<PAGE>   1
                                                                  EXHIBIT 10.38

[HEALTHDYNE TECHNOLOGIES LOGO]



October 12, 1995

Mr. John L. Miclot
10526 Wellington Boulevard
Powell, Ohio 43065

Dear John:

This correspondence supersedes my letter to you of October 10, 1995 and confirms
our offer to you for the position of Senior Vice President, Sales and Marketing,
on behalf of Healthdyne Technologies, Inc. ("Healthdyne Technologies" or
"Company"), which employment is to commence on or before November 1, 1995. In
this position you will report directly to me. The Company agrees to make a
recommendation to the Board of Directors at the next Board meeting to elect you
as an executive officer of the Company.

Your initial base salary will be $6,730.77 (gross before deductions) payable on
a biweekly basis, which is equivalent to approximately $175,000.00 per annum.
Future salary adjustments and assignment of job responsibilities shall be based
upon individual and Company performance. Your salary will be reviewed by the
Compensation Committee of the Board of Directors at the time all other executive
officers are reviewed. Executive officers of the Company are reviewed for annual
salary consideration effective March 1st of each year. You also will be eligible
to participate in any applicable annual Company bonus program with an annual
target bonus amount equal to twenty-five percent (25%) of the base salary paid
to you in accordance with the terms of such program in effect from time to time.

As an incentive to enter into the employment of Healthdyne Technologies, the
Company agrees to pay you a bonus in the amount of $40,000.00 (gross before
deductions). This bonus will be paid to you in two separate payments of
$20,000.00 (gross before deductions) each. The first payment will be made to you
within thirty (30) days following the commencement of your employment with the
Company. The second payment will be made to you upon the completion of your
relocation from Powell, Ohio to the Marietta, Georgia area, and is conditioned
on your status as an active ernployee on the date of payment.

The Company will make a recommendation to the Company's Stock Option Committee
that you be granted a stock option to purchase 35,000 shares of Healthdyne
Technologies Common Stock. Such stock option will be subject to the standard
terms and conditions of the Company's applicable stock option plan. You will be
eligible for ongoing consideration for future stock option grants.

In accordance with Company policy, you will receive an automobile allowance in
the amount of $700.00 per month.



<PAGE>   2


Mr. John Miclot
October 12, 1995
Page 2




You will be eligible to participate in the Healthdyne Technologies Retirement
Benefit Award under the terms and conditions of this plan. A copy of the
Retirement Benefit Award is enclosed.

You will be eligible to participate in the customary medical, dental, life
insurance and long-term disability benefits offered to other employees in
similar positions the first pay period following thirty (30) days of employment.
A summary of these benefits is enclosed. More detailed enrollment information
will be sent to you shortly after you begin employment. If you accept this
offer, you may receive copies of Company policies and procedures in effect from
time to time and agree to abide by same, realizing that changes can occur at any
time and that such polices and procedures are not to be construed as a contract
of employment. You will also be reimbursed for your reasonable business expenses
in accordance with policy.

Vacation will accrue at the rate of 1.25 days per month, which is equivalent to
fifteen (15) days or three (3) weeks per year.

The Company will also reimburse you for your actual expenses incurred in
maintaining your COBRA coverage from your previous employer for a period of
thirty (30) days from your date of hire. Depending on whether you have elected
individual or family COBRA coverage, the Company will reimburse you up to a
maximum of $156.95 for single coverage and $422.42 for family coverage per
month.

In connection with your relocation from your current residence located at 10526
Wellington Boulevard, Powell, Ohio to the Marietta, Georgia area, the following
relocation benefits will be provided to you as a condition of your employment:

-    Reimbursement for expanses associated with movement of household goods,
     storage, appliance servicing, transportation, house hunting trips,
     temporary lodging and living expenses, purchase of new residence, and
     interim house expenses will be in accordance with the Healthdyne
     Technologies Relocation Policy (copy enclosed) as described on Pages 1
     through 6 of the Policy. The limits and duration of such expenses will be
     extended, when necessary, on a reasonable case-by-case basis.

-    You will also be eligible for reimbursement of expenses associated with the
     sale of your current residence in Powell, Ohio. Eligible expenses are
     defined on Page 7 Section II.A.2. (Sale of Former Residence) of the
     Healthdyne Technologies Relocation Policy.

-    Full gross-up tax protection (first and second tier) will also be offered
     for relocation expenses resulting in non-deductible, taxable income as
     defined on Page 6 in Section 5 (Tax Effects) of the Healthdyne Technologies
     Relocation Policy.

The reimbursement of eligible relocation expenses, including tax protection,
will be limited to $85,000.00 in the aggregate.

If through your good faith efforts, you are unable to sell your current
residence for an amount equal to or greater than your confirmed purchase price
of the residence, the Company agrees to reimburse you for the confirmed loss
(difference between purchase price and sales price) up to a maximum 
reimbursement of $25,000.00.



<PAGE>   3


Mr. John Miclot
October 12, 1995
Page 3




Should you voluntarily elect to leave the employ of Healthdyne Technologies
within the first twenty-four (24) months of employment with the Company, you
will be required to repay to the Company the relocation expenses incurred and
paid on your behalf through the date of your termination of employment. The
specific amount of relocation expenses to be repaid to the Company will decline
over time in accordance with the following schedule:
<TABLE>
<CAPTION>

         Period of Employment with    Percentage of Relocation Expenses
          Healthdyne Technologies     Payable to Healthdyne Technologies

          <S>                                         <C> 
               0 - 12 months                          100%
              13 - 18 months                           50%
              19 - 24 months                           25%
          Greater than 24 months                        0%
</TABLE>



A special severance arrangement is included in this offer of employment. This
special severance arrangement will become effective and the payments and
benefits, described below, will be provided to you only if your employment with
the Company is terminated by the Company due to the elimination of your job,
through no fault of your own, with no offer of a comparable position within the
Company. This special severance arrangement will not apply if your employment
with the Company is terminated due to voluntary resignation, death, disability,
retirement, discharge for cause, lack of a comparable position upon return from
a leave of absence, or change of control of Healthdyne Technologies. "Cause"
shall be defined as:

         (i)      Your conviction of, or your plea of guilt or nolo contendere
                  to any felony (other than operating a motor vehicle under the
                  influence of alcohol) or any act of fraud or embezzlement of
                  funds;

         (ii)     Your violation of the terms and conditions set forth in the
                  Company's Confidentiality Agreement, which you have executed
                  and acknowledge as binding obligations;

         (iii)    Your engagement in any fraudulent, unlawful or unethical
                  practice adversely affecting the Company or its customers or
                  suppliers, or your engagement in activities outside the
                  ordinary course of business that have a material adverse
                  effect on the Company or its customer or suppliers;

         (iv)     Your refusal to perform reasonable duties required of your
                  position (as designated by the officers and directors of the
                  Company from time to time).

Under this special severance arrangement, if such termination of employment
occurs, you are eligible to receive your regular base salary, in effect at the
time of your termination, for a period of twelve (12) months from the date of
your termination of employment These severance payments will be made to you in
regular installments consistent with the Company's normal payroll cycle. Your
existing medical and life insurance benefits will continue at the normal
contribution rate for you and your dependents during the period of severance
pay.



<PAGE>   4


Mr. John Miclot
October 12, 1995
Page 4



Severance payments will cease prior to the twelve (12) month period described
above if, during the period of severance pay, you violate or do not comply with
any of the terms and conditions specified in the Company's Confidentiality
Agreement, or you do not cooperate with the Company in taking all means
reasonably possible to ensure the rights and interest of the Company are fully
protected and preserved. In order to receive the severance pay and benefits
described above, you will be required to release the Company from any and all
other claims, demands, or causes of action. This release must be executed prior
to the receipt of the first severance pay installment.

As we discussed, the enclosed Non-Competition Agreement has been revised and
those revisions can be found on Page 6, 4(a)(1) and on Page 8, 5(a). This
Agreement is extended to you to ensure you receive reasonable compensation in
return for your agreement not to compete with the Company in the event of your
termination of employment with the Company following a change in control of the
Company as defined in the Agreement.

This offer is contingent upon your signing the Company's Confidentiality
Agreement attached hereto. Please indicate your acceptance to the terms stated
herein by signing the acceptance below and returning this letter, along with an
executed original of the attached Agreement to me in the enclosed self-addressed
envelope. Please retain a copy of the fully executed Agreements for your
records.

I look forward to your joining Healthdyne Technologies and believe the
relationship will be mutually rewarding. I am confident these arrangements will
be satisfactory to you and I look forward to receiving your acceptance of our
offer of employment

Sincerely,

/s/ Craig B. Reynolds

Craig B. Reynolds
President and Chief Executive Officer




                                   ACCEPTANCE

I have read and understand the foregoing which constitutes the complete, entire
and exclusive statement of the agreement between the Company and the undersigned
and supersedes all prior or contemporaneous proposals, promises, understandings,
representations, conditions, oral or written, relating to the subject matter of
this agreement. I accept employment at will with the Company subject to the
terms and conditions contained herein.


/s/ John L. Miclot                                      10/17/95
-------------------------------------------------------------------------------
John L. Miclot                                          Date