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EXHIBIT 10.1

 

WATSON WYATT & COMPANY HOLDINGS

INCENTIVE COMPENSATION PLAN

 

Watson
Wyatt & Company Holdings (the “Company”), a Delaware corporation, hereby
establishes and adopts the following Incentive Compensation Plan (the “Plan”)
to provide incentive awards that are intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended.

 

1.             PURPOSES
OF THE PLAN

 

The
purposes of the Plan are to provide incentive and financial rewards to
executive officers of the Company and its Affiliates who, because of the extent
of their responsibilities, can make significant contributions to the Company’s
success by their ability, industry, loyalty and exceptional services.

 

2.             DEFINITIONS

 

“Affiliate” shall mean any corporation,
partnership or other organization of which the Company owns or controls,
directly or indirectly, not less than 50% of the total combined voting power of
all classes of stock or other equity interests.

 

“Award” shall mean any amount granted to a
Participant under the Plan.

 

“Board” shall mean the board of directors
of the Company.

 

“Certification” shall have the meaning set
forth in Section 4.2.

 

“Code” shall mean the Internal Revenue Code
of 1986 of the United States of America, as amended from time to time, and any
successor thereto.

 

“Committee” shall mean the Compensation
Committee of the Board or any subcommittee thereof formed by the Compensation
Committee for the purpose of acting as the Committee hereunder. For purposes of
satisfying the requirements of Section 162(m) of the Code and the regulations
thereunder, the Committee is intended to consist solely of “outside directors”
as such term is defined in Section 162(m) of the Code.

 

“Disability” means any physical or mental
condition of a Participant that in the opinion of the Committee renders the
Participant incapable of continuing to be an employee of the Company and its
Affiliates.

 

“Maximum Incentive Award” shall mean a
payment in an amount equal to 2.5%, in the case of the Company’s Chief
Executive Officer and any other Participant who is a member of the Board, or
1.5%, in the case of each other Participant, of the Company’s Net Income for a
given Performance Period.

 

 

“Net Income” shall mean the Company’s after-tax income on a
consolidated basis as reported in the Company’s income statement for the
applicable Performance Period, prior to accrual of any amounts for payment
under this Plan for the Performance Period, adjusted to eliminate the effects
of charges for restructurings, discontinued operations, extraordinary items and
all items of gain, loss or expense determined to be extraordinary or unusual in
nature or infrequent in occurrence or related to the disposal of a segment of a
business or related to a change in accounting principle all as determined in
accordance with standards established by opinion No. 30 of the Accounting
Principles Board (APB Opinion No. 30) or other applicable or successor
accounting provisions, as well as the cumulative effect of accounting changes,
in each case as determined in accordance with generally accepted accounting
principles or identified in the Company’s financial statements or notes to the
financial statements.

 

“Participant” shall mean each executive
officer of the Company who is employed by the Company or an Affiliate as of the
last day of a Performance Period.

 

“Performance Period” shall mean the Company’s
fiscal year or such other period that the Committee, in its sole discretion,
may establish, provided any such Performance Period shall not be less than one
year or more than five years in length.

 

3.             ELIGIBILITY
AND ADMINISTRATION

 

3.1.          Eligibility.  The
individuals eligible to participate in the Plan shall be the Company’s Chief
Executive Officer and any other executive officer of the Company or an
Affiliate selected by the Committee to participate in the Plan (each, a “Participant”).

 

3.2.          Administration. 

 

(a)           The Plan shall be
administered by the Committee. The Committee shall have full power and
authority, subject to the provisions of the Plan and subject to such orders or
resolutions not inconsistent with the provisions of the Plan as may from time
to time be adopted by the Board, to: (i) select the Participants to whom
Awards may from time to time be paid hereunder; (ii) determine the terms
and conditions, not inconsistent with the provisions of the Plan, of each
Award; (iii) determine the time when Awards will be granted and paid and the
Performance Period to which they relate; (iv) affirm the formula for determining
the Maximum Incentive Award payable for each Participant in respect of
Performance Periods and certify as to the calculation of Net Income and the
amount of the Maximum Incentive Award payable for each Participant in respect
of Performance Periods; (v) determine whether payment of Incentive Awards
may be deferred by Participants as provided in Section 4.3; (vi) interpret and
administer the Plan and any instrument or agreement entered into in connection
with the Plan; (vii) correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent that the
Committee shall deem desirable to carry it into effect; (viii) establish
such rules and regulations and appoint such agents as it shall deem appropriate
for the proper administration of the Plan;

 

 

and
(ix) make any other determination and take any other action that the
Committee deems necessary or desirable for administration of the Plan.

 

(b)           Decisions of the Committee
shall be final, conclusive and binding on all persons or entities, including
the Company, any Affiliate, any Participant and any person claiming any benefit
or right under an Award or under the Plan.

 

(c)           To the extent not
inconsistent with applicable law or the rules and regulations of the New York
Stock Exchange, any other national securities exchange or the NASDAQ National
Market on which the Company’s securities are listed or qualified for trading,
including the applicable provisions of Section 162(m) of the Code, the
Committee may delegate to one or more officers of the Company or a committee of
officers the authority to take actions on its behalf pursuant to the Plan.

 

4.             AWARDS

 

4.1.          Performance Period. Not later than the earlier
of (i) 90 days after the commencement of each fiscal year of the Company and
(ii) the expiration of 25% of the Performance Period, the Committee shall, in
writing, designate one or more Performance Periods and shall affirm the
applicability of the Plan’s formula for determining the Maximum Incentive Award
for each Participant for such Performance Period(s).

 

4.2.          Certification. At such time as it shall
determine appropriate following the conclusion of each Performance Period, the
Committee shall certify, in writing, the amount of the Maximum Incentive Award
for each Participant for such Performance Period (the “Certification”).

 

4.3.          Payment of Awards. The selection of
Participants to whom Awards shall actually be paid and the amount of the Award
actually paid to a Participant shall be such amount as determined by the
Committee in its sole discretion, including zero, provided that the actual
Award shall not exceed the Maximum Incentive Award with respect to such
Participant. The actual amount of the Award determined by the Committee for a
Performance Period shall be paid in cash or, to the extent provided in such
plan, share awards under a shareholder-approved stock plan of the Company to
each Participant at such time as determined by the Committee in its sole
discretion following the end of the applicable Performance Period, and may be
deferred under a program or plan approved by the Committee subject to the terms
and conditions of such program or plan.

 

4.4.          Commencement or Termination of Employment.
If a Participant obtains such status during a Performance Period (whether
through promotion or commencement of employment) or if a person who otherwise
would have been a Participant dies, retires or is Disabled, or if the person’s
employment is otherwise terminated, during a Performance Period (except for
cause, as determined by the Committee in its sole discretion), the Award
payable to such a Participant may, in the discretion of the Committee, be
proportionately reduced based on the period of actual employment during the
applicable Performance Period.

 

 

5.             MISCELLANEOUS

 

5.1.          Amendment and Termination of the Plan.
The Board may, from time to time, alter, amend, suspend or terminate the Plan
as it shall deem advisable, subject to any requirement for stockholder approval
imposed by applicable law, including Section 162(m) of the Code. No amendments
to, or termination of, the Plan shall in any way impair the rights of a
Participant under any Award previously granted without such Participant’s
consent.

 

5.2.          Section 162(m) of the Code. Unless otherwise
determined by the Committee, the provisions of this Plan shall be administered
and interpreted in accordance with Section 162(m) of the Code to ensure the
deductibility by the Company of the payment of Awards. Subject to shareholder
approval of the Plan, the failure of any aspect of the Plan to satisfy Section
162(m) shall not void any action taken by the Committee under the Plan.

 

5.3.          Tax Withholding. The Company or an
Affiliate shall have the right to make all payments or distributions pursuant
to the Plan to a Participant, net of any applicable federal, state and local
taxes required to be paid or withheld. The Company or an Affiliate shall have
the right to withhold from wages, Awards or other amounts otherwise payable to
such Participant such withholding taxes as may be required by law, or to
otherwise require the Participant to pay such withholding taxes. If the
Participant shall fail to make such tax payments as are required, the Company
or an Affiliate shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to such Participant
or to take such other action as may be necessary to satisfy such withholding
obligations.

 

5.4.          Right of Discharge Reserved; Claims to Awards.
Absent action by the Committee, nothing in this Plan shall provide any
Participant a right to receive any Award or payment under the Plan with respect
to a Performance Period. Nothing in the Plan nor the grant of an Award
hereunder shall confer upon any Participant the right to continue in the
employment of the Company or an Affiliate or affect any right that the Company
or an Affiliate may have to terminate the employment of (or to demote or to
exclude from future Awards under the Plan) any such Participant at any time for
any reason. Except as specifically provided by the Committee, the Company shall
not be liable for the loss of existing or potential profit from an Award
granted in the event of the termination of employment of any Participant. No
Participant shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Participants under the
Plan.

 

5.5.          Nature of Payments. All Awards made pursuant to
the Plan are in consideration of services performed or to be performed for the
Company or an Affiliate, division or business unit of the Company. Any income
or gain realized pursuant to Awards under the Plan constitute a special
incentive payment to the Participant and shall not be taken into account, to
the extent permissible under applicable law, as compensation for purposes of
any of the employee benefit plans of the Company or an Affiliate except as may
be determined by the Committee or by the Board or board of directors of the
applicable Affiliate.

 

5.6.          Other Plans. Nothing contained in the Plan
shall prevent the Board from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.

 

5.7.          Severability. If any provision of the Plan
shall be held unlawful or otherwise invalid or unenforceable in whole or in
part by a court of competent jurisdiction, such provision shall (a) be deemed
limited to the extent that such court of competent jurisdiction deems it
lawful, valid and/or enforceable and as so limited shall

 

 

remain in full force and
effect, and (b) not affect any other provision of the Plan or part
thereof, each of which shall remain in full force and effect. If the making of
any payment or the provision of any other benefit required under the Plan shall
be held unlawful or otherwise invalid or unenforceable by a court of competent
jurisdiction, such unlawfulness, invalidity or unenforceability shall not
prevent any other payment or benefit from being made or provided under the
Plan, and if the making of any payment in full or the provision of any other
benefit required under the Plan in full would be unlawful or otherwise invalid
or unenforceable, then such unlawfulness, invalidity or unenforceability shall
not prevent such payment or benefit from being made or provided in part, to the
extent that it would not be unlawful, invalid or unenforceable, and the maximum
payment or benefit that would not be unlawful, invalid or unenforceable shall
be made or provided under the Plan.

 

5.8.          Construction. As used in the Plan, the words “include” and “including,” and variations thereof, shall not be deemed to
be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”

 

5.9.          Unfunded Status of the Plan. The
Plan is intended to constitute an “unfunded” plan for incentive compensation
and deferred compensation if permitted by the Committee. With respect to any
payments not yet made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than those of a
general creditor of the Company.

 

5.10.        Governing
Law. The Plan and all determinations made and actions taken
thereunder, to the extent not otherwise governed by the Code or the laws of the
United States, shall be governed by the laws of the State of Delaware, without
reference to principles of conflict of laws that might result in the
application of the laws of another jurisdiction, and shall be construed
accordingly.

 

5.11.        Resolution
of Disputes. In the event a Participant or person claiming a right
under an Award or the Plan believes that a decision by the Committee with
respect to such person or Award was arbitrary or capricious, the person may
request arbitration with respect to such decision. The review by the arbitrator
shall be limited to determining whether the Participant or other person has
proven that the Committee’s decision was arbitrary or capricious. This
arbitration shall be the sole and exclusive review permitted of the Committee’s
decision. Participants and persons claiming rights under an Award or the Plan
explicitly waive any right to judicial review. Notice of demand for arbitration
shall be made in writing to the Committee within thirty (30) days after the
applicable decision by the Committee. The arbitrator shall be selected by those
members of the Board of Directors who are neither members of the Compensation
Committee of the Board of Directors nor employees of the Company or any Affiliate.
If there are no such members of the Board of Directors, the arbitrator shall be
selected by the Board of Directors. Such arbitrator shall be neutral within the
meaning of the Commercial Rules of Dispute Resolution of the American
Arbitration Association; provided, however, that the arbitration shall not be
administered by the American Arbitration Association. Any challenge to the
neutrality of the arbitrator shall be resolved by the arbitrator whose decision
shall be final and conclusive. The arbitration shall be administered and
conducted by the arbitrator pursuant to the Commercial Rules of Dispute
Resolution of the American Arbitration Association. Each side shall bear its
own fees and expenses, including its own attorney’s fees, and each side shall
bear one half of the arbitrator’s fees and expenses. The decision of the
arbitrator on the issue(s) presented for arbitration shall be final and
conclusive and may be enforced in any court of competent jurisdiction.

 

 

5.12.        Effective
Date of Plan. The Plan shall be effective on the date of the approval
of the Plan by the holders of the then outstanding securities of the Company
entitled to vote generally in the election of directors. The Plan shall be null
and void and of no effect if the foregoing condition is not fulfilled.

 

5.13.        Captions.
The captions in the Plan are for convenience of reference only, and are not
intended to narrow, limit or affect the substance or interpretation of the
provisions contained herein.EXHIBIT
10.2

 

WATSON
WYATT & COMPANY HOLDINGS

AMENDED
COMPENSATION PLAN FOR OUTSIDE DIRECTORS

 

I.                                     The
schedule of fees is as follows:

 

A.                                 Cash Retainer: $45,000 per year, paid
quarterly

 

B.                                   Stock Grant: Watson Wyatt & Company
Holdings Class A common stock, equivalent to $45,000, issued at the end of each
fiscal year (at the completed fiscal year-end share price) for services
provided during the preceding fiscal year. Shares vest immediately at grant. At
the election of the director (which shall apply until modified), the stock
grant will be made at the end of each fiscal year, or in deferred stock units
payable in shares upon termination of board service.

 

C.                                   Board Meetings: $1,500 per day

 

D.                                  Committee Meetings: Compensation Committee and
Nominating and Governance Committee: $1,000 per day; Audit Committee: $2,000
per day

 

E.                                    Telephone Meetings of less than 4 hours: 50% of applicable fee

 

F.                                    Other Meetings: $1,000 per day

 

G.                                     Audit Committee Chair Annual Retainer:
$15,000

 

H.                                    Compensation Committee Chair Annual Retainer:
$10,000

 

I.                                         Nominating and Governance Committee Chair Annual
Retainer: $5,000

 

J.                                        Lead/Presiding Director Annual Retainer:
$10,000

 

II.                                 Outside
directors will initially be paid in a combination of cash and Watson Wyatt
& Company Holdings (“WWCH”) common stock, at the end of each calendar
quarter (at the completed quarter-end share price) for services during the
preceding quarter.

 

A.                                   Within
five years, a director is expected to own at least 5,000 shares of WWCH common
stock.  To meet a target of 5,000 shares, a director may initially elect
to be paid all in shares, or up to 40% of each payment in cash in order to
satisfy immediate tax liability. At any time, a director may change this
election within these parameters.

 

B.                                     A
director may elect to be paid through any combination of (i) cash; (ii)
deferral of cash under the WWCH Voluntary Deferred Compensation Plan for
Non-Employee Directors; and/or (iii) shares of WWCH common 

 

stock.

 

C.                                     Once
a director attains the 5,000 share target, he/she shall continue to own at
least 5,000 shares while serving as a director.

 

III.                             Shares
will be distributed to the director by means of an account to be established
for each director at a brokerage firm designated by the Company.

 

IV.                             The
maximum number of shares that may be issued under the Plan is 150,000, subject
to adjustments for stock splits, stock dividends and similar transactions. The
shares may be authorized but unissued shares of common stock, issued shares
held in or acquired for the Company’s treasury, or shares reacquired by the
Company upon purchase in the open market.  

 

V.                                 The
Plan may be amended from time to time by the board of directors, except that
any such amendment is subject to stockholder approval to the extent required
under NYSE rules.

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