EX-10.56


    
      
        

          


          


          SEVERANCE
            COMPENSATION

          AND

          RESTRICTIVE
            COVENANT AGREEMENT

          


          


          THIS
            SEVERANCE COMPENSATION AND RESTRICTIVE COVENANT AGREEMENT
            (the
“Agreement”) is dated as of April 26, 2006 between MATRIA
            HEALTHCARE, INC.,
            a
            Delaware corporation (the “Company”), and THORNTON
            A. KUNTZ, JR. (the
            “Executive”).

          


          


          WHEREAS,
            the
            severance benefits payable by the Company to the Executive as provided
            herein
            are in part intended to ensure that the Executive receives reasonable
            compensation given the specific circumstances of Executive’s employment history
            with the Company;

          


          


          NOW,
            THEREFORE,
            in
            consideration of their respective obligations to one another set forth
            in this
            Agreement, and other good and valuable consideration, the receipt, sufficiency
            and adequacy of which the parties hereby acknowledge, the parties to
            this
            Agreement, intending to be legally bound, hereby agree as follows:

          


          1. Term.
            The
            term of this Agreement began on April 26, 2006 and shall terminate, except
            to
            the extent that any obligation of the Company hereunder remains unpaid
            as of
            such time, upon the Date of Termination (as hereinafter defined) of the
            Executive’s employment with the Company as a result of the Executive’s death,
            Disability (as defined in Section 2(b)) or Retirement (as defined in
            Section 2(c)), by the Company for Cause (as defined in Section 2(d)), or by
            the Executive other than for Good Reasons (as defined in Section
            2(e)).

          


          2. Termination
            of Employment During the Term.

          


          (a) General.
            The
            Executive shall be entitled to the compensation and benefits provided
            in
            Section 3 upon the termination of the Executive’s employment with the
            Company by the Executive or by the Company during the term of this Agreement,
            unless such termination is as a result of (i) the
            Executive’s death; (ii) the
            Executive’s Disability; (iii) the
            Executive’s Retirement; (iv) the
            Executive’s termination by the Company for Cause; or (v) the
            Executive’s decision to terminate employment other than for Good
            Reason.

          


          (b) Disability.
            The
            term “Disability” as used in this Agreement shall mean termination of the
            Executive’s employment by the Company as a result of the Executive’s incapacity
            due to physical or mental illness, provided that the Executive shall
            have been
            absent from his duties with the Company on a full-time basis for six
            consecutive
            months and such absence shall have continued unabated for 30 days after
            Notice
            of Termination as described in Section 2(f) is thereafter given to the
            Executive
            by the Company.

          


          (c) Retirement.
            The
            term “Retirement” as used in this Agreement shall mean termination of the
            Executive’s employment by the Company based on the Executive’s having attained
            age 65 or such later retirement age as shall have been established pursuant
            to a
            written agreement between the Company and the Executive.

          


          (d) Cause.
            The
            term “Cause” for purposes of this Agreement shall mean (i) the Executive’s
            failure, neglect or refusal, as determined by the reasonable judgment
            of the
            Company, to perform the duties of his position, unless the Executive
            shall have
            cured such failure, neglect or refusal within 30 days of receipt of written
            notice from the Company of such failure, neglect or refusal and has not
            at any
            time thereafter repeated such failure or failed to sustain such cure;
            (ii) any
            intentional act by the Executive that has the effect of injuring the
            reputation
            or business of the Company or any of its affiliates in any material respect;
            (iii) the Executive’s continued or repeated absence from the Company, unless
            such absence is (x) approved or excused by the Chief Executive Officer
            of the
            Company or (y) is the result of illness, Disability or incapacity; (iv)
            the
            Executive’s use of illegal drugs or repeated drunkenness; (v) the Executive’s
            arrest and/or conviction for the commission of a felony; or (vi) the
            commission
            by the Executive of an act of fraud, deceit, material misrepresentation
            or
            embezzlement against the Company or any of its affiliates. For purposes
            of this
            Agreement only, the preparation and filing of fictitious, false or misleading
            claims in connection with any federal, state or other third party medical
            reimbursement program, or any other violation of any rule or regulation
            in
            respect of any federal, state or other third party medical reimbursement
            program
            by the Company or any subsidiary of the Company shall not be deemed to
            constitute “criminal fraud” or “civil fraud.”

          


          (e) Good
            Reason.
            For
            purposes of this Agreement, “Good Reason” shall mean (i) a reduction of the
            Executive’s base salary; (ii) any failure of the Company to continue the
            Executive’s participation in its applicable Management Incentive Plan or any
            reduction in the Executive’s bonus amount as expressed as a percentage of the
            Executive’s base salary; (iii) failure of the Company to continue the
            Executive’s participation in any benefit programs except those programs or
            arrangements that may be discontinued for all other similarly situated
            executives of the Company; or (iv) a relocation of the Company’s principal
            executive offices to a location more than 50 miles outside of Marietta,
            Georgia
            or the relocation of the Executive’s office to any place other than the
            Company’s principal executive offices.

          


          (f) Notice
            of Termination.
            Any
            termination of the Executive’s employment by the Company for a reason specified
            in Section 2(b), 2(c) or 2(d) shall be communicated to the Executive by a
            Notice of Termination prior to the effective date of the termination.
            For
            purposes of this Agreement, a “Notice of Termination” shall mean a written
            notice which shall indicate whether such termination is for the reason
            set forth
            in Section 2(b), 2(c) or 2(d) and which sets forth in reasonable detail
            the
            facts and circumstances claimed to provide a basis for termination of
            the
            Executive’s employment under the provision so indicated. For purposes of this
            Agreement, no termination of the Executive’s employment by the Company shall
            constitute a termination for Disability, Retirement or Cause unless such
            termination is preceded by a Notice of Termination.

          


          (g) Date
            of Termination.
            For
            purposes of this Agreement, “Date of Termination” shall mean (a) if
            the Executive’s employment is terminated by the Company for Disability, 30 days
            after a Notice of Termination is given to the Executive (provided that
            the
            Executive shall not have returned to the performance of the Executive’s duties
            on a full-time basis during such 30-day period) or (b) if
            the Executive’s employment is terminated by the Company or the Executive for any
            other reason, the date on which the Executive’s termination is
            effective.

          


          3. Compensation
            and Benefits upon Termination of Employment.

          


          (a) If
            the
            Company shall terminate the Executive’s employment other than pursuant to
            Section 2(b), 2(c) or 2(d) and Section 2(f), or if the Executive shall
            terminate his or her employment for Good Reason, then, provided the Executive
            shall have executed the Company’s standard general release (which release shall
            not obligate the Executive to release any benefits payable in connection
            with
            any supplemental executive retirement plan or other retiree benefits),
            the
            Company shall pay to the Executive, as severance compensation and in
            consideration of the Executive’s adherence to the terms of Section 4 hereof and
            execution of the aforesaid general release, the following:

          


          (i) On
            the
            Date of Termination, the Company shall become liable to the Executive
            for an
            amount equal to one times the Executive’s annual base compensation, targeted
            base bonus and annual car allowance, which amount shall be payable over
            the one
            year following the Date of Termination on the regular payroll
            dates.

          


          (ii) For
            a
            period of one year following the Date of Termination, the Executive and
            anyone
            entitled to claim under or through the Executive shall be entitled to
            all
            benefits under the group hospitalization plan, health care plan, dental
            care
            plan, life insurance or death benefit plan, or other present or future
            similar
            group employee benefit plan or program of the Company for which he was
            eligible
            at the Date of Termination, to the same extent as if the Executive had
            continued
            to be an employee of the Company during such period.

          


          (iii) Notwithstanding
            any other provision of this Agreement, it is intended that any payment
            or
            benefit provided pursuant to or in connection with this Agreement that
            is
            considered to be nonqualified deferred compensation subject to Section
            409A of
            the Code shall be provided and paid in a manner, and at such time and
            in such
            form, as complies with the applicable requirements of Section 409A of
            the Code.
            If and to the extent required by Section 409A of the Code, no payment
            or benefit
            shall be made or provided to a “specified employee” (as defined below) prior to
            the six-month anniversary of the Executive’s separation from service
            (within
            the meaning of Section
            409A(a)(2)(A)(i) of the Code). The amounts provided for in this Agreement
            that
            constitute nonqualified deferred compensation shall be paid as soon as
            the
            six-month deferral period ends. In the event that benefits are required
            to be
            deferred, any such benefit may be provided during such six-month deferral
            period
            at the Executive’s expense, with the Executive having a right to reimbursement
            from the Company for the amount of any premiums or expenses paid by the
            Executive once the six month deferral period ends. For this purpose,
            a specified
            employee shall mean an individual who is a key employee (as defined in
            Section 416(i) of the Code without regard to Section 416(i)(5) of the
            Code) of the Company at any time during the 12-month period ending on
            each
            December 31 (the “identification date”). If the Executive is a key employee as
            of an identification date, the Executive shall be treated as a specified
            employee for the 12-month period beginning on the April 1 following the
            identification date. Notwithstanding the foregoing, the Executive shall
            not be
            treated as a specified employee unless any stock of the Company or a
            corporation
            or business affiliated with it pursuant to Sections 414(b) or (c) of
            the Code is
            publicly traded on an established securities market or otherwise.

          


          (b) The
            parties hereto agree that the payments provided in Section 3(a) hereof are
            reasonable compensation in light of the Executive’s services rendered to the
            Company and in consideration of the Executive’s adherence to the terms of
            Section 4 hereof.

          


          (c) The
            payments provided in Section 3(a) above shall be in lieu of any other
            severance compensation otherwise payable to Executive under any other
            agreement
            between Executive and the Company (other than the Change in Control Severance
            Compensation and Restrictive Covenant Agreement of even date (the “CIC”)) or the
            Company’s established severance compensation policies; provided, however, that
            nothing in this Agreement shall affect or impair Executive’s vested rights under
            any other employee benefit plan or policy of the Company. In circumstances
            in
            which the Executive is entitled to severance benefits under the CIC,
            the
            Company’s obligations under this Agreement shall be null and void.

          


          4. Protective
            Covenants.

          


          (a) Definitions.

          


          This
            Subsection sets forth the definition of certain capitalized terms used
            in
            Subsections (a) through (f) of this Section 4.

          


          (i)
            “Competing
            Business”
shall
            mean a business (other than the Company) that, directly or through a
            controlled
            subsidiary or through an affiliate, (a) provides disease management programs
            for
            diabetes, congestive heart failure, coronary artery disease, chronic
            obstructive
            pulmonary disease, cancer, pregnancy, depression, chronic pain or hepatitis
            C;
            and/or (b) provides obstetrical home care; and/or (c) provides on-line
            programs
            targeting weight loss, nutrition and diet, fitness, smoking cessation
            or stress
            management; and/or (d) provides informatics services (collectively, “Competing
            Services”). Notwithstanding the foregoing, no business shall be deemed a
“Competing Business” unless, within at least one of the business’s three most
            recently concluded fiscal years, that business, or a division of that
            business,
            derived more than twenty percent (20%) of its gross revenues or more
            than
            $2,000,000 in gross revenues from the provision of Competing
            Services.

          


          (ii)
            “Competitive
            Position”
shall
            mean: (A) the Executive’s direct or indirect equity ownership (excluding
            ownership of less than one percent (1%) of the outstanding common stock
            of any
            publicly held corporation) or control of any portion of any Competing
            Business;
            or (B) any employment, consulting, partnership, advisory, directorship,
            agency,
            promotional or independent contractor arrangement between the Executive
            and any
            Competing Business where the Executive performs services for the Competing
            Business substantially similar to those the Executive performed for the
            Company,
            provided, however, that the Executive shall not be deemed to have a Competitive
            Position solely because of the Executive’s services for a Competing Business
            that are not directly related to the provision of Competing Services,
            unless
            more than thirty-five percent (35%) of the gross revenues of the Competing
            Business are derived from the provision of Competing Services.

          


          (iii)
            “Covenant
            Period”
shall
            mean the period of time from the date of this Agreement to the date that
            is one
            year after the Date of Termination.

          


          (iv)
            “Customers”
shall
            mean actual customers, clients or referral sources to or on behalf of
            which the
            Company provides Competing Services (A) during the one year prior to
            the date of
            this Agreement and (B) during the Covenant Period.

          


          (v)
            “Restricted
            Territory”
shall
            mean the 48 contiguous states of the continental United States.

          


          (b) Limitation
            on Competition.
            In
            consideration of the Company’s entering into this Agreement, the Executive
            agrees that during the Covenant Period, the Executive will not, without
            the
            prior written consent of the Company, anywhere within the Restricted
            Territory,
            either directly or indirectly, alone or in conjunction with any other
            party,
            accept, enter into or take any action in conjunction with or in furtherance
            of a
            Competitive Position (other than action to reject an unsolicited offer
            of a
            Competitive Position).

          


          (c) Limitation
            on Soliciting Customers.
            In
            consideration of the Company’s entering into this Agreement, the Executive
            agrees that during the Covenant Period, the Executive will not, without
            the
            prior written consent of the Company, alone or in conjunction with any
            other
            party, solicit, divert or appropriate or attempt to solicit, divert or
            appropriate on behalf of a Competing Business with which Executive has
            a
            Competitive Position any Customer located in the Restricted Territory
            (or any
            other Customer with which the Executive had any direct contact on behalf
            of the
            Company) for the purpose of providing the Customer or having the Customer
            provided with a Competing Service.

          


          (d) Limitation
            on Soliciting Personnel or Other Parties.
            In
            consideration of the Company’s entering into this Agreement, the Executive
            hereby agrees that he will not, without the prior written consent of
            the
            Company, alone or in conjunction with any other party, solicit or attempt
            to
            solicit any employee, consultant, contractor, independent broker or other
            personnel of the Company or any subsidiary of the Company to terminate,
            alter or
            lessen that party’s affiliation with the Company or to violate the terms of any
            agreement or understanding between such employee, consultant, contractor
            or
            other person and the Company or any subsidiary of the Company.

          


          (e) Acknowledgement.
            The
            parties acknowledge and agree that the Protective Covenants are reasonable
            as to
            time, scope and territory given the Company’s need to protect its trade secrets
            and confidential business information and given the substantial payments
            and
            benefits to which the Executive may be entitled pursuant to this
            Agreement.

          


          (f) Remedies.
            The
            parties acknowledge that any breach or threatened breach of a Protective
            Covenant by the Executive is reasonably likely to result in irreparable
            injury
            to the Company, and therefore, in addition to all remedies provided at
            law or in
            equity, the Executive agrees that the Company shall be entitled to a
            temporary
            restraining order and a permanent injunction to prevent a breach or contemplated
            breach of the Protective Covenant. If the Company seeks an injunction,
            the
            Executive waives any requirement that the Company post a bond or any
            other
            security.

          


          5. No
            Obligation to Mitigate Damages; No Effect on Other Contractual
            Rights.

          


          (a) All
            compensation and benefits provided to the Executive under this Agreement
            are in
            consideration of the Executive’s services rendered to the Company and of the
            Executive’s adhering to the terms set forth in Section 4 hereof and the
            Executive shall not be required to mitigate damages or the amount of
            any payment
            provided for under this Agreement by seeking other employment or otherwise,
            nor
            shall the amount of any payment provided for under this Agreement be
            reduced by
            any compensation earned by the Executive as the result of employment
            by another
            employer after the Date of Termination, or otherwise.

          


          (b) The
            provisions of this Agreement, and any payment provided for hereunder,
            shall not
            reduce any amounts otherwise payable, or in any way diminish the Executive’s
            existing rights, or rights which would accrue solely as a result of the
            passage
            of time, under any Benefit Plan, Incentive Plan or Securities Plan, employment
            agreement or other contract, plan or arrangement.

          


          6. Notice.
            For
            purposes of this Agreement, notices and all other communications provided
            for in
            this Agreement shall be in writing and shall be deemed to have been duly
            given
            when delivered by overnight courier service (e.g., Federal Express) or
            mailed by
            United States certified mail, return receipt required, postage prepaid,
            as
            follows:

          


          If
            to
            Company:

          


          Matria
            Healthcare, Inc.

          1850
            Parkway Place, 12th Floor

          Marietta,
            GA 30067

          Attention:
            General Counsel

          


          If
            to
            Executive:

          


          Thornton
            A. Kuntz, Jr.

          4238
            Highborne Drive

          Marietta,
            GA 30066

          


          or
            such
            other address as either party may have furnished to the other in writing
            in
            accordance herewith, except that notices of change of address shall be
            effective
            only upon receipt.

          


          7. Miscellaneous.
            No
            provisions of this Agreement may be modified, waived or discharged unless
            such
            waiver, modification or discharge is agreed to in writing signed by the
            Executive and the Company. No waiver by either party hereto at any time
            of any
            breach by the other party hereto of, or compliance with, any condition
            or
            provision of this Agreement to be performed by such other party shall
            be deemed
            a waiver of similar or dissimilar provisions or conditions at the same
            or at any
            prior or subsequent time. No agreements or representations, oral or otherwise,
            express or implied, with respect to the subject matter hereof have been
            made by
            either party which are not set forth expressly in this Agreement. This
            Agreement
            shall be governed by and construed in accordance with the laws of the
            State of
            Delaware.

          


          8. Counterparts.
            This
            Agreement may be executed in one or more counterparts, each of which
            shall be
            deemed to be an original but all of which together shall constitute one
            and the
            same instrument.

          


          9. Section
            409A Indemnification.
            Notwithstanding any other provision of this Agreement, it is intended
            that any
            payment or benefit which is provided pursuant to or in connection with
            this
            Agreement which is considered to be nonqualified deferred compensation
            subject
            to Section 409A of the Code shall be provided and paid in a manner, and
            at such
            time and in such form, as complies with the applicable requirements of
            Section
            409A of the Code. The Company and the Executive shall cooperate to modify
            this
            Agreement as necessary to comply with the requirements of Section 409A
            of the
            Code. In the event the Company does not so cooperate, it shall indemnify
            and
            hold harmless the Executive on an after-tax basis from any tax or interest
            penalty imposed under Section 409A of the Code with respect to any payment
            or
            benefit provided pursuant to this Agreement or any other plan or arrangement
            sponsored or maintained by the Company to the extent such tax or interest
            penalty is imposed as a result of any failure of the Company to comply
            with
            Section 409A of the Code with respect to such payment or benefit.

          


          10. Severability;
            Modification.
            All
            provisions of this Agreement are severable from one another, and the
            unenforceability or invalidity of any provision of this Agreement shall
            not
            affect the validity or enforceability of the remaining provisions of
            this
            Agreement, but such remaining provisions shall be interpreted and construed
            in
            such a manner as to carry out fully the intention of the parties. Should
            any
            judicial body interpreting this Agreement deem any provision of this
            Agreement
            to be unreasonably broad in time, territory, scope or otherwise, it is
            the
            intent and desire of the parties that such judicial body, to the greatest
            extent
            possible, reduce the breadth of such provision to the maximum legally
            allowable
            parameters rather than deeming such provision totally unenforceable or
            invalid.

          


          11. Confidentiality.
            The
            Executive acknowledges that he has previously entered into, and continues
            to be
            bound by the terms of, a Confidentiality and Non-Solicitation Agreement
            with the
            Company.

          


          12. Agreement
            Not an Employment Contract.
            This
            Agreement shall not be deemed to constitute or be deemed ancillary to
            an
            employment contract between the Company and the Executive, and nothing
            herein
            shall be deemed to give the Executive the right to continue in the employ
            of the
            Company or to eliminate the right of the Company to discharge the Executive
            at
            any time.

          


          


          IN
            WITNESS WHEREOF,
            the
            parties have executed this Agreement to be effective as of the date first
            above
            written.

          


          


          MATRIA
            HEALTHCARE, INC.

          


          


          By:       

          Its
            Chief
            Executive Officer

          


          


          THORNTON
            A. KUNTZ, JR.

          


           

          Executive