**Exhibit 10.1**

 

**Watson Wyatt Worldwide, Inc.**

**Performance Share Bonus Incentive Program**

**FY08**

 

Summary

 

ThePerformance Share Bonus Incentive Program (the Program) is a long-term bonusprogram for senior executives, designed to strengthen incentives and align behaviorsto grow the business in a way that is consistent with the strategic goals ofthe Company.  Incentives are providedthrough grants of deferred stock units tied to a 3-year performance period withvesting contingent upon meeting certain Company goal thresholds.  This bonus program does not replace theFiscal Year End Bonus (FYEB).

 

Eligibility

 

Associatesof Watson Wyatt & Company and its Affiliates will be eligible fornomination to participate in the Program. Eligible participants will be nominated and approved by the CompensationCommittee of the Board (the Committee). Generally, associates eligible for nomination will be high performing,senior-level executives that have direct impact or responsibility for drivingstrategy throughout the organization.  Alist of participants nominated and approved by the Committee for theperformance period beginning July 1, 2007 and ending June 30, 2010 isattached hereto as Attachment 1.

 

PerformancePeriod

 

Theperformance period is a 3-year period that begins on July 1, 20xx and endson June 30, 20xx+3.  For example,the performance period that began on July 1, 2007 will end on June 30,2010.  Baseline metrics are establishedat the beginning of the performance period. At the end of the performance period, performance metrics will then bemeasured.  The Company will follow itsstandard process for financial reporting following the close of the fiscalyear.  Once Company financial results arefinalized (August following end of fiscal year) the final performancemetric results for the most recent performance period can be determined.

 

Grants

 

Grantsof stock (performance shares) are made under the 2001 Deferred Stock UnitPlan for Selected Employees.  Grantsare based on the value of the cash portion of the Fiscal Year End Bonustarget.  A multiplier, which varies byparticipation tier, is then applied to that value to determine the cash valueof the performance shares.  The cashvalue is then converted to a number of shares of stock based on the stockmarket closing price on the last day of the fiscal year prior to thegrant.  For calculation purposes, bandand salary information will be based on what is in effect as of October 1of the first fiscal year of the performance period.

 

 

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Allperformance share grants will be made by the Committee at the beginning of eachperformance period (following the fiscal year end close process).  Final grant amounts will generally bedetermined by the method outlined here. However, the Committee, at its discretion, may adjust final grantamounts.

 

Vesting

 

Theperformance shares will vest 3 years from the date of grant based on theachievement of certain performance metrics and subject to the participant’scontinued employment on the vesting date unless waived in accordance with theTermination Provisions herein.  Companyperformance goals are established by the Committee at the beginning of eachperformance period.  At the conclusion ofeach performance period, Company performance metrics are measured against goalsover the same period to determine the percentage of the grant to beawarded.  The actual award is determinedby an earnout schedule which defines performance level ranges and associatedearnout of grants.  Vested shares aredistributed to participants in September following the end of theperformance period and the fiscal year end close.

 

PerformanceMetrics and Earnout

 

Theearnout for each performance period is determined by evaluating actual Companyperformance, using pre-defined metrics, for the full 3-year performanceperiod.  Baselines for each metric willbe established at the beginning of each performance period by theCommittee.  The baseline will bedetermined by recording the metric as of the last day of the prior fiscal year(6/30).

 

Forgrants under the Program covering the performance period beginning July 1,2007 and ending June 30, 2010, two types of financial metrics will beused:

 

1.   EarningsPer Share (“EPS”) Growth; and

 

2.* * Revenue Growth.

 

*Earnout Schedule*

 

Anearnout schedule using total growth over the 3-year performance period forE.P.S and Revenue is shown below:

 

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*PerformanceMetrics for Performance period 7/1/2007 — 6/30/2010*

 

EarningsPer Share (E.P.S.) Growth — E.P.S. for the fiscal year before the start of theperformance period compared to E.P.S. of the 3rd year of theperformance period, expressed as a percentage. E.P.S. is defined as fullydiluted earnings per share from continuing operations.  The E.P.S. to be used for the fiscal yearbefore the start of the performance period is $2.60 which reflects fiscal 2007fully diluted earnings per share from continuing operations.

 

Revenue Growth — Revenuegrowth is defined as the percentage change in revenue from the fiscal yearprior to the performance period of the plan to the third year of theperformance period.

 

Revenue will be defined asthe amount stated in the Form 10-K.

 

In performance periods whereacquisitions occur:

 

Revenue at the start of theperformance period (as published in the Form 10-K) will be increased bythe revenue generated by the acquired company during the annual periodpreceding the acquisition. In the eventan acquisition occurs after the first day of the performance period, theacquisition revenue from the year preceding the acquisition will be discounted,using Watson Wyatt’s revenue growth rate, from the year preceding theacquisition to the beginning of the performance period. In addition, therevenue to be counted for the acquired company in the year of acquisition willbe adjusted to be representative of a full year’s revenue.  Acquisition revenue used will be asreported in the acquired company’s published financial reports (Form 10-K).In the event such financial reports are unavailable, revenue generated by theacquired company will be provided by the investment bankers familiar with theacquired company.

 

For significant foreignoperations, revenue for use in the revenue growth calculations and E.P.S. foruse in the E.P.S. growth calculations will reflect a constant currency exchangebetween the local currency and the U.S. dollar over the 3-year measurementperiod.

 

 

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TerminationProvisions

 

Performanceshares granted to a participant whose employment terminates prior to thescheduled vesting date on account of the participant’s death, or permanentdisability (permanent disability to be determined pursuant to the terms of theCompany’s tax-qualified pension plan) shall vest as if the participant remainedemployed through the scheduled vesting date. Performance shares granted to a participant whose employment terminatesprior to the scheduled vesting date on account of retirement (determinedpursuant to the terms of the Company’s qualified pension plan) shall vest asthe Committee may determine, in its sole discretion and on a case-by-casebasis.  Performance shares granted to aparticipant whose employment terminates for reasons other than death, permanentdisability or retirement will not vest and shall be forfeited; provided,however, that the Committee may determine, in its sole discretion and on acase-by-case basis, to permit some or all of such participant’s performanceshares to vest.

 

Changein Control or Capitalization

 

Achange in control or capitalization (merger, consolidation, reorganization,stock split, acquisition, etc.) may affect the value of performance sharesgranted, earnout of vested performance shares or other provisions of theProgram.  To assure fair and equitabletreatment of participants in the event of such a change in control orcapitalization, the Committee, at its discretion, may make changes to grantsand/or vesting that is consistent with the Change in Control and Change inCapitalization provisions described in the 2001 Deferred Stock Unit Plan forSelected Employees.  Under thesecircumstances, the Committee may make appropriate adjustments to the number ofperformance shares granted for any performance period, accelerate the vestingof any performance shares granted, or provide for payment in cash in lieu ofshares.

 

 

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**Attachment 1**

 

**Watson Wyatt Worldwide, Inc.**

**Performance Share Bonus IncentiveProgram**

 

| ** **     | ** ** | **Multiplier** | ** ** | **FY08**                                                                       | ** ** |
|----------------|------------|----------------|------------|--------------------------------------------------------------------------------|------------|
| **Tier One**   |       | 2.0            |       | ·  John Haley                                                        |       |
| **Tier Two**   |       | 1.0            |       | · Carl Mautz· Gene Wickes· Kevin Meehan· Babloo Ramamurthy |       |
| **Tier Three** |       | .75            |       | · Walter Bardenwerper· Paul Platten· Steve Mele                 |       |

 

 

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