DEVELOPMENT AND SERVICE AGREEMENT

1.

Definitions.

CHANGE OF CONTROL:

(A) the direct or indirect acquisition of either (i) the majority of the voting stock of Health Grades or (ii) all or substantially all of the assets of Health Grades, by another entity in a single transaction or series of related transactions; or (B) the merger, consolidation or reorganization of Health Grades with or into another entity.

DIRECTORY SEARCH:

Functionality of the Sites that enables participants to retrieve only basic provider information (name, address, phone number, network status (by location, if applicable, as mutually agreed upon by Health Grades and Hewitt), hospital affiliation, network specific provider ID, status of accepting new patients (by location, if applicable, as mutually agreed upon by Health Grades and Hewitt) and participation level (e.g., tiered network, high performance network, etc.)) and no quality information (board certification, disciplinary actions, Leapfrog ratings, etc.).

EVALUATION PERIOD:

The period beginning on the Effective Date and ending on December 31, 2005, during which Hewitt will evaluate Health Grades’ performance of Pilot Services and Health Grades’ adequacy to provide Network Tag Services, as set forth in more detail in Section 5.

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HEALTH GRADES MATERIALS:

All data, information and materials (in whatever form or media) and software that are owned by, or licensed by third parties to, Health Grades, including the underlying code for the web site through which Health Grades provides its Services, the data and content displayed thereon (except with regard to data and content supplied by or on behalf of Hewitt), and other Proprietary Rights of Health Grades, and that Health Grades supplies to or makes accessible to Hewitt or a Hewitt Client in connection with the Services contracted for or provided under this Agreement.

HEWITT CLIENT:

Any entity to which Hewitt provides Provider Search Services, whether or not Hewitt provides other services to such entity. This includes clients for whom Hewitt may not provide Outsourcing services. Hewitt Clients are not Parties to this Agreement.

HEWITT MATERIALS:

All data, information and materials (in whatever form or media) and software that are owned by, or licensed by third parties to, Hewitt, including the web site through which Hewitt provides its services, the data and other content displayed thereon, and Hewitt’s other Proprietary Rights, and that Hewitt supplies to or makes accessible to Health Grades in connection with the Services contracted for or provided under this Agreement.

HEWITT CLIENT MATERIALS:

All data or information (in whatever form or media) that is owned by, or licensed by third parties to, a Hewitt Client, including its participants’ data, content and other Proprietary Rights and that Hewitt or the Hewitt Client supplies to or makes accessible to Health Grades in connection with the Services contracted for or provided under this Agreement.

NETWORK TAGS:

Provider-specific data received from health plans (including * ).

NETWORK TAG SERVICES:

The collection, processing, integration, deployment, maintenance and updating of Network Tags on an ongoing basis in connection with the Tool and the Sites.

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PILOT CLIENT:

*

PILOT SERVICES:

The Services to be performed by Health Grades on behalf of the Pilot Client, as set forth in more detail in Section 3.

PROPRIETARY RIGHTS:

All patent rights, copyright rights, trademark rights, trade secret rights, rights of publicity, rights of privacy, moral rights or other intellectual property or proprietary rights any where in the world.

PROVIDER SEARCH SERVICES:

The Provider Search Services, which include the Services, includes * , all as set forth in the Specification.

QUALITY-
CENTRIC APPLICATION

Application incorporating the Tool and Sites as specified in Schedule B to be used solely for Hewitt and Hewitt Clients and to be integrated into the Sites in accordance with Hewitt’s requirements as set forth in the Specification.

QUALITY SEARCH:

Functionality of the Sites that enables participants to retrieve providers ranked in order of Health Grades’ provider quality data as well as proximity to the participant’s location.

SEARCH LEVEL:

For a given Hewitt Client, the type of search (Directory Search or Quality Search) to which such Hewitt Client’s participants will have access through the Sites.

SERVICES:

The services described in Schedule A, including but not limited to Pilot Services and Network Tag Services.

SITES:

The web sites (as identified in Schedule A ) to be developed and implemented by Health Grades for the Transition Application or the Quality-Centric Application, as applicable, in accordance with Hewitt’s requirements as set forth in the Specification and to be hosted by Health Grades as a subcontractor to Hewitt.

SPECIFICATION:

The detailed functional requirements and specifications for the Tool and the Sites, as set forth in Schedule B.

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TOOL:

The web-based health care provider search tool to be developed and implemented by Health Grades and to be integrated into the Sites in accordance with Hewitt’s requirements as set forth in the Specification.

TRANSITION APPLICATION:

The Site * to be implemented by Health Grades in accordance with Hewitt’s requirements as set forth in the Specification and to be hosted by Health Grades as a subcontractor to Hewitt, as elected by Hewitt Clients during the transition * to the Quality-Centric Application.

TRANSITION PERIOD:

Period beginning on January 1, 2006 and ending on December 31, 2006, during which the Parties anticipate the transfer of all Hewitt Clients * to the Transition Application or the Quality-Centric Application.

LIST OF SCHEDULES:

Schedule A: Services
Schedule B: Specification
Schedule C: Service Levels
Schedule D: Fees
Schedule E: Health Grades Disaster Recovery Plan

2.

Term of Agreement.

3.

Services Provided — Summary.

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b.

Site Hosting. Health Grades will host the Sites and provide access to the Sites for Hewitt Clients and their participants. The Sites will initially be made available to the Pilot Client, and upon Hewitt’s written determination that the Pilot Services have been successful, the Sites will be made available to other Hewitt Clients on a schedule to be determined jointly by Hewitt and Health Grades. With respect to each Hewitt Client, Hewitt shall instruct Health Grades as to which Search Level and application type (Transition Application or Quality-Centric Application) such Hewitt Client requires, and Health Grades shall configure the Sites so that Hewitt Clients have access to the appropriate Sites to accommodate such Search Level and application type.

c.

Network Tag Services . As set forth in the Specification, the Tool shall display, to each Hewitt Client’s participants, information regarding whether or not the providers retrieved by a search participate in the health plans that are applicable to such Hewitt Client. Hewitt and Health Grades shall work together during the Evaluation Period to collect Network Tags from health plans selected by Hewitt. While performing the Pilot Services, Health Grades will be responsible for integrating the Network Tags received from Hewitt’s current provider into the Tool and the Sites as appropriate. Upon Hewitt’s written determination that Health Grades is capable of adequately performing all the Network Tag Services, Health Grades shall commence performance of all Network Tag Services in connection with the Provider Search Services. Hewitt and Health Grades will jointly determine the schedule for moving Hewitt Clients during the Transition Period * to the Transition Application or the Quality-Centric Application, as applicable, with respect to the Network Tags.

d.

Party Responsibilities. The responsibilities of the Parties with regard to the Services are set forth in greater detail in Schedule A and the Specification. The Parties acknowledge and agree that the Services and the responsibilities set forth in Schedule A may change from time to time at Hewitt’s request, subject to Health Grades’ approval (not to be unreasonably withheld), based on Hewitt’s evaluation of the Pilot Services, feedback from the Pilot Client or other Hewitt Clients and input and feedback from Health Grades.

5.

Network Tag Evaluation.

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6.

Exclusivity.

7.

Independent Contractors.

8.

Representations and Warranties.

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c.

Intellectual Property . Each Party represents and warrants that its contributions to the Tool and the Sites, and any other intellectual property used or provided in connection with this Agreement or the Provider Search Services, will not infringe on any copyright, patent, trademark, service mark or any other third party intellectual property or other right.

d.

General . Each Party represents and warrants to the other Party that: (i) such Party has the full corporate right, power and authority to enter into this Agreement, to grant any licenses granted hereunder and to perform the acts required of it hereunder; (ii) the execution of this Agreement by such Party, and the performance by such Party of its obligations and duties hereunder, do not and will not violate any agreement to which such Party is a Party or by which it is otherwise bound; and (iii) when executed and delivered by such Party, this Agreement will constitute the legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms.

a.

Authorized Representatives . Each Party shall designate an appropriate person or persons (or designated alternates) as their respective Authorized Representatives (“Authorized Representatives”). Each Party may supplement or otherwise modify its Authorized Representatives from time to time by written notice to the other Party. Each Party’s Authorized Representatives shall have authority to issue, execute, grant or provide any approvals, requests, change requests, change orders, notices or other communications required hereunder or requested by the other Party hereto. The following is the initial list of Authorized Representatives:

Health Grades:

Kerry Hicks

Dave Hicks

Allen Dodge

b.

Periodic Meetings . The Parties’ Authorized Representatives will meet quarterly at Hewitt’s facilities in Lincolnshire, Illinois, during the Term of this Agreement and assess the Parties’ performance hereunder. Such meetings may be scheduled more frequently at Hewitt’s

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request subject to Health Grades approval, not to be unreasonably withheld. Each party will bear its own costs with respect to such meetings.

c.

Audit . Hewitt (acting on its behalf or on behalf of a Hewitt Client)shall have the right during the Term of this Agreement with reasonable advance notice to Health Grades and during normal business hours to review and audit Health Grades relating to the performance by Health Grades of the Services for Hewitt. Such review and audit may be conducted by counsel, internal staff or by independent third parties. Any such review or audit shall be conducted in a manner reasonably designed to protect the confidentiality of participant data and of Confidential Information of Health Grades and to avoid interfering with Health Grades business operations. As between Health Grades and Hewitt, any such audit shall be at the sole cost of Hewitt, provided that: (i) if the audit reveals that Health Grades has overcharged Hewitt by 5% or more during the period audited (for example by failing to accurately calculate credits due to service level failures, failing to calculate fees properly based on accurate Headcount, etc.), then Health Grades shall reimburse Hewitt for (a) the amount of the overcharge and (b) the costs of such audit; and (ii) if the audit reveals any material defect in Health Grades’ performance or processes, then (a) Health Grades shall promptly implement corrective measures to remedy such defects and (b) Health Grades shall reimburse Hewitt for the costs of such audit. Health Grades further acknowledges that governmental authorities may have the right to review and audit records of Health Grades pursuant to applicable law. Hewitt agrees that any third party conducting such audit shall be subject to the confidentiality provisions of this Agreement.

d.

Notice of Non-Compliance with Law . The Parties will use reasonable efforts to notify each other in writing if either Party learns that the Services do not comply with any applicable law, rule, regulation, or ordinance relating to the Services, including but not limited to provisions of the Employee Retirement Income Security Act of 1974, as amended from time to time (“ERISA”), the Internal Revenue Code or the Health Insurance Portability and Accountability Act of 1996 as amended from time to time (“HIPAA”).

e.

Notice of Change in Law . To the extent that any change in applicable laws, rules, regulations, or ordinances requires a change to the Services or the terms of this Agreement, the Parties will notify each other thereof if and to the extent either party becomes aware of such matter. All reasonable and practicable systems and administrative changes resulting from the enactment of legislation will be considered within the scope of Services to be provided by Health Grades hereunder.

f.

Compliance with Law . Health Grades will comply with the laws, ordinances, regulations and codes (including identification and procurement of required permits, certificates, approvals and inspections) which are applicable to its performance of the Services, and if working on a Hewitt Client’s or Hewitt’s premises will comply with the Hewitt Client’s/Hewitt’s work rules, safety and security rules and regulations, which are applicable at the location where such Services are performed to the extent Health Grades has been provided a copy of such rules and regulations.

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g.

Reports . Health Grades will provide Hewitt and Hewitt Clients with such reports in the format and at the times as are required by Schedule A .

h.

Insurance . During the Term of this Agreement, Health Grades will maintain in force the following minimum insurance coverage and limits:

a)

Hewitt, including any of its subsidiaries and affiliates, and their respective directors, officers, employees, and agents shall be included as additional insured (except for professional liability).

b)

Insurance shall be primary and non-contributory to any insurance maintained by Hewitt, which shall apply explicitly on an excess basis.

c)

Health Grades and its insurance companies waive their rights to subrogation against the above named additional insureds.

i.

Cooperation . Health Grades will use commercially reasonable efforts to cooperate with Hewitt in Hewitt’s performance of Hewitt’s obligations under its contracts with Hewitt Clients, to the extent those obligations involve the Services, including but not limited to complying with pass-through obligations that Hewitt Client’s require Hewitt to impose on subcontractors and vendors.

j.

Use of Subcontractors . Health Grades shall not employ the services of any subcontractor to perform all or a portion of the Services without the express written consent of Hewitt

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(which consent may be withheld at Hewitt’s sole discretion); provided that Health Grades may engage individual independent contractors to perform specified tasks within the Services, such as coding, project management, etc. Any approved subcontractor or permitted independent contractor must be bound by terms and conditions consistent with those contained in this Agreement. Upon Hewitt’s request, with respect to any individual performing the Services that is identified by Hewitt, Health Grades shall have a background check performed and will confirm for Hewitt that there were no adverse results to any background checks performed by or on behalf of Health Grades (but Health Grades will not provide a copy of any such checks to Hewitt).

k.

Material Change to Health Grades Business . Health Grades shall give reasonable notice to Hewitt of any material change in its business which would be relevant to Hewitt, including a Change of Control, a change in its relationship with any approved subcontractor, or other change which may materially affect the Services. In the event of a Change of Control, (i) Health Grades shall give Hewitt not less than ninety (90) days’ prior written notice, subject to regulatory and confidentiality obligations, of such Change of Control; (ii) Hewitt shall have the right to terminate this Agreement in its reasonable discretion within ninety (90) days following such Change of Control; and (iii) if Hewitt elects to terminate this Agreement in its entirety, then Health Grades will provide Transition Services at no cost to Hewitt.

l.

Upgrades and Enhancements . Health Grades will supply reasonable functionality enhancements, including but not limited to enhancements suggested by Hewitt subject to Health Grades’ consent (not to be unreasonably withheld), and annual ratings updates free of charge.

a.

Each Party will use its reasonable efforts to cause its respective agents, employees and representatives to minimize distribution and duplication, and prevent unauthorized disclosure, of the Confidential Information of the other Party or a Hewitt Client. Each Party agrees that only the agents, employees and representatives who have a need to know the Confidential Information of the other Party will receive such Confidential Information. Neither Party will disclose the other Party’s (and in the case of Health Grades, a Hewitt Client’s) Confidential Information to a third party without the prior written consent of the other party (except Hewitt may disclose Confidential Information of Health Grades that relates to a Hewitt Client to such Hewitt Client and may also disclose Confidential Information of Health Grades to a Hewitt subcontractor as reasonably required for Hewitt or such subcontractor to provide services to such Hewitt Client), which consent may be conditioned upon the execution of a confidentiality agreement reasonably acceptable to the owner of the Confidential Information.

b.

For the purposes of this Agreement, “Confidential Information” includes (i) for both Parties, the terms of this Agreement (including the Schedules), (ii) for Hewitt, all Hewitt Client Materials and Hewitt Materials, (iii) for Health Grades, all Health Grades Materials, (iv) for each Party, oral and written information designated by such Party as confidential

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prior to the other Party obtaining access thereto, and (v) for both Parties, oral and written information which should reasonably be deemed confidential by the recipient whether or not such material is designated as confidential. As between the Parties, each Party’s respective Confidential Information will remain its sole and exclusive property and the Parties agree that a Hewitt Client’s Confidential Information shall remain the Hewitt Client’s sole and exclusive property.

c.

The confidentiality restrictions set forth in Section 10.a above shall not apply to information if and to the extent: (i) such information is or becomes generally available or known to the public through no fault of the receiving Party; (ii) such information was already known by or available to the receiving Party prior to the disclosure by the other party; (iii) such information is subsequently disclosed to the receiving Party by a third party (other than the corresponding Hewitt Client) who is not under any obligation of confidentiality to the Party who disclosed the information; (iv) the information is required to be disclosed as part of a judicial process, government investigation, legal proceeding or other similar process; (v) the information is required by applicable law or regulation to be disclosed; or (vi) the information has already been or is hereafter independently acquired or developed by the receiving Party without violating any confidentiality agreement with or other obligation to the Party who disclosed the information.

d.

If a Party is required to disclose the Confidential Information of the other Party (including in the case of Health Grades, a Hewitt Client’s Confidential Information) as part of a judicial process, government investigation, legal proceeding or other similar process, such Party will give prior written notice of such requirement to the other Party. Reasonable efforts will be made to provide this notice in sufficient time to allow the other Party to seek an appropriate confidentiality agreement, protective order or modification of any disclosure and the Party required to make such disclosure will cooperate in such efforts.

e.

Each Party acknowledges that any breach of any provision of this Section 8 by either Party, or its personnel or subcontractors, will cause immediate and irreparable injury to the other Party, and in the event of such breach, the injured Party shall be entitled to injunctive relief, without bond or other security, and to any and all other remedies available at law or in equity.

f.

For purposes of this Agreement, Health Grades will address and resolve with Hewitt issues relating to the Services provided to or for the benefit of a Hewitt Client and each Hewitt Client’s Confidential Information.

a.

Health Grades will maintain an effective information security program (a “Security Program”) to protect Hewitt Client Materials, which Security Program will (i) include appropriate administrative, technical and physical safeguards, (ii) ensure the security, availability and confidentiality of Hewitt Client Materials, (iii) protect against any threats or hazards to the integrity, security or confi