The manual page, in the source tree man/watchdogd.conf.5 has some information on this. Here's an excerpt.

script = /path/to/script.sh
When a supervised process fails to meet its deadline the supervisor by default performs an unconditional reset,
saving the reset cause first. However, if a script is provided in this section it will be called instead:

       script.sh supervisor CAUSE PID LABEL

The CAUSE value is documented in watchdogctl(1).

The LABEL can be any free form string the supervised process used when registering with the supervisor, hence it
is given as the last argument to the script.

The return value of the script determines how the system continues to operate: POSIX OK (0) means the script has
handled the situation in some manner and watchdogd stops supervising the offending process, a non-zero return
value from script means the script has either failed to handle the situation or prefers to delegate to watchdogd
to save the reset cause and perform the actual system reset.

This should probably also be mentioned in the top-level README.