**Exhibit 10.1**

 

**WatsonWyatt Worldwide, Inc.**

 

**2008Long-Term Incentive Program for Selected Associates**

 

Summary

 

The Long-Term Incentive Program for Selected Associates (the Program)is a long-term stock bonus program for key associates designed to meet specificretention needs in certain parts of Watson Wyatt & Company, WatsonWyatt Limited and their Affiliates (collectively, the “Company”).  Incentives are provided through grants ofdeferred stock units tied to a 3-year performance period with vesting contingentupon meeting certain Company goal thresholds. This incentive program does not replace the Fiscal Year End Bonus (FYEB)program.

 

Eligibility

 

Associates of the Company will be eligible for nomination toparticipate in the Program.  Eligibleparticipants will be nominated and approved by the Compensation Committee ofthe Board (the Committee).  Generally,associates eligible for nomination will be associates who are critical to thelong-term success of the Company and whom the Company seeks to retain due tovarious factors, including but not limited to their ability to win major newprojects or clients, their ability to build strong and profitable relationshipswith our most important clients, their exceptional technical competence andthought leadership, or their critical role in the management of theCompany.  A list of participantsnominated and approved by the Committee for the performance period beginning January 1,2008 and ending December 31, 2010 is attached hereto as Attachment 1.

 

Performance Period

 

The performance period is a 3-year period that begins on January 1,20xx and ends on December 31, 20xx+3. For example, the performance period that began on January 1, 2008will end on December 31, 2010. Baseline metrics are established at the beginning of the performanceperiod (except that metrics for the first performance period may be establishedafter January 1, 2008).  At the endof the performance period, performance metrics will then be measured.  The Company will follow its standard processfor financial reporting in conjunction with the close of the calendar year(i.e., following the second quarter of the fiscal year).  Once Company financial results are finalizedand the Company has filed its second quarter 10-Q (February following endof the calendar year) the final performance metric results for the most recentperformance period can be determined. The Chief Financial Officer will certify the final performance metricresults to the Committee, which will then determine the earnout for theperformance period.

 

Grants

 

Grants of stock (performanceshares) are made under the 2001 Deferred Stock Unit Plan for SelectedEmployees.  Grants are determinedusing base salary at the start of the performance period as the startingpoint.  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 first quarter of the performanceperiod (i.e., March 31).  Forcalculation purposes, salary information will be based on what is in effect asof January 1 of the first calendar year of the performance period.

 

All performance share grants will be made by the Committee as of April 1of the first year of the performance period. Final grant amounts will generally be determined by the method outlinedhere.  However, the Committee, at itsdiscretion, may adjust final grant amounts.

 

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Vesting

 

The performance shares will vest 3 years from the first day of theperformance period based on the achievement of certain performance metrics andsubject to the participant’s continued employment on the vesting date unlesswaived in accordance with the Termination Provisions herein.  Company performance goals are established bythe Committee at the beginning of each performance period.  At the conclusion of each performance period,Company performance metrics are measured against goals over the same period todetermine the percentage of the grant to be awarded.  The actual award is determined by an earnoutschedule which defines performance level ranges and associated earnout ofgrants.  Vested shares are distributed toparticipants in March following the end of the performance period and thefiling of the 10-Q for the second quarter of the fiscal year.  A participant must be an active employee ofthe Company on the payment date in order to be eligible to receive adistribution of the vested shares.

 

Performance Metrics and Earnout

 

The earnout for each performance period is determined by evaluatingactual region and practice performance, using pre-defined metrics, for the full3-year performance period.  Baselines foreach metric will be established at the beginning of each performance period bythe Committee and will vary by region and practice corresponding to the regionand practice of each respective participant. The baseline will be determined by recording the metric applicable tothe prior calendar year (year ending December 31).

 

For grants under the Program covering the performance period beginning January 1,2008 and ending December 31, 2010, two types of financial metrics will beused:

 

1.   Revenue Growth; and

 

2.   NetOperating Income (NOI) Percentage

 

RevenueGrowth – Revenue growth is defined as the percentage change in revenue from thecalendar year prior to the performance period of the Program through the thirdcalendar year of the performance period. Revenue will be defined as the amounts included in the publishedinternal results applicable to each respective region and practice, asadjusted, if necessary, for practice-specific adjustments for the performanceperiod that are excluded from the financials (e.g., for the effects ofacquisitions and divestitures — see below).

 

Net Operating Income Percentage – The net operating income percentagewill be defined as the cumulative annual amounts of NOI for each of the threecalendar years in the performance period divided by total Revenue for the sameperiod.  All amounts will be derived frompublished internal results applicable to each respective region and practice,as adjusted, if necessary, for practice-specific adjustments for theperformance period that are excluded from the financials (as above).

 

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The financial metrics by region and practice are as follows:

 

**Europe**

 
| **Practice**           | ** ** | **Revenue Growth** | ** ** | **NOI %** | ** ** |
|------------------------|------------|-------------------------|------------|----------------|------------|
| Benefits               |       | 15.76                   | %          | 25.0           | %          |
| HCG/WWDS               |       | 33.10                   | %          | 15.0           | %          |
| Investment             |       | 52.09                   | %          | 30.0           | %          |
| IFS                    |       | 33.10                   | %          | 20.0           | %          |
| International - Global |       | 24.23                   | %*         | 12.5           | %          |
| Business Services      |       | 19.10                   | %          | 23.0           | %          |

 

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*The practice must alsogenerate more revenues each year for other practices than is generated by theInternational Practice for itself (to be measured each year, and a recordmaintained, by the International Practice).

 

**North America**

 
| **Practice** |   | **Revenue Growth** | ** ** | **NOI %** | ** ** |
|--------------|--------|-------------------------|------------|----------------|------------|
| Benefits     |   | 17.76                   | %          | 31.9           | %          |
| Investment   |   | 72.80                   | %          | 20.0           | %          |
| Compensation |   | 33.10                   | %          | 20.0           | %          |
| Growth       |   | 25.97                   | %          | 25.3           | %          |

 

*Earnout Schedule*

 

At the end of the 3-year performance period, a sliding scale will beapplied if the performance measures are not met.  For achievement of less than 90% of eitherapplicable performance metric, no vesting will occur.  For achievement of at least 90% of bothperformance metrics, but not 100% of both, the vesting percentage will be equalto the lower of the two achievement percentages (rounded down to the nearest1/10th of apercentage point).

 

If at least 100% of both performance metrics are achieved, vesting willoccur at 100%.

 

Notwithstanding the foregoing, however, a participant will not beentitled to payment and vesting will not be deemed to have occurred withrespect to that particular participant unless the participant has achieved aminimum assessed performance bonus in each of the three years (i.e., beforeapplying the bonus funding percentage for the participant’s region andpractice) equivalent to Performance Grade 4 (Strong Performance) with anassessed bonus between 90% and 100% of the participant’s target bonus.

 

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Inperformance periods where acquisitions occur:

 

Revenueat the start of the performance period will be increased by the revenuegenerated by the acquired company during the annual period preceding theacquisition. In the event anacquisition occurs after the first day of the performance period, theacquisition revenue from the calendar year preceding the acquisition will bediscounted, using Watson Wyatt’s revenue growth rate, from the calendar yearpreceding the acquisition to the beginning of the performance period. Inaddition, the revenue to be counted for the acquired company in the year ofacquisition will be adjusted to be representative of a full year’srevenue.  Acquisition revenue forpurposes of this adjustment will be based on the acquired company’s auditedfinancials.  In the event auditedfinancials are unavailable, revenue generated from the acquired company will bebased on the acquired company’s internal financials as compiled in a fashionconsistent with those financials used to perform the valuation in connectionwith the purchase price.

 

Therevenue growth and NOI percentage calculations will be calculated on a constantcurrency basis.

 

*DividendEquivalents*

 

Participants will be entitled to the crediting of dividend equivalentsduring the 3-year performance period. Dividend equivalents shall be credited at the same time, and in the samemanner, and shall vest as specified in Section 4.1 of the Company’s 2001Deferred Stock Unit Plan for Selected Employees.

 

Termination Provisions

 

Performance shares granted to a participant whose employment terminatesprior to the scheduled vesting date on account of the participant’s death, orpermanent disability (permanent disability to be determined pursuant to theterms of the Company’s tax-qualified pension plan in the U.S.) shall vest as ifthe participant remained employed through the scheduled payment date.  Performance shares granted to a participantwhose employment terminates prior to the scheduled payment date on account ofretirement (determined pursuant to the terms of the Company’s qualified pensionplan in the U.S.) shall vest as the Committee may determine, in its solediscretion and on a case-by-case basis. Performance shares granted to a participant whose employment terminatesprior to the payment date for reasons other than death, permanent disability orretirement will not vest and shall be forfeited; provided, however, that theCommittee may determine, in its sole discretion and on a case-by-case basis, topermit some or all of such participant’s performance shares to vest.

 

Changein Control or Capitalization

 

A change in control orcapitalization (merger, consolidation, reorganization, stock split,acquisition, etc.) may affect the value of performance shares granted, earnoutof vested performance shares or other provisions of the Program.  To assure fair and equitable treatment ofparticipants in the event of such a change in control or capitalization, theCommittee, at its discretion, may make changes to grants and/or vesting that isconsistent with the Change in Control and Change in Capitalization provisionsdescribed in the 2001 Deferred Stock Unit Plan for Selected Employees.  Under these circumstances, the Committee maymake appropriate adjustments to the number of performance shares granted forany performance period, accelerate the vesting of any performance sharesgranted, or provide for payment in cash in lieu of shares.

 

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