Exhibit
10.56
  CHANGE
IN CONTROL
 SEVERANCE
COMPENSATION
 AND
 RESTRICTIVE
COVENANT AGREEMENT
 
 
 THIS SEVERANCE COMPENSATION AND
RESTRICTIVE COVENANT AGREEMENT (the “Agreement”) is dated as of June 4,
2007 between MATRIA HEALTHCARE,
INC., a Delaware corporation (the “Company”), and THOMAS D. UNDERWOOD(the
“Executive”).
 
 WHEREAS, the Company, has
determined that it is appropriate to reinforce and encourage the continued
attention and dedication of members of the Company’s management, including the
Executive, to their assigned duties without distraction in potentially
disruptive circumstances arising from the possibility of a Change in Control (as
hereinafter defined) of the Company; and
 
 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.  This
Agreement shall terminate, except to the extent that any obligation of the
Company hereunder remains unpaid as of such time, upon the earliest of
(i) 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 3(b)) or Retirement (as defined in Section 3(c)),
by the Company for Cause (as defined in Section 3(d)) or by the Executive
other than for Good Reason (as defined in Section 3(e)); and
(ii) three years from the date of a Change in Control if the Executive’s
employment with the Company has not terminated as of such time.
 
 2.           Change in
Control.  For purposes of this Agreement, “Change in Control”
shall mean changes in the ownership of the Company, changes in the effective
control of the Company, changes in ownership of a substantial portion of the
Company’s assets and a disposition of a substantial portion of the Company’s
assets, all as defined below:
 
 (a)  A change
in the ownership of the Company occurs on the date that any one person, or more
than one person acting as a group, acquires ownership of stock of the Company
which, together with stock held by such person or group, represents more than
fifty percent (50%) of the total fair market value or total voting power of the
stock of the Company.  An increase in the percentage of stock owned by
any one person, or persons acting as a group, as a result of a transaction in
which the Company acquires its stock in exchange for property will be
  1
 
  treated
as an acquisition of stock.
 
 (b)           A
change in the effective control of the Company occurs on the date that either:
any one person, or more than one person acting as a group becomes the beneficial
owner of stock of the Company possessing twenty-five percent (25%) or more of
the total voting power of the stock of the Company; or a majority of members of
the Company’s board of directors is replaced during any 24-month period by
directors whose appointment or election is not endorsed by at least two-thirds
(2/3) of the members of the Company’s board of directors who were directors
prior to the date of the appointment or election of the first of such new
directors.
 
 (c)           A
change in the ownership of a substantial portion of the Company’s assets occurs
on the date that any one person, or more than one person acting as a group,
acquires (or has acquired during the 12-month period ending on the date of the
most recent acquisition by such person or persons) assets from the Company that
have a total fair market value equal to or more than one-half (1/2) of the total
fair market value of all of the assets of the Company immediately prior to such
acquisition or acquisitions.  The transfer of assets by the Company is
not treated as a change in the ownership of such assets if the assets are
transferred:  to a shareholder of the Company (immediately before the
asset transfer) in exchange for such shareholder’s capital stock of the Company
having a fair market value approximately equal to the fair market value of such
assets; or to an entity, fifty percent (50%) or more of the total value or
voting power of which is owned, directly or indirectly, by the
Company.
 
 (d)           A
disposition of a substantial portion of the Company’s assets occurs on the date
that the Company transfers assets by sale, lease, exchange, distribution to
shareholders, assignment to creditors, foreclosure or otherwise, in a
transaction or transactions not in the ordinary course of the Company’s business
(or has made such transfers during the 12-month period ending on the date of the
most recent transfer of assets) that have a total fair market value equal to or
more than one-half (1/2) of the total fair market value of all of the assets of
the Company as of the date immediately prior to the first such transfer or
transfers.  The transfer of assets by the Company is not treated as a
disposition of a substantial portion of the Company’s assets if the assets are
transferred to an entity, fifty percent (50%) or more of the total value or
voting power of which is owned, directly or indirectly, by the
Company.
 
 For
purposes of the provision of this Agreement defining “Change in Control,” (i)
references to the Company herein include the Delaware corporation known as
Matria Healthcare, Inc. as of the date of execution of this Agreement, and any
corporation that is the Successor or Assign (as defined in Section 7(a)) to such
corporation; and (ii) the terms “person,” “acting as a group” and “ownership”
shall have the meanings prescribed in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended, and Rule 13d-3 promulgated
thereunder; provided, however, that in any merger, consolidation or share
exchange in which less than fifty percent (50%) of the outstanding voting
securities of the Company or its successor corporation are held by the former
shareholders of the Company, the shareholders of the other parties to the
transaction shall be deemed to have acted as a group that acquired ownership of
more than fifty percent (50%) of the
  2
  outstanding
voting securities of the Company, resulting in a change in ownership under
Section 2(a) above.
 
 3.           Termination Following Change
in Control.
 
 (a)           General.  If
the Executive is still an employee of the Company at the time of a Change in
Control, the Executive shall be entitled to the compensation and benefits
provided in Section 4 upon the subsequent 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 3(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 the Company’s termination
of the Executive’s employment on the basis of criminal or civil fraud on the
part of the Executive involving a material amount of funds of the
Company.  Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Company’s Board of Directors at a meeting of the Board called and held for such
purpose (after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive’s counsel, to be heard before the Board)
finding that in the good faith opinion of the Board the Executive was guilty of
conduct set forth in the first sentence of this Section 3(d) and specifying
the particulars thereof in detail.  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 any of the following actions taken by the Company without the Executive’s
express written consent:
  3
  (i)  The assignment to the
Executive by the Company of duties inconsistent with, or a material adverse
alteration of the powers and functions associated with, the Executive’s
position, duties, responsibilities and status with the Company prior to a Change
in Control, or an adverse change in the Executive’s titles or offices as in
effect prior to a Change in Control, or any removal of the Executive from or any
failure to re-elect the Executive to any of such positions, except in connection
with the termination of his employment for Disability, Retirement or Cause or as
a result of the Executive’s death or by the Executive other than for Good
Reason;
 
 (ii)  A reduction in the
Executive’s base salary as in effect on the date hereof or as the same may be
increased from time to time during the term of this Agreement or the Company’s
failure to increase (within 12 months of the Executive’s last increase in base
salary) the Executive’s base salary after a Change in Control in an amount which
at least equals, on a percentage basis, the average annual percentage increase
in base salary for all corporate officers of the Company effected in the
preceding 36 months;
 
 (iii)  Any failure by the
Company to continue in effect any benefit plan, program or arrangement
(including, without limitation, any profit sharing plan, group annuity contract,
group life insurance supplement, or medical, dental, accident and disability
plans) in which the Executive was eligible to participate at the time of a
Change in Control  (hereinafter referred to as “Benefit Plans”), or
the taking of any action by the Company which would adversely affect the
Executive’s participation in or materially reduce the Executive’s benefits under
any such Benefit Plan, unless a comparable substitute Benefit Plan shall be made
available to the Executive, or deprive the Executive of any fringe benefit
enjoyed by the Executive at the time of a Change in Control;
 
 (iv)  Any failure by the
Company to continue in effect any incentive plan or arrangement (including,
without limitation, any bonus or contingent bonus arrangements and credits and
the right to receive performance awards and similar incentive compensation
benefits) in which the Executive is participating at the time of a Change in
Control (or any other plans or arrangements providing him with substantially
similar benefits) (hereinafter referred to as “Incentive Plans”) or the taking
of any action by the Company which would adversely affect the Executive’s
participation in any such Incentive Plan or reduce the Executive’s benefits
under any such Incentive Plan, expressed as a percentage of his base salary, by
more than five percentage points in any fiscal year as compared to the
immediately preceding fiscal year, or any action to reduce Executive’s bonuses
under any Incentive Plan by more than 20% of the average annual bonus previously
paid to Executive with respect to the preceding three fiscal years;
 
 (v)  Any failure by the
Company to continue in effect any plan or arrangement to receive securities of
the Company (including, without limitation, the Company’s 1997 Stock Incentive
Plan, Employee Stock Purchase Plan and any other plan or arrangement to receive
and exercise stock options, stock appreciation rights, restricted stock or
grants thereof) in which the Executive is participating or has the right to
participate in prior to a Change in Control (or plans or arrangements providing
him with substantially similar benefits) (hereinafter referred to
  4
  as
“Securities Plans”) or the taking of any action by the Company which would
adversely affect the Executive’s participation in or materially reduce the
Executive’s benefits under any such Securities Plan, unless a comparable
substitute Securities Plan shall be made available to the
Executive;
 
 (vi)  A relocation of the
Company’s principal executive offices to a location more than ten (10) miles
outside of Marietta, Georgia, or the Executive’s relocation to any place other
than the Company’s principal executive offices, except for required travel by
the Executive on the Company’s business to an extent substantially consistent
with the Executive’s business travel obligations immediately prior to a Change
in Control;
 
 (vii)  Any failure by the
Company to provide the Executive with the number of paid vacation days (or
compensation therefor at termination of employment) accrued to the Executive
through the Date of Termination;
 
 (viii)  Any material breach
by the Company of any provision of this Agreement;
 
 (ix)  Any failure by the
Company to obtain the assumption of this Agreement by any successor or assign of
the Company effected in accordance with the provisions of Section 7(a)
hereof;
 
 (x)  Any purported
termination of the Executive’s employment that is not effected pursuant to a
Notice of Termination satisfying the requirements of Section 3(f), and for
purposes of this Agreement, no such purported termination shall be effective;
or
 
 (xi)  Any proposal or
request by the Company after the Effective Date to require that the Executive
enter into a non-competition agreement with the Company where the terms of such
agreement as to its scope or duration are greater than the terms set forth in
Section 5 hereof.
 
 (f)           Notice of
Termination.  Any termination of the Executive’s employment by
the Company for a reason specified in Section 3(b), 3(c) or 3(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 3(b), 3(c) or 3(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.  “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
  5
  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; provided that, if
within 30 days after any Notice of Termination is given to the Executive by the
Company the Executive notifies the Company that a dispute exists concerning the
termination, the Date of Termination shall be the date the dispute is finally
determined whether by mutual agreement by the parties or upon final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected).  For
purposes of this Agreement, the Executive’s employment by the Company shall be
deemed terminated upon the date the Executive incurs a “separation from service”
within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of
1986, as amended (“Code”), and the regulations issued thereunder.
 
 4.           Compensation and Benefits
upon Termination of Employment.
 
 (a)           If
the Company shall terminate the Executive’s employment after a Change in Control
other than pursuant to Section 3(b), 3(c) or 3(d) and Section 3(f), or if
the Executive shall terminate his employment for Good Reason, then the Company
shall pay to the Executive, as severance compensation and in consideration of
the Executive’s adherence to the terms of Section 5 hereof, the
following:
 
 (i)           On
the Date of Termination, the Company shall become liable to the Executive for an
amount equal to two times the Executive’s annual base compensation, targeted
base bonus and annual car allowance on the date of the Change in Control, which
amount shall be paid to the Executive in cash on or before the fifth day
following the Date of Termination.
 
 (ii)           For
a period of two years 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 or other insurance or death benefit plan, or other present or future
similar group employee benefit plan or program of the Company for which key
executives are eligible at the date of a Change in Control, to the same extent
as if the Executive had continued to be an employee of the Company during such
period and such benefits shall, to the extent not fully paid under any such plan
or program, be paid by the Company.  Also during such two-year period,
the Company will extend full insurance coverage for the Executive’s primary
automobile in favor of the Executive, as an additional named
insured.
 
 (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 (6) 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
  6
 
  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 4(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 5 hereof.  Neither party shall contest the payment of such
benefits as constituting an “excess parachute payment” within the meaning of
Section 280G(b)(1) of the Code.  In the event that the Executive
becomes entitled to the compensation and benefits described in Section 4(a)
hereof (the “Compensation Payments”) and the Company has determined, based upon
the advise of tax counsel selected by the Company’s independent auditors and
acceptable to the Executive, that, as a result of such Compensation Payments and
any other benefits or payments required to be taken into account under Code
Section 280G(b)(2) (“Parachute Payments”), any of such Parachute Payments must
be reported by the Company as “excess parachute payments” and are therefore not
deductible by the Company, the Company shall pay to the Executive at the time
specified in Section 4(a) above an additional amount (the “Gross-Up
Payment”) such that the net amount retained by the Executive, after deduction of
any of the tax imposed on the Executive by Section 4999 of the Code (the “Excise
Tax”) and any Federal, state and local income tax and Excise Tax upon the
Gross-Up Payment, shall be equal to the Parachute Payments determined prior to
the application of this paragraph.  The value of any non-cash benefits
or any deferred payment or benefit shall be determined by the Company’s
independent auditors.  For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay Federal income taxes at
the highest marginal rate of Federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rates of taxation in the state and locality of the Executive’s
residence on the Date of Termination, net of the maximum reduction in Federal
income taxes which could be obtained from deduction of such state and local
taxes.  In the event that the Excise Tax payable by the Executive is
subsequently determined to be less than the amount, if any, taken into account
hereunder at the time of termination of the Executive’s employment, the
Executive shall repay to the Company at the time that the amount of such
reduction in Excise Tax is finally determined the portion of the Gross-Up
Payment attributable to such reduction plus interest on the amount of such
repayment at the rate provided for in Section 1274(b)(2)(B) of the Code
(“Repayment Amount”).  In the event that the Excise Tax payable by the
Executive is determined to exceed the amount, if any, taken into account
hereunder at the time of the termination of the
  7
  Executive’s
employment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any interest
and penalty payable with respect to such excess) immediately prior to the time
that the amount of such excess is required to be paid by Executive (“Additional
Gross-up”), such that the net amount retained by the Executive, after deduction
of any Excise Tax on the Parachute Payments and any Federal, state and local
income tax and Excise Tax upon the Additional Gross-Up Payment, shall be equal
to the Parachute Payments determined prior to the application of this
paragraph.  The obligation to pay any Repayment Amount or Additional
Gross-up shall remain in effect under this Agreement for the entire period
during which the Executive remains liable for the Excise Tax, including the
period during which any applicable statute of limitation remains
open.
 
 (c)           The
payments provided in Section 4(a) above shall be in lieu of any other
severance compensation otherwise payable to Executive under any other agreement
between Executive and the Company 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.  For the avoidance of doubt, if more than
one Change in Control occurs during the term hereof, the term of this Agreement
shall be measured from the latest such Change in Control to occur and the amount
of compensation payable under Section 4(a)(1) shall be based upon the highest
annual base salary, targeted base bonus and car allowance payable to Executive
on the date of any such Change in Control, but Executive shall not be entitled
to receive severance compensation under Section 4(a) more than
once.
 
 (d)           Unless
the Company determines that any Parachute Payments made hereunder must be
reported as “excess parachute payments” in accordance with the third sentence of
Section 4(b) above, neither party shall file any return taking the position
that the payment of such benefits constitutes an “excess parachute payment”
within the meaning of Section 280G(b)(1) of the Code.  If the
Internal Revenue Service proposes an assessment of Excise Tax against the
Executive in excess of the amount, if any, taken into account at the time
specified in Section 4(a), then, if the Company notifies Executive in
writing that the Company elects to contest such assessment at its expense,
unless the Executive waives the right to an Additional Gross-Up Payment, the
Executive (i) shall in good faith cooperate with the Company in contesting
such proposed assessment; and (ii) such Executive shall not settle such
contest without the written consent of the Company.  Any such contest
shall be controlled by the Company, provided, however, that the
Executive may participate in such contest.
 
 5.           Protective
Covenants.
 
 (a)           Definitions.
 
 This Subsection sets forth the
definition of certain capitalized terms used in Subsections (a) through (f) of
this Section 5.
  8
  (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 two years 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 two years prior to the date
of this Agreement and (B) during the Covenant Period.
 
 (v)  “Restricted Territory”
shall mean the 48 continuous 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
  9
  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.
 
 6.           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 5 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.
  10
   7.           Successor to the
Company.
 
 (a)           The
Company will require any successor or assign (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company (“Successor or Assign”), by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume 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 or assignment had taken place.  Any failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession or assignment shall be a material breach of this Agreement and shall
entitle the Executive to terminate the Executive’s employment for Good
Reason.  As used in this Agreement (except for purposes of defining
“Change in Control” in Section 2), “Company” shall mean the Company as
hereinbefore defined and any Successor or Assign to the Company.  If
at any time during the term of this Agreement the Executive is employed by any
corporation a majority of the voting securities of which is then owned by the
Company, “Company” as used in Sections 3, 4, 12 and 14 hereof shall in
addition include such employer.  In such event, the Company agrees
that it shall pay or shall cause such employer to pay any amounts owed to the
Executive pursuant to Section 4 hereof.
 
 (b)           This
Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal and legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees.  If the Executive should
die while any amounts are still payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive’s devisee, legatee, or the designee or, if there
be no such designee, to the Executive’s estate.
 
 8.           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:
 
 Thomas D. Underwood
 10570 Oxford Mill Circle
 Alpharetta,
GA  30022
 
 11
  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.
 
 9.           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.
 
 10.           Validity.  The
invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
 
 11.           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.
 
 12.           Legal Fees and
Expenses.  The Company shall pay all legal fees, expenses and
damages which the Executive may incur as a result of the Executive’s instituting
legal action to enforce his rights hereunder, or in the event the Company
contests the validity, enforceability or the Executive’s interpretation of, or
determinations under, this Agreement.  If the Executive is the
prevailing party or recovers any damages in such legal action, the Executive
shall be entitled to receive in addition thereto pre-judgment and post-judgment
interest on the amount of such damages.
 
 13.           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.
 
 14.           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
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  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.
 
 15.           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.
 
 16.           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 Administrative
Officer
 
 
 THOMAS D. UNDERWOOD
 
 
 Executive
 
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