Exhibit 10.5

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PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD

Award Number:                         

 

Award Date     

Target Number of

Performance-Based

Units

 

     Performance Period

THIS CERTIFIES THAT UnitedHealth Group Incorporated has on the Award Date
specified above granted to

«Name»

(“Participant”) an award (the “Award”) to be eligible to receive a number of
Performance-Based Restricted Stock units (the “Performance-Based Restricted
Stock Units”), the target number of which is indicated above in the box labeled
“Target Number of Performance-Based Units,” each Performance-Based Restricted
Stock Unit representing the right to receive one share of UnitedHealth Group
Incorporated Common Stock, $.01 par value per share (the “Common Stock”),
subject to certain restrictions and on the terms and conditions contained in
this Award and the UnitedHealth Group Incorporated 2002 Stock Incentive Plan
(the “Plan”). A copy of the Plan is available upon request. In the event of any
conflict between the terms of the Plan and this Award, the terms of the Plan
shall govern. Any terms not defined herein shall have the meaning set forth in
the Plan. This Award is intended to qualify as “qualified performance-based
compensation” as described in Section 162(m)(4) of the Code.

* * * * *

1. Rights of the Participant with Respect to the Performance-Based Restricted
Stock Units.

(a) No Shareholder Rights. The Performance-Based Restricted Stock Units granted
pursuant to this Award do not and shall not entitle Participant to any rights of
a shareholder of Common Stock. The rights of Participant with respect to the
Performance-Based Restricted Stock Units shall remain forfeitable at all times
prior to the date on which such rights become vested, and the restrictions with
respect to the Performance-Based Restricted Stock Units lapse, in accordance
with Section 2, 3 or 4.

(b) Conversion of Performance-Based Restricted Stock Units; Issuance of Common
Stock. No shares of Common Stock shall be issued to Participant prior to the
date on which the Performance-Based Restricted Stock Units vest, and the

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restrictions with respect to the Performance-Based Restricted Stock Units lapse,
in accordance with Section 2, 3 or 4. Neither this Section 1(b) nor any action
taken pursuant to or in accordance with this Section 1(b) shall be construed to
create a trust of any kind. After any Performance-Based Restricted Stock Units
vest pursuant to Section 2, 3 or 4, the Company shall promptly cause to be
issued shares of Common Stock in book-entry form, registered in Participant’s
name or in the name of Participant’s legal representatives, beneficiaries or
heirs, as the case may be, in payment of such vested whole Performance-Based
Restricted Stock Units, but in any event, within the period ending on March 15th
of the year following the year in which the vesting event occurs (which payment
schedule is intended to comply with the “short-term deferral” exemption from the
application of Section 409A of the Code), unless such payment is deferred in
accordance with the terms and conditions of the Company’s non-qualified
compensation deferral plans. The value of any fractional Performance-Based
Restricted Stock Unit shall be paid in cash at the time shares of Common Stock
are delivered to Participant in payment of the Performance-Based Restricted
Stock Units.

2. Vesting. Subject to the terms and conditions of this Award, including without
limitation the terms set forth in Attachment 1, the Performance-Based Restricted
Stock Units shall vest and the restrictions with respect to the
Performance-Based Restricted Stock Units shall lapse (i) if Participant has
remained continuously employed with the Company or any Affiliate from the Award
Date through and including the end of the Performance Period, and (ii) if and to
the extent the Performance Vesting Criteria described in Attachment 1 have been
achieved during the Performance Period. Regardless of whether Participant meets
the continuous employment or service criterion described in subpart (i) of this
Section 2, if and to the extent the Performance Vesting Criteria have not been
achieved, the Participant’s rights to the Performance-Based Restricted Stock
Units shall be immediately and irrevocably forfeited on that date. The Committee
will determine in its sole discretion and certify in accordance with the
requirements of Section 162(m) of the Code the extent, if any, to which the
Performance Vesting Criteria have been met, and it will retain sole discretion
to reduce the number of Performance-Based Restricted Stock Units that would
otherwise vest as a result of the performance measured against the Performance
Vesting Criteria. The Committee may not increase the number of Performance-Based
Restricted Stock Units that may vest as a result of the performance as measured
against the Performance Vesting Criteria. Any vesting that may occur pursuant to
this Section 2 will be effective on the date on which the Committee has
certified the extent to which the Performance Vesting Criteria in subpart
(ii) of this Section 2 were satisfied.

3. Early Vesting Upon Change in Control. Notwithstanding the other vesting
provisions contained in Section 2, but subject to the other terms and conditions
set forth herein, upon the effective date of a Change in Control, then the
Target Number of Performance-Based Restricted Stock Units described in this
Award will become immediately and unconditionally vested, and the restrictions
with respect thereto shall lapse. For purposes of this Award, a “Change in
Control” shall mean the sale of all or substantially all of the Company’s assets
or any merger, reorganization, or exchange or tender offer which, in each case,
will result in a change in the power to elect 50% or more of the members of the
Board of Directors of the Company.

 

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4. Termination of Employment.

(a) Termination of Employment Generally. Subject to the provisions of this
Section 4, if, prior to vesting of the Performance-Based Restricted Stock Units
pursuant to Section 2 or 3, Participant ceases to be an employee of the Company
or any Affiliate, for any reason (voluntary or involuntary), then Participant’s
rights to all of the unvested Performance-Based Restricted Stock Units shall be
immediately and irrevocably forfeited on the date of termination.

(b) Death or Permanent Long-Term Disability. If Participant dies while employed
by the Company or any Affiliate, or if Participant’s employment by the Company
or any Affiliate is terminated due to Participant’s failure to return to work as
the result of a permanent long-term disability which renders Participant
incapable of performing his or her duties as determined under the provisions of
the Company’s long-term disability program applicable to Participant, then
following the end of the Performance Period, if and to the extent the Committee,
in accordance with Section 2 above, determines that some number of
Performance-Based Restricted Stock Units will vest and the restrictions with
respect thereto will lapse, Participant will vest in a pro rata number of
Performance-Based Restricted Stock Units, and the restrictions with respect
thereto will lapse. Such pro rationing shall be based on the number of full
months of the Performance Period that Participant was employed prior to the date
of death or termination.

(c) Severance. If Participant’s employment ends and in connection with that
separation from employment the Company pays the Participant severance benefits
pursuant to an employment agreement with Participant that is in effect on the
date of this Award or pursuant to any Company severance policy, plan or program
in effect on the date of termination, then following the end of the Performance
Period, if and to the extent the Committee, in accordance with Section 2 above,
determines that some number of Performance-Based Restricted Stock Units will
vest and the restrictions with respect thereto will lapse, Participant will vest
in a pro rata number of Performance-Based Restricted Stock Units, and the
restrictions with respect thereto will lapse. Such pro rationing shall be based
on the number of full months of the Performance Period that Participant was
employed prior to the date of termination.

5. Restriction on Transfer. Participant may not transfer the Performance-Based
Restricted Stock Units except by will or by the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act or the rules promulgated
thereunder. Any attempt to otherwise transfer the Performance-Based Restricted
Stock Units shall be void.

6. Special Restriction on Transfer for Certain Participants. If Participant is
an officer of the Company within the meaning of Section 16 of the Securities
Exchange Act of 1934 and Rule 16a-1 issued thereunder, as such status is
reasonably determined from time to time by the Board of Directors of the Company
(a “Section 16 Officer”), at any time that shares of Common Stock are issued
upon vesting of the Performance-Based Restricted Stock Units and the Company has
theretofore communicated Participant’s

 

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status as a Section 16 Officer to Participant, the following special transfer
restrictions apply to Participant’s Award. One third ( 1/3) of the net number of
any shares of Common Stock issued to Participant upon vesting of the
Performance-Based Restricted Stock Units at a time when Participant is a
Section 16 Officer (including any shares of Common Stock or other securities
into which such shares may be converted or exchanged as a result of any
adjustment made pursuant to this Award or Section 7 of the Plan) must be
retained, and may not be sold or otherwise transferred, for a period of at least
one year following the issuance date. For purposes of this Award, the “net
number of any shares of Common Stock issued” shall mean the number of shares
issued with respect to the Award after reduction for any shares of Common Stock
withheld by or tendered to the Company, or sold on the market, to cover any
federal, state, local or other payroll, withholding, income or other applicable
tax withholding required in connection with the issuance of the shares. The
restrictions of this Section 6 are in addition to, and not in lieu of, the
restrictions imposed under other Company policies and applicable laws.

7. Forfeiture of Performance-Based Restricted Stock Units and Shares of Common
Stock. This section sets forth circumstances under which Participant shall
forfeit all or a portion of the Performance-Based Restricted Stock Units, or be
required to repay the Company for the value realized in respect of all or a
portion of the Performance-Based Restricted Stock Units.

(a) Violation of Restrictive Covenants. If Participant violates any provision of
the Restrictive Covenants set forth in Section 8 below, then any unvested
Performance-Based Restricted Stock Units shall be immediately and irrevocably
forfeited without any payment therefor. In addition, for any Performance-Based
Restricted Stock Units that did vest, whether before or after Participant’s
employment terminated, the Participant shall be required, upon demand, to repay
or otherwise reimburse the Company (including by forfeiting any deferred
compensation credits in respect of such Performance-Based Restricted Stock Units
under the Company’s non-qualified compensation deferral plans) an amount having
a value equal to the aggregate Fair Market Value of the shares of Common Stock
underlying such Performance-Based Restricted Stock Units on the date the
Performance-Based Restricted Stock Units became vested.

(b) Fraud or Misconduct. If the Committee determines that: (i) the Participant
has engaged in fraud or Misconduct that, in whole or in part, caused the need
for a material restatement of the Company’s consolidated financial statements,
(ii) the Performance Vesting Criteria were met was based, in whole or in part,
on achievement of financial results that were restated in connection with the
restatement of the Company’s consolidated financial statements, and (iii) the
number of Performance-Based Restricted Stock Units in which Participant vested
would have been less if that number had been based on the restated consolidated
financial statements, then any Performance-Based Restricted Stock Units that
have not yet been settled in shares of Common Stock (including any deferred
compensation credits under the Company’s non-qualified compensation deferral
plans in respect of Performance-Based Restricted Stock Units that have
previously become vested) shall be immediately and irrevocably forfeited without
any payment therefore. In addition, for any Performance-Based Restricted Stock
Units that did

 

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vest, Participant shall be required, upon demand, to repay or otherwise
reimburse the Company (including by forfeiting any deferred compensation credits
in respect of such Performance-Based Restricted Stock Units under the Company’s
non-qualified compensation deferral plans) an amount having a value equal to the
aggregate Fair Market Value of the shares of Common Stock underlying such
Performance-Based Restricted Stock Units on the date the Performance-Based
Restricted Stock Units became vested. For the avoidance of doubt, a Participant
shall be required to repay the full amount of the aggregate Fair Market Value of
any such Common Stock, and not just the amount by which the amount of the
aggregate Fair Market Value of the Common Stock underlying the Performance-Based
Restricted Stock Units that vested exceeded the amount of the aggregate Fair
Market Value of the Common Stock underlying the number of Performance-Based
Restricted Stock Units that would have vested based on the corrected and
restated financial results. For purposes of this Section 7(b), “Misconduct”
shall mean a Participant’s (a) violation of, or failure to act upon or report
known or suspected violations of, the Company’s Principles of Ethics and
Integrity, or (b) commission of any illegal, fraudulent, or dishonest act or
gross negligent or intentional misrepresentation in connection with the
Participant’s employment.

(c) In General. This section does not constitute the Company’s exclusive remedy
for Participant’s violation of the Restrictive Covenants or commission of fraud
or Misconduct. The Company may seek any additional legal or equitable remedy,
including injunctive relief, for any such violations. The provisions in this
section are essential economic conditions to the Company’s grant of
Performance-Based Restricted Stock Units to Participant. By receiving the grant
of Performance-Based Restricted Stock Units hereunder, Participant agrees that
the Company may deduct from any amounts it owes Participant from time to time
(such as wages or other compensation, deferred compensation credits,
vacation/PTO pay, any severance or other payments owed following a termination
of employment, as well as any other amounts owed to the Participant by the
Company) to the extent of any amounts Participant owes the Company under this
section. The provisions of this section and any amounts repayable by Participant
hereunder are intended to be in addition to any rights to repayment the Company
may have under Section 304 of the Sarbanes-Oxley Act of 2002 and other
applicable law.

8. Restrictive Covenants. In consideration of the terms of this Award and
Participant’s access to Confidential Information, Participant agrees to the
Restrictive Covenants set forth below. For purposes of the Restrictive
Covenants, the “Company” means UnitedHealth Group and all of its Affiliates.

(a) Confidential Information. Participant has or will be given access to and
provided with sensitive, confidential, proprietary and/or trade secret
information (collectively, “Confidential Information”) in the course of
Participant’s employment. Examples of Confidential Information include
inventions, new product or marketing plans, business strategies and plans,
merger and acquisition targets, financial and pricing information, computer
programs, source codes, models and data bases, analytical models, customer lists
and information, and supplier and vendor lists and information. Participant
agrees not to disclose or use Confidential

 

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Information, either during or after Participant’s employment with the Company,
except as necessary to perform Participant’s duties or as the Company may
consent in writing.

(b) Non-Solicitation. During Participant’s employment and for two years after
the later of (i) the termination of Participant’s employment for any reason
whatsoever, or (ii) the date on which any number of Performance-Based Restricted
Stock Units vests under Sections 2, 3 or 4, Participant may not, without the
Company’s prior written consent, directly or indirectly, for Participant or for
any other person or entity, as agent, employee, officer, director, consultant,
owner, principal, partner or shareholder, or in any other individual or
representative capacity:

 

  (i) Solicit any business competitive with the Company from any person or
entity who (a) was a Company provider or customer within the 12 months before
Participant’s employment termination and with whom Participant had contact to
further the Company’s business, or for whom Participant provided services or
supervised employees who provided those services, or (b) was a prospective
provider or customer the Company solicited within the 12 months before
Participant’s employment termination and with whom Participant had contact for
the purposes of soliciting the person or entity to become a provider or customer
of the Company, or supervised employees who had those contacts.

 

  (ii) Hire, employ, recruit or solicit any Company employee or consultant.

 

  (iii) Induce or influence any Company employee, consultant, or provider to
terminate his, her or its employment or other relationship with the Company.

 

  (iv) Assist anyone in any of the activities listed above.

(c) Non-Competition. During Participant’s employment and for one year after the
later of (i) the termination of Participant’s employment for any reason
whatsoever, or (ii) the date on which any number of Performance-Based Restricted
Stock Units vests under Sections 2, 3 or 4, Participant may not, without the
Company’s prior written consent, directly or indirectly, for Participant or for
any other person or entity, as agent, employee, officer, director, consultant,
owner, principal, partner or shareholder, or in any other individual or
representative capacity:

 

  (i) Engage in or participate in any activity that competes, directly or
indirectly, with any Company product or service that Participant engaged in,
participated in, or had Confidential Information about during Participant’s
employment.

 

  (ii) Assist anyone in any of the activities listed above.

 

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(d) Because the Company’s business competes on a nationwide basis, the
Participant’s obligations under this “Restrictive Covenants” section shall apply
on a nationwide basis anywhere in the United States.

(e) To the extent Participant and the Company agree at any time to enter into
separate agreements containing restrictive covenants with different or
inconsistent terms than those contained herein, Participant and the Company
acknowledge and agree that such different or inconsistent terms shall not in any
way affect or have relevance to the Restrictive Covenants contained herein.

By accepting this Performance-Based Restricted Stock Units Award, Participant
agrees that the provisions of this Restrictive Covenants section are reasonable
and necessary to protect the legitimate interests of the Company.

9. Adjustments to Performance-Based Restricted Stock Units. In the event that
any dividend or other distribution (whether in the form of cash, shares of
Common Stock, other securities or other property), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase or exchange of Common Stock or other
securities of the Company or other similar corporate transaction or event
affecting the Common Stock would be reasonably likely to result in the
diminution or enlargement of any of the benefits or potential benefits intended
to be made available under the Award (including, without limitation, the
benefits or potential benefits of provisions relating to the vesting of the
Performance-Based Restricted Stock Units), the Committee shall, in such manner
as it shall deem equitable or appropriate in order to prevent such diminution or
enlargement of any such benefits or potential benefits, make adjustments to the
Award, including adjustments in the number and type of shares of Common Stock
Participant would have received upon vesting of the Performance-Based Restricted
Stock Units; provided, however, that the number of shares into which the
Performance-Based Restricted Stock Units may be converted shall always be a
whole number.

10. Tax Matters.

(a) In order to comply with all applicable federal or state income tax laws or
regulations, the Company may take such action as it deems appropriate to ensure
that all applicable federal or state payroll, withholding, income or other
taxes, which are the sole and absolute responsibility of Participant, are
withheld or collected from Participant.

(b) On any pertinent vesting date described in this Award, Participant will be
deemed to have elected to satisfy Participant’s minimum required federal, state,
and local payroll, withholding, income or other tax withholding obligations
arising from the receipt of shares or the lapse of restrictions relating to the
Performance-based Restricted Stock Units, by having the Company withhold a
portion of the shares of Common Stock otherwise to be delivered having a Fair
Market Value equal to the amount of such taxes (but only to the extent of the
minimum amount required to be withheld under applicable laws or regulations),
unless, on or before the applicable vesting date, Participant notifies the
Company that Participant has elected, and makes appropriate arrangements, to
deliver cash, check (bank check, certified check or personal check) or money
order payable to the Company.

 

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11. Miscellaneous.

(a) This Award does not confer on Participant any right with respect to the
continuance of any relationship with the Company or any Affiliate, nor will it
interfere in any way with the right of the Company to terminate such
relationship at any time.

(b) Neither the Plan nor this Award shall create or be construed to create a
trust or separate fund of any kind or a fiduciary relationship between the
Company and Participant or any other Person. To the extent that any Person
acquires a right to receive payments from the Company or any Affiliate pursuant
to an Award, such right shall be no greater than the right of any unsecured
creditor of the Company or any Affiliate.

(c) The Company shall not be required to deliver any shares of Common Stock upon
the vesting of any Performance-Based Restricted Stock Units until the
requirements of any federal or state securities laws, rules or regulations or
other laws or rules (including the rules of any securities exchange) as may be
determined by the Company to be applicable have been and continue to be
satisfied (including an effective registration of the shares under federal and
state securities laws).

(d) An original record of this Award and all the terms hereof, executed by the
Company, is held on file by the Company. To the extent there is any conflict
between the terms contained in this Award and the terms contained in the
original held by the Company, the terms of the original held by the Company
shall control.

(e) If a court or arbitrator decides that any provision of this Award
certificate is invalid or overbroad, Participant agrees that the court or
arbitrator should narrow such provision so that it is enforceable or, if
narrowing is not possible or permissible, such provision should be considered
severed and the other provisions of this Award certificate should be unaffected.

(f) Participant agrees that (i) legal remedies (money damages) for any breach of
the Restrictive Covenants in Section 8 will be inadequate, (ii) the Company will
suffer immediate and irreparable harm from any such breach, and (iii) the
Company will be entitled to injunctive relief from a court in addition to any
legal remedies the Company may seek in arbitration.

(g) The Restrictive Covenants in Section 8 and the provisions regarding the
forfeiture of Performance-Based Restricted Stock Units and shares of Common
Stock shall survive termination of the Performance-Based Restricted Stock Units.

(h) The validity, construction and effect of this Award and any rules and
regulations relating to this Award shall be determined in accordance with the
laws of the State of Minnesota (without regard to its conflict of law
principles).

 

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(i) The vesting and settlement of Performance-Based Restricted Stock Units
pursuant to this Award is intended to qualify for the “short-term deferral”
exemption from Section 409A of the Code. The Company reserves the right, to the
extent the Company deems necessary or advisable in its sole discretion, to
unilaterally amend or modify the Plan and/or this Award certificate to ensure
that the Award is made in a manner that qualifies for exemption from or complies
with Section 409A of the Code; provided however, that the Company makes no
representations that the Award will be exempt from Section 409A of the Code and
makes no undertaking to preclude Section 409A of the Code from applying to this
Award.

 

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