Exhibit 10.1

CONSENT AND WAIVER AGREEMENT AND
AMENDMENT NO. 7
TO LOAN AND SECURITY AGREEMENT

 
CONSENT AND WAIVER AGREEMENT AND AMENDMENT NO. 7 TO LOAN AND SECURITY AGREEMENT,
dated as of September 22, 2005 (this “Agreement”), by and among MATRIA WOMEN’S
AND CHILDREN’S HEALTH, LLC, a Delaware limited liability company (together with
its permitted successors and assigns, “Parent”) and by conversion from Matria
Women’s and Children’s Health, Inc. (“Immediate Predecessor”) successor by
merger to Matria Healthcare, Inc., a Delaware corporation (together with the
Immediate Predecessor, “Former Parent”), DIABETES ACQUISITION, INC., a Georgia
corporation (together with its permitted successors and assigns, “DAI”), GAINOR
MEDICAL ACQUISITION COMPANY, a Georgia corporation (together with its permitted
successors and assigns, “Gainor”), DIABETES MANAGEMENT SOLUTIONS, INC., a
Delaware corporation (together with its permitted successors and assigns,
“DMS”), DIABETES SELF CARE, INC., a Virginia corporation (together with its
permitted successors and assigns, “DSC”), MATRIA LABORATORIES, INC., a Delaware
corporation (together with its permitted successors and assigns, “MLI”), FACET
TECHNOLOGIES, LLC, a Georgia limited liability company (together with its
permitted successors and assigns, “Facet”), MATRIA OF NEW YORK, INC., a New York
corporation (together with its permitted successors and assigns, “MNY”), MATRIA
HEALTHCARE OF ILLINOIS, INC., a Georgia corporation (together with its permitted
successors and assigns, “MII”), QUALITY ONCOLOGY, INC., a Delaware corporation
(together with its permitted successors and assigns, “QO”) (Parent, DAI, Gainor,
DMS, DSC, MLI, Facet, MNY, MII and QO, each individually a “Borrower” and
jointly and severally, the “Borrowers”), Parent, in its capacity as authorized
representative of the Borrowers (“Authorized Representative”), and HFG
HEALTHCO-4, LLC, a Delaware limited liability company (together with its
successors and assigns, the “Lender”).
 
W I T N E S S E T H
 
WHEREAS, the Borrowers, Former Parent, in its capacity as the authorized
representative of the Borrowers, and the Lender are parties to that certain Loan
and Security Agreement, dated as of October 22, 2002 (including all annexes,
exhibits and schedules thereto, and as amended, restated, supplemented or
otherwise modified from time to time, the “Loan and Security Agreement”);
 
WHEREAS, Former Parent, Matria Healthcare, Inc., a Delaware corporation formerly
known as Matria Holding Company, Inc. (together with its permitted successors
and assigns, “Holdco”), and Matria MergerSub, Inc., a Delaware corporation
(“MergerSub”), are party to that certain Agreement of Merger and Plan of
Reorganization dated as of December 31, 2004 (the “Merger Agreement”), pursuant
to which Former Parent created a new holding company structure by (a) merging
MergerSub with and into Former Parent and (b) converting the outstanding capital
stock of Former Parent into a like number of shares of capital stock of Holdco,
with the result being that Former Parent became a wholly-owned subsidiary of
Holdco, all on the terms of and subject to the conditions of the Merger
Agreement;
 

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WHEREAS, pursuant to the terms of the Merger Agreement, Former Parent changed
its name to “Matria Women’s and Children’s Health, Inc.” and subsequently
converted from a Delaware corporation to a Delaware limited liability company,
“Matria Women’s and Children’s Health, LLC” (the “Conversion”);
 
WHEREAS, pursuant to the terms of the Merger Agreement, Matria Health
Enhancement Company, a Delaware corporation, formerly known as
Clinical-Management Systems, Inc. (together with its successors and assigns,
“MHE”) changed its name from “Clinical-Management Systems, Inc.” to “Matria
Health Enhancement Co.” and subsequently changed its domicile from Georgia to
Delaware under the name “Matria Health Enhancement Company” (the “HED Name
Change”);
 
WHEREAS, pursuant to the terms of the Merger Agreement, Parent shall (i)
contribute to Holdco all of the issued and outstanding stock or membership
interests, as applicable, of its direct, wholly-owned subsidiaries DAI, MHE,
Matria Insurance, Ltd., a Vermont corporation, Shared Care, Inc., a Georgia
corporation, and Facet, (ii) cause DAI to contribute to Facet the outstanding
capital stock of Facet Technologies Limited, a corporation organized under the
laws of the United Kingdom, (iii) contribute to MHE all of the outstanding
capital stock of QO, and (iv) contribute to Holdco its 35% stock ownership
interest in Matria Holding GmbH, a company organized under the laws of Germany
(the “Inter-Company Transfers”);
 
WHEREAS, pursuant to the terms of the Merger Agreement, Parent shall transfer
and assign to MHE all of the disease management contracts to which Parent is a
party (the “Assignment and Assumption”);
 
WHEREAS, pursuant to the terms of the Merger Agreement, Parent shall cause Q
Liquidation Corp., a Delaware corporation and MarketRing.com, Inc., a Georgia
corporation to merge with and into Shared Care, Inc., in accordance with Section
252 of the DGCL and Section 14-2-1104 of the Georgia Business Corporation Code,
as applicable;
 
WHEREAS, pursuant to the terms of the Merger Agreement, Holdco shall cause DMS
to transfer all of the assets exclusively used in the operations of its Options
Unlimited division to Matria Case Management, Inc., a New York corporation and
direct, wholly-owned subsidiary of MHE;
 
WHEREAS, the consummation of the transactions contemplated hereby would be in
violation of the Loan and Security Agreement, and Lender has agreed to consent
to the consummation of such transactions and waive certain Defaults and Events
of Default solely to the extent set forth herein; and
 
WHEREAS, the parties to the Agreement have agreed to amend the Loan and Security
Agreement as described herein.
 
NOW THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the Borrowers, the Authorized Representative and the Lender hereby
agree as follows:

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1.  Definitions. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Loan and Security Agreement.
 
2.  Consents. As of the Agreement Effective Date (as hereinafter defined), the
Lender hereby consents, pursuant to Section 6.01 of the Loan and Security
Agreement and notwithstanding anything set forth to the contrary in clauses (b)
(solely with respect to the final sentence thereof, to the extent that such
clause (b) requires Parent to provide the Lender with 30 days’ prior Written
Notice of Parent changing its name from “Matria Women’s and Children’s Health,
Inc.” to “Matria Women’s and Children’s Health, LLC”), (g), (r), (w) and (z) of
Exhibit IV and clauses (m), (v) and (y) of Exhibit V to the Loan and Security
Agreement, to Parent, Holdco and the Borrowers party to the Inter-Company
Transfers consummating the transactions contemplated by the Merger Agreement,
the Assumption and Assignment, the Conversion, the HED Name Change and the
Inter-Company Transfers (collectively, the “Subject Transactions”).
 
3.  Waiver Upon the Agreement Effective Date, the Lender hereby agrees to waive
any Default or Event of Default arising pursuant to a breach of the covenant set
forth in the final sentence of clause (b) of Exhibit IV of the Loan and Security
Agreement, solely to the extent that such breach arises with respect to Parent
failing to provide the Lender with 30 days’ prior Written Notice of Parent
changing its name from “Matria Women’s and Children’s Health, Inc.” to “Matria
Women’s and Children’s Health, LLC”.
 
4.  Amendments to Loan and Security Agreement. Notwithstanding the delivery of
any Written Notice by any Borrower or the Authorized Representative to the
effect that the Borrowers do not intend to extend the term of the Loan and
Security Agreement beyond the Scheduled Maturity Date in effect immediately
prior to the effectiveness of this Agreement, the parties hereto agree to amend
the Loan and Security Agreement as follows:
 
a.  Section 6.06(a) of the Agreement is amended by deleting the date “October
21, 2005” therein and substituting in lieu thereof the date “October 21, 2006”.
 
b.  Section 6.06(c) of the Agreement is amended in its entirety to read as
follows:
 
(c) The Borrowers may terminate this Agreement at any time prior to the Maturity
Date by providing one days’ prior Written Notice to the Lender, subject to
payment in full of all Lender Debt, if any, including all applicable fees,
charges, premiums and costs, all as provided hereunder, and in the event of such
occurrence, the Revolving Commitment shall be deemed to be terminated.
 
c.  The definition of “Scheduled Maturity Date” in Exhibit I to the Loan and
Security Agreement is amended in its entirety to read as follows:
 
“Scheduled Maturity Date” means October 21, 2006, as such date may be extended
thereafter in accordance with Section 6.06(a).
 
d.  The definition of “Early Termination Fee” in Exhibit I to the Loan and
Security Agreement is amended in its entirety to read as follows:
 

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“Early Termination Fee” shall mean an amount equal to the decrease in or
termination of the Revolving Commitment multiplied by the applicable percentage
below:

Period
Percentage
From October 22, 2003 until October 21, 2005
0.75%
from October 22, 2005 until the date immediately prior to the Scheduled Maturity
Date
0.00%

5.  Post-Closing Obligations As a condition to the Lender granting the foregoing
consents and waiver, the Borrowers and the Authorized Representative hereby
agree that, prior to the advance of any Revolving Advance on or after the date
hereof, in addition to satisfying the conditions set forth in the Loan and
Security Agreement, the Borrowers and the Authorized Representative shall have
delivered to the Lender an executed amendment to the Loan and Security Agreement
effecting such modifications to the Loan and Security Agreement relating to the
Subject Transactions as the Lender shall require, and shall have executed and
delivered such other agreements, opinions, lien searches, financing statements,
account control agreements, instruments, documents and information as the Lender
may request, in form and substance satisfactory to the Lender.
 
6.  Confirmation and Reaffirmation of Obligations. Without affecting in any way
any provisions of the Documents pursuant to which the obligations of the
Borrowers thereunder are agreed to be absolute and unconditional irrespective of
any amendment thereof:
 
a.  Parent hereby confirms and agrees that, notwithstanding (i) the consummation
of the transactions contemplated by the Merger Agreement, including the
Conversion, and (ii) the effectiveness of this Agreement, each of the Documents
which Parent or Former Parent has heretofore executed and delivered, and the
obligations of Parent thereunder, are, and shall continue to be, in full force
and effect and shall apply to the Documents as amended hereby, and each of such
Documents is hereby ratified and confirmed and such obligations are ratified and
confirmed as obligations of Parent.
 
b.  Without limiting the foregoing, Parent agrees that the security interests
and rights of set-off granted by Parent and Former Parent pursuant to the
Documents, including, without limitation, the Loan and Security Agreement and
the Pledge Agreement -- Parent, are hereby ratified and reaffirmed by Parent in
all respects and shall remain in full force and effect as continuing security
interests and rights of set-off.
 
c.  Each of the other Borrowers hereby confirms and agrees that:
 
i. notwithstanding (x) the consummation of the Subject Transactions and (y) the
effectiveness of this Agreement, each of the Documents and the obligations of
such Borrowers thereunder, are, and shall continue to be, in full force and
effect and shall apply to the Documents as amended hereby, and each of such
Documents is hereby ratified and confirmed by such Borrower and such obligations
are ratified and confirmed as obligations of such Borrower;

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ii. the security interests and rights of set-off granted by such Borrower
pursuant to the Documents are hereby ratified and reaffirmed by such Borrower in
all respects and shall remain in full force and effect as continuing security
interests and rights of set-off; and

iii. without limiting the foregoing, the indemnification obligations of the
Borrowers described in Section 1.08, 1.09 and 6.06 of the Loan and Security
Agreement are hereby ratified and confirmed by such Borrower and such
obligations are ratified and confirmed as obligations of such Borrower.

7.  Remedies. This Agreement shall constitute a Document. The breach by any
Borrower of any representation, warranty, covenant or agreement in this
Agreement shall constitute an immediate Event of Default hereunder and under the
other Documents.
 
8.  Representations and Warranties. To induce the Lender to enter into this
Agreement, each Borrower, jointly and severally and giving effect to this
Agreement, makes the following representations and warranties to the Lender:
 
a.  The execution, delivery and performance by it of this Agreement and the
performance of the Loan and Security Agreement, as amended hereby, the Documents
and the other documents to be delivered by it hereunder and thereunder and the
actions contemplated hereby and thereby, including, in the case of the parties
thereto, the Merger Agreement, the Assumption and Assignment, the Transfer
Agreements and each other document or instrument executed and delivered in
connection therewith (i) are within its corporate or company powers, (ii) have
been duly authorized by all necessary corporate or company action, (iii) do not
contravene (1) its charter or its bylaws, or its operating agreement, as
applicable, (2) any law, rule or regulation applicable to it, (3) the Indenture
or any contractual restriction binding on or affecting it or its Property, or
(4) any order, writ, judgment, award, injunction or decree binding on or
affecting it or its Property, and (iv) do not result in or require the creation
of any Lien upon or with respect to any of its Properties, other than in favor
of the Lender pursuant to this Agreement, the Loan and Security Agreement, as
amended hereby, or the Documents. This Agreement has been duly executed and
delivered by it.
 
b.  This Agreement, the Loan and Security Agreement, as amended hereby, and the
Documents constitute the legal, valid and binding obligation of the Borrowers,
enforceable against the Borrowers in accordance with their respective terms,
except as limited by bankruptcy, insolvency, moratorium, fraudulent conveyance
or other laws relating to the enforcement of creditors’ rights generally and
general principles of equity (regardless of whether enforcement is sought at
equity or law).
 
c.  Except as expressly waived by Lender herein, no event has occurred and is
continuing, or would result from the execution of this Agreement, that
constitutes a Default or Event of Default.
 
d.  After giving effect to this Agreement, the representations and warranties of
each Borrower contained in the Loan and Security Agreement and each other
Document are true and correct on and as of the Agreement Effective Date with the
 

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same effect as if such representations and warranties had been made on and as of
such date, except that any such representation or warranty which is expressly
made only as of a specified date need be true only as of such date.
 
9.  No Other Waivers or Consents. Except as expressly provided herein, the Loan
and Security Agreement and the other Documents shall be unmodified and shall
continue to be in full force and effect in accordance with their terms. In
addition, except as specifically provided herein, this Agreement shall not be
deemed a (i) waiver of any term or condition of any Document or (ii) consent to
any deviation from the terms of the Loan and Security Agreement or any of the
other Documents on the part of any Borrower, and shall not be deemed to
prejudice any right or rights which the Lender may now have or may have in the
future under or in connection with the Loan and Security Agreement or any other
Document or any of the instruments or agreements referred to therein, as the
same may be amended from time to time.
 
10.  Effectiveness. This Agreement shall become effective as of the date first
set forth above (the “Agreement Effective Date”) only upon satisfaction in full
in the judgment of the Lender of each of the following conditions:
 
a.  The Lender shall have received copies by facsimile of duly executed
signature pages of this Agreement from each Borrower, the Authorized
Representative and the Lender.
 
b.  The Lender shall have received all UCC-3 amendment statements as it shall
deem necessary or reasonably desirable in order to correctly identify each of
the Borrowers and correctly identify the collateral granted by each such
Borrower, to be filed on or immediately prior to the Agreement Effective Date
under the UCC.
 
c.  The representations and warranties of or on behalf of the Borrowers in this
Agreement shall be true and correct on and as of the Agreement Effective Date.
 
d.  The Borrowers shall have (i) paid to Kaye Scholer LLP all outstanding legal
fees and expenses related to its representation of the Lender in connection with
this Agreement and/or the Loan and Security Agreement and (ii) paid and
reimbursed the Lender for all other reasonable costs and out-of-pocket expenses
incurred in connection with the negotiation, preparation, execution and delivery
of this Agreement and all other documents and instruments delivered in
connection herewith.
 
11.  GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY
CONFLICTS OF LAWS PRINCIPLES THEREOF.
 
12.  WAIVER OF JURY TRIAL, JURISDICTION AND VENUE. EACH OF THE PARTIES HERETO
HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN THE EVENT OF ANY LITIGATION WITH
RESPECT TO ANY MATTER RELATED TO THIS AGREEMENT OR THE LOAN AND SECURITY
AGREEMENT, AND HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE STATE AND
FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK CITY, NEW YORK IN CONNECTION
WITH ANY ACTION OR PROCEEDING ARISINGOUT OF OR RELATING TO THIS AGREEMENT OR THE
LOAN AND SECURITY AGREEMENT. IN ANY SUCH LITIGATION, EACH OF THE PARTIES HERETO
WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS AND AGREES
THAT SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE
PARTIES HERETO AT THEIR ADDRESSES SET FORTH ON SCHEDULE I TO THE LOAN AND
SECURITY AGREEMENT, AS AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED
FROM TIME TO TIME. THE PARTIES HERETO SHALL APPEAR IN ANSWER TO SUCH SUMMONS,
COMPLAINT OR OTHER PROCESS WITHIN THE TIME PRESCRIBED BY LAW, FAILING WHICH THE
PARTY FAILING TO SO APPEAR SHALL BE DEEMED IN DEFAULT AND JUDGMENT MAY BE
ENTERED BY THE OTHER PARTY FOR THE AMOUNT OF THE CLAIM AND OTHER RELIEF
REQUESTED THEREIN.
 
13.  Counterparts. This Agreement may be executed by the parties hereto on any
number of separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier or
electronic mail shall be effective as delivery of a manually executed
counterpart of this Agreement.
 
[SIGNATURE PAGE FOLLOWS]
 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
 
HFG HEALTHCO-4 LLC
 
 
By:  
Name:
Title:
MATRIA LABORATORIES, INC.
 
 
By:  
Name:
Title:
MATRIA WOMEN’S AND CHILDREN’S HEALTH, LLC
 
By:   
Name:
Title:
FACET TECHNOLOGIES, LLC
 
 
By:  
Name:
Title:
DIABETES ACQUISITION, INC.
 
 
By:  
Name:
Title:
MATRIA OF NEW YORK, INC.
 
 
By:  
Name:
Title:
 
GAINOR MEDICAL ACQUISITION COMPANY
 
 
By:  
Name:
Title:
 
MATRIA HEALTHCARE OF ILLINOIS, INC.
 
By:  
Name:
Title:
 
DIABETES MANAGEMENT SOLUTIONS, INC.
 
 
By:  
Name:
Title:
 
QUALITY ONCOLOGY, INC.
 
 
By:  
Name:
Title:
 
DIABETES SELF CARE, INC.
 
 
By:  
Name:
Title: