Matria's Charter of the Audit Committee, as amended December 14, 2006


    
      

        MATRIA
          HEALTHCARE, INC.

        


        CHARTER
          OF THE AUDIT COMMITTEE 

        OF
          THE BOARD OF DIRECTORS

        


        AMENDED
          DECEMBER 14, 2006

        


        


        


        ARTICLE
          I

        


        Purpose

        


        The
          Audit
          Committee is appointed by the Board of Directors to oversee the accounting
          and
          financial reporting processes of the Company and the audits of the financial
          statements of the Company. In connection with its performance of such oversight
          responsibilities, the Audit Committee shall perform the following duties
          and
          responsibilities:

        


        
          	 	 	
                  Monitor
                    the integrity of the Company’s financial reporting process and system of
                    internal controls regarding finance and accounting
                    compliance.

                


        

        


        
          	 	 	
                  Monitor
                    the qualifications and independence of the Company’s independent auditors
                    and internal auditors.

                


        

        


        
          	 	
                  Monitor
                    the performance of the Company’s independent auditors and internal
                    auditors.

                


        

        


        
          	 	 	
                  Provide
                    an avenue of communication among the independent auditors, internal
                    auditors, management and the Board of
                    Directors.

                


        

        


        ARTICLE
          II

        


        Audit
          Committee Composition and Meetings

        


        The
          Audit
          Committee shall be comprised of at least three directors as determined
          by the
          Board. The members of the Audit Committee shall meet the independence and
          experience requirements of NASDAQ, Section 10A(m)(3) of the Securities
          Exchange
          Act of 1934 (the “Exchange Act”) and the rules and regulations of the Securities
          and Exchange Commission (the “Commission”). Each member of the Audit Committee
          shall be independent and free from any relationship which, in the opinion
          of the
          Board, would interfere with the exercise of his or her independent judgment
          in
          carrying out the responsibilities of a director and an Audit Committee
          member.
          All members of the Committee shall have a basic understanding of finance
          and
          accounting and be able to read and understand fundamental financial statements,
          and at least one member of the Committee shall have past employment experience
          in finance or accounting, requisite 


        
          
            
              


            

            
            

          

          
            
            

            
              

            

          

          
            
            

            
            

          

        



        professional
          certification in accounting, or any other comparable experience or background
          which results in the individual’s financial sophistication, including being or
          having been a chief executive officer, chief financial officer or other
          senior
          officer with financial oversight responsibilities.

        


        The
          Audit
          Committee members shall be appointed by the Board. If an Audit Committee
          Chair
          is not designated or present, the members of the Committee may designate
          a Chair
          by majority vote of the Committee membership.

        


        The
          Committee shall meet at least four times annually or more frequently as
          circumstances dictate. The Audit Committee Chair shall prepare and/or approve
          an
          agenda in advance of each meeting. The Audit Committee may request any
          officer
          or employee of the Company or the Company’s outside counsel or independent
          auditors or internal auditors to attend a meeting of the Audit Committee
          or to
          meet with any members of, or consultants to, the Audit Committee.

        


        ARTICLE
          III

        


        Audit
          Committee Authority and Responsibilities

        


        The
          Audit
          Committee shall have the sole authority to appoint or replace the independent
          auditor (subject, if applicable, to shareholder ratification). The Audit
          Committee shall be directly responsible for the compensation and oversight
          of
          the work of the independent auditor (including resolution of disagreements
          between management and the independent auditor regarding financial reporting)
          for the purpose of preparing or issuing an audit report or related work.
          The
          independent auditor shall report directly to the Audit Committee.

        


        The
          Audit
          Committee shall preapprove all auditing services and permitted non-audit
          services (including the fees and terms thereof) to be performed for the
          Company
          by its independent auditor, subject to the de minimus exceptions for non-audit
          services described in Section 10A(i)(1)(B) of the Exchange Act which are
          approved by the Audit Committee prior to the completion of the audit. The
          Audit
          Committee may form and delegate authority to subcommittees consisting of
          one or
          more members when appropriate, including the authority to grant preapprovals
          of
          audit and permitted non-audit services, provided that decisions of such
          subcommittee to grant preapprovals shall be presented to the full Audit
          Committee at its next scheduled meeting.

        


        The
          Audit
          Committee shall have the authority, to the extent it deems necessary or
          appropriate, to retain independent legal, accounting or other advisors.
          The
          Company shall provide for appropriate funding, as determined by the Audit
          Committee, for payment of compensation to the independent auditor for the
          purpose of rendering or issuing an audit report and to any advisors employed
          by
          the Audit Committee.

        


        The
          Audit
          Committee shall be responsible for the oversight of the work of the internal
          audit function. The internal audit function shall report to the Audit
          Committee.


        
          
            
              


            

            
            

          

          
            
            

            
              

            

          

          
            
            

            
            

          

        



        


        The
          Audit
          Committee shall make regular reports to the Board. The Audit Committee
          shall
          review and reassess the adequacy of this Charter annually and recommend
          any
          proposed changes to the Board for approval.

        


        The
          Audit
          Committee, to the extent it deems necessary or appropriate, shall:

         

        Financial
          Statement and Disclosure Matters

         

         

        
          	
                  1.

                	
                  Review
                    and discuss with management and the independent auditor the annual
                    audited
                    financial statements and recommend to the Board whether the audited
                    financial statements should be included in the Company’s Form
                    10-K.

                


        

         

         

        
          	
                  2.

                	
                  Review
                    and discuss with management and the independent auditor the Company’s
                    quarterly financial statements prior to the filing of its Form
                    10-Q,
                    including the results of the independent auditor’s review of the quarterly
                    financial statements.

                


        

         

        
          	
                  3.

                	
                  Review
                    disclosures made to the Committee by the Company’s Chief Executive Officer
                    and Chief Financial Officer regarding: (i) any significant deficiencies
                    in
                    the design or operation of internal controls of the Company which
                    could
                    adversely affect the Company’s ability to record, process, summarize and
                    report financial data; and (ii) any fraud, material or otherwise,
                    that
                    involves management or other
                    employees.

                


        

         

        
          	
                  4.

                	
                  Discuss
                    with management and the independent auditor significant financial
                    reporting issues and judgments made in connection with the preparation
                    of
                    the Company’s audited financial statements, including any significant
                    changes in the Company’s selection or application of accounting
                    principles, any major issues as to the adequacy of the Company’s internal
                    controls (including issues disclosed to the Committee by the
                    Company’s
                    Chief Executive Officer or Chief Financial Officer) and any special
                    steps
                    adopted in light of material control
                    deficiencies.

                


        

         

         

        5. Review
          and discuss reports from the independent auditors on:

         

         

        (a) All
          critical accounting policies and practices to be used.

         

         

        
          	 	
                  (b)

                	
                  All
                    alternative treatments of financial information within generally
                    accepted
                    accounting principles that have been discussed with management,
                    ramifications of the use of such alternative disclosures and
                    treatments,
                    and the treatment preferred by the independent
                    auditor.

                


        

         

         

        
          	 	
                  (c)

                	
                  Other
                    material written communications between the independent auditor
                    and
                    management, such as any management letter or schedule of unadjusted
                    differences.

                


        

         

         

        
          	
                  6.

                	
                  Discuss
                    with the independent auditor the matters required to be discussed
                    by
                    Statement on Auditing Standards No. 61 relating to the conduct
                    of the
                    audit, including any

                


        

         


        
          
            
              


            

            
            

          

          
            
            

            
              

            

          

          
            
            

            
            

          

        



         

        
          	 	
                  difficulties
                    encountered in the course of the audit work, any restrictions
                    on the scope
                    of activities or access to requested information, and any significant
                    disagreements with management.

                


        

         

        
          	
                  7.

                	
                  Review
                    and discuss with management earnings releases (including pro
                    forma or non-
                    GAAP information or earnings guidance) given to third
                    parties.

                


        

         

        Oversight
          of the Company’s Relationship with the Independent Auditor

         

         

        
          	
                  8.

                	
                  Obtain
                    and review a formal written statement from the independent auditor
                    delineating all relationships between the independent auditors
                    and the
                    Company, consistent with Independence Standards Board Standard
                    1, and
                    review and discuss with the independent auditor, on a periodic
                    basis, any
                    disclosed relationships or services that may impact the objectivity
                    and
                    independence of the auditor. Evaluate the independence of the
                    independent
                    auditor, including whether the provision of permitted non-audit
                    services
                    is compatible with maintaining the auditor’s independence, and taking into
                    account the opinions of management.

                


        

         

        
          	
                  9.

                	
                  Meet
                    with the independent auditor prior to the audit to discuss the
                    planning
                    and staffing of the audit.

                


        

        


        Oversight
          of the Company’s Internal Audit Function

        


        
          	
                  10.

                	
                  Review
                    the scope and effectiveness of the internal auditing
                    activities.

                


        

        


        
          	
                  11.

                	
                  Review
                    and discuss with the independent auditors the responsibilities,
                    budget and
                    staffing of the Company’s internal audit
                    function.

                


        

        


        Compliance
          Oversight Responsibilities

         

        
          	
                  12.

                	
                  Obtain
                    from the independent auditor assurance that Section 10A(b) of
                    the Exchange
                    Act has not been implicated.

                


        

         

         

        
          	
                  13.

                	
                  Review
                    reports and disclosures of insider and affiliated party transactions,
                    and
                    review and approve or disapprove all proposed related-party transactions
                    required to be disclosed under the rules of the Commission. Advise
                    the
                    Board with respect to the Company’s policies and procedures regarding
                    conflicts of interest and the Company’s Code of
                    Conduct.

                


        

         

        
          	
                  14.

                	
                  Establish
                    procedures for the receipt, retention and treatment of complaints
                    received
                    by the Company regarding accounting, internal accounting controls
                    or
                    auditing matters, and the confidential, anonymous submission
                    by employees
                    of concerns regarding questionable accounting or auditing
                    matters.

                


        

         

        Investigations

         


        
          
            
              


            

            
            

          

          
            
            

            
              

            

          

          
            
            

            
            

          

        



         

        The
          Audit
          Committee has the authority to conduct any investigation appropriate to
          fulfilling its responsibilities, and it has direct access to the independent
          auditors as well as anyone in the organization.

         

         

        Other
          Audit Committee Responsibilities

         

         

        Annually
          prepare a report to shareholders as required by the Securities and Exchange
          Commission. The report should be included in the Company’s annual proxy
          statement.

         

         

        Perform
          any other activities consistent with this Charter, the Company’s by-laws and
          governing law, as the Committee or the Board deems necessary or
          appropriate.

         

         

        Periodically
          report to the Board of Directors on significant results of the foregoing
          activities.

         

         

        ARTICLE
          IV

         

         

        Limitation
          of Audit Committee’s Role

         

        While
          the
          Audit Committee has the responsibilities and powers set forth in this Charter,
          it is not the duty of the Audit Committee to plan or conduct audits or
          to
          determine that the Company’s financial statements and disclosures are complete
          and accurate and are in accordance with generally accepted accounting principles
          and applicable rules and regulations. These are the responsibilities of
          management and the independent auditor.