**EXHIBIT10.2**

 
|        |                | W. R. Grace & Co. |                    | T 410.531-4574 |
|--------|---------------------|----------------------------|-------------------------|----------------|
|   | 7500  Grace Drive   |                       | F 410.531-4414          |
|   | Columbia,  MD 21044 |                       | E  fred.festa@grace.com |
|   |                |                       | W grace.com             |

 

**Fred Festa**

Chairman, President and Chief Executive Officer

 

March 31,2008

 

RobertM. Tarola

8550 Leisure Hill Drive

Baltimore, MD 21208

 

Dear Bob:

 

This letter specifies theterms of your continued employment with W. R. Grace & Co. (the “Company”),as well as the agreed arrangements related to your transition from Senior VicePresident and Chief Financial Officer (“CFO”) to Senior Vice President (“SVP”) –Corporate Strategy, and then to your retirement later this year.

 

Transition From CFO ToSVP – Corporate Strategy

 

You will resign yourposition as CFO of the Company, effective April 1, 2008 (which is the samedate that your replacement will assume that position). In addition, effectiveas of that date, you will resign all other director and officer positions thatyou hold with the Company and its subsidiaries and affiliates, except that youwill remain a member of the executive committee of Advanced RefiningTechnologies LLC (“ART”). In addition, you will remain a Senior Vice Presidentof the Company, and will assume the position of Senior Vice President –Corporate Strategy, as of that date. You will also cease to be a member of theInvestment & Benefits Committee of the Grace Benefit Plans, as of April 1,2008.

 

These arrangements willbe effectuated by a letter from you to the Company’s Secretary, dated March 31,2008, a copy of which is attached hereto.

 

As you know, the Company’sBoard of Directors has resolved that, upon your resignation as CFO and yoursuccessor’s assumption of that position, you will no longer be designated as an“executive officer” of the Company for purposes of section 16 of the Securitiesand Exchange Act of 1934. Keep in mind that following your resignation as CFO,you will remain subject to Company Policy 515 “Insider Trading” and otherapplicable law in connection with your transactions in Company securities. TheCompany acknowledges your stated intention to contact your broker and terminateyour existing Rule 10b5-1 Trading Plan relative to your stock options thatexpire in May 2009 and securities acquired upon the exercise thereof.

 

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As Senior Vice President –Corporate Strategy, you will continue to report directly to me and remain amember of the Grace Leadership Team. Your duties will generally consist offamiliarizing your successor as CFO with issues that are relevant to thatposition at the Company, as well as assisting in the resolution of the Company’sChapter 11 cases and assisting the Company in securing emergence-financingarrangements with various financial institutions. You will perform these dutiesbased on any instructions or parameters that I (or my assigns) communicate toyou.

 

Your current annualsalary will not be reduced during the period you remain employed by the Companyas Senior Vice President – Corporate Strategy. In addition, you will continueto be covered by your Executive Severance Agreement, dated May 11, 1999,the so-called “golden parachute” (your “Change In Control Agreement”), for thatperiod.

 

For the period youare employed as Senior Vice President – Corporate Strategy, the Company willcontinue to provide you with office space and administrative support at itsColumbia, Maryland Headquarters. However, you will be moved from you currentoffice space at headquarters, on or around April 1, 2008.

 

Finally, for thatperiod, you will be permitted to accept consulting assignments and boardpositions from entities unrelated to the Company, provided that you give meadvance notice of your intention to accept any such assignment or position andthat I consent; and my consent will be given unless it is reasonable toconclude that your acceptance of any particular such assignment or positionwould interfere with, or conflict with, your ongoing work or position at theCompany.

 

# TransitionFrom SVP – Corporate Strategy To Retirement

 

Effective October 31,2008 (or an earlier date selected by you, on at least 30 days prior notice tome), you will resign as Senior Vice President – Corporate Strategy and retirefrom employment with the Company. You will resign as a member of the executivecommittee of ART, on a date designated by the Company (in order to provide a smoothtransition to a replacement for you on that committee), but in no event laterthan your last date of employment with the Company. These resignations will beeffectuated by a letter (or letters) acceptable to the Company, sent by you tothe Secretary of the Company.

 

Notwithstandingthe foregoing, however, if I determine that your services to the Company shouldcease before October 31, 2008, you understand and agree that you may beplaced on leave before that date. In that event, you will continue to be paidyour current salary as an employee on paid leave from the Company until October 31,2008 (unless, as stated above, you resign before that date).

 

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As of your last date ofemployment (or paid leave, if later) with the Company, your salary will ceaseto accrue. You will be entitled to all rights and benefits applicable to activeemployees until your salary ceases to accrue.

 

# 2008Annual Incentive Compensation Program (“AICP”) Bonus

 

You will be paid an AICPbonus for the 2008 calendar year, at the same time that such bonuses are paidto others who participate in the 2008 AICP, expected to be in March 2009. Theamount of that bonus will be as calculated under the applicable formula with atarget bonus of 78% (of annual salary), with no discretionary adjustmentupwards or downwards from the results of that calculation. However, the amountof the bonus will be pro-rated to reflect only the portion of 2008 during whichyou remain CFO. This means that you will receive 25% of the calculated bonus(since your resignation as CFO will be effective on April 1, 2008; i.e.,you will have been CFO for 25% (i.e., 3 months/12 months) of the 2008 calendaryear).

 

You will not be eligiblefor any further AICP bonuses.

 

# Long-TermIncentive Programs (“LTIPs”)

 

As you know, youcurrently participate in LTIPs for the 2006-2008 and the 2007-2009 performanceperiods. Copies of the letters that have previously been sent to you specifyingyour awards under these LTIPs are attached. You will be paid the amountscalculated under the terms of these LTIPs, with no discretionary adjustmentupwards or downwards from the results of the calculations. Those payments willbe made at the same time that payments are made to others who participate inthese LTIPs, which is expected to be in March 2009 and March 2010. However,the amount of each such payment will be pro-rated to reflect only the portionof the applicable performance period during which you remain employed by theCompany. This means, for instance, if you retire on October 31, 2008, thenyou will receive 94.4% (i.e., 34 months/36 months) of the last 2006-2008 LTIPpayment, payable in March 2009; 61.1% (i.e., 22 months/36 months) of theinterim 2007-2009 LTIP payment, payable that month; and 61.1% (i.e., 22months/36 months) of the last payment under the 2007-2009 LTIP, payable in March 2010.For clarification, the calculations to derive the payments to you under theseLTIPs are more fully described below; again assuming your last date ofemployment is October 31, 2008 (and assuming that LTIP payments aregenerated for LTIP participants in general, based on Company performanceresults).

 

·      Your pro-rated last 2006-2008 LTIP payment (payable inMarch 2009) would be derived as follows:

 

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The 2006-2008 Companyresults would be applied to your LTIP award for that performance period usingthe applicable formula to produce a total, non-pro-rated cash amount for thatperformance period (the “06-08 Non-Pro-Rated Cash Total”), then the followingformula would be applied:

 

(The 06-08 Non-Pro-Rated Cash Total x 94.4%) minus (The amount of thepayment you received in March 2008 related to the 2006-2008 performanceperiod)

 

·      Your interim 2007-2009 LTIP payment(payable in March 2009) would be derived as follows:

 

(Your 2007-2009LTIP award multiplied by 61.1%) x 66.67%) x 50%.

 

·      Your pro-rated last 2007-2009 LTIP payment (payable inMarch 2010) would be derived as follows:

 

The 2007-2009 Company results would be applied to your LTIP award forthat performance period using the applicable formula to produce a total,non-pro-rated cash amount for that period (the “07-09 Non-Pro-Rated Cash Total”),then the following formula would be applied:

 

(The 07-09 Non-Pro-RatedCash Total x 61.1%) minus (The amount of the payment you received in March 2009related to the 2007-2009 performance period, i.e., the interim paymentdescribed above)

 

You will not participatein any further LTIPs, and will not receive any LTIP payments after the lastpayment is made for the 2007-2009 performance period.

 

Severance Arrangement

 

At the time you ceaseemployment with the Company, under your Retention Agreement dated December 18,2000, you will be entitled to receive total severance pay equal to $888,000(i.e., 2 times a dollar amount equal to 100% of your annual base salary). Thisseverance pay will be governed by, and paid in accordance with, the terms ofthe Grace Severance Pay Plan for Salaried Employees (the “Grace Severance Plan”).Under the terms of the Plan, in order to receive this severance pay, you arerequired to agree to and sign an employment law release that is acceptable tothe Company. You will be asked to sign that release a few weeks before yourlast day of employment. A copy of such a release is enclosed. After you (andyour attorney and other advisors) review the release, please call John Forgachwith any questions or comments. Severance will not be paid

 

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until we receive a signedcopy of the release (and the revocation period has passed). If you also becomeentitled to benefits under your Change In Control Agreement; you will onlyreceive benefits under the Agreement that provides the greater amount ofbenefits to you; you will not receive benefits under both Agreements, in anyevent.

 

Provided you return asigned release on a timely basis, your severance pay will commence on the dayafter your last date of employment with the Company. Under the terms of theGrace Severance Plan, you may elect to receive your severance pay over a periodof 24 months in periodic payroll installments. Alternatively, you may receiveyour severance pay in a lump sum at any time following termination (less anyinstallments previously paid). You should note, however, that you are entitledto continue to participate in the Company’s medical, vision, dental and lifeinsurance plans, on the same basis as active employees, only during the periodyou receive severance pay. Therefore, such entitlement ceases when and if youelect to receive severance pay in a lump sum.

 

As provided under thefederal law commonly called “COBRA”, you may continue coverage under Grace’smedical, vision and dental plans for up to 18 months following your finalseverance payment. Prior to that date, more information regarding your rightsunder COBRA will be sent to you at your home address.

 

You will beeligible to convert any or all of your current basic, supplemental, anddependent life insurance (as applicable) to a personal policy with MetropolitanLife Insurance Company. If you are interested in obtaining cost informationfrom MetLife on this coverage, please contact the Grace Benefits Service Centerat 1-800-974-2363.

 

The above is only a briefoutline of how the terms of the Grace Severance Plan may affect your severancearrangement. Please refer to the Plan’s summary plan description for furtherexplanation.

 

Special Retirement PayArrangement

 

In addition to yourbenefits entitlements under the Grace Salaried Retirement Plan (the Company’squalified defined benefit pension plan for salaried employees), and the GraceSupplemental Executive Retirement Plan (the Company’s supplemental,non-qualified defined benefit plan for executives), which are generallyapplicable to all Company executives, you will also be entitled to theretirement benefits provided by your Employment Agreement dated, May 6,1999, under the heading “Special Supplemental Retirement Pay Arrangement” (your“Special Retirement Arrangement”).

 

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Under the terms of theSalaried Plan and the SERP, your benefits will be calculated based on youryears of service with the Company, at the time you cease employment with theCompany. Assuming that you retire on October 31, 2008, you will becredited with 9.5 years of service under those Plans.

 

In accordance with yourSpecial Retirement Arrangement, you will be credited with a number of years ofservice that is equal to the years of service recognized under the SalariedPlan and the SERP at the time you cease employment with the Company. In allother respects, the benefits under your Special Retirement Arrangement will begoverned by the terms of the Salaried Plan and the SERP, and the elections youmake under those Plans.

 

This means that, if youretire on October 31, 2008, you will be credited with 9.5 years of serviceunder the Salaried Plan and the SERP; as well as an additional 9.5 years ofservice under your Special Retirement Arrangement; for a total of 19 years ofservice for purposes of calculating your total retirement benefits. Benefitswill commence under your Special Retirement Arrangement at the same time, andin the same form, that you elect under the Salaried Plan and SERP.

 

Since you have attainedthe age of 55, you may commence benefits under these retirement arrangements atthe time you cease employment, or you may delay commencement until a later date(but no later than the first of the month following the month you attain age65). If you retire on October 31, 2008, you may elect to commence benefitsas of November 1, 2008 (i.e., the first of the month following yourretirement).

 

If you have any questionsregarding your pension entitlements, please call John Forgach or the GracePension Service Center, as appropriate.

 

Other Grace Employee andExecutive Benefits

 

In general, under theterms of the relevant plan or program, your active participation under theCompany’s employee and executive benefit plans and programs will cease as ofyour last date of employment, except of course as provided above.

 

Specifically, yourparticipation in Grace Business Travel and Accident Coverage and Grace’sShort-Term and Long-Term Disability Plans, as well as your coverage under theExecutive Salary Protection Plan and the Company’s group personal excessliability program, will cease as of your last date of employment. Your activeparticipation under the Grace Savings & Investment Plan (i.e., the 401(k) plan)will also cease on your last date of employment with the Company.

 

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Also, your entitlementunder applicable Company policies to vacation time off while employed with theCompany, and to payment for unused vacation at retirement, shall continue inaccordance with such policies.

 

EmergenceBonus Eligibility

 

Aswe discussed, if the Company’s Chapter 11 cases are resolved, and the Companyemerges from Chapter 11 bankruptcy, on or before October 31, 2009, if thethen current senior officers of the Company are awarded cash bonuses related tosuch resolution and emergence, then I will consider recommending you for such abonus, based upon my evaluation regarding whether such a bonus is appropriateand my opinion of your contributions to such resolution and emergence. Thereis, however, no guarantee that you will receive any such bonus, regardless ofthe circumstances or timing of the Company’s emergence from Chapter 11.

 

## Indemnification And Continuation To Defend

 

After the termination of your employment, theCompany shall, to the extent permitted by applicable law, continue to indemnifyyou and hold you harmless from and against any and all losses and liabilitiesyou may incur as a result of your prior performance of your duties as an officeror employee of the Company or any of its subsidiaries or affiliates. Inaddition, the Company shall continue to indemnify and hold you harmless againstany and all losses and liabilities that you may incur, directly or indirectly,as a result of any third party claims brought against you (other than by anytaxing authority) with respect to the Company’s performance of (or failure toperform) any commitment made to you under this agreement. (The Company confirmsthat the indemnifications specified in this paragraph would include, to theextent permitted by applicable law, providing for your defense with respect toany and all losses or liabilities specified in this paragraph, consistent with,and in the same manner, the Company would provide defense to other defendantswho are (or were) employed by, or are (or were) officers of, the Company.)

 

In addition, the Company will, of course, afterthe date you cease employment with the Company, continue to provide for yourdefense with respect to law suits involving Company matters that are initiatedbefore that date. Specifically, with respect to Keri Evans v. John F. Akers,et al., Siamis, et al. v. Akers, et al. and Lawrence W. Bunch, etal. v. W. R. Grace & Co., et al., the so-called “401(k) cases”,the Company will continue to provide for your defense consistent with, and inthe same manner, it provides defense to the other named individual defendantswho are (or were) employed by the Company, as specified in the retentionletters from Arent Fox previously delivered to you applicable those cases.

 

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# Dispute Resolution

 

Any dispute, controversyor claim arising out of or relating to this letter agreement, or a breachthereof, shall be settled by arbitration in accordance with the National Rules forthe Resolution of Employment Disputes of the American Arbitration Associationas such rules are in effect on the date of the delivery of a demand forarbitration (the “National Resolution Rules”), which shall be effectuated bythe demanding party providing written notice to the other party. The partiesexpressly acknowledge that they are waiving their rights to seek remedies incourt, including without limitation the right (if any) to a jury trial.

 

There shall be one arbitrator,to be selected under the national Resolution Rules.

 

The decision of thearbitrator shall be final and binding on the parties and their respectiveheirs, executors, administrators, personal representatives, successors andassigns. Judgment upon any award of the arbitrator may be entered in any courtof competent jurisdiction, or application may be made to any such court for thejudicial acceptance of the award and for an order of enforcement.

 

Legal Expenses

 

In order to helpyou resolve any issues that you may have with respect to the terms of thisletter agreement, the Company will reimburse you for the costs of seeking legaladvice regarding those terms, up to a maximum of $4,000.

 

Bob, thanks for your pastservice to Grace, and we look forward to continuing to work with you until yourretirement later this year.

 
| Sincerely,          |   |                 |
|---------------------|--------|----------------------|
|                |   |                 |
| /s/ Alfred E. Festa |   |                 |
|                |   |                 |
| Fred Festa          |   |                 |
|                |   |                 |
| Enclosures          |   | Agreed:              |
|                |   |                 |
|                |   | /s/ Robert M. Tarola |
|                |   | Robert M. Tarola     |
|                |   |                 |
|                |   | March 31 . 2008 |
|                |   | Date                 |

 

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