Product Development And Co-branding Agreement

PRODUCT DEVELOPMENT AND CO-BRANDING AGREEMENT


"SONGS 4 WORSHIP SERIES"


EXCLUDING CONFIDENTIAL PORTIONS


/1/ Indicates information which has been redacted pursuant to a request for
confidential treatment.


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INDEX TO THE CONFIDENTIAL PORTIONS


PAGE SECTION LINE(S)
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1 1(c) 3, 4, and 5
3 3(a) 4, 5, 10, 11, 12 and 13
4 4(c) 2, 4 and 5
4 4(d) 2, 3, 4 and 5
5 5 2


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PRODUCT DEVELOPMENT AND CO-BRANDING AGREEMENT
"SONGS 4 WORSHIP SERIES"


This Agreement, entered into this the 10th day of January 2000, by and between INTEGRITY INCORPORATED, a Delaware corporation with principal offices at 1000 Cody Road, Mobile, Alabama ("Integrity") and TIME LIFE, INC., a Delaware corporation d/b/a Time Life Music, with principal offices located at 2000 Duke Street, Alexandria, Virginia 22314 ("TL"). The parties wish to produce a series of recorded compilations and companion song books featuring praise and worship repertoires, which will be co-branded and co-marketed throughout the world. Now, therefore, the parties agree as follows:


1. Product Concept and Creation.


a. Product description. The product to be created under the
series trade name "Songs 4 Worship" will be a praise and
worship continuity series, with each volume in the series
containing approximately 22 songs. Each volume will be
manufactured in Double CD, Double Cassette, and song book
formats, with standard double jewel boxes, inlays, booklets
and j-cards (the "Product"). TL and Integrity will jointly
develop the repertoire, and all repertoire selections are
subject to master, mechanical and print rights clearance in
accordance with the financial terms established below. The
exact songbook format, song selection and number of songbook
volumes has not yet been determined, and TL has no obligation
to sell any songbooks produced pursuant to this Agreement.


b. Branding. The Product will prominently display the "Songs 4
Worship" logo and trademark (or other logo as mutually
approved) and will also bear the labels of "Time Life Music"
and "Integrity Music" in equal proportion on the exterior of
Product packaging. The "Integrity Music" and "Time Life Music"
logos will be used on advertising whenever possible, and it is
understood that neither logo will be used without the other
with reference to the Product.


c. Integrity's responsibilities. Integrity will obtain master
lease and print agreements with all third party owners of
masters embodied in the Product at its own expense. Mechanical
rates will not exceed [**]/1/ percent ([**]/1/%) of the
then-current statutory rate, and Print licenses will not
exceed a prorated portion of [**]/1/ percent ([**]/1/%) of the
retail selling price, Integrity will also manufacture the
Product and sell to TL its requirements for resale.


- --------------- /1/ Indicates information which has been redacted pursuant to a request for
confidential treatment.


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d. TL's responsibilities. At its sole expense, TL will create all
artwork for Product covers and packaging, and furnish
Integrity with the same for manufacturing of the Products. All
such artwork will be subject to Integrity's reasonable
approval. (Integrity agrees to respond to any request for
approval within five (5) business days after Integrity's
receipt of request and samples.) In addition, TL will pay all
mastering expense required in preparation for manufacturing.


e. Shared expenses. The parties agree to share equally in costs
of additional products created (excluding the Product, and
song books, which such song books shall be created at
Integrity's sole discretion and expense), by mutual agreement
under the "Songs 4 Worship" branding.


2. Marketing and Distribution.


a. Time Life Distribution. TL will hold exclusive worldwide
rights to promote and sell the product through the following
distribution channels: Outgoing telemarketing, General Market
retail, and General Market catalogs, and exclusive rights
within the United States for Television Direct response. TL
will have Internet and e-commerce rights with respect to its
own web site and other General Market e-commerce. In addition,
TL may cross-sell the products to its internal list by inserts
placed in mailings for other TL products and services (but
excluding direct mail campaigns for the Product.) TL may
obtain television and/or direct response rights in certain
international territories upon Integrity's agreement.


b. Integrity Distribution. Integrity will hold exclusive
worldwide rights to promote and sell the product to/through
the following distribution channels: Christian retail (CBA or
Christian Booksellers Association markets), direct mail
(including continuity sales, church sales, digital and
e-commerce sales.) Integrity will have Internet and e-commerce
rights with respect to its own web site and other Christian
e-commerce. Integrity shall have the right to license
distribution of the Product through all channels of
distribution throughout the remainder of the world.


c. Selling Price. The parties agree that the initial suggested
retail selling price for the products will be $19.95 for CD's,
$17.95 for Cassettes, and $19.95 for song books. Any change in
the suggested retail selling price will be mutually agreed by
the parties. The parties acknowledge that they cannot control
the prices set by independent retailers and resellers, but
agree that sales by the parties hereto via e-commerce will be
the same, and such will be mutually agreed.


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d. Mailing Lists. The parties hereby agree that they will
mutually share mailing list data of purchasers of the products
created hereunder in exchange for names of equal value, (i.e.,
an expired name for an expired name, active buyer for active
buyer.) TL specifically agrees to supply Integrity with data
on former subscribers to its "Songs 4 Life" series, who have
subsequently canceled for the express purpose of soliciting
Product continuity subscriptions.


e. Retail release. The, parties will mutually agree upon the date
the products shall be released to retail (General Market and
CBA); and it is hereby agreed that such release shall be
simultaneous (i.e., television and direct response will have a
period of exclusivity before the products are available at
retail).


3. Product sales to TL.


a. Integrity will, upon receipt of approved purchase orders from
TL, sell to TL in non-returnable box lot quantities, TL's
requirements products rates calculated on the following basis
(plus freight). The copyright royalty on recorded products is
based on [**]/1/% of the then current statutory mechanical
rate, and on song books, [**]/1/ percent ([**]/1/%) of the
retail selling price (prorated to each copyright holder).
Integrity may adjust the prices charged to TL on each volume
to accurately reflect the then-current royalty obligation to
all parties, including Integrity.


CD Cassette Song book
--------- -------- ---------

Manufacturing $ [**]/1/ $ [**]/1/ $ [**]/1/
(May be adjusted if actual costs exceed above amounts)


Master Lease ...