EXHIBIT 10.38


                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

         This Amended and Restated  Employment  Agreement (the  "Agreement")  is
entered into by and between  Apria  Healthcare  Group Inc. (the  "Company")  and
Lawrence M. Higby (the "Executive"), as of the 26th day of February, 1999.

I.       EMPLOYMENT.

         The Company  hereby  employs the  Executive  and the  Executive  hereby
accepts such  employment,  upon the terms and conditions  hereinafter set forth,
from  February  26,  1999,  to and  including  January 18,  2001.  The period of
employment  covered by this  Agreement  shall be  automatically  extended for an
additional year until January 18, 2002, unless either party shall send the other
a notice prior to October 1, 2000, declining to accept such extension.

II.      DUTIES.

         A. The Executive shall serve during the course of his employment as the
President  and Chief  Operating  Officer of the Company,  reporting to the Chief
Executive  Officer.  He  shall  have  responsibility  for  all  operating  field
management, the corporate-wide sales, marketing and revenue management functions
and such other duties and  responsibilities  as shall be determined from time to
time by the Chief Executive Officer or the Board of Directors of the Company.

         B. The Executive agrees to devote substantially all of his time, energy
and ability to the business of the  Company.  Nothing  herein shall  prevent the
Executive,  upon approval of the Board of Directors of the Company, from serving
as a director or trustee of other  corpo0rations  or businesses which are not in
competition  with the business of the Company or in competition with any present
or future  affiliate of the Company.  Nothing herein shall prevent the Executive
from  investing in real estate for his own account or from becoming a partner or
a  stockholder  in  any  corporation,   partnership  or  other  venture  not  in
competition  with the business of the Company or in competition with any present
or future affiliate of the Company.

III.     COMPENSATION.

         A. Salary.  The Company will pay to the  Executive a base salary at the
rate of $400,000 per year. Such salary shall be payable in periodic installments
in accordance with the Company's customary  practices.  Amounts payable shall be
reduced  by  standard   withholdings  and  other  authorized   deductions.   The
Executive's  salary may be increased  from time to time at the discretion of the
Company's Board of Directors or its Compensation Committee.

         B. Annual Bonus, Incentive, Savings and Retirement Plans. The Executive
shall be entitled to  participate  in all annual bonus,  incentive,  savings and
retirement plans, practices, policies and programs applicable generally to other
executives of the Company,  including without limitation the Company's Incentive
Compensation Plan at the 40% target level, with eligibility for over-achievement
up to 80% of base salary.

         C. Welfare Benefit Plans. The Executive and/or his family,  as the case
may be, shall be eligible for  participation  in and shall  receive all benefits
under welfare benefit plans,  practices,  policies and programs  provided by the
Company  (including,   without  limitation,   medical,   prescription,   dental,
disability, salary continuance, group life, accidental death and travel accident
insurance  plans and  programs)  to the  extent  applicable  generally  to other
executives of the Company. The Company reserves the right to modify,  suspend or
discontinue any and all of the above plans, practices,  policies and programs at
any time  without  recourse  by the  Executive  so long as such  action is taken
generally with respect to other similarly  situated peer executives and does not
single out the Executive.

         D.  Expenses.  The  Executive  shall  be  entitled  to  receive  prompt
reimbursement  for  all  reasonable  employment  expenses  incurred  by  him  in
accordance  with the policies,  practices and procedures as in effect  generally
with respect to other executives of the Company.

         E. Fringe Benefits. The Executive shall be entitled to fringe benefits,
including without  limitation (i) a car allowance of $8,400 per year, payable in
periodic installments in accordance with the Company's customary practices, (ii)
reasonable access to the Company's  independent  auditors for personal financial
planning,  (iii) reasonable travel and entertainment expenses of the Executive's
spouse,  on an  actually  incurred  basis  when  necessary  in  connection  with
participation in Company events, and (iv) such other benefits in accordance with
the plans,  practices,  programs and policies as may be in effect generally with
respect to other executives of the Company.

         F.  Vacation.  The  Executive  shall be  entitled to four weeks of paid
vacation annually,  to be available and prorated monthly during the term of this
Agreement and otherwise to be consistent  with the vacation  policy and practice
applicable to other executives of the Company.

IV.      TERMINATION.

         A. Death or Disability.  The  Executive's  employment  shall  terminate
automatically  upon the  Executive's  death.  If the Company  determines in good
faith  that the  Disability  of the  Executive  has  occurred  (pursuant  to the
definition of Disability set forth below),  it may give to the Executive written
notice in  accordance  with Section  XVIII of its  intention  to  terminate  the
Executive's  employment.  In such event,  the  Executive's  employment  with the
Company shall  terminate  effective on the 30th day after receipt of such notice
by the  Executive,  provided  that,  within the 30 days after such receipt,  the
Executive  shall not have returned to full-time  performance of his duties.  For
purposes  of this  Agreement,  "Disability"  shall  mean a  physical  or  mental
impairment which substantially limits a major life activity of the Executive and
which  renders the Executive  unable to perform the  essential  functions of his
position,  even with  reasonable  accommodation  which  does not impose an undue
hardship on the Company.  The Company reserves the right, in good faith, to make
the  determination  of Disability  under this Agreement  based upon  information
supplied by the Executive and/or his medical  personnel,  as well as information
from medical personnel (or others) selected by the Company or its insurers.

         B. Cause.  The Company may terminate  the  Executive's  employment  for
Cause.  For  purposes of this  Agreement,  "Cause"  shall mean that the Company,
acting in good faith  based  upon the  information  then  known to the  Company,
determines that the Executive has engaged in or committed:  willful  misconduct;
theft, fraud or other illegal conduct; refusal or unwillingness to substantially
perform  his duties  (other than such  failure  resulting  from the  Executive's
Disability) for a 30-day period after written demand for substantial performance
is delivered  by the Company  that  specifically  refers to this  paragraph  and
identifies  the  manner in which the  Company  believes  the  Executive  has not
substantially  performed  his duties;  insubordination;  any willful act that is
likely to and which does in fact have the effect of injuring the  reputation  or
business of the  Company;  violation  of any  fiduciary  duty;  violation of the
Executive's  duty of  loyalty  to the  Company;  or a breach of any term of this
Agreement.  For  purposes of this  paragraph,  no act, or failure to act, on the
Executive's part shall be considered  willful unless done or omitted to be done,
by him not in good  faith  and  without  reasonable  belief  that his  action or
omission was in the best interest of the Company. Notwithstanding the foregoing,
the  Executive  shall not be deemed to have been  terminated  for Cause  without
delivery to the  Executive of a notice of  termination  signed by the  Company's
Chairman  of the  Board or Chief  Executive  Officer  stating  that the Board of
Directors of the Company has  determined  that the  Executive  has engaged in or
committed  conduct  of the  nature  described  in the  second  sentence  of this
paragraph, and specifying the particulars thereof in detail.

         C.  Other  than  Cause or Death or  Disability.  The  Executive  or the
Company may terminate the Executive's  employment at any time, without Cause, by
giving the other party to this Agreement at least 30 days advance written notice
of such termination, subject to the provisions of this Agreement.

         D.  Obligations of the Company Upon Termination.

         1. Death or Disability.  If the Executive's employment is terminated by
reason of the  Executive's  death or Disability,  this Agreement shall terminate
without further obligations to the Executive or his legal  representatives under
this  Agreement,  other than for (a)  payment of the sum of (i) the  Executive's
base salary through the date of termination to the extent not theretofore  paid,
plus (ii) any earned vacation pay, to the extent not  theretofore  paid (the sum
of the amounts  described in clauses (i) and (ii) shall be hereinafter  referred
to as the "Accrued  Obligations"),  which shall be paid to the  Executive or his
estate or  beneficiary,  as applicable,  in a lump sum in cash within 30 days of
the date of  termination;  and (b)  payment  to the  Executive  or his estate or
beneficiary,  as  applicable,  any  amounts  due  pursuant  to the  terms of any
applicable welfare benefit plans.

         2. Cause.  If the  Executive's  employment is terminated by the Company
for Cause,  this Agreement  shall terminate  without further  obligations to the
Executive other than for the timely payment of the Accrued Obligations. If it is
subsequently  determined  that the  Company  did not have Cause for  termination
under this Section  IV-D-2,  then the Company's  decision to terminate  shall be
deemed to have been made under Section IV-D-3 and the amounts payable thereunder
shall be the only amounts the Executive may receive for his termination.

         3.  Other than Cause or Death or Disability.

         (a)      If,  during  the  term of  this  Agreement,  (i)  the  Company
                  terminates the Executive's  employment for other than Cause or
                  death or  Disability,  or (ii) the  Executive  terminates  his
                  employment hereunder with Good Reason (as defined below), this
                  Agreement  shall terminate and the Executive shall be entitled
                  to receive a  severance  payment  payable in one lump sum upon
                  the  termination  of his employment in an amount equal to 300%
                  of his Annual Compensation (as defined below).

                  Any payment made pursuant to this Section  IV-D-3(a)  shall be
                  reduced by all amounts  required to be withheld by  applicable
                  law, and shall only be made in exchange for a valid release of
                  all claims the  Executive  may have  against  the Company in a
                  form acceptable to the Company.  Such payment shall constitute
                  the sole and entire  obligation  of the Company to provide any
                  compensation  or benefits to the Executive  upon  termination,
                  except for  obligations  under the  Company's  401(k)  Savings
                  Plan,  obligations  pursuant  to the terms of any  outstanding
                  stock  option  agreements  and  the  Company's  obligation  to
                  provide the benefits  required by Section IV-D-3(d) below, and
                  except that the  Company  will also pay to the  Executive  any
                  Accrued Obligations (as defined in Section IV-D-1).

         (b)      The term "Good Reason" means:

                  (i)    the Executive's  annual base salary is reduced,  except
                         for  a  general  one-time   "across-the  board"  salary
                         reduction  not  exceeding  ten  percent  (10%) which is
                         imposed  simultaneously on all officers of the Company;
                         or

                  (ii)   the Company  requires  the  Executive to be based at an
                         office  location  which will  result in an  increase of
                         more than thirty (30) miles in the Executive's  one-way
                         commute; or

                  (iii)  if the Company's  Board of Directors or Chief Executive
                         Officer  does not permit the  Executive  to continue to
                         serve as the President and Chief Operating Officer with
                         the  responsibilities  as  described in Section II-A or
                         another mutually  acceptable senior executive position;
                         or

                  (iv)   there  shall occur a "change of control" of the Company
                         and,  at  any  time   concurrent  with  or  during  the
                         six-month period following such change of control,  the
                         Executive  shall  have  sent  to  the  Chief  Executive
                         Officer  of the  Company  (or the party  acting in such
                         capacity) a written notice  terminating  his employment
                         on a date  specified  in said  notice.  For purposes of
                         this Agreement, the term "change of control" shall mean
                         the occurrence of one of the following:

                           (1) any  "person,"  as such term is used in  Sections
                               13(d)and 14(d)(2) of the Securities  Exchange Act
                               of 1934, as amended (the "1934 Act") is,  becomes
                               or enters a contract to become,  the  "beneficial
                               owner,"  as such  term  is  used  in  Rule  13d-3
                               promulgated  under  the  1934  Act,  directly  or
                               indirectly,     of    securities     representing
                               twenty-five  percent  (25%) or more of the voting
                               common stock of the Company;

                           (2) all or  substantially  all of the business of the
                               Company is disposed  of, or a contract is entered
                               to dispose of all of the  business of the Company
                               pursuant   to  a  merger,   consolidation   other
                               transaction  in which (a) the  Company is not the
                               surviving  company or (b) the stockholders of the
                               Company prior to the  transaction do not continue
                               to  own  at  least  sixty  percent  (60%)  of the
                               surviving corporation;

                           (3) the Company is materially or completely liquida-
                               ted; or

                           (4) any person (other than the Company) purchases any
                               common  stock  of  the  Company  in a  tender  or
                               exchange  offer  with the  intent,  expressed  or
                               implied,  of  purchasing  or otherwise  acquiring
                               control of the Company.

     Notwithstanding clause (1) above, a "change of control" shall not be deemed
to have  occurred  solely  because  a person  shall be,  become or enter  into a
contract to become the  beneficial  owner of 25% or more,  but less than 40%, of
the voting  common  stock of the  Company,  if and for so long as such person is
bound by, and in  compliance  with, a contract with the Company  providing  that
such  person may not  nominate,  vote for, or select more than a minority of the
directors of the Company. The exception provided by the preceding sentence shall
cease  to  apply  with  respect  to  any  person  upon  expiration,  waiver,  or
non-compliance with any such contract, by which such person was bound.


     (c)  The  term  "Annual   Compensation"   means  an  amount  equal  to  the
          Executive's  annual  base  salary at the rate in effect on the date on
          which  the   Executive   received  or  gave  written   notice  of  his
          termination, plus the sum of (i) an amount equal to the average of the
          Executive's two most recent annual bonuses, if any, received under the
          Company's   Incentive   Compensation  Plan  prior  to  the  notice  of
          termination,  (ii) the Executive's  annual car allowance,  if any, and
          (iii) an amount  determined  by the  Company  from time to time in its
          sole  discretion  to be equal to the  average  annual cost for Company
          employees  of obtaining  medical,  dental and vision  insurance  under
          COBRA,  which amount is hereby initially  determined to be $5,000.  In
          the event that the Executive's bonus for one of the two calendar years
          preceding the calendar  year in which the Executive  receives or gives
          written  notice of  termination  was a prorated bonus due to Executive
          having worked a partial year,  then solely for purposes of calculating
          Annual   Compensation,   the   Executive's   prorated  bonus  will  be
          recalculated  to reflect the bonus the  Executive  would have received
          had the  Executive  worked for the entire year. In the event that such
          notice of termination  is received or given by the Executive  prior to
          the first  date  subsequent  to the  commencement  of the  Executive's
          employment by the Company on which annual  bonuses are generally  paid
          to other  executives  of the  Company,  then  solely for  purposes  of
          calculating Annual  Compensation,  the Executive's  average of his two
          most recent annual bonuses shall be deemed to be his applicable target
          bonus pursuant to Section III-B, with no over-achievement.

     (d)  In the event of any termination of the Executive's employment pursuant
          to Section  IV-D-3(a),  the  Company  shall,  for a period of one year
          following the termination date, provide the Executive with appropriate
          office  space  in  a  furnished  office  suite,  including  reasonable
          secretarial,  telephone,  copying and delivery  services.  The Company
          shall not be required to spend more than a total of $50,000 to provide
          this benefit to the Executive.

         4.   Exclusive   Remedy.   The  Executive   agrees  that  the  payments
contemplated  by this Agreement  shall  constitute the exclusive and sole remedy
for any termination of his employment and the Executive  covenants not to assert
or  pursue  any  other  remedies,  at  law or in  equity,  with  respect  to any
termination of employment.

V.       INTENTIONALLY DELETED

VI.      ARBITRATION.

         Any dispute or  controversy  arising under or in  connection  with this
Agreement or Executive's  employment by the Company shall be settled exclusively
by arbitration,  conducted before a single neutral arbitrator in accordance with
the  American  Arbitration   Association's  National  Rules  for  Resolution  of
Employment  Disputes  as  then  in  effect.  Judgment  may  be  entered  on  the
arbitrator's award in any court having jurisdiction; provided, however, that the
Company shall be entitled to seek a restraining order or injunction in any court
of competent  jurisdiction  to prevent any  continuation of any violation of the
provisions  of Sections  VII,  VIII,  or IX of this  Agreement and the Executive
hereby consents that such restraining order or injunction may be granted without
the necessity of the Company's posting any bond, and provided, further, that the
Executive shall be entitled to seek specific performance of his right to be paid
until the date of employment  termination  during the pendency of any dispute or
controversy  arising under or in connection  with this  Agreement.  The fees and
expenses of the arbitrator shall be borne by the Company.

VII.     ANTISOLICITATION.

         The  Executive  promises  and  agrees  that  during  the  term  of this
Agreement  (including any renewal) and for a period of one year  thereafter,  he
will not  influence or attempt to  influence  customers of the Company or any of
its present or future subsidiaries or affiliates, either directly or indirectly,
to divert their business to any individual,  partnership,  firm,  corporation or
other  entity  then in  competition  with the  business  of the  Company  or any
subsidiary or affiliate of the Company.

VIII.    SOLICITING EMPLOYEES.

         The  Executive  promises  and  agrees  that,  for a period  of one year
following  termination  of his  employment,  he will not directly or  indirectly
solicit any of the Company  employees who earned  annually  $50,000 or more as a
Company employee during the last six months of his or her own employment to work
for any other business,  individual,  partnership,  firm, corporation,  or other
entity.

IX.      CONFIDENTIAL INFORMATION.

         A. The  Executive,  in the  performance  of his duties on behalf of the
Company,  shall have  access to,  receive  and be  entrusted  with  confidential
information,  including but not limited to systems technology, field operations,
reimbursement,  development, marketing,  organizational,  financial, management,
administrative,  clinical, customer,  distribution and sales information,  data,
specifications  and  processes  presently  owned  or at any  time in the  future
developed, by the Company or its agents or consultants,  or used presently or at
any time in the future in the course of its business that is not otherwise  part
of the public  domain  (collectively,  the  "Confidential  Material").  All such
Confidential  Material  is  considered  secret  and  will  be  available  to the
Executive in  confidence.  Except in the  performance of duties on behalf of the
Company,  the  Executive  shall  not,  directly  or  indirectly  for any  reason
whatsoever,  disclose  or  use  any  such  Confidential  Material,  unless  such
Confidential  Material  ceases  (through  no  fault  of the  Executive's)  to be
confidential  because it has  become  part of the public  domain.  All  records,
files,  drawings,  documents,  notes, disks,  diskettes,  tapes, magnetic media,
photographs,  equipment and other tangible items, wherever located,  relating in
any way to the  Confidential  Material or otherwise to the  Company's  business,
which the  Executive  prepares,  uses or  encounters  during  the  course of his
employment,  shall be and remain the Company's  sole and exclusive  property and
shall  be  included  in the  Confidential  Material.  Upon  termination  of this
Agreement by any means,  or whenever  requested by the  Company,  the  Executive
shall promptly deliver to the Company any and all of the Confidential  Material,
not previously delivered to the Company, that may be or at any previous time has
been in the Executive's possession or under the Executive's control.

         B. The Executive hereby  acknowledges that the sale or unauthorized use
or  disclosure  of any of  the  Company's  Confidential  Material  by any  means
whatsoever and at any time before,  during or after the  Executive's  employment
with the Company shall constitute unfair competition.  The Executive agrees that
he shall not engage in unfair competition either during the time employed by the
Company or any time thereafter.

X.       PARACHUTE LIMITATION.

         Notwithstanding  any other provision of this  Agreement,  the Executive
shall not have any right to  receive  any  payment or other  benefit  under this
Agreement,  any other agreement,  or any benefit plan if such right,  payment or
benefit,  taking into account all other  rights,  payments or benefits to or for
the Executive under this Agreement, all other agreements, and all benefit plans,
would cause any right,  payment or benefit to the Executive under this Agreement
to be considered a "parachute payment" within the meaning of Section 280G(b) (2)
of the Internal Revenue Code as then in effect (a "Parachute  Payment").  In the
event that the receipt of any such right or any other  payment or benefit  under
this  Agreement,  any other  agreement,  or any  benefit  plan  would  cause the
Executive  to be  considered  to have  received a Parachute  Payment  under this
Agreement,  then the Executive  shall have the right,  in the  Executive's  sole
discretion,   to  designate  those  rights,  payments  or  benefits  under  this
Agreement,  any other  agreements,  and/or any  benefit  plans,  that  should be
reduced or eliminated so as to avoid having the right, payment or benefit to the
Executive under this Agreement be deemed to be a Parachute Payment.

XI.      SUCCESSORS.

         A. This  Agreement is personal to the Executive and shall not,  without
the prior written consent of the Company, be assignable by the Executive.

         B. This Agreement shall inure to the benefit of and be binding upon the
Company,   its  subsidiaries  and  its  successors  and  assigns  and  any  such
subsidiary,  successor or assignee shall be deemed  substituted  for the Company
under the terms of this Agreement for all purposes. As used herein,  "successor"
and  "assignee"  shall include any person,  firm,  corporation or other business
entity which at any time, whether by purchase, merger or otherwise,  directly or
indirectly  acquires  the stock of the Company or to which the  Company  assigns
this Agreement by operation of law or otherwise.

XII.     WAIVER.

         No waiver  of any  breach of any term or  provision  of this  Agreement
shall be  construed  to be,  nor shall be, a waiver of any other  breach of this
Agreement.  No waiver shall be binding unless in writing and signed by the party
waiving the breach.

XIII.    MODIFICATION.

         This  Agreement may not be amended or modified  other than by a written
agreement  executed  by the  Executive  and  the  Company's  Chairman  or  Chief
Executive Officer.

XIV.     SAVINGS CLAUSE.

         If any provision of this Agreement or the  application  thereof is held
invalid,  such invalidity  shall not affect any other provisions or applications
of the  Agreement  which can be given effect  without the invalid  provisions or
applications  and, to this end, the provisions of this Agreement are declared to
be severable.

XV.      COMPLETE AGREEMENT.

         This Agreement  constitutes and contains the entire agreement and final
understanding  concerning the  Executive's  employment  with the Company and the
other subject matters  addressed  herein between the parties.  It is intended by
the  parties  as a  complete  and  exclusive  statement  of the  terms  of their
agreement  from and after the date hereof.  It supersedes and replaces all prior
negotiations and all agreements proposed or otherwise,  whether written or oral,
concerning  the  subject  matter  hereof,   including  without   limitation  the
Executive's  Employment  Agreements dated November 7, 1997 and January 26, 1998,
except that (i) such prior agreements shall remain in effect with respect to the
time  periods  prior to the date hereof  during  which such  agreements  were in
effect,  and (ii) any reference in the Executive's  stock option agreements with
the  Company to the term "Good  Reason" as defined in such  agreements  shall be
deemed  to  refer  to  "Good   Reason"  as  defined  in  this   Agreement.   Any
representation, promise or agreement not specifically included in this Agreement
shall not be binding upon or enforceable  against either party.  This is a fully
integrated agreement.

XVI.     GOVERNING LAW.

         This  Agreement  shall be deemed to have been  executed  and  delivered
within the State of  California  and the rights and  obligations  of the parties
hereunder  shall be construed and enforced in accordance  with, and governed by,
by the laws of the State of California  without regard to principles of conflict
of laws.

XVII.    CONSTRUCTION.

         In any construction to be made of this Agreement, the same shall not be
construed  against  any party on the basis that the party was the  drafter.  The
captions of this Agreement are not part of the provisions  hereof and shall have
no force or effect.

XVIII.  COMMUNICATIONS.

         All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if  delivered  by hand
or by courier,  or if mailed by registered or certified mail,  postage  prepaid,
addressed to the Executive at 218 Via Lido Nord, Newport Beach, California 92663
or addressed to the Company at 3560 Hyland Avenue, Costa Mesa, California 92626,
Attention:  Chief Executive Officer,  with a copy to the attention of the Senior
Vice President,  Human  Resources.  Either party may change the address at which
notice shall be given by written notice given in the above manner.

XIX.     EXECUTION.

         This  Agreement  may be executed in one or more  counterparts,  each of
which shall be deemed an original,  but all of which together  shall  constitute
one and the same instrument.  Xerographic copies of such signed counterparts may
be used in lieu of the originals for any purpose.

XX.      LEGAL COUNSEL.

         The Executive and the Company  recognize that this is a legally binding
contract and acknowledge and agree that they have had the opportunity to consult
with legal counsel of their choice.

         In witness whereof,  the parties hereto have executed this Agreement as
of the date first above written.


  APRIA HEALTHCARE GROUP INC.              THE EXECUTIVE



By: 
   --------------------------------         -------------------------------
   Philip L. Carter                         Lawrence M. Higby
   Chief Executive Officer