Document:

Exhibit 10.3

    Exhibit
      10.3

    

    MATRIA
      HEALTHCARE, INC.

    

    LONG-TERM
      STOCK INCENTIVE PLAN

    

    

    1. Establishment,
      Purpose, and Definitions.

    

    (a) Matria
      Healthcare, Inc. (the “Company”) hereby amends and restates the Matria
      Healthcare, Inc. 2004 Stock Incentive Plan to provide additional incentives
      hereunder and renames the plan the Matria Healthcare, Inc. Long-Term Stock
      Incentive Plan (the “Plan”).

    

    (b) The
      purpose of the Plan is to allow the Company to attract and retain eligible
      individuals (as defined in Section 5 below) and to provide incentives to such
      individuals for their services, increased efforts, and successful achievements
      on behalf of or in the interests of the Company and its Affiliates and to
      maximize the rewards due them for those efforts and achievements. The Plan
      provides employees (including officers and directors who are employees) of
      the
      Company and of its Affiliates an opportunity to purchase shares of common stock,
      $0.01 par value per share, of the Company (the “Stock”) pursuant to options
      which may qualify as incentive stock options (referred to as “incentive stock
      options”) under Section 422 of the Internal Revenue Code of 1986, as amended
      (the “Code”), and employees, officers, independent contractors, and consultants
      of the Company and of its Affiliates an opportunity to purchase shares of Stock
      pursuant to options which are not described in Sections 422 or 423 of the Code
      (referred to as “non-qualified stock options”). The Plan also provides for the
      sale or bonus grant of Stock to eligible individuals in connection with the
      performance of services for the Company or its Affiliates. Finally, the Plan
      authorizes the grant of stock appreciation rights (“SARs”), either separately or
      in tandem with stock options, entitling holders to cash compensation measured
      by
      appreciation in the value of the Stock.

    

    (c) The
      term
“Affiliate” as used in the Plan means parent or subsidiary corporations of the
      Company, as defined in Sections 424(e) and (f) of the Code (but substituting
      “the Company” for “employer corporation”), including parents or subsidiaries of
      the Company that become such after adoption of the Plan.

    

    2. Administration
      of the Plan.

    

    (a) The
      Plan
      shall be administered by the Board of Directors of the Company (the “Board”).
      Subject to Section 2(f) below, the Board may delegate the responsibility for
      administering the Plan to a committee, under such terms and conditions as the
      Board shall determine (the “Committee”). To the extent necessary to exempt
      transactions under the Plan from Section 16(b) under the Securities Exchange
      Act
      of 1934, as amended (the “Exchange Act”): (i) the Committee shall consist of at
      least (a) two (2) members of the Board or (b) such lesser number of members
      of
      the Board as permitted by Rule 16b-3 

    
      
        
        

      

      
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    adopted
      under the Exchange Act (“Rule 16b-3”); and (ii) each member of the Committee
      shall be a Non-Employee Director (as defined in Rule 16b-3), or grants and
      awards under the Plan to persons subject to Section 16 of the Exchange Act
      (“Insiders”) shall be determined by a subcommittee consisting solely of
      Non-Employee Directors or by the full Board. Members of the Committee shall
      serve at the pleasure of the Board. The Committee shall select one of its
      members as chair of the Committee and shall hold meetings at such times and
      places as it may determine. A majority of the Committee shall constitute a
      quorum, and acts of the Committee at which a quorum is present, or acts reduced
      to or approved in writing by all members of the Committee, shall be the valid
      acts of the Committee. If the Board does not delegate administration of the
      Plan
      to the Committee, then each reference in this Plan to the “Committee” shall be
      construed to refer to the Board.

    

    (b) The
      Committee shall determine which eligible individuals (as defined in Section
      5
      below) shall be granted options under the Plan, the timing of such grants,
      the
      terms thereof (including any restrictions on the Stock, and the number of shares
      subject to such options).

    

    (c) The
      Committee shall also determine which eligible individuals (as defined in Section
      5 below) shall be granted or issued SARs or Stock (other than pursuant to the
      exercise of options) under the Plan, the timing of such grants or issuances,
      the
      terms thereof (including any restrictions and the consideration, if any, to
      be
      paid therefor), and the number of shares or SARs to be granted.

    

    (d) Subject
      to Section 16 below, the Committee may (i) amend the terms of any outstanding
      option or SAR granted under this Plan, but any amendment that would adversely
      affect the holder’s rights under an outstanding option or SAR shall not be made
      without the holder’s written consent; (ii) with the holder’s written consent,
      cancel any outstanding option or SAR or accept any outstanding option or SAR
      in
      exchange for a new option, SAR, or Stock under the Plan on such terms determined
      by the Committee; or (iii) amend any stock purchase agreement or stock bonus
      agreement relating to sales or bonuses of Stock under the Plan, but any
      amendment that would adversely affect the individual’s rights to the Stock shall
      not be made without his or her written consent. Notwithstanding the foregoing,
      without the prior approval of the Company’s stockholders sufficient to approve
      the Plan in the first instance: the Committee shall not reprice any option
      by
      lowering the option exercise price of a previously granted award, or by
      cancellation of outstanding options with subsequent replacement, or regrant
      of
      options with lower exercise prices.

    

    (e) The
      Committee shall have the sole authority, in its absolute discretion, to adopt,
      amend, and rescind such rules and regulations as, in its opinion, may be
      advisable in the administration of the Plan, to construe and interpret the
      Plan,
      the rules and regulations, and the instruments evidencing options, SARs, or
      Stock granted or issued under the Plan, and to make all other determinations
      deemed necessary or advisable for the administration of the Plan. All decisions,
      determinations, and interpretations of the Committee shall be binding on all
      participants.

    
      
        
        

      

      
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    (f) Notwithstanding
      the foregoing provisions of this Section 2, grants of options or SARs or Stock
      to any “Covered Employee,” as such term is defined by Section 162(m) of the
      Code, shall be made only by a subcommittee of the Committee which, in addition
      to meeting other applicable requirements of this Section 2, is composed solely
      of two (2) or more outside directors within the meaning of Section 162(m) of
      the
      Code and the regulations thereunder (the “Subcommittee”), to the extent
      necessary to qualify such grants as “performance-based compensation” under
      Section 162(m) of the Code and the regulations thereunder. In the case of grants
      to Covered Employees, references to the “Committee” shall be deemed to be
      references to the Subcommittee, as specified above.

    

    3. Fair
      Market Value.
      Where
      this Plan uses the term “fair market value” in connection with the Stock, such
      fair market value shall be determined by the Committee as follows:

    

    (a) If
      the
      Stock is listed on any established stock exchange or a national market system,
      including, without limitation, the NASDAQ National Market, its fair market
      value
      shall be the closing selling price for such stock on the principal securities
      exchange or national market system on which the Stock is at the time listed
      for
      trading. If there are no sales of Stock on that date, then the closing selling
      price for the Stock on the next preceding day for which such closing price
      is
      quoted shall be determinative of fair market value; or

    

    (b) If
      the
      Stock is not traded on an exchange or national market system, its fair market
      value shall be determined in good faith by the Committee, and such determination
      shall be conclusive and binding on all persons.

    

    4. Stock
      Subject to the Plan.

    

    (a) Subject
      to adjustment pursuant to Section 4(c) below, the aggregate number of shares
      of
      Stock available for issuance under the Plan and during the life of the Plan
      shall be 1,610,000 shares of Stock. The number of shares of Stock available
      for
      issuance as incentive stock options shall be 1,610,000 shares of
      Stock.

    

    (b) To
      the
      extent any shares of Stock covered by an option are not delivered to an optionee
      because the option is surrendered, forfeited, canceled or for any other reason
      ceases to be exercisable in whole or in part or the shares of Stock are not
      delivered because the Option is used to satisfy the applicable tax withholding
      obligation, such shares shall continue to be available under the Plan and shall
      not be deemed to have been delivered for purposes of determining the maximum
      number of shares of Stock available for delivery under the Plan. If the exercise
      price of any option granted under the Plan is satisfied by tendering shares
      of
      Stock to the Company, only the number of shares of Stock issued net of the
      shares of Stock tendered shall be deemed delivered for purposes of determining
      the maximum number of shares of Stock available for delivery under the Plan.
      Any
      shares of Stock forfeited to the Company pursuant to the terms of agreements
      evidencing sales or bonus grants under the Plan shall not be deemed to have
      been
delivered
      for purposes of determining the maximum number of shares of Stock available
      for
      delivery under the Plan.

    
      
        
        

      

      
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    (c) If
      there
      is any change in the Stock through merger, consolidation, reorganization,
      recapitalization, reincorporation, stock split, stock dividend (in excess of
      two
      percent (2%)), or other change in the corporate structure of the Company,
      appropriate adjustments shall be made by the Committee in order to preserve
      but
      not to increase the benefits to the outstanding options, SARs and stock purchase
      or stock bonus awards under the Plan, including adjustments to the aggregate
      number and kind of shares subject to the Plan, or to outstanding stock purchase
      or stock bonus agreements, or SAR agreements, and the number and kind of shares
      and the price per share subject to outstanding options.

    

    5. Eligible
      Individuals.
      Individuals who shall be eligible to have granted to them options, SARs, or
      Stock under the Plan shall be such employees, officers, independent contractors,
      and consultants of the Company or an Affiliate as the Committee, in its
      discretion, shall designate from time to time. Notwithstanding the foregoing,
      only employees of the Company or an Affiliate (including officers and directors
      who are bona fide employees) shall be eligible to receive incentive stock
      options.

    

    6. Terms
      and Conditions of Options and SARs.

    

    (a) Each
      option granted pursuant to the Plan will be evidenced by a written stock option
      agreement executed by the Company and the person to whom such option is
      granted.

    

    (b) The
      Committee shall determine the term of each option granted under the Plan;
      provided, however, that the term of an incentive stock option shall not be
      for
      more than ten (10) years and that, in the case of an incentive stock option
      granted to a person possessing more than ten percent (10%) of the combined
      voting power of the Company or an Affiliate, the term of each incentive stock
      option shall be no more than five (5) years. 

    

    (c) In
      the
      case of incentive stock options, the aggregate fair market value (determined
      as
      of the time such option is granted) of the Stock with respect to which incentive
      stock options are exercisable for the first time by an eligible employee in
      any
      calendar year (under this Plan and any other plans of the Company or its
      Affiliates) shall not exceed $100,000. If the aggregate fair market value of
      stock with respect to which incentive stock options are exercisable by an
      optionee for the first time during any calendar year exceeds $100,000, such
      options shall be treated as non-qualified options to the extent required by
      Section 422 of the Code. The rule set forth in the preceding sentence shall
      be
      applied by taking options into account in the order in which they were
      granted.

    
      
        
        

      

      
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    (d) The
      exercise price of each option shall be not less than the per share fair market
      value of the Stock subject to such option on the date the option is granted.
      Notwithstanding the foregoing, (i) in the case of an incentive stock option
      granted to a person possessing more than ten percent (10%) of the combined
      voting power of the Company or an Affiliate, the exercise price shall be not
      less than one hundred ten percent (110%) of the fair market value of the Stock
      on the date the option is granted; and (ii) in the case of an option granted
      to
      a Covered Employee, the exercise price shall be not less than the per share
      fair
      market value of the Stock subject to such option on the date the option is
      granted. The exercise price of an option or SAR shall be subject to adjustment
      to the extent provided in Section 4(c) above, but, in the case of a grant to
      a
      Covered Employee, only to the extent such adjustment does not cause the grant
      to
      fail to qualify as “performance-based compensation” within the meaning of
      Section 162(m) of the Code and the regulations thereunder.

    

    (e) The
      Committee may, under such terms and conditions as it deems appropriate,
      authorize the issuance of SARs evidenced by a written SAR agreement (which,
      in
      the case of tandem options, may be part of the option agreement to which the
      SAR
      relates) executed by the Company and the person to whom the SARs are granted.
      The SAR agreement shall specify the term for the SARs covered thereby, the
      cash
      amount payable or securities issuable upon exercise of the SAR, and contain
      such
      other terms, provisions, and conditions consistent with this Plan, as may be
      determined by the Committee.

    

    (f) Payment
      of the purchase price and any withholding amounts pursuant to Section 11 upon
      the exercise of any option or SAR granted under this Plan shall be made in
      cash
      or by optionee’s personal check, a certified check, a bank draft, or a postal or
      express money order payable to the order of the Company in lawful money of
      the
      United States; provided, however, that the Committee, in its sole discretion,
      may permit an optionee to pay the option price and any such withholding amounts
      in whole or in part (i) with shares of Stock owned by the optionee (provided
      that any shares of stock tendered for payment shall have been owned for a period
      of six (6) months, or such other period as in the opinion of the Committee
      shall
      be sufficient to avoid an accounting compensation charge with respect to the
      shares used to pay the option price); (ii) by delivery on a form prescribed
      by
      the Committee of an irrevocable direction to a securities broker approved by
      the
      Committee to sell shares of Stock and deliver all or a portion of the proceeds
      to the Company in payment for the Stock; (iii) by delivery of the optionee’s
      promissory note with such recourse, interest, security, and redemption
      provisions as the Committee in its discretion determines appropriate (provided,
      however, no promissory note may be accepted from an optionee that would be
      in
      violation of the Sarbanes Oxley Act of 2002 or any other federal or state law);
      or (iv) in any combination of the foregoing. Any Stock used to exercise options
      shall be valued at its fair market value on the date of the exercise of the
      option.

    

    (g) In
      the
      event that the exercise price is satisfied by shares withheld from the shares
      of
      Stock otherwise deliverable to the optionee, the Committee may issue the
      optionee an additional option, with terms identical to the option agreement
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    the
      option was exercised, entitling the optionee to purchase additional shares
      of
      Stock equal to the number of shares so withheld but at an exercise price equal
      to the fair market value of the Stock on the grant date of the new option.
      Such
      additional option shall be subject to the provisions of Section 6(i)
      below.

    

    (h) The
      stock
      option agreement or SAR agreement may contain such other terms, provisions,
      and
      conditions consistent with this Plan, as may be determined by the Committee.
      If
      an option, or any part thereof, is intended to qualify as an incentive stock
      option, the stock option agreement shall contain those terms and conditions
      which are necessary to qualify it.

    

    (i) The
      maximum number of shares of Stock with respect to which SARs or options to
      acquire Stock may be granted, or sales or bonus grants of Stock may be made,
      to
      any individual per calendar year under this Plan shall not exceed 150,000 shares
      (which number may be increased without stockholder approval to reflect
      adjustments under Section 4(c) above, to the extent such adjustment, in the
      case
      of a grant to a Covered Employee, does not cause the grant to fail to qualify
      as
“performance-based compensation” within the meaning of Section 162(m) of the
      Code and the regulations thereunder). To the extent required to cause options
      granted to Covered Employees to qualify as “performance-based compensation”
under Section 162(m) of the Code and the regulations thereunder, in applying
      the
      foregoing limitation with respect to an employee, if any option is canceled,
      the
      canceled option shall continue to count against the maximum number of shares
      for
      which options may be granted to the employee under this Section 6(i). For this
      purpose, the repricing of an option shall be treated as a cancellation of the
      existing option and the grant of a new option to the extent required by Section
      162(m) of the Code or the regulations thereunder. The preceding sentence shall
      also apply in the case of an SAR, if, after the award is made, the base amount
      on which stock appreciation is calculated is reduced to reflect a reduction
      in
      the fair market value of the Stock.

    

    7. Terms
      and Conditions of Stock Purchases and Bonuses.

    

    (a) Each
      sale
      or bonus grant of Stock pursuant to the Plan will be evidenced by a written
      stock purchase agreement or stock bonus agreement, as applicable, executed
      by
      the Company and the person to whom such stock is sold or granted.

    

    (b) The
      stock
      purchase agreement or stock bonus agreement may contain such other terms,
      provisions, and conditions consistent with this Plan, as may be determined
      by
      the Committee, including, not by way of limitation, the consideration, if any,
      to be paid for the Stock, restrictions on transfer, forfeiture provisions,
      repurchase provisions, and vesting provisions. Notwithstanding the foregoing,
      the restriction period applicable to restricted stock awards shall be at least
      one (1) year in the case of performance-based restricted stock awards and at
      least three (3) years in the case of all other restricted stock
      awards.

    

    (c) Stock
      bonuses granted to officers and directors shall be expressly in lieu of

    
      
        
        

      

      
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    salary
      or
      cash bonus.

    

    8. Use
      of Proceeds.
      Cash
      proceeds realized from the exercise of options granted under the Plan or from
      other sales of Stock under the Plan shall constitute general funds of the
      Company.

    

    9. Amendment,
      Suspension, or Termination of the Plan.

    

    (a) Subject
      to Section 16 below, the Board may at any time amend, suspend, or terminate
      the
      Plan as it deems advisable; provided that such amendment, suspension, or
      termination complies with all applicable requirements of state and federal
      law,
      including any applicable requirement that the Plan or an amendment to the Plan
      be approved by the stockholders, and provided further that, except as provided
      in Section 4(c) above and Section 15 below, the Board shall in no event amend
      the Plan in the following respects without the approval of stockholders then
      sufficient to approve the Plan in the first instance:

    

    (i) to
      increase the maximum number of shares of Stock provided in Section 6(i) above,
      with respect to which restricted stock, SARs, or options to acquire Stock may
      be
      granted to any Covered Employee per calendar year under the Plan;
      or

    

    (ii) to
      materially increase the number of shares of Stock available under the Plan,
      or
      to increase the number of shares of Stock available for grant of incentive
      stock
      options under the Plan; or

    

    (iii) to
      materially modify the eligibility requirements for participation in the Plan
      or
      the class of employees eligible to receive options under the Plan, or to change
      the designation or class of persons eligible to receive incentive stock options
      under the Plan; or

    

    (iv) to
      permit
      repricing of options by lowering the option exercise price of a previously
      granted award, or by cancellation of outstanding options with subsequent
      replacement, or regrants of options with lower exercise prices; or

    

    (v) to
      otherwise materially increase the benefits to participants.

    

    (b) No
      option
      or SAR may be granted nor may any Stock be issued (other than upon exercise
      of
      outstanding options) under the Plan during any suspension or after the
      termination of the Plan, and no amendment, suspension, or termination of the
      Plan shall, without the affected individual’s consent, alter or impair any
      rights or obligations under any option or SAR previously granted under the
      Plan.
      The Plan shall terminate with respect to the grant of incentive stock options
      on
      April 12, 2015, the tenth anniversary of the date of adoption of this amendment
      and restatement of the Plan, unless previously terminated by the Board pursuant
      to this Section 9.

    

    
      
        
        

      

      
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    10. Assignability.
      No
      option or SAR granted pursuant to this Plan shall be transferable by the holder
      except to the extent provided in the option agreement or the SAR agreement
      covering the option or the SAR. Stock subject to a stock purchase agreement
      or a
      stock bonus agreement shall be transferable only as provided in such agreement.
      Notwithstanding the foregoing, if required by the Code, each incentive stock
      option under the Plan shall be transferable by the optionee only by will or
      the
      laws of descent and distribution, and, during the optionee’s lifetime, be
      exercisable only by the optionee.

    

    11. Withholding
      Taxes.
      No Stock
      shall be granted or sold under the Plan to any individual, and no option or
      SAR
      may be exercised, until the individual has made arrangements acceptable to
      the
      Committee for the satisfaction of federal, state, and local income and
      employment tax withholding obligations, including, without limitation,
      obligations incident to the receipt of Stock under the Plan, the lapsing of
      restrictions applicable to such Stock, the failure to satisfy the conditions
      for
      treatment as incentive stock options under the applicable tax law, or the
      receipt of cash payments.

    

    12. Restrictions
      on Transfer of Shares.
      The
      Committee may require that the Stock acquired pursuant to the Plan be subject
      to
      such restrictions and agreements regarding sale, assignment, encumbrances,
      or
      other transfer as are in effect among the stockholders of the Company at the
      time such Stock is acquired, as well as to such other restrictions as the
      Committee shall deem appropriate.

    

    13. Change
      in Control.

    

    (a) For
      purposes of this Section 13, a “Change in Control” shall be deemed to occur
      upon:

    

    (i) the
      direct or indirect acquisition by any person or related group of persons (other
      than an acquisition from or by the Company or by a Company-sponsored employee
      benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of
      the
      Exchange Act of securities possessing more than fifty percent (50%) of the
      total
      combined voting power of the Company’s outstanding Stock;

    

    (ii) a
      change
      in the composition of the Board over a period of thirty-six (36) months or
      less,
      such that a majority of the Board members (rounded up to the next whole number)
      ceases, by reason of one or more contested elections for Board membership or
      by
      one or more actions by written consent of stockholders, to be comprised of
      individuals who either (A) have been Board members continuously since the
      beginning of such period, or (B) have been elected or nominated for election
      as
      Board members during such period by at least a majority of the Board members
      described in clause (A) who were still in office at the time such election
      or
      nomination was approved by the Board.

    

    

    
      
        
        

      

      
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    (b) For
      purposes of this Section 13, a “Corporate Transaction” shall be deemed to occur
      upon any of the following transactions to which the Company is a
      party:

    

    (i) approval
      by the Company’s stockholders of a merger or consolidation in which the Company
      is not the surviving entity, except for a transaction the principal purpose
      of
      which is to change the state in which the Company is incorporated;

    

    (ii) approval
      by the Company’s stockholders of the sale, transfer, or other disposition of all
      or substantially all of the assets of the Company (including the capital stock
      of the Company’s subsidiary corporations) in connection with a complete
      liquidation or dissolution of the Company; or 

    

    (iii) approval
      by the Company’s stockholders of any reverse merger in which the Company is the
      surviving entity but in which securities possessing more than fifty percent
      (50%) of the total combined voting power of the Company’s outstanding securities
      are transferred to a person or persons different from those who held such
      securities immediately prior to such merger.

    

    (c) In
      its
      discretion, the Committee may provide in any stock option, SAR, Stock bonus,
      or
      Stock purchase agreement (or in an amendment thereto) evidencing an option,
      SAR,
      Stock bonus, or Stock purchase agreement hereunder that, in the event of any
      Corporate Transaction or an event giving rise to a Change in Control, any
      outstanding options or SARs covered by such an agreement shall be fully vested,
      non-forfeitable, and become exercisable, and that any restricted Stock covered
      by such an agreement shall be released from restrictions on transfer and
      repurchase or forfeiture rights, as of the date of the Change in Control or
      Corporate Transaction. However, the Committee may provide in any such agreement
      that, in the case of a Corporate Transaction, the Committee may determine that
      an outstanding option will not be so accelerated if and to the extent, (i)
      such
      option is either to be assumed by the successor or parent thereof or to be
      replaced with a comparable option to purchase shares of the capital stock of
      the
      successor corporation or parent thereof; or (ii) such option is to be replaced
      with a cash incentive program of the successor corporation that preserves the
      option spread existing at the time of the Corporate Transaction and provides
      for
      subsequent payment in accordance with the same vesting schedule applicable
      to
      such option.

    

    (d) If
      the
      Committee determines to incorporate a Change in Control or Corporate Transaction
      acceleration provision in any option or SAR agreement hereunder, the agreement
      shall provide that, (i) in the event of a Change in Control or Corporate
      Transaction described in clauses (a)(i), (a)(ii), and (b)(iii) of Section 13
      above, the option or SAR shall remain exercisable for the remaining term of
      the
      option or SAR; and (ii) in the event of a Corporate Transaction described in
      clauses (i) or (ii) of Section 13(b) above, the option or SAR shall terminate
      as
      of the effective date of the Corporate Transaction described therein, unless
      such option or SAR is assumed by a successor corporation in the event of a
      Corporate Transaction described in clause (i) of Section 13(b). If an option
      or
      SAR is assumed in the event of a Corporate Transaction described

    
      
        
        

      

      
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    in
      clause
      (i) of Section 13(b) above, the option or SAR shall remain exercisable for
      the
      remaining term of the option or SAR. In no event shall any option or SAR under
      the Plan be exercised after the expiration of the term provided for in the
      related stock option agreement or SAR agreement pursuant to Section 6(b) or
      (e).

    

    (e) The
      Committee may provide in any option or SAR agreement hereunder that should
      the
      Company dispose of its equity holding in any subsidiary effected by, (i) merger
      or consolidation involving that subsidiary; (ii) the sale of all or distribution
      of substantially all of the assets of that subsidiary; or (iii) the Company’s
      sale of or distribution to stockholders of substantially all of the outstanding
      capital stock of such subsidiary (“Subsidiary Disposition”) while a holder of
      the option or SAR is engaged in the performance of services for the affected
      subsidiary corporation, then such option or SAR shall, immediately prior to
      the
      effective date of such Subsidiary Disposition, become fully exercisable with
      respect to all of the shares at the time represented by such option or SAR
      and
      may be exercised with respect to any or all of such shares. Any such option
      or
      SAR shall remain exercisable until the expiration or sooner termination of
      the
      term of the option or SAR.

    

    14. Stockholder
      Approval.
      Continuance of the Plan shall be subject to approval by the stockholders of
      the
      Company within twelve (12) months before or after the date this amendment and
      restatement of the Plan is adopted. Any incentive stock options granted
      hereunder and any options, SARs, or Stock granted to Covered Employees hereunder
      shall become effective only upon such stockholder approval. The Committee may
      grant incentive stock options or may grant options, SARs, or Stock to Covered
      Employees under the Plan prior to such stockholder approval, but until
      stockholder approval is obtained, no such option or SAR shall be exercisable
      and
      no such Stock grant shall be effective. In the event that such stockholder
      approval is not obtained within the period provided above, all options, SARs,
      or
      Stock grants previously granted above shall terminate. If such stockholder
      approval is obtained at a duly held stockholders’ meeting, the Plan must be
      approved by a majority of the shares present or represented at the meeting
      and
      entitled to vote at such stockholders’ meeting at which a quorum, representing a
      majority of all outstanding voting stock of the Company, is, either in person
      or
      by proxy, present. If such stockholder approval is obtained by written consent,
      it must be obtained by the written consent of the holders of a majority of
      all
      outstanding stock of the Company entitled to vote on such matter. However,
      approval at a meeting or by written consent may be obtained to a lesser degree
      of stockholder approval if the Board determines, in its discretion after
      consultation with the Company’s legal counsel, that such a lesser degree of
      stockholder approval will comply with all applicable laws and will not adversely
      affect the qualification of the Plan under either Section 162(m) or 422 of
      the
      Code, or Rule 16b-3.

    

    15. Rule
      16b-3 Compliance.

    

    (a) With
      respect to Insiders, transactions under the Plan are intended to comply with
      all
      applicable conditions of Rule 16b-3. To the extent any provision of the Plan
      or
      action by the Committee fails to so comply, it shall be deemed null and void,
      to

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    the
      extent permitted by law and deemed advisable by the Committee. Moreover, in
      the
      event the Plan does not include a provision required by Rule 16b-3 to be stated
      therein as a condition to exemption from Section 16(b) of the Exchange Act,
      such
      provision (other than one relating to eligibility requirements or the price
      and
      amount of awards) shall be deemed automatically to be incorporated by reference
      into the Plan insofar as transactions with Insiders are concerned.

    

    (b) If,
      subsequent to the Board’s adoption of the Plan, Rule 16b-3 is amended to delete
      any of the Rule 16b-3 conditions or requirements addressed by the provisions
      of
      the Plan, the Board may amend the Plan without stockholder approval (unless
      such
      approval is required by Rule 16b-3, as so amended) to delete or otherwise amend
      any such provisions no longer required for grants of options, SARs, and Stock
      under the Plan to Insiders to be exempt from Section 16(b) liability under
      the
      Exchange Act.

    

    16. Compliance
      with Section
      409A of the Code.
      To the
      extent any provisions of the Plan, or any grants or payments under the Plan,
      are
      subject to Section 409A of the Code, it is intended that the Plan comply fully
      with and satisfy all the requirements of Section 409A of the Code (including,
      to
      the extent necessary, applying the definition of Change in Control in Section
      409A(a)(2)(A)(v) of the Code to any award that is subject to Section 409A of
      the
      Code). Any provision, grant or payment that would cause the Plan or any grant
      or
      payment made hereunder to fail to satisfy Section 409A of the Code shall have
      no
      force and effect until amended to comply with Section 409A of the Code (which
      amendment may be retroactive to the extent permitted by Section 409A of the
      Code, and which may be made without the consent of the holder of an option
      or
      SAR).

    

    17. The
      Right of the Company to Terminate Employment.
      No
      provision in the Plan or any Option shall confer upon any optionee any right
      to
      continue in the employment of the Company or an Affiliate or to interfere in
      any
      way with the right of the Company or an Affiliate to terminate his employment
      at
      any time.Exhibit 10.4

    Exhibit
      10.4

    

    MATRIA
      HEALTHCARE, INC.

    

    2005
      EMPLOYEE STOCK PURCHASE PLAN

    

    

    The
      following constitute the provisions of the 2005 Employee Stock Purchase Plan
      of
      Matria Healthcare, Inc.

    

    1. Purpose.
      The
      purpose of the Plan is to provide employees of the Company and its Designated
      Subsidiaries with an opportunity to purchase Common Stock of the Company through
      accumulated payroll deductions. It is the intention of the Company to have
      the
      Plan qualify as an “Employee Stock Purchase Plan” under Section 423 of the Code.
      The provisions of the Plan, accordingly, shall be construed so as to extend
      and
      limit participation in a manner consistent with the requirements of that section
      of the Code.

    

    2. Definitions.

    

    (a) “Board”
shall
      mean the Board of Directors of the Company.

    

    (b) “Code”
shall
      mean the Internal Revenue Code of 1986, as amended.

    

    (c) “Common
      Stock”
shall
      mean the common stock, $0.01 par value per share, of the Company.

    

    (d) “Company”
      shall mean Matria Healthcare, Inc., a Delaware corporation.

    

    (e) “Compensation”
shall
      mean an Employee’s base salary, including commissions, from the Company or one
      or more Designated Subsidiaries, including such amounts of base salary as are
      deferred by the Employee (i) under a qualified cash or deferred arrangement
      described in Section 401(k) of the Code, or (ii) to a plan qualified under
      Section 125 of the Code. Compensation does not include overtime, bonuses,
      reimbursements or other expense allowances, fringe benefits (cash or noncash),
      moving expenses, deferred compensation, and contributions (other than
      contributions describe din the first sentence) made on the Employee’s behalf by
      the Company or one or more Designated Subsidiaries under any employee benefit
      or
      welfare plan now or hereafter established.

    

    (f) “Designated
      Subsidiaries”
shall
      mean the Subsidiaries which have been designated by the Board from time to
      time
      in its sole discretion as eligible to participate in the Plan.

    

    (g) “Effective
      Date”
shall
      mean the later of July 1, 2005 or (ii) the date that the Plan is approved by
      the
      Company’s stockholders. However, should any Designated Subsidiary become a
      Participating Company in the Plan after such date, then such entity shall
      designate a separate Effective Date with respect to its employee
      participants.

    

    (h) “Employee”
shall
      mean any individual who is engaged in the rendition of personal services to
      the
      Company or a Designated Subsidiary for Compensation. For purposes of the Plan,
      the employment relationship shall be treated as continuing intact while the
      individual is on sick leave or other leave of absence approved by the Company.
      Where the period of leave exceeds 90 days and the individual’s right to
      reemployment is not guaranteed either by statute or by contract, the employment
      relationship will be deemed to have terminated on the 91st
      day of
      such leave.

    

    (i) “Enrollment
      Date”
shall
      mean the first day of each Purchase Period.

    

    (j) “Exercise
      Date”
shall
      mean the last day of each Purchase Period.

    
      
        Exhibit
          10 4 Matria 2005 Employee Stock Purchase Plan A-

        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    (k) “Fair
      Market Value”
shall
      mean, as of any date, the value of Common Stock determined as
      follows:

    

    (1) If
      the
      Common Stock is listed on any established stock exchange or a national market
      system, including with out limitation the Nasdaq National Market, its Fair
      Market Value shall be the closing selling price of such stock on the principal
      securities exchange or national market system on which the Common Stock is
      at
      the time listed for trading. If there are no sales of Common Stock on that
      date,
      then the closing selling price for the Common Stock on the next preceding day
      for which such closing selling price is quoted shall be determinative of Fair
      Market Value; or

    

    (2) If
      the
      Common Stock is not traded on an exchange or a national market system, its
      Fair
      Market Value shall be determined in good faith by the Board, and such
      determination shall be conclusive and binding on all persons.

    

    (l) “Participant”
means
      an Employee of the Company or Designated Subsidiary who is actively
      participating in the Plan.

    

    (m) “Plan”
shall
      mean this Employee Stock Purchase Plan.

    

    (n) “Plan
      Administrator”
shall
      mean either the Board or a committee of the Board that is responsible for the
      administration of the Plan.

    

    (o) “Purchase
      Period”
shall
      mean a period of approximately three months, commencing on January 1, April
      1,
      July 1 and October 1 of each year and terminating on the next following March
      31, June 30, September 30 or December 31, respectively, provided, however,
      that
      the first Purchase Period shall commence on the Effective Date and shall end
      on
      December 31, 2005.

    

    (p) “Purchase
      Price”
shall
      mean an amount equal to 85% of the Fair Market Value of a share of Common Stock
      on the Enrollment Date or on the Exercise Date, whichever is lower.

    

    (q) “Reserves”
shall
      mean the number of shares of Common Stock covered by each option under the
      Plan
      which have not yet been exercised and the number of shares of Common Stock
      which
      have been authorized for issuance under the Plan but not yet placed under
      option.

    

    (r) “Subsidiary”
shall
      mean a corporation, domestic or foreign, of which not less than 50% of the
      voting shares are held by the Company or a Subsidiary, whether or not such
      corporation now exists or is hereafter organized or acquired by the Company
      or a
      Subsidiary.

    

    3. Eligibility.

    

    (a) General.
      Any
      Employee who is employed by the Company on a given Enrollment Date shall be
      eligible to participate in the Plan for the Purchase Period commencing with
      such
      Enrollment Date.

    

    (b) Limitations
      on Grant and Accrual.
      Any
      provisions of the Plan to the contrary notwithstanding, no Employee shall be
      granted an option under the Plan (i) if, immediately after the grant, such
      Employee (taking into account stock owned by any other person whose stock would
      be attributed to such Employee pursuant to Section 424(d) of the Code) would
      own
      stock and/or holding outstanding options to purchase stock possessing five
      percent (5%) or more of the total combined voting power or value of all classes
      of stock of the company or of any Subsidiary of the Company, or (ii) which
      permits his or her rights to purchase stock under all employee stock purchase
      plans of the Company and its Subsidiaries to accrue at a rate which exceeds
      Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the Fair
      Market Value of the shares at the time such option is granted) for each calendar
      year in which such option is outstanding at any time. The determination of
      the
      accrual of the right to purchase stock shall be made in accordance with Section
      423(b)(8) of the Code and the regulations thereunder.

    
      
        Exhibit
          10 4 Matria 2005 Employee Stock Purchase Plan A-

        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (c) Other
      Limits on Eligibility.
      Notwithstanding paragraph (a) above, the following Employees, as defined in
      paragraph 2, shall not be eligible to participate in the Plan for any relevant
      Purchase Period: (i) employees whose customary employment is 20 hours or less
      per week; and (ii) employees whose customary employment is for not more than
      5
      months in any calendar year.

    

    4. Purchase
      Periods.
      

    

    (a) The
      Plan
      shall be implemented through consecutive Purchase Periods until such time as
      (i)
      the maximum number of shares of Stock available for issuance under the Plan
      shall have been purchased, or (ii) the Plan shall have been sooner terminated
      in
      accordance with paragraph 19 hereof.

    

    (b) A
      Participant shall be granted a separate purchase right for each Purchase Period
      in which he/she participates. The purchase right shall be granted on the first
      day of the Purchase Period and shall be automatically exercised on the last
      day
      of the Purchase Period.

    

    (c) Except
      as
      specifically provided herein, the acquisition of Common Stock through
      participation in the Plan for any Purchase Period shall neither limit nor
      require the acquisition of Common Stock by a Participant in any subsequent
      Purchase Period.

    

    5. Participation.

    

    (a) An
      eligible Employee may become a Participant in the Plan by completing a
      subscription agreement authorizing payroll deductions in the form of Exhibit
      A
      to this Plan and filing it with the Company’s payroll office at least fifteen
      (15) business days prior to the Enrollment Date for the Purchase Period in
      which
      such participation will commence, unless a later time for filing the
      subscription agreement is set by the Board for all eligible Employees with
      respect to a given Purchase Period.

    

    (b) Payroll
      deductions for a Participant shall commence with the first period payroll
      following the Enrollment Date and shall end on the last complete payroll period
      during the Purchase Period, unless sooner terminated by the Participant as
      provided in paragraph 10.

    

    6. Payroll
      Deductions.

    

    (a) At
      the
      time a Participant files his/her subscription agreement, he/she shall elect
      to
      have payroll deductions made on each pay day during the Purchase Period in
      an
      amount not exceeding ten percent (10%) of the Compensation which he/she receives
      on each payday during the Purchase Period.

    

    (b) All
      payroll deductions made for a Participant shall be credited to his/her account
      under the Plan and will be withheld in whole percentages only. A Participant
      may
      not make any additional payments into such account.

    

    (c) A
      Participant may discontinue his or her participation in the Plan as provided
      in
      paragraph 10, or may decrease the rate of his/her deductions during the Purchase
      Period by completing or filing with the Company a new subscription agreement
      authorizing a decrease in payroll deduction rate. The decrease in rate shall
      be
      effective with the first full payroll period following ten (10) business days
      after the Company’s receipt of the new subscription agreement unless the Company
      elects to process a given change in participation more quickly. A Participant
      may increase the rate of his/her payroll deductions for a future Purchase Period
      by filing with the Company a new subscription agreement authorizing an increase
      in payroll deduction rate within ten (10) business days (unless the Company
      elects to process a given change in participation more quickly) before the
      commencement of the upcoming Purchase Period. A Participant’s subscription
      agreement shall remain in effect for successive Purchase Periods unless
      terminated as provided in paragraph 10. The Board shall be authorized to limit
      the number of participation rate changes during any Purchase
      Period.

    

    (d) Notwithstanding
      the foregoing, to the extent necessary to comply with Section 423(b)(8) of
      the Code and paragraph 3(b) herein, a Participant’s payroll deductions may be

    
      
        Exhibit
          10 4 Matria 2005 Employee Stock Purchase Plan A-

        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    decreased
      to 0% at such time during any Purchase Period which is scheduled to end during
      the current calendar year (the “Current Purchase Period”) that the aggregate of
      all payroll deductions which were previously used to purchase stock under the
      Plan in a prior Purchase Period which ended during that calendar year plus
      all
      payroll deductions accumulated with respect to the Current Purchase Period
      equals $25,000. Payroll deductions shall recommence at the rate provided in
      such
      Participant’s subscription agreement at the beginning of the first Purchase
      Period which is scheduled to end in the following calendar year, unless
      terminated by the Participant as provided in paragraph 10.

    

    7. Grant
      of Option.
      On the
      first day of each Purchase Period, each eligible Employee participating in
      such
      Purchase Period shall be granted an option to purchase on the Exercise Date
      for
      such Purchase Period (at the applicable Purchase Price) up to a number of shares
      of the Company’s Common Stock determined by dividing such Employee’s payroll
      deductions accumulated prior to such Exercise Date and retained in the
      Participant’s account as of the Exercise Date by the applicable Purchase Prices,
      provided (i) that such purchase shall be subject to the limitations set
      forth in paragraphs 3(b), 12, and 21 hereof, and (ii) the maximum number of
      shares of Common Stock an Employee shall be permitted to purchase in any
      Purchase Period shall be 375 shares, subject to adjustment as provided in
      paragraph 18 hereof. Exercise of the option shall occur as provided in
      paragraph 8, unless the Participant has withdrawn pursuant to
      paragraph 10, and the option, to the extent not exercised, shall expire on
      the last day of the Purchase Price.

    

    8. Exercise
      of Option.
      Unless
      a Participant withdraws from the Plan as provided in paragraph 10 below,
      his/her option for the purchase of shares will be exercised automatically on
      each Exercise Date, and the maximum number of full shares subject to option
      shall be purchased for such Participant at the applicable Purchase Price with
      the accumulated payroll deductions in his/her account. No fractional shares
      will
      be purchased; any payroll deductions accumulated in a Participant’s account
      which are not sufficient to purchase a full share shall be carried over to
      the
      next Purchase Period, if the Participant elects to participate in the next
      Purchase Period, or returned to the Participant. Any amount remaining in a
      Participant’s account following the purchase of shares on the Exercise Date,
      other than the amounts described in the preceding sentence, shall be returned
      to
      the Participant and shall not be carried over to the next Purchase Period.
      During a Participant’s lifetime, a Participant’s option to purchase shares
      hereunder is exercisable only by him/her.

    

    9. Delivery.
      Upon
      receipt of a request from a Participant after each Exercise Date on which a
      purchase of shares occurs, the Company shall arrange the delivery to such
      Participant, as appropriate, of a certificate representing the shares purchased
      upon exercise of his/her options.

    

    10. Withdrawal,
      Termination of Employment.
      

    

    (a) A
      Participant may withdraw all but not less than all the payroll deductions
      credited to his/her account and not yet used to exercise his/her option under
      the Plan at any time by giving written notice to the Company in the form of
      Exhibit B to this Plan. All of the Participant’s payroll deductions credited to
      his/her account will be paid to such Participant promptly after receipt of
      notice of withdrawal, such Participant’s option for the Purchase Period will be
      automatically terminated, and on further payroll deductions for the purchase
      of
      shares will be made during the Purchase Period. If a Participant withdraws
      from
      a Purchase Period, payroll deductions will not resume at the beginning of the
      succeeding Purchase Period unless the Participant delivers to the Company a
      new
      subscription agreement.

    

    (b) Upon
      a
      Participant’s ceasing to be an Employee for any reason or upon termination of a
      Participant’s employment relationship (as described in paragraph 2(h), the
      payroll deductions credited to such Participant’s account during the Purchase
      Period but not yet used to exercise the option will be returned to such
      Participant or, in the case of his/her death, to the person or persons entitled
      thereto under paragraph 14, and such Participant’s option will be
      automatically terminated.

    

    11. Interest.
      No
      interest shall accrue on the payroll deductions of a Participant in the
      Plan.

    
      
        Exhibit
          10 4 Matria 2005 Employee Stock Purchase Plan A-

        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    12. Stock.
      

    

    (a) The
      maximum number of shares of the company’s Common Stock which shall be made
      available for sale under the Plan shall be 150,000 shares, subject to adjustment
      upon changes in capitalization of the Company as provided in paragraph 18.
      If on a given Exercise Date the number of shares with respect to which options
      are to be exercised exceeds the number of shares then available under the Plan,
      the Company shall make a pro rata allocation of the shares remaining available
      for purchase in as uniform a manner as shall be practicable and as it shall
      determine to be equitable. 

    

    (b) A
      Participant will have no interest or voting right in shares covered by his/her
      option until such shares are actually purchased on the Participant’s behalf in
      accordance with the applicable provisions of the Plan. No adjustment shall
      be
      made for dividends, distributions or other rights for which the record date
      is
      prior to the date of such purchase.

    

    (c) Shares
      to
      be delivered to a Participant under the Plan will be registered in the name
      of
      the Participant or in the name of the Participant and his/her
      spouse.

    

    13. Administration.

    

    (a) Administrative
      Body.
      The
      Plan shall be administered by the Board of the Company or a committee of members
      of the Board appointed by the Board. The Board or its committee shall have
      full
      and exclusive discretionary authority to construe, interpret and apply the
      terms
      of the Plan, to determine eligibility and to adjudicate all disputed claims
      filed under the Plan. Every finding, decision and determination made by the
      Board or its committee shall, to the full extent permitted by law, be final
      and
      binding under all parties. Members of the Board who are eligible Employees
      are
      permitted to participate in the Plan to the extent limited by subparagraph
      (b)
      of this paragraph 13.

    

    (b) Rule
      16b-3 Limitations.
      Notwithstanding the provisions of subparagraph (a) of this paragraph 13, in
      the
      event that Rue 26b-3 promulgated under The Securities Exchange Act of 1934,
      as
      amended, or any successor provision (“Rule 16b-3”) provides specific
      requirements for the administrators of plans of this type, the Plan shall be
      only administered by such a body and in such a manner as shall comply with
      the
      applicable requirements of Rule 16b-3. Unless permitted by Rule 16b03, no
      discretion concerning decisions regarding the Plan shall be afforded to any
      committee or person that is not “disinterested” as that term is used in Rule
      16b-3.

    

    14. Designation
      of Beneficiary.
      (a)
      Each Participant will file a written designation of a beneficiary who is to
      receive any shares and cash, if any, from the Participant’s account under the
      Plan in the event of such Participant’s death subsequent to an Exercise Date on
      which the option is exercised but prior to delivery to such Participant of
      such
      shares and cash. In addition, a Participant may file a written designation
      of a
      beneficiary who is to receive any cash from the Participant’s account under the
      Plan in the event of such Participant’s death prior to exercise of the option.
      If a Participant is married and the designated beneficiary is not the spouse,
      spousal consent shall be required for such designation to be
      effective.

    

    (b) Such
      designation of beneficiary may be changed by the Participant (and his or her
      spouse, if any) at any time by written notice. In the event of the death of
      a
      Participant and to the absence of a beneficiary validly designated under the
      Plan who is living at the time of such Participant’s death, the Company shall
      deliver such shares and/or cash to the executor or administrator of the estate
      of the Participant, or if no such executor or administrator of the estate of
      the
      Participant, or if no such executor or administrator has been appointed (to
      the
      knowledge of the Company), the Company, in it discretion, may delivery such
      shares and/or cash to the spouse or to any one or more dependents or relatives
      of the Participant, or if no spouse, dependent or relative is known to the
      Company, then to such other person as the Company may designate.

    

    15. Transferability.
      Neither
      payroll deductions credited to a Participant’s account nor any rights with
      regard to the exercise of an option or to receive shares under the Plan may
      be
      assigned, transferred, pledge or otherwise disposed of in any way (other than
      by
      will, the laws of descent and distribution or as provided in 

    
      
        Exhibit
          10 4 Matria 2005 Employee Stock Purchase Plan A-

        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    paragraph
      14 hereof) by the Participant. Any such attempt at assignment, transfer, pledge
      or other disposition shall be without effect, except that the Company may not
      treat such act as an election to withdraw funds from a Purchase Period in
      accordance with paragraph 10.

    

    16. Use
      of Funds.
      All
      payroll deduction received or held by the Company under the Plan may be used
      by
      the Company for any corporate purpose, and the Company shall not be obligated
      to
      segregate such payroll deductions.

    

    17. Reports.
      Individual accounts will be maintained for each Participant in the Plan.
      Statements of account will be given to Participants at least annually, which
      statements will set forth the amounts of payroll deductions, the Purchase Price,
      the number of shares purchased and the remaining cash balance, if
      any.

    

    18. Adjustments
      Upon Changes in Capitalization, Dissolution, Merger or Asset
      Sale.

    

    (a) Changes
      in Capitalization.
      Subject
      to any required action by the shareholders of the Company, the Reserves, as
      well
      as the price per share of Common Stock covered by each option under the Plan
      which has not yet been exercised, shall be proportionately adjusted for any
      increase or decrease in the number of issued shares of Common Stock resulting
      from a stock split, reverse stock split, stock dividend, combination or
      reclassification of the Common Stock, or any other increase or decrease in
      the
      number shares of Common Stock effected without receipt of consideration by
      the
      Company, provided, however, that conversion of any convertible securities of
      the
      Company shall not be deemed to have been “effected without receipt of
      consideration.” Such adjustment shall be made by the Board, whose determination
      in that respect shall be final, binding and conclusive. Except as expressly
      provided herein, no issue by the Company of share of stock of any class, or
      securities convertible into shares of stock of any class, shall affect, and
      no
      adjustment by reason thereof shall be made with respect to, the number of price
      of shares of Common Stock subject to an option. The Board may, if it so
      determines in the exercise of its sole discretion, make provision for adjusting
      the Reserves, as well as the price per share of Common Stock covered by each
      outstanding option, in the event the Company effects one or more reorganization,
      recapitalizations, rights offerings or other increases or reductions of shares
      of its outstanding Common Stock.

    

    (b) Change
      in Ownership, Dissolution or Liquidation.
      In the
      event of a proposed sale of all or substantially all of the assets of the
      Company, the merger of the Company with or into another corporation, in which
      merger the Company will not be the surviving corporation (other than a
      reorganization effectuated primarily to change the state in which the Company
      is
      incorporated), or a reverse merger in which the Company is the surviving
      corporation but in which securities possessing more than fifty percent (50%)
      of
      the total combined voting power of the Company’s outstanding securities are
      transferred to a person or persons different from the person or persons holding
      those securities immediately prior to the transfer, each option under the Plan
      shall be assumed or an equivalent option shall be substituted by such successor
      corporation or a parent or subsidiary of such successor corporation, unless
      the
      Board determines, in the exercise, of its sole discretion and in lieu of such
      assumption or substitution, to shorten the Purchase Period then in progress
      by
      setting a new Exercise Date (the “New Exercise Date”). If the Board shortens the
      Purchase Period then in progress in lieu of assumption or substitution in the
      event of a merger or sale of assets, the Board shall notify each Participant
      in
      writing, at least ten (10) days prior to the New Exercise Date, that the
      Exercise Date for his/her option ahs been changed to the New Exercise Date
      and
      that his/her option will be exercised automatically on the New Exercise Date,
      unless prior to such date he/she has withdrawn from the Purchase Period as
      provided in paragraph 10. For purposes of this paragraph, an option granted
      under the Plan shall be deemed to be assumed if, following the sale of assets
      or
      merger, the option confers the right to purchase, for each share of option
      stock, subject to the option immediately prior to the sale of assets or merger,
      the consideration (whether stock, cash or other securities or property) received
      in the sale of assets or merger by holders of Common Stock for each share of
      Common Stock held on the effective date of the transaction (and if such holders
      were offered a choice of consideration, the type of consideration chosen by
      the
      holders of a majority of the outstanding shares of Common Stock); provided,
      however, that if such consideration received in the sale of assets or merger
      was
      not solely common stock of the successor corporation or its parent (as defined
      in Section 424(e) of the Code), the Board may, with the consent of the successor
      corporation and the Participant, provide for the consideration to be received
      upon exercise of the option to be solely common stock of the successor
      corporation or its parent equal in fair market value to the per share
      consideration received by holders of Common Stock in the sale of assets or
      merger.

    
      
        Exhibit
          10 4 Matria 2005 Employee Stock Purchase Plan A-

        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    19. Amendment
      or Termination.
      

    

    (a) The
      Board
      of Directors of the Company may at any time and for any reason terminate or
      amend the Plan. Except as provided in paragraph 18, no such termination can
      affect options previously granted, provided that a Purchase Period may be
      terminated by the Board of Directors on any Exercise Date if the Board
      determines that the termination of the Plan is in the best interests of the
      Company and its shareholders. Except as provided in paragraph 18, no amendment
      may make any change in any option theretofore granted which amendment adversely
      affects the rights of any Participant. To the extent necessary to comply with
      Rule 16b-3 or Section 423 of the Code (or any successor rule or provision or
      any
      other applicable law or regulation), the Company shall obtain shareholder
      approval in such a manner and to such a degree as required.

    

    (b) Without
      shareholder consent and without regard to whether any Participant rights may
      be
      considered to have been “adversely affected,” the Board (or its committee) shall
      be entitled to change the Purchase Period, limit the frequency and/or number
      of
      changes in the amounts withheld during Purchase Periods, establish the exchange
      ratio applicable to amounts withheld in a currency other than U.S. dollars,
      permit payroll withholding in excess of the amount designated by a Participant
      in order to adjust for delays or mistakes in the Company’s processing of
      properly completed withholding elections, establish reasonable waiting and
      adjustment periods and/or accounting and crediting procedures to ensure that
      amounts applied toward the purchase of Common Stock for each Participant
      properly correspond with amounts withheld from the Participant’s Compensation,
      and establish such other limitations or procedures as the Board (or its
      committee), determines in its sole discretion advisable which are consistent
      with the Plan.

    

    20. Notices.
      All
      notices or other communications by a Participant to the Company under or in
      connection with the Plan shall be deemed to have been duly given when received
      in the form specified by the Company at the location, or by the person,
      designated by the Company for the receipt thereof.

    

    21. Conditions
      Upon Issuance of Shares.
      Shares
      shall not be issued with respect to an option unless the exercise of such option
      and the issuance and delivery of such shares pursuant thereto shall comply
      with
      all applicable provisions of law, domestic or foreign, including, without
      limitation, the Securities Act of 1933, as amended, the Securities Exchange
      Act
      of 1934, as amended, the rules and regulations promulgated thereunder, the
      requirements of any stock exchange upon which the shares may then be listed,
      and
      applicable income or employment tax laws, and shall be further subject to the
      approval of counsel for the Company with respect to such option to represent
      and
      warrant at the time of any such exercise that the shares are being purchased
      only for investment and without any present intention to sell or distribute
      such
      shares if, in the opinion of counsel for the Company, such a representation
      is
      required by any of the aforementioned applicable provisions of law. In addition,
      no purchase rights shall be exercised or shares issued hereunder before the
      Plan
      shall have been approved by shareholders of the Company as provided in
      paragraph 25.

    

    22. Term
      of Plan.
      The
      Plan shall become effective upon the earlier to occur of its adoption by the
      Board of Directors or its approval by the shareholders of the Company. It shall
      continue in effect for a term of ten (10) years unless sooner terminated under
      paragraph 19.

    

    23. Additional
      Restrictions of Rule 16b-3.
      The
      terms and conditions of options granted hereunder to, and the purchase of shares
      by, persons subject to Section 16 of the Exchange Act shall comply with the
      applicable provisions of Rule 16b-3. This Plan shall be deemed to contain,
      such
      options shall contain, and the shares issued upon exercise thereof shall be
      subject to, such additional conditions and restrictions as may be required
      by
      Rule 16b-3 to qualify for the maximum exemption from Section 16 of the Exchange
      Act with respect to Plan transactions.

    

    24. Shareholder
      Approval.
      Continuance of the Plan shall be subject to approval by the shareholders of
      the
      Company within twelve (12) months before or after the date the Plan is adopted.
      If such shareholder approval is obtained at a duly held shareholders’ meeting,
      the Plan must be approved by a majority of the votes cast at such shareholders’
meeting at which a quorum representing a majority of all outstanding voting
      stock of the Company is, either in person or by proxy, present and voting on
      the
      Plan. If such shareholder approval is obtained by written consent, it must
      be
      obtained by the written consent of the holders of a majority of all outstanding
      voting stock of the Company. However, approval at a meeting or by written
      consent may be obtained by a lesser degree of shareholder approval if the Board
      determines, in its discretion after consultation with the Company’s legal
      counsel, that such a 

    
      
        Exhibit
          10 4 Matria 2005 Employee Stock Purchase Plan A-

        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    lesser
      degree of shareholder approval will comply with all applicable laws and will
      not
      adversely affect the qualification of the Plan under Section 423 of the
      Code.

    

    25. No
      Employment Rights.
      The
      Plan does not, directly or indirectly, create any right for the benefit of
      any
      employee or class of employees to purchase any shares under the Plan, or create
      in any employee or class of employees any right with respect to continuation
      of
      employment by the Company, and it shall not be deemed to interfere in any way
      the Company’s right to terminate, or otherwise modify, an employee’s employment
      at any time.

    

    26. Effect
      of Plan.
      The
      provisions of the Plan shall, in accordance with its terms, be binding upon,
      and
      inure to the benefit of, all successors of each employee participating in the
      Plan, including, without limitation, such employee’s estate and the executors,
      administrators or trustees thereof, heirs and legatees, and any receiver,
      trustee in bankruptcy or representative of creditors of such
      employee.

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