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                                                                   EXHIBIT 10.32
                              CONSULTING AGREEMENT
                                 BY AND BETWEEN
                             UROHEALTH SYSTEMS, INC.
                                       AND
                              RICHARD R. NEWHAUSER


         THIS CONSULTING AGREEMENT (this "Agreement") is entered into as of
August 14, 1996 (the "Execution Date"), by and between UROHEALTH Systems, Inc.,
a corporation organized and existing under the laws of Delaware ("UROHEALTH"),
and Richard R. Newhauser, a person acting in his individual capacity
("Consultant").


                                   WITNESSETH:


         WHEREAS, UROHEALTH desires to retain the consultation services of
Consultant to aid in UROHEALTH's continuing mission to develop, improve, and
expand its business;


         WHEREAS, Consultant possesses the knowledge and professional expertise
to aid UROHEALTH in its mission to develop, improve and expand its business as
referenced above;


         WHEREAS, UROHEALTH and Consultant desire to enter into this Agreement
in accordance with Section 2.4 of that certain Agreement and Plan of Merger,
dated as of July 5, 1996, by and among UROHEALTH, UROHEALTH, Inc., and
Richard-Allan Medical Industries, Inc.;


         NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:


         SECTION 1. CONSULTING SERVICES. During the term of this Agreement,
Consultant shall perform those consulting services and work on such projects as
Consultant and UROHEALTH may from time to time mutually agree. Consultant shall
devote sufficient time and best efforts as a consultant in order to perform the
responsibilities under this Agreement to the satisfaction of UROHEALTH.
Consultant shall provide services under this Agreement as reasonably requested
by UROHEALTH at the times reasonably available to Consultant, taking into
account Consultant's other professional duties.


         SECTION 2. TERM. The term of this Agreement shall commence as of the
Effective Date and shall continue for five (5) years thereafter, unless
terminated earlier by either party in accordance with Section 3. "Effective
Date" shall mean the date of termination of that certain Employment Agreement
dated as of August __, 1996 by and between UROHEALTH and Consultant.
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         SECTION 3. TERMINATION. Consultant may terminate this Agreement at any
time upon thirty (30) days' written notice to UROHEALTH. UROHEALTH may terminate
this Agreement for "cause," which for purposes of this Agreement shall mean (i)
the willful engaging by Consultant in misconduct which is materially injurious
to UROHEALTH, monetarily or otherwise, or (ii) Consultant's final conviction for
fraud or of any felony involving moral turpitude. Notwithstanding the foregoing,
Consultant shall not be deemed to have been terminated for cause under clause
(i) unless and until there shall have been delivered to Consultant a copy of a
Notice of Termination from the Board of Directors of UROHEALTH after reasonable
notice to Consultant and an opportunity for Consultant to be heard before the
Board, finding that in the good faith opinion of the Board, Consultant was
guilty of conduct set forth above and specifying the particulars thereof in
detail. In addition, this Agreement shall be terminated automatically upon
Consultant's death or incapacity, whether mental or physical. UROHEALTH or its
designee shall determine in good faith whether Consultant is incapacitated for
the purposes of this Section 3. Notwithstanding anything to the contrary herein
contained, in the event performance by either party hereto of any term,
covenant, condition or provision of this Agreement shall (i) jeopardize the
licensure of UROHEALTH, (ii) jeopardize its participation in (a) Medicare,
Medicaid, Blue Cross, or other reimbursement or payment programs, or (b) the FDA
approval process, regulatory program and guidelines, or (c) any other state or
nationally recognized accrediting organization, or (iii) be in violation of any
statute, ordinance, or be otherwise deemed illegal, or be deemed unethical by
any recognized body, agency, or association in the medical fields, UROHEALTH
may, at its option, terminate this Agreement immediately.


         SECTION 4. COMPENSATION. In consideration for the services rendered by
Consultant to UROHEALTH under this Agreement, UROHEALTH shall pay to Consultant
during the term of this Agreement, Two Hundred Thousand Dollars ($200,000) per
annum. Such sum shall be paid in 24 equal bi-monthly installments each year.
Consultant shall be reimbursed by UROHEALTH for all proper, necessary and
reasonable business expenses incurred as a result of the performance of services
requested by UROHEALTH. Consultant shall submit a detailed bill and
documentation as deemed necessary by UROHEALTH for expenses which shall be
subject to approval by UROHEALTH's Chief Financial Officer. UROHEALTH shall also
provide health insurance benefits to Consultant at levels comparable to benefits
afforded by UROHEALTH to its California employees. Notwithstanding anything
herein to the contrary, UROHEALTH's obligation to provide Consultant such health
insurance benefits shall commence as of the Effective Date, shall survive the
expiration or termination of this Agreement and shall continue until
Consultant's death.


         SECTION 5.  INSURANCE AND INDEMNIFICATION.  UROHEALTH shall indemnify
Consultant with respect to all matters relating to services rendered by
Consultant hereunder, except for those caused by Consultant's willful
misconduct.


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         SECTION 6. RESTRICTIVE COVENANTS.


                  6.1 Consultant agrees that during the term of this Agreement,
and for the one (1) year period following the termination of this Agreement, he
shall not serve as proprietor, partner, employee, stockholder, principal,
member, agent, consultant, director, or officer for, or in any other capacity
participate, engage, or have a financial or other interest in, any Direct
Competitor of UROHEALTH. For purposes of this Agreement, "Direct Competitor"
shall mean any person or entity, including, but not limited to, a partnership,
limited liability company, or corporation, which is engaged in, or is about to
become engaged in, the development or operation of any entity or business which
develops, manufactures, or distributes medical products which perform the same
functions as do those manufactured by UROHEALTH.


                  6.2 Consultant agrees and acknowledges that the restrictions
contained herein are a reasonable and necessary protection of a legitimate
interest of UROHEALTH and that any violation of this restriction would cause
substantial and irreparable injury to UROHEALTH and that UROHEALTH would not
have entered into this Agreement without receiving the additional consideration
agreed to by Consultant herein binding himself/herself to this restriction. In
the event of any violation of this restriction, UROHEALTH shall be entitled, in
addition to any other remedy available, to preliminary and permanent injunctive
relief hereof, and all costs of enforcement hereunder including, but not limited
to, reasonable attorneys' fees, costs and expenses.


         SECTION 7. CONFIDENTIALITY. During the term of this Agreement,
UROHEALTH, its clients, and its prospective clients may reveal to Consultant
confidential and proprietary information of UROHEALTH ("Confidential
Information"). Confidential Information shall include, but not be limited to,
that information which is designated as confidential either in writing or
orally, or that information which is not generally known to the public. With
respect to any Confidential Information disclosed to Consultant, Consultant
agrees to: (a) not disclose such Confidential Information to third parties
except: (i) third parties for whom Consultant has secured the prior written
approval of UROHEALTH, and/or (ii) as required by law or by any court or
governmental body, agency or department of competent jurisdiction; and (b) use
such Confidential Information only for the purpose of performing his/her
obligations under this Agreement. Notwithstanding anything to the contrary
herein, Consultant shall not have an obligation to preserve the confidentiality
of any Confidential Information which was previously known to Consultant free of
any obligation to keep it confidential or is or becomes publicly available by
other than unauthorized disclosure. The provisions of this Section 7 shall
survive expiration or termination of this Agreement for any reason.


         SECTION 8. STATUS OF THE PARTIES. In the performance of this Agreement,
it is mutually understood and agreed that Consultant is performing as an
independent contractor with, and not as an employee, partner, or joint venturer
of or with UROHEALTH. Except as provided in Section 4, Consultant shall have no
claim under this Agreement against UROHEALTH for workers' compensation,
unemployment 

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compensation, vacation pay, sick leave, disability benefits, retirement
benefits, social security benefits or any other employee benefits of any kind,
all of which shall be the sole responsibility of Consultant. UROHEALTH shall not
withhold on behalf of Consultant pursuant to this Agreement any sums for income
tax, unemployment insurance, social security or otherwise pursuant to any law or
requirement of any government agency, and all such withholding, if any is
required, shall also be the sole responsibility of Consultant. Consultant shall
indemnify and hold UROHEALTH harmless from any and all loss or liability, if
any, arising with respect to any of the foregoing benefits or withholding
requirements.


         SECTION 9. GOVERNING LAW. This Agreement is being delivered and
executed in the State of California and the validity, construction, and
enforcement of this Agreement shall be governed in all respects by the laws of
the State of California. Venue shall be proper only in a court of competent
jurisdiction located in the State of California. The parties agree to be subject
to personal jurisdiction and consent to service of process issued by a court in
which venue is proper as defined in this Section 9.


         SECTION 10. MODIFICATION AND WAIVER. No modification of this Agreement
shall be deemed effective unless in writing and signed by each of the parties.
Any waiver of a breach of any provision of this Agreement shall not be deemed
effective unless in writing and signed by the party against whom enforcement of
the waiver is sought.


         SECTION 11. HEADINGS. The descriptive headings of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any provision hereof.


         SECTION 12. ASSIGNMENT. Neither party may assign, delegate,
subcontract, or otherwise transfer its rights or obligations hereunder without
the prior written consent of the other party and any assignment or other
transfer in violation of this Section 12 shall be void; provided, however, that
UROHEALTH may assign its rights and delegate its duties pursuant to this
Agreement to any successor, subsidiary, or affiliate without the written consent
of the Consultant.


         SECTION 13. SEVERABILITY. If, as a result of any valid Act of Congress
or act of any legislature or any regulation duly promulgated by the United
States or any state acting in accordance with the law, the terms and conditions
of this Agreement, or the payments made pursuant to this Agreement, render any
other relationship or transaction between the parties, or any affiliate of the
parties, illegal or in violation of law, then the parties shall negotiate in
good faith, and shall take all steps necessary, including, but not limited to,
amendment to the terms and conditions of this Agreement or return of the
compensation or any part of the compensation paid pursuant to this Agreement, in
order to reform this Agreement such that the terms and conditions of this
Agreement, or the payments made pursuant to this Agreement, if any, shall not
render any other relationship or transaction between the parties, or any
affiliate of the parties, illegal or in violation of law.


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         SECTION 14. NOTICES. All notices, requests, demands, and other
communications provided for hereunder shall be in writing and shall be deemed to
been duly given if (i) delivered in person; (ii) given by prepaid telex or
telegram, or by facsimile or other instantaneous electronic transmission device;
or (iii) deposited in the United States mail, first class, registered or
certified, return receipt requested, with proper postage prepaid, as follows:


         If to UROHEALTH:

                  UROHEALTH Systems, Inc.
                  5 Civic Plaza, Suite 100
                  Newport Beach, California  92660
                  Attention:  General Counsel

         If to Consultant:

                  Richard R. Newhauser
                  19232 Fisher Island Drive
                  Fisher Island, Florida  33109


         SECTION 15. ATTORNEYS' FEES. In the event any party hereto brings an
action or arbitration proceeding in connection with the performance, breach, or
interpretation of this Agreement, the prevailing party in such action or
proceeding shall be entitled to recover from the losing party all reasonable
cost and expenses of such litigation or proceeding, including attorneys' fees,
court costs, costs of investigation, and other costs, fees, and expenses
reasonably related to such action or proceeding.


         SECTION 16. BINDING EFFECT. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
permitted assigns.


         SECTION 17. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement between the parties concerning the subject matter
hereof, and supersedes all prior negotiations, agreements and understandings
between the parties, whether oral or in writing, concerning the subject matter
hereof.


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         INTENDING TO BE LEGALLY BOUND, the parties, or their duly authorized
representatives, have executed this Agreement to be effective on the Execution
Date.


UROHEALTH SYSTEMS, INC.                         RICHARD R. NEWHAUSER


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Signature                                       Signature

Date                                            Date
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