Exhibit 10.1


 





 


	
   

  	
   

  	
  W. R. Grace & Co.

  
	
   

  	
   

  	
  7500 Grace Drive

  
	
   

  	
   

  	
  Columbia, MD 21044

  
	
   

  	
   

  
	
  John
  F. Akers

  	
   

  
	
  Chairman, Compensation
  Committee

  	
   

  
	
  W. R. Grace & Co.
  Board of Directors

  	
   

  



 


May 27, 2009


 


Mr. Alfred E. Festa


14713 Goddingham Court


Midlothian, VA 23113


 


Dear Fred:


 


The Board of Directors has approved this letter agreement which
specifies the terms of your continued employment with W. R. Grace &
Co. (the “Company”) as Chief Executive Officer and President of the Company
(collectively, the “CEO”).  (In addition,
this letter agreement was approved on April 22, 2009 by the U.S.
Bankruptcy Court with jurisdiction over the Company’s Chapter 11 cases.)


 


This letter agreement shall be effective as of June 1, 2009.


 


Your principal
obligations, duties and responsibilities will continue to be those generally
inherent in the office and title of CEO. 
Your office will continue to be located at the Company’s Headquarters in
Columbia, Maryland.


 


Also, you will continue as Chairman of the Board of Directors of the
Company (the “Board”), so long as holding both the Chairman and CEO positions
is permitted by applicable law and the rules of each securities exchange
whose regulations are applicable to the Company.


 


Fred, I am pleased that
you have agreed to continue in the position of CEO and Chairman, and we are
confident that you will continue to make valuable contributions to the success
of the Company.


 


If you agree with the
terms of this letter agreement, please sign where indicated below and return
one fully executed copy to me.  An
additional copy of this letter is also enclosed for your records.


 


Term
of Agreement


 


The extended term of your
employment as CEO under this letter agreement will be for a period of four
years, beginning immediately upon the expiration of your current employment
agreement, June 1, 2009, and ending on May 31, 2013 (such period is
referred to in this agreement as your “Extended CEO Employment Term”).


 


If your employment as CEO
of the Company (or in any other position) continues after the Extended CEO Employment
Term, and no other contrary arrangements have been mutually agreed in writing
between you and the Board, then the arrangements described in this agreement
will be discontinued and you will be an employee of the Company “at 


 

















 


will” subject to the same
requirements as similarly situated employees of the Company at that time,
except as provided under the following section entitled “Severance Pay
Arrangement”.


 


Compensation


 


1.                           Your
annual base salary as of June 1, 2009, will be $936,000.00.  Thereafter, your base salary will be subject
to periodic reviews on the same basis and at the same intervals as are
applicable to other senior officers of the Company.


 


Your salary will
cease to accrue immediately upon your termination of employment with the Company,
even if your termination occurs during your Extended CEO Employment Term and
whether or not your termination is voluntary. (Note, however, the provisions
under “Severance Pay Arrangement.”)


 


2.                           You
will, of course, continue to be eligible to participate in the Company’s Annual
Incentive Compensation Program. 
Consistent with the prior years that you have been CEO, your targeted
award under the Program for 2009 will be 100% of your base salary earned during
the applicable calendar year.  For 2010
and thereafter, your targeted award will continue to be 100% (or greater, as
determined by the Board) of your annual base salary earned during the
applicable calendar year.  Any payments
to you under the Program will be made at the same time and in the same manner
as payments to other participants in the Program.  Under the Program, awards for a calendar year
are generally paid during March of the following calendar year   Awards under this Program are subject to
Board approval and are contingent upon individual performance and financial
results of the Company.   In general, the
amount of award paid to any participant may range from 0% to 200% of the
participant’s targeted award for the year, depending on individual performance
and the extent to which the Company achieves (or surpasses) certain financial
goals.  Also, a Program participant is
not entitled to payment of an award for a calendar year, if the participant is
not an active employee of the Company on the date the award is actually
paid.  These and the other provisions of
the Program will apply to you in the same manner as applicable to other Program
participants; except as specified in the next sentence.  Notwithstanding the prior provisions of this
paragraph, if your employment is terminated by the Company without “Cause” (as
defined below) or by you as a result of “Constructive Discharge” (as defined
below) after the Company emerges from Chapter 11 but during your Extended CEO
Employment Term, or as a result of your death or because you become entitled to
disability income payments under the “Grace LTD Plan” and/or the “ESP Plan”
(mentioned below) at any time during your Extended CEO Employment Term, then
you (or your beneficiary, if applicable) will be entitled to a pro-rated award
under the Program for the calendar year of your last day of employment with the
Company.  In that event, your pro-rated
award for that calendar year will be calculated as follows:  the amount you would have otherwise been
awarded under the Program for that calendar year (but for your termination),
calculated based solely on the applicable financial results of the Company for
that calendar year, multiplied by the fraction whereby the numerator is the
number of days that you were an active employee of the Company during


 


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that calendar year and
the denominator is 365.  The actual
payment under the Program for that calendar year shall be made to you at the
same time and in the same manner as payments are made to other Program participants
(who were not terminated prior to the payment date) for that calendar year.


 


3.                           You also will be eligible for a targeted
award under the Company’s Long-Term Incentive Plan (the “LTIP”) for the 2009 —
2011 performance period in the amount of $3,200,000; or an equivalent value
comprised of stock options or other equity and/or cash targets, as provided
under the terms of that LTIP.  The terms
of your award under that LTIP, and your awards under all other LTIPs, shall be
the same as the terms governing the awards of the other participants under the
applicable LTIP, including the requirement of active employment with the
Company on the date an LTIP payment is made to the LTIP participants, in order
to be entitled to such a payment; except as specified in the next
sentence.  Notwithstanding the prior
provisions of this paragraph, if your employment is terminated by the Company
without “Cause” (as defined below) or by you as a result of “Constructive
Discharge” (as defined below) after the Company emerges from Chapter 11 but
during your Extended CEO Employment Term, or as a result of your death or
because you become entitled to disability income payments under the “Grace LTD
Plan” and/or the “ESP Plan” (mentioned below) at any time during your Extended
CEO Employment Term, then you will be entitled to a pro-rated award under each
LTIP in which you participated prior to your termination.  In that event, your pro-rated award under
each such LTIP will be calculated as follows: the amount you would have otherwise
been entitled to under the LTIP (but for your termination), multiplied by the
fraction whereby the numerator is the number of days that you were an active
employee of the Company during the performance period of the LTIP and the
denominator is the total number of days of during such performance period.  Each payment under each such LTIP shall be
made to you at the same time and in the same manner as payments are made to
other LTIP participants who were not terminated prior to the payment date.


 


4.                           The Executive Severance Agreement you
entered into with the Company upon your initial election as an officer will
remain in effect during your term as CEO, subject to the actual terms of that
agreement (including the Board’s right to amend or terminate that agreement in
accordance with the procedures described therein).  In general, as you know, the terms of that
agreement would provide for a severance payment of 3 times the sum of your
annual base salary plus your targeted annual incentive compensation award, and
certain other benefits, in the event your employment terminates under certain
conditions following a change-in-control of the Company.


 


Severance Pay Arrangement


 


If your employment
is terminated by the Company without “Cause” (as defined below) during or at
the time your Extended CEO Employment Term expires, or by you as a result of “Constructive
Discharge” (as defined below) during your Extended CEO Employment Term, then
you will be entitled to the severance payment described in the 


 


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next
sentence.  The severance payment will be
2 times a dollar amount equal to 175% of your annual base salary at the time
your employment is terminated.  The
severance payment may be made to you in installments, at the same time and in
the same manner as salary continuation payments, over a period of 24 months
beginning as of the date you are terminated. 
However, at your option, the entire severance payment may be paid to you
in a single lump-sum as soon as practical after your termination (if approved
by the Compensation Committee).  In all
other respects, your severance pay arrangement shall be governed by the terms
of the W. R. Grace & Co. Severance Pay Plan for Salaried Employees.


 


Regarding this
severance pay arrangement, please note that the provisions of the letter
agreement between the Company and you, dated December 18, 2008, concerning
section 409A of the Internal Revenue Code (the “Code”), are now incorporated
into this letter agreement. 
Specifically, notwithstanding any other provision of this letter
agreement to the contrary, if you become entitled to severance pay under this
agreement, at a time that the Company determines that you are a “specified
employee”, within the meaning of Code section 409A(a)(2)(B), you will not be
paid any of that pay prior to a date that is 6 months after your “separation
from service” (within the meaning of section 409A(2)(A)(i)) from the Company or
your date of death if sooner; provided, however, if your employment is
terminated involuntarily and you become entitled to such severance pay, then
you may receive, prior to that date, an amount of severance pay under this
letter  agreement (when added to the
severance benefits you receive under any other plan or program of the Company, if
any, which is deemed to be a “nonqualified deferred compensation plan” (as
defined by section 409A(d)(1) of the Code)), that does not exceed an
amount that is 2-times the compensation limit under Code section 401(a)(17) at
the time of your termination (or 2-times your annual compensation at that time,
if lesser). Fred, as CEO, you would be a “specified employee” if and when you
become entitled to such severance pay under this letter agreement.  Fred, please note that the provisions under
this paragraph do not grant you any new or additional rights or benefits, but
instead these provisions are solely intended to help assure that the severance
benefits specified in your initial CEO letter agreement and continued hereunder
will be paid in a manner that does not violate the provisions of Code section
409A.


 


Finally, please
note that all payments under this letter agreement are intended to be exempt
from Code section 409A or, with respect to any such payment that is not so
exempt, to be in compliance with that Code section; and the provisions of this letter
agreement shall be interpreted and administered in that manner.


 


You will not, in any
event, however, be entitled to the severance payment described above if, at the
time your employment terminates, your employment terminates as the result of
your death, or you are entitled to payments under your Executive Severance
Agreement described above, or to disability income payments under the Grace “LTD
Plan” and/or “ESP Plan” mentioned below.


 


Also, if you receive a severance
payment under this letter agreement, you will not be entitled to any other
severance pay from the Company.


 


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Definition Of Cause


 


“Cause”, for purposes of
this letter agreement, means:


 


(i)        Commission
by you of a criminal act (i.e., any act
which, if successfully prosecuted by the appropriate authorities would
constitute a crime under State or Federal law) or of willful misconduct
(including but not limited to violating written policies of the Company),
either of which has had or will have a direct material adverse effect upon the
business affairs, reputation, properties, operations or results of operations
or financial condition of Company,


 


(ii)       Refusal or failure of you
to comply with the mandates of the Board (unless any such mandates by the Board
constitute Constructive Discharge, and you have determined to terminate your
employment as a result thereof), or failure by you to substantially perform
your duties as CEO, other than such failure resulting from your total or
partial incapacity due to physical or mental illness, which refusal or failure
has not been cured within 30 days after notice has been given to you, or


 


(iii)      Material breach of any of
the terms of this agreement by you, which breach has not been cured within 30
days after notice has been given to you.


 


Definition of Constructive Discharge


 


“Constructive
Discharge,” for purposes of this letter agreement, means the occurrence of any
of the following without your prior written consent:


 


(i)        any demotion
from the position as CEO of the Company (provided that this provision shall not
apply if you agree that any other individual should be elected as President
and/or Chief Executive Officer of the Company);


 


(ii)       the relocation
of your principle office to a location more than 35 miles away from the current
site of the Company’s Headquarters in Columbia, Maryland, without your prior
consent;


 


(iii)      any material diminution in your level of
authority from that of CEO or any assignment to you of any duties that are not
consistent with the position of CEO; other than authority or duties that (a) may
be appropriate to another position with the Company that you hold in addition
to the position of CEO, (b) result from any requirement or request from the
Board that is reasonably related to your position as CEO (or any other position
you may hold with the Company at the time you retain your position as CEO), or (c) results
from an inadvertent failure or oversight of the Board that is remedied within
30 days after your written notice thereof has been received by the Chairman of
the Compensation Committee of the Company’s Board of Directors;


 


(iv)      the
Company imposes upon you compensation arrangements that do not comply with this
letter agreement; or


 


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(v)                     any material
breach of this letter agreement by the Company.


 


Notwithstanding the foregoing:


 


·                              any
termination of employment by you will not be deemed to be a termination as a
result of Constructive Discharge, unless (i) you provide to the Chairman
of the Compensation Committee written notice of your decision to terminate your
employment that sets forth in reasonable detail the specific conduct or
occurrence that you deem constitutes Constructive Discharge and the specific
provision of this letter agreement upon which you rely and (ii) the
Company does not cure such conduct or occurrence within 30 days after such
notice has been received by the Chairman of the Compensation Committee;


 


·                              your
right to terminate your employment on the basis of Constructive Discharge shall
be deemed waived by you if you do not provide such notice to the Chairman of
the Compensation Committee within 60 days after you become aware of all
material facts regarding the conduct or occurrence that you deem constitutes
Constructive Discharge.


 


Other
Benefit Programs


 


As a senior officer of
the Company, you will also continue to be eligible to participate in the
following benefit plans and programs (subject to the continuation and the
actual provisions of the plans and programs, as amended from time to time):


 


·                              The W. R. Grace & Co. Retirement Plan for
Salaried Employees (“Grace Salaried Retirement Plan”)


·                              The W. R. Grace & Co. Supplemental Executive
Retirement Plan


·                              The W. R. Grace & Co. Salaried Employee
Savings & Investment Plan


·                              The
W. R. Grace & Co. Savings & Investment Plan Replacement
Payment Program


·                              The
W. R. Grace & Co. Long-Term Disability Income Plan (“LTD Plan”)


·                              Executive Salary Protection Plan (“ESP Plan”)


·                              The
W. R. Grace & Co. Voluntary Group Accident Insurance Plan


·                              The
W. R. Grace & Co. Business Travel Accident Insurance Plan


·                              The
W. R. Grace & Co. Group Term Life Insurance Program


·                              Personal
Excess Liability Insurance


·                              The
W. R. Grace & Co. Group Medical Plan


·                              The
W. R. Grace & Co. Dental Plan


·                              Retiree
Medical Coverage


 


In addition,
during your employment with the Company, you shall also be entitled to
participate in all other employee/executive perquisites, pension and welfare
benefit plans and programs made available to the Company’s senior level
executives or to its employees generally, as such plans or programs may be in
effect, and amended, from time to time.


 


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Indemnification


 


The
Company shall, to the extent permitted by applicable law, indemnify you and
hold you harmless from and against any and all losses and liabilities you may
incur as a result of your performance of your duties as a director, officer or
employee of the Company.  In addition,
the Company shall indemnify and hold you harmless against any 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 any taxing authority)
with respect to the Company’s performance of (or failure to perform) any
commitment made to you under this agreement.


 


The
provisions of this section shall survive the termination of this letter
agreement.


 


Dispute
Resolution


 


Any dispute,
controversy or claim arising out of or relating to this letter agreement, or a
breach thereof, shall be settled by arbitration in accordance with the National
Rules for the Resolution of Employment Disputes of the American
Arbitration Association as such rules are in effect on the date of the
delivery of a demand for arbitration (the “National Resolution Rules”), which
shall be effectuated by the demanding party providing notice to the other party
in accordance with the provisions below under the heading “Notices”.  The parties expressly acknowledge that they
are waiving their rights to seek remedies in court, 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
the arbitrator shall be final and binding on the parties and their respective
heirs, executors, administrators, personal representatives, successors and
assigns.  Judgment upon any award of the
arbitrator may be entered in any court of competent jurisdiction, or
application may be made to any such court for the judicial acceptance of the
award and for an order of enforcement.


 


Air Travel


 


In addition to the usual Company policies regarding air travel by
senior officers on Company business, the Company will provide you with travel
by chartered aircraft or with travel on an aircraft fractionally owned by the
Company, at times requested by you, including for reasonable personal travel
that will be included as taxable income to you.


 


Notices


 


Except as otherwise
provided herein, you and the Company agree that any notices and other
communications permitted or required under this letter agreement shall be in 


 


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writing and shall be
given by hand delivery to the other party or sent by registered or certified
mail, return receipt requested, postage prepaid, or by nationally recognized
overnight courier service, addressed as follows:


 


If to you:


 


Alfred E. Festa


W. R. Grace &
Co.


7500 Grace Drive


Columbia, MD 21044


 


If to the Company:


 


W. R. Grace &
Co.


Attention:  General Counsel


7500 Grace Drive


Columbia, MD 21044


 


or to such other
addresses as either party furnishes to the other in writing in accordance with
this notice provision.  Notices and
communications shall be effective when actually received by the addressee.


 


No Mitigation; No Set Off


 


In the event of any
termination of employment hereunder, you shall be under no obligation to seek
other employment and there shall be no offset against any amounts due to you
under this letter agreement on account of any remuneration attributable to any
subsequent employment you may obtain. 
The amounts payable hereunder shall not be subject to setoff,
counterclaim, recoupment, defense or other right which the Company may have
against you.


 


Successors


 


Except as otherwise
provided herein, this letter agreement is personal to you, and without the
prior written consent of the Company shall not be assignable by you other than
by will or the laws of descent and distribution.  This agreement shall inure to the benefit of
and be enforceable by your legal representatives.  This agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns.  Except as provided herein, this agreement
shall not be assignable by the Company without your prior written consent.  The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place.  “Company”
means the Company as hereinbefore defined and any successor to its business
and/or 


 


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assets as aforesaid that
assumes and agrees to perform this agreement by operation of law or otherwise.


 


Survivorship


 


The respective rights and
obligations of the parties hereunder shall survive any termination of your
employment to the extent necessary to effect those rights and obligations.


 


Vacation


 


As an officer of the
Company, you shall be entitled to four weeks paid vacation per full calendar
year of employment with the Company.


 


Confidentiality and Non-Compete Agreements


 


Fred, of course, the
Company’s standard employment agreement (the “Standard Agreement”), which
includes agreements regarding the confidentiality of Company information and
non-competition, and similar provisions, which you signed in order to commence
employment with the Company shall remain in full force and effect; except you
and the Company agree that, to the extent that the terms the Standard Agreement
differ from the terms of this letter agreement, the terms of this letter
agreement (and not the Standard Agreement) shall control your employment
relationship with the Company, and that the provisions of item 5 of the
Standard Agreement are not applicable to the terms of this letter agreement, in
that the Standard Agreement does not supercede any terms of this letter
agreement.  A copy of the Standard
Agreement that you signed has previously been provided to you.


 


Miscellaneous


 


You and the Company
acknowledge this letter agreement, and the other written agreements referred to
herein, contain the entire understanding of the parties concerning the subject
matter hereof.  You and the Company
acknowledge that this agreement supersedes any prior agreement between you and
the Company concerning the subject matter hereof.  Except as expressly otherwise provided
herein, this agreement shall not adversely affect your right to participate in,
or receive any benefit under, any incentive, severance or other benefit plan or
program in which you may from time to time participate.


 


If any provision of this
agreement is held invalid or unenforceable in whole or in part, such provision,
to the extent it is invalid or unenforceable, shall be revised to the extent
necessary to make the provision, or part hereof, valid and enforceable, consistent
with the intentions of the parties hereto. 
Any provision of this agreement that is held invalid 


 


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or unenforceable, in
whole or in part, shall not affect the validity and enforceability of the other
provision of this agreement, which shall remain in full force and effect.


 


This letter agreement may
be amended, superseded or canceled only by a written instrument specifically
stating that it amends, supersedes or cancels this agreement, executed by you
and the Company.


 


If you have any questions
regarding any expectations of your new position, please call me.


 


If you have any questions
regarding the compensation and Company benefit plans and programs, please feel
free to call W. Brian McGowan, Senior Vice President, Administration, at (410)
531-4191.


 


Fred, we look forward to
continuing to work with you in your capacity as CEO and Chairman.


 


Sincerely,


 


 


	
  /s/ JOHN F. AKERS

  	
   

  
	
   

  	
   

  
	
  John F. Akers

  	
   

  
	
  Chairman, Compensation Committee

  	
   

  
	
  W. R. Grace & Co. Board of Directors

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  AGREED AND ACCEPTED:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ ALFRED E. FESTA

  	
   

  
	
  Alfred E. Festa

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  5/27/09

  	
   

  
	
  Date

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  cc: W. B. McGowan

  	
   

  



 


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