOUNT TWO (2) BUSINESS DAYS AFTER YOUR NOTIFICATION TO US VIA
      AUTHENTICATED SWIFT OR TESTED TELEX THAT DOCUMENTS WERE RECEIVED IN
      ORDER.”
 
 -OR-
 
 “WE
      WILL REIMBURSE YOU PER YOUR INSTRUCTIONS FOR YOUR FEES AND/OR DRAWING(S)
      REIMBURSEMENT WITHIN TWO BUSINESS DAYS OF OUR RECEIPT OF YOUR
      AUTHENTICATED SWIFT/TELEX REQUESTING FEE PAYMENT OR CERTIFYING DOCUMENTS
      IN ORDER.”
 
 3)
    WE
      HEREBY UNDERTAKE TO NOTIFY BANK OF AMERICA, N.A., CHICAGO, ILLINOIS VIA
      AUTHENTICATED SWIFT, TESTED TELEX, OR COURIER AT LEAST NINETY (90) DAYS
      PRIOR TO THE CURRENT EXPIRY DATE OF OUR ELECTION TO NON-RENEWAL THIS
      STANDBY LETTER OF CREDIT.
 
  26