The Board of Directors

                                                                    EXHIBIT 10.1

                                              PAUL J. NORRIS

                                              Chairman & Chief Executive Officer

[GRACE LOGO]

[GRAPHIC OMITTED]                             W. R. Grace & Co.

                                              7500 Grace Drive

                                              Columbia, MD 21044

                                              (410) 531-4404

                                              Fax: (410) 531-4414

                                              email paul.j.norris@grace.com

January 19, 2005

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"). You

will assume the position of Chief Executive Officer of the Company, effective

June 1, 2005, in conjunction with my retirement from the Company effective the

day before that date (i.e., effective May 31, 2005). Thus, as of June 1, 2005,

you will be Chief Executive Officer and President of the Company (collectively,

the "CEO").

Also, as discussed, I will continue as Chairman of the Board of Directors of the

Company (the "Board") after my retirement, and, as agreed with the Board, will

provide consulting services related to the Company's Chapter 11 cases and other

matters.

As you know, the provisions of this letter agreement were previously approved by

the Board and the Compensation Committee of the Board. In addition, this letter

agreement will be submitted to the U. S. Bankruptcy Court with jurisdiction over

the Company's Chapter 11 cases.

Fred, I am extremely pleased that you have agreed to assume the position of CEO,

and we are confident that you will continue to make valuable contributions to

the success of the Company in your new position.

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.

RESPONSIBILITIES

You will assume the position as CEO of the Company on June 1, 2005. (As all

other Company Headquarters employees, you will continue to be employed by W. R.

Grace & Co.-Conn., but will be CEO of both W. R. Grace & Co. and W. R. Grace &

Co.-Conn.) As of that date, your title will be "Chief Executive Officer and

President" of the Company, and you will report directly to the Board.

Alfred E. Festa                 January 19, 2005                         Page 2

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Your principal obligations, duties and responsibilities will 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.

EFFECTIVE DATE AND STATUS OF PRIOR AGREEMENT

Subject to Bankruptcy Court approval, this letter agreement shall be effective

as of June 1, 2005. Any other provision of this agreement notwithstanding,

should you cease to be an employee of the Company for any reason before that

date, you shall not become the CEO of the Company, and the provisions of this

letter agreement shall become void as of the date that your employment with the

Company ceases, which means that neither you nor the Company (nor any other

party) shall have any rights or obligations under this agreement, in that case.

As of the date you assume the position of CEO, your prior agreement with the

Company, dated November 17, 2003, shall become void, which means that neither

you nor the Company (nor any other party) will retain any rights or obligations

thereunder, as of that date. The rights and obligations related to your

employment with the Company as CEO on and after that date shall be governed by

the terms of this letter agreement (including any written amendments to this

agreement).

TERM OF AGREEMENT

The term of your employment as CEO under this letter agreement will be for a

period of four years, beginning on the date you assume that position, June 1,

2005, and ending on May 31, 2009 (such period is referred to in this agreement

as your "Initial CEO Employment Term").

If your employment as CEO of the Company (or in any other position) continues

after the Initial 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 initial annual base salary as CEO will be $760,000.00. 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

     Initial CEO Employment Term and whether or not your termination is

     voluntary. (Note, however, the provisions under "Severance Pay

     Arrangement.")

2.   As CEO, you will, of course, continue to be eligible to participate in the

     Company's Annual Incentive Compensation Program. For 2005, your targeted

     award under the Program will be 100% of your base salary earned during the

     applicable calendar year. For 2006 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

Alfred E. Festa                 January 19, 2005                         Page 3

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     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 Initial 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 Initial 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

     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 2005 - 2007 performance

     period in the amount of $1,690,000; 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 Initial 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 Initial 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