Severance Compensation and Restrictive Covenant Agreement between Matria and
      Roberta L. McCaw dated April 26, 2006


    

      


      


      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 ROBERTA
        L. MCCAW (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 


      
        
           

        

        
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      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 her 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 


      
        
           

        

        
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      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 benefit), 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 she 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 


      
        
           

        

        
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      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 


      
        
           

        

        
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      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 


      
        
           

        

        
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      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:


      
        
           

        

        
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      If
        to
        Company:

      


      Matria
        Healthcare, Inc.

      1850
        Parkway Place, 12th Floor

      Marietta,
        GA 30067

      Attention:
        General Counsel

      


      If
        to
        Executive:

      


      Roberta
        L. McCaw

      810
        Millsbee Drive

      Roswell,
        GA 30075

      


      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.


      
        
           

        

        
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      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

      


      


      ROBERTA
        L. MCCAW

      


       

      Executive

      


    

    
      
         

      

      
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