Document:

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Exhibit 10.16

                        OMEGA WORLDWIDE, INC. EMPLOYMENT
                        AND CHANGE IN CONTROL AGREEMENT

         This Employment and Change in Control Agreement (the "Agreement") is
made as of August 1, 2000 (the "Effective Date") by and between JAMES P.
FLAHERTY (the "Officer"), and OMEGA WORLDWIDE, INC., a Maryland corporation (the
"Company").

         WHEREAS, the Officer presently employed as the President of the
Company.

         WHEREAS, the Officer and the Company are currently party to a change in
control agreement dated March 24, 2000 (the "Change in Control Agreement"), and
the Officer and the Company wish to modify the terms of the Change in Control
Agreement and to substitute this Agreement for the Change in Control Agreement
as of the Effective Date, and have the terms of the Officer's employment
governed by this Agreement.

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and in consideration of the continuing employment of Officer by the
Company, the parties agree as follows:

         1. Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth in this paragraph 1:

(a)      "Affiliate" means any corporation, partnership, joint venture or other
         entity during any period in which at least a twenty-five percent
         interest in such entity is owned, directly or indirectly, by the
         Company (or a successor to the Company).

(b)      The "Agreement Term" shall be the period beginning on the Effective
         Date and ending on the three-year anniversary of the Effective Date.

(c)      "Board" means the Board of Directors of the Company.

(d)      "Cause" means (i) willful refusal to follow a lawful written order of
         the Board; (ii) willful misconduct or reckless disregard of his duties
         by the Officer; (iii) any act of fraud, misappropriation, dishonesty
         or moral turpitude; or (iv) the conviction of the Officer of any
         felony.

(e)      "Change in Control" means the occurrence of the events described in any
         of paragraphs (i), (ii), (iii), (iv), or (v) below:

         (i) Acquisition of Securities. The acquisition (disregarding any
         Excluded Acquisitions) by any Person of ownership of any Voting
         Securities if, immediately after such acquisition, such person has
         ownership of more than fifty percent (50%) of either the

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         Outstanding Company Common Stock, or the combined voting power of the
         Outstanding Company Voting Securities.

         (ii)  Change in Board. During any period of not more than two (2)
         consecutive years, not including any period prior to the Effective
         Date, Incumbent Directors cease for any reason to constitute at least
         a majority of the Board.

         (iii) Corporate Transaction. Consummation of a Corporate Transaction,
         but not including an Internal Reorganization.

         (iv)  Sale of Principal Assets. The sale or other disposition of all of
         the Principal Assets solely in exchange for cash or cash equivalents to
         one or more third-parties not controlled by the Company.

         (v)   Liquidation. The complete liquidation or dissolution of the
         Company. For purposes of this Agreement, the term "complete
         liquidation or dissolution" shall include only the complete disposition
         of all of the assets of the Company, such that after the disposition,
         the only assets held by the Company are cash or cash equivalents.

         Definitions. The terms used in the definition of "Change in Control"
         shall have the following meanings:

         -     The term "Company Plan" means an employee benefit plan (or
               related trust) sponsored or maintained by the Company or any
               corporation controlled by the Company.

         -     The term "Corporate Transaction" means any reorganization,
               merger, consolidation, or other business combination involving
               the Company.

         -     The following shall constitute "Excluded Acquisitions" of Stock
               or Voting Securities (whichever is applicable);

               (A)   Any acquisition of Stock or Voting Securities (whichever is
                     applicable) by a Company Plan.

               (B)   Any acquisition of Stock Or Voting Securities (whichever is
                     applicable) by an underwriter temporarily holding
                     securities pursuant to an offering of such securities.

               (C)   Any acquisition of Stock or Voting Securities (whichever is
                     applicable) by any person pursuant to an Internal
                     Transaction.

               (D)   Any acquisition of Stock or Voting Securities (whichever is
                     applicable) directly from the company (excluding any
                     acquisition resulting from the exercise of an exercise,
                     conversion, or exchange privilege unless the

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                     security being so exercised, converted, or exchanged was
                     acquired directly from the Company).

               (E)   Any acquisition of Stock or Voting Securities (whichever is
                     applicable) by the Company.

         -     The "Incumbent Directors" shall be the members of the Board on
               the Effective Date, and shall also include any director who is
               not a director on the Effective Date if that director is elected
               to the Board on the recommendation, or with the approval, of at
               least two-thirds (2/3) of the directors who then qualify as
               Incumbent Directors; and provided further that no director whose
               initial assumption of office is in connection with an actual or
               threatened election contest relating to the election of directors
               shall be deemed to be an Incumbent Director.

         -     The term "Internal Reorganization" means a sale-leaseback or
               other arrangement resulting in the continued utilization of such
               assets (or the operating products of such assets) by the Company.
               The term "Internal Reorganization" also means a Corporate
               Transaction to which all of paragraphs (A), (B), and (C) below
               are applicable;

               (A)   All or substantially all of the individuals and entities
                     who have ownership, respectively, of the Outstanding
                     Company Common Stock and Outstanding Company Voting
                     Securities immediately prior to such Corporate Transaction
                     have ownership of more than fifty percent (50%) of,
                     respectively, the then outstanding shares of common equity
                     securities and the combined voting power of the then
                     outstanding voting securities entitled to vote generally in
                     the election of directors, as the case may be, of the
                     ultimate parent entity resulting from such Corporate
                     Transaction (including, without limitation, an entity
                     which, as a result of such transaction, have ownership of
                     the Company or all or substantially all of the assets of
                     the Company either directly or through one or more
                     subsidiaries) in substantially the same relative
                     proportions as their ownership, immediately prior to such
                     Corporate Transaction, of the Outstanding Company Common
                     Stock and Outstanding Company Voting Securities, as the
                     case may be.

               (B)   No Person (other than the Company, any Company Plan or
                     related trust, the corporation resulting from such
                     Corporate Transaction, and any Person having ownership,
                     immediately prior to such Corporate Transaction, directly
                     or indirectly, more than fifty percent (50%) of the
                     Outstanding Company Common Stock or the Outstanding Company
                     Voting Securities, as the case may be) will have ownership
                     of more than fifty percent (50%) of, respectively, the then
                     outstanding common stock of the ultimate parent entity
                     resulting from such Corporate Transaction or the combined
                     voting power of the then outstanding voting securities of
                     such entity.

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               (C)   Individuals who were Incumbent Directors immediately prior
                     to the Corporate Transaction will constitute at least a
                     majority of the members of the board of directors of the
                     ultimate parent entity resulting from such Corporate
                     Transaction.

         -     The term "Outstanding Company Common Stock" as of any date means
               the then outstanding shares of common stock, of whatever class,
               of the Company.

         -     The term "Outstanding Company Voting Securities" as of any date
               means the then outstanding Voting Securities.

         -     The term "ownership" means beneficial ownership within the
               meaning of Rule 13d-3 promulgated under the Exchange Act.

         -     The term "Person" means an individual, entity or group as that
               term is used in Section 13(d)(3) or 14(d)(2) of the Exchange
               Act.

         -     The term "Voting Securities" as of any date means any of the
               outstanding securities of the Company entitled to vote generally
               in the election of the Board.

(f)      "Code" means the Internal Revenue Code of 1986, as amended.

(g)      "Company" means Omega Worldwide, Inc.

(h)      "Compensation Committee" means the Compensation Committee of the Board.

(i)      "Confidential Information" means data and information relating to the
         business of the Company or an Affiliate (which does not rise to the
         status of a Trade Secret) which is or has been disclosed to the Officer
         or of which the Officer became aware as a consequence of or through the
         Officer's relationship to the Company and which has value to the
         Company and is not generally known to its competitors. Confidential
         Information shall not include any data or information that has been
         voluntarily disclosed to the public by the Company or, where
         applicable, an Affiliate (except where such public disclosure has
         been made by the Officer without authorization) or that has been
         independently developed and disclosed by others, or that otherwise
         enters the public domain through lawful means.

(j)      "Date of Termination" means the last day the Officer is employed by the
         Company.

(k)      "Disability" has the same meaning as provided in the long-term
         disability plan or policy maintained or, if applicable, most recently
         maintained, by the Company for the Officer. If no long-term disability
         plan or policy was ever maintained on behalf of the Officer,
         Disability means that condition described in Code Section 22(e)(3), as
         amended from time to time. In the event of a dispute, the determination
         of Disability shall be made by

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         the Board and shall be supported by advice of a physician competent in
         the area to which such Disability relates.

(l)      "Fair Market Value of Restricted Stock Awards" means an amount equal to
         the value per share of common stock of the Company multiplied by the
         number of shares of common stock subject to restricted stock awards
         granted to the Officer during the twelve (12) full months (excluding
         any partial month in which a Change in Control occurs) immediately
         preceding the Date of Termination. The value per share will be equal
         to:

         (i)   the closing price per share at which sales of the common stock of
         the Company shall have been sold on the most recent trading date
         immediately prior to the date of grant of the restricted stock award,
         as reported by any such exchange or system selected by the Company on
         which the shares of common stock are then traded;

         (ii)  if such market information is not published, the price of one
         share of common stock in the over-the-counter market on the most recent
         trading date prior to the date of grant of the restricted stock award
         that is available as reported by the NASDAQ Stock Market or, if not so
         reported, by a generally accepted reporting service; or

         (iii) if no such information is available, the value of one share of
         common stock as of the date of grant of the restricted stock award, as
         determined in good faith by the Company with due consideration being
         given to the most recent independent appraisal of the Company and the
         valuation methodology used in the appraisal.

(m)      "Idun" means Idun Health Care Ltd.

(n)      A "Notice of Termination" means a dated notice which indicates the Date
         of Termination (not earlier than the date on which the notice is
         provided), and which indicates the specific termination provision in
         this Agreement relied on and which sets forth in reasonable detail the
         facts and circumstances, if any, claimed to provide a basis for
         termination of the Officer's employment under the provision so
         indicated.

(o)      "Omega Australia" means Omega (Australia) Pty Limited.

(p)      The "Principal Assets" shall be all of the Company's direct or indirect
         interest in Idun, Principal Australia and Principal UK.

(q)      "Principal Australia" means Principal Healthcare Finance Trust.

(r)      "Principal UK" means Principal Healthcare Finance Limited.

(s)      "Quit with Good Reason" mean the Officer's resignation within ninety
         (90) days following the occurrence of any of the following events
         which (except as to paragraph (vi) below) occurs without the Officer's
         written consent:

         (i)   the failure of the Board to reelect the Officer to his then
         existing office;

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         (ii)  a diminution in the Officer's title, position, authority or
         responsibility or the assignment to the Officer of duties or work
         responsibilities which are inconsistent with his title, position,
         authority or responsibility;

         (iii) any reduction in the Officer's base Salary, bonus opportunity or
         other compensation, or a material reduction in employee benefits;

         (iv)  a change in the position to which the Officer reports or the
         positions which report to the Officer;

         (v)   the relocation of the Company's headquarters or the primary place
         at which the Officer is to perform his duties to a location more than
         fifty (50) miles from the location at which the Officer previously
         performed his duties;

         (vi)  the expiration of one hundred eighty (180) days after the
         occurrence of a Change in Control, regardless of whether the Officer
         consented to the Change in Control; or

         (vii) the occurrence of a complete liquidation or dissolution (as
         defined in paragraph 1(e)(v)) of the Company.

         Each separate event meeting the above requirements will allow the
         Officer to terminate his employment due to a Quit with Good Reason and
         the failure of the Officer to do so within one hundred eighty (180)
         days from the occurrence of such event in any given case will not
         prevent the Officer from terminating his employment due to a Quit With
         Good Reason if a later event occurs which entitles the Officer to do
         so.

(t)      "Termination Payment" means a payment under this Agreement equal to
         three (3) times the Officer's Total Compensation less one dollar
         ($1.00).

(u)      "Total Compensation" means that amount paid to the Officer by the
         Company during the last twelve (12) full months (excluding any partial
         month in which the Change in Control occurs) immediately preceding the
         Date of Termination equal to aggregate compensation (Salary, inclusive
         of any elective Salary reductions, such as contributions to a plan
         described in Code Section 401(k) or to a nonqualified deferred
         compensation plan, plus any cash bonus) plus the Fair Market Value of
         Restricted Stock Awards (whether or not such awards are vested).

(v)      "Trade Secrets" means Company or Affiliate information including, but
         not limited to, technical or nontechnical data, formulas, patterns,
         compilations, programs, devices, methods, techniques, drawings,
         processes, financial data, financial plans, product and/or lists of
         actual or potential customers or suppliers which: (i) derives economic
         value, actual or potential, from not being generally known to, and not
         being readily ascertainable by proper means by, other persons who can
         obtain economic value from its disclosure or

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         use; and (ii) is the subject of efforts that are reasonable under the
         circumstances to maintain its secrecy.

         2. Performance of Services. The Officer's employment with the Company
shall be subject to the following:

(a)      Subject to the terms of this Agreement, the Company hereby agrees to
         employ the Officer as its President during the Agreement Term, and the
         Officer hereby agrees to remain in the employ of the Company during the
         Agreement Term.

(b)      During the Agreement Term, while the Officer is employed by the
         Company, the Officer shall devote his full time, energies and talents
         to serving as its President. However, it is understood that the Officer
         currently devotes substantial time to the management of Principal UK,
         Idun, and Principal Australia, in which the Company holds a substantial
         ownership interest. It is agreed that during such time as the Company
         continues to hold a substantial interest in any such company (or in
         any other company), the Officer may continue to devote his time,
         energies, and talents to the operation of such company, and it is
         further agreed that if the Company ceases to hold a substantial
         interest in any such company, the Officer may continue to provide
         services to such company or companies except that the provision of such
         services may not unreasonably interfere with the provision of services
         under this Agreement.

(c)      The Officer agrees that he shall perform his duties faithfully and
         efficiently subject to the directions of the Board. The Officer shall
         not, without his consent, be assigned tasks that would be inconsistent
         with those of President of the Company. The Officer shall report to the
         Board and shall have such authority, power, responsibilities and duties
         as are inherent in his positions (and the undertakings applicable to
         his positions) and necessary to carry out his responsibilities and the
         duties required of him hereunder.

(d)      Notwithstanding the foregoing provisions of this paragraph 2, during
         the Agreement Term, the Officer may devote reasonable time to
         activities other than those required under this Agreement, including
         the supervision of his personal investments, and activities involving
         professional, charitable, community, educational, religious and similar
         types of organizations, speaking engagements, membership on the boards
         of directors of other organizations, and similar types of activities,
         to the extent that such other activities do not, in the judgment of the
         Board, inhibit or prohibit the performance of the Officer's duties
         under this Agreement, or conflict in any material way with the business
         of the Company or any Affiliate; provided, however, that except as
         otherwise specifically provided in this Agreement, the Officer shall
         not serve on the board of any business, or hold any other position with
         any business, without the consent of the Board.

         3. Compensation. Subject to the terms of this Agreement, during the
Agreement Term, while the Officer is employed by the Company, the Company shall
compensate him for his services as follows:

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(a)      The Officer shall receive, for the 12-consecutive month period
         beginning on the Effective Date, in substantially equal monthly or more
         frequent installments, an annual base salary of not less than $330,000
         (the "Salary"), The rate of Salary shall be increased annually,
         effective on each anniversary of the Effective Date, in the amount of
         3% (three per cent) over the applicable Salary rate during the
         preceding 12-month period. The Officer may elect to receive all or any
         portion of the Salary in British pounds sterling, rather than in United
         States dollars. The amount payable in pounds shall be determined based
         on the exchange rate as reported in The Wall Street journal as of a
         date shortly before each payment date, with such determination to be as
         mutually agreed upon by the Company and the Officer. The Officer's
         election as to the portion of the Salary to be paid in pounds shall be
         filed with the Company as soon as practicable after the Effective Date
         for the remainder of calendar year 2000, and, for each subsequent
         calendar year, shall be filed with the Company prior to the beginning
         of each calendar year.

(b)      For the period ending on September 30, 2000, the Officer shall
         participate in an annual performance bonus program. Based on the
         performance through the Effective Date, and subject to the provisions
         of this Agreement, the Company and the Officer have agreed that the
         amount of the performance bonus for such period shall be equal to
         $150,000, to be distributed in accordance with the following:

         (i)   The Officer shall receive a cash payment $100,000 on or before
         September 30, 2000.

         (ii)  The Officer shall receive a restricted stock grant under the
         Omega Worldwide, Inc. 1997 Stock Option and Restricted Stock Plan (the
         "1997 Plan") and subject to the terms of that plan, with such shares to
         have a Fair Market Value (as that term is used in the 1997 Plan without
         regard to the restrictions) as of September 30, 2000 of $50,000 (the
         "Covered Shares"). If the Date of Termination does not occur during the
         Restricted Period with respect to any Installment of the Covered
         Shares, then, at the end of the Restricted Period for such shares, the
         Officer shall become vested in those Covered Shares, and shall own the
         shares free of all restrictions otherwise imposed by this Agreement.
         For the Covered Shares, the Restricted Period with respect to each
         Installment shown on the schedule shall end on the Vesting Date
         applicable to such Installment:

                                                    VESTING DATE APPLICABLE TO
                  INSTALLMENT                               INSTALLMENT
             -----------------------------------------------------------------
             1/2 of Covered Shares                        March 31, 2001
             -----------------------------------------------------------------
             1/2 of Covered Shares                        January 1, 2002

         Notwithstanding the foregoing provisions of this paragraph (b), the
         Officer shall become vested in the Covered Shares, and become owner of
         the shares free of all restrictions otherwise imposed by this
         Agreement, prior to the end of the Restricted Period, upon a Change in
         Control that occurs on or before the Date of Termination.

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(c)      For periods beginning after September 30, 2000, the Officer shall
         participate in an annual performance bonus program, providing for the
         right to earn bonus distributions as determined by the Board.

(d)      Following the sale by the Company of Principal Australia and Omega
         Australia to one or more third-parties not controlled by the Company,
         the Officer shall be entitled to a cash payment equal to 5% (five
         percent) of (i) the net amount realized for the Company's interest in
         Principal Australia and Omega Australia reduced by (ii) the total cost
         (including, without limitation, any capital contribution) of the
         Company for such interest. The amount payable in accordance with this
         paragraph (d) shall be payable following the Officer's Date of
         Termination, subject to the provisions of paragraph 5.

(e)      The following options shall be granted under the 1997 Plan on (or as
         soon as practicable after) September 18, 2000, subject to the terms of
         the plan:

         (i)   An option to purchase 75,000 shares of Company stock shall be
         granted to the Officer with an exercise price of $3.50 per share.

         (ii)  An option to purchase 50,000 shares of Company stock shall be
         granted to the Officer with an exercise price of $4.00 per share.

         (iii) An option to purchase 75,000 shares of Company stock shall be
         granted to the Officer with an exercise price per share equal to the
         market value per share as of close of business September 18, 2000.

         The options granted to the Officer in accordance with the foregoing
         provisions of this paragraph (e) shall be non-qualified options that
         are not intended to be incentive stock options under section 422 of the
         Code. Each of the options shall vest over three years, at the rate of
         one third per year on each of the first three anniversaries of the
         Effective Date, if the Date of Termination has not then occurred. The
         Officer may be entitled to further equity-based grants during the
         Agreement Term to the extent determined by the Board in its sole
         discretion. It is understood by the parties that shares of Company
         stock reserved under the 1997 Plan may not be sufficient to permit the
         Company to fulfill the Company's obligation under this paragraph (e).
         If the Company is unable, within a reasonable time after September 18,
         2000 (but in no event later than November 1, 2000) to make the grant
         required under this paragraph (e), the Company shall grant an award to
         the Officer which shall provide the value to the Officer that is
         equivalent to the value that would otherwise be provided to the Officer
         by the Options required under this paragraph (e). If an equivalent
         award is made in accordance with the preceding sentence, such award
         shall be made as of September 18, 2000, and will provide the value that
         would have been provided under the options if the options had been
         granted as of September 18, 2000.

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(f)      The Company shall make contributions on behalf of the Officer in
         accordance with the following, provided that, in no event shall the
         total amount payable by the Company under this paragraph (f) exceed
         the rate of $59,000 per year;

         (i)   The Company shall make pre-tax elective contributions to the 401
         (k) plan maintained by the Company in the United States of America at
         the maximum rate permitted under the plan (provided that, subject to
         the terms of the plan, the Officer may cancel future contributions to
         the plan).

         (ii)  The Company shall make elective contributions on behalf of the
         Officer to the voluntary pension scheme maintained by the Company in
         the United Kingdom at the maximum rate permitted under the plan
         (provided that, subject to the terms of the plan, the Officer may
         cancel future contributions to the plan).

         (iii) The Company shall make contributions on behalf of the Officer and
         his family to the supplementary health care scheme maintained by the
         Company in the United Kingdom (provided that, subject to the terms of
         the plan, the Officer may cancel future contributions to and coverage
         under the plan).

(g)      The Officer is authorized to incur reasonable expenses for
         entertainment, traveling, meals, lodging and similar items in promoting
         the Company's business. The Company will reimburse the Officer for all
         reasonable expenses so incurred, provided that such expenses are
         incurred and accounted for in accordance with the reasonable policies
         and procedures established by the Company. However, if the Officer
         incurs expenses in connection with the business of any other company
         where he is employed, reimbursement of such expenses shall be the sole
         responsibility of such other company.

(h)      Except as otherwise specifically provided to the contrary in this
         Agreement, the Officer shall be Provided with the welfare benefits and
         other fringe benefits to the same extent and on the same terms as those
         benefits are provided by the Company from time to time to the Company's
         other senior management employees. However, the Company shall not be
         required to provide a benefit under this paragraph (h) if such benefit
         would duplicate (or otherwise be of the same type as) a benefit
         specifically required to be provided under another provision of this
         Agreement. The Officer shall complete all forms and physical
         examinations, and otherwise take all other similar actions to secure
         coverage and benefits described in this paragraph 3, to the extent
         determined to be necessary or appropriate by the Company.

(i)      Notwithstanding any of the foregoing provisions of this paragraph 3 to
         the contrary, in the event that the Company disposes of all or
         substantially all of its direct and indirect ownership interest in any
         one or more of Principal UK, Idun, and Principal Australia, and the
         Officer continues to perform services for such company or companies
         after such disposition while the Officer is employed by the Company,
         the Officer's compensation described in paragraph 3(a) (relating to
         salary), 3(b) (relating to bonus), 3(c) (relating to bonus), 3(f)
         (relating to contributions to other plans), and paragraph 3(h)
         (relating to other

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         benefits) attributable to periods after such disposition shall be
         subject to a pro-rata reduction to reflect the portion of the Officer's
         working time that is devoted to such company or companies after the
         date of disposition.

(j)      All payments, deliveries, and distributions under this Agreement are
         subject to withholding of all applicable taxes.

(k)      Except as may otherwise be indicated in this Agreement, all references
         in this Agreement to dollars ($) refer to United States currency.

         4. Termination. The Officer's employment with the Company during the
Agreement Term may be terminated by the Company or the Officer without any
breach of this Agreement only under the circumstances described in paragraphs
4(a) through 4(f):

(a)      Death. The Officer's employment hereunder will terminate upon his
         death.

(b)      Disability. The Company may terminate the Officer's employment during
         any period in which he has a Disability.

(c)      Cause. The Company may terminate the Officer's employment hereunder at
         any time for Cause.

(d)      Good Reason. The Officer may Quit with Good Reason.

(e)      Termination by Officer. The Officer may terminate his employment
         hereunder at any time for any reason by giving the Company prior
         written Notice of Termination, which Notice of Termination shall be
         effective not less than 60 days after it is given to the Company,
         provided that nothing in this Agreement shall require the Officer to
         specify a reason for any such termination.

(f)      Termination by Company. The Company may terminate the Officer's
         employment hereunder at any time for any reason, by giving the Officer
         prior written Notice of Termination, which Notice of Termination shall
         be effective immediately, or such later time as is specified in such
         notice. The Company shall not be required to specify a reason for the
         termination under this paragraph 4(f).

(g)      Notice of Termination. Any termination of the Officer's employment by
         the Company or the Officer (other than a termination pursuant to
         paragraph 4(a)) must be communicated by a written Notice of Termination
         to the other party hereto.

(h)      Effect of Termination. If, on the Date of Termination, the Officer is
         a member of the Board of Directors of the Company or any of the
         Subsidiaries, or holds any other position with the Company and the
         Subsidiaries, the officer shall resign from all such positions as of
         the Date of Termination.

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         5. Rights Upon Termination. The Officer's right to payment and benefits
under this Agreement for periods after his Date of Termination shall be
determined in accordance with the following provisions of this paragraph 5:

(a)      If the Officer's Date of Termination occurs during the Agreement Term
         for any reason, the Company shall pay to the Officer:

         (i)   The Officer's Salary for the period ending on the Date of
         Termination.

         (ii)  Payment for unused vacation days, as determined in accordance
         with Company policy as in effect from time to time.

         (iii) If the Date of Termination occurs after the end of a performance
         period and prior to the payment of the performance bonus (as described
         in paragraphs 3(b) and 3(c)) for the period, the Officer shall be paid
         such performance bonus amount (if any) at the regularly scheduled time.

         (iv)  Any other payments or benefits to be provided to the Officer by
         the Company pursuant to any employee benefit plans or arrangements
         adopted by the Company, to the extent such amounts are due from the
         Company.

         Except as may otherwise be expressly provided to the contrary in this
         Agreement, nothing in this Agreement shall be construed as requiring
         the Officer to be treated as employed by the Company for purposes of
         any employee benefit plan or arrangement following the date of the
         Officer's Date of Termination.

(b)      If the Officer's Date of Termination occurs during the Agreement Term
         under circumstances described in paragraph 4(c) (relating to the
         Officer's termination for Cause) or paragraph 4(e) (relating to the
         Officer's resignation), then, except as otherwise expressly provided in
         this Agreement or otherwise agreed in writing between the Officer and
         the Company, the Company shall have no obligation to make payments
         under the Agreement for periods after the Officer's Date of
         Termination.

(c)      If the Officer's Date of Termination occurs during the Agreement Term
         under circumstances described in paragraph 4(a) (relating to Officer's
         death), paragraph 4(b) (relating to Officer's being Permanently
         Disabled), or if the Officer's employment with the Company terminates
         after the end of the Agreement Term then, in addition to the amounts
         payable in accordance with paragraph 5(a):

         (i)   The Officer shall receive payment of the bonus for the
         performance period in which his Date of Termination occurs, based on
         actual performance for the entire period (but subject to any
         applicable minimum as set forth in paragraph 3), and payable at the
         same time as it is payable for other participants in the bonus plan;
         provided, however, that it shall be subject to a pro-rata reduction for
         the portion of the performance period following the Date of
         Termination.

<PAGE>   13

         (ii)  If, on or before the Date of Termination, the Company has sold
         its interest in Principal Australia to one or more third parties who
         are not controlled by the Company, the Officer shall be entitled to the
         amount of the cash payment (if any) described in paragraph 3(c).

(d)      If the Officer's Date of Termination occurs during the Agreement Term
         under circumstances described in paragraph 4(d) (relating to Quit for
         Good Reason) or paragraph 4(f) (relating to termination by the Company
         without Cause), then, in addition to the amounts payable in accordance
         with paragraph 5(a):

         (i)   The Officer shall receive payment of the bonus for the
         performance period in which his Date of Termination occurs, based on
         actual performance for the entire period (but subject to any
         applicable minimum as set forth in paragraph 3), and payable at the
         same time as it is payable for other participants in the bonus plan;
         provided, however, that it shall be subject to a pro rata reduction for
         the portion of the performance period following the Date of
         Termination.

         (ii)  If, on or before the Date of Termination, the Company has sold
         its interest in Principal Australia to one or more third parties who
         are not controlled by the Company, the Officer shall be entitled to the
         amount of the cash payment (if any) described in paragraph 3(c).

         (iii) The Company shall pay to the Officer a lump sum cash Termination
         Payment within thirty (30) days following the Date of Termination.

         (iv)  The exercise restrictions with respect to stock options granted
         to the Officer by the Company shall lapse, and the options shall become
         vested and exercisable as of the Date of Termination. The portion of
         any stock option granted to the Officer that is exercisable immediately
         prior to the Date of Termination, as well as the portion of any stock
         option that becomes exercisable by reason of this paragraph (iv), shall
         remain exercisable for 90 days after the Date of Termination, but in no
         event later than the date fixed for expiration of the option
         (determined without regard to Officer's termination of employment).

         In no event, however, shall the Officer be entitled to receive any
         amounts, rights, or benefits under this paragraph (d) unless he
         executes a release of claims against the Company in a form prepared by
         the Company.

(e)      Except as may be otherwise specifically provided in an amendment of
         this paragraph (e) adopted in accordance with paragraph 16, the
         Officer's rights under this paragraph 5 shall be in lieu of any
         benefits that may be otherwise payable to or on behalf of the Officer
         pursuant to the terms of any severance pay arrangement of the Company
         or any Affiliate or any other, similar arrangement of the Company or
         any Affiliate providing benefits upon involuntary termination of
         employment.

<PAGE>   14

(f)      It is understood that the Officer, by reason of agreement with persons
         other than the Company, may be entitled to payments in connection with
         the sale of Principal UK, and the right to such payments shall not be
         subject to this Agreement.

If the Officer dies before receiving cash payments otherwise due to him under
this Agreement, the Company will pay such amounts to his beneficiary as
designated in writing by the Officer or, in the absence of such written
designation, his estate. The Officer shall designate in writing a beneficiary or
beneficiaries to receive such payments. The Officer may revoke or change his
designation of a beneficiary at any time by written notice to the Company.

         6. Tax Indemnity Payment. Should any of the payments or benefits that
are provided for hereunder to be paid to or for the benefit of Officer or
payments or benefits under any other plan, agreement or arrangement between
Officer and the Company, be determined or alleged to be subject to an excise or
similar purpose tax pursuant to Code Section 4999 or any successor or other
comparable federal, state or local tax laws, the Company shall pay to the
Officer such additional compensation as is necessary (after taking into account
all federal, state and local income taxes payable by the Officer as a result of
the receipt of such additional compensation) to place the Officer in the same
after-tax position (including federal, state and local taxes) the Officer would
have been in had no such excise or similar purpose tax (or any interest or
penalties thereon) been paid or incurred. The Company hereby agrees to pay such
additional compensation within ten (10) business days after the Officer notifies
the Company that the Officer intends to file a tax return which takes the
position that such excise or similar purpose tax is due and payable in reliance
upon a written opinion of the Officer's tax counsel (such tax counsel to be
chosen solely by the Officer), that is more likely than not that such excise tax
is due and payable. The costs of obtaining such tax counsel's opinion shall be
borne by the Company, and as long as such tax counsel was chosen by the Officer
in good faith, the conclusions reached in such opinion shall not be challenged
or disputed by the Company. If the Officer intends to make any payment with
respect to any such excise or similar purpose tax as a result of an adjustment
to the Officer's tax liability by any federal, state or local tax authority, the
Company will pay such additional compensation by delivering its cashier's check
payable in such amount to the Officer within ten (10) business days after the
Officer notifies the Company of his intention to make such payment. Without
limiting the obligation of the Company hereunder, the Officer agrees, in the
event the Officer makes any payment pursuant to the preceding sentence, to
negotiate with the Company in good faith with respect to procedures reasonably
requested by the Company which would afford the Officer the ability to contest
the imposition of such excise tax; provided, however, that the Officer will not
be required to afford the Company any right to contest the applicability of any
such excise tax to the extent that the Officer reasonably determines (based upon
the opinion of his tax counsel) that such contest is inconsistent with the
overall tax interests of the Officer.

         7. No Mitigation. No amounts or benefits payable to the Officer
hereunder shall be subject to mitigation or reduction by income or benefits the
Officer receives from other sources.

<PAGE>   15

         8.  Nondisclosure Of Confidential Information. The Officer agrees not
to disclose, directly or indirectly to any third person any Confidential
Information, Trade Secrets or customer list relating to Company's business
within three (3) years following the Date of Termination.

         9.  Continued Employment. This Agreement does not constitute a
guarantee of continued employment but instead provides for certain rights and
benefits for the Officer during his employment, and in the event his employment
with the Company terminates under the circumstances described herein.

         10. Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of the Company's successors and assigns.
This Agreement may be assigned by the Company to any legal successor to the
Company or to an entity which purchases all or substantially all of the assets
of the Company. In the event the Company assigns this Agreement as permitted by
this Agreement and the Officer remains employed by the assignee, the "Company"
as defined herein will refer to the assignee and the Officer will not be deemed
to have terminated employment hereunder until the Officer terminates employment
from the assignee.

         11. Attorneys' Fees. If the Officer (or the Officer's estate in the
event of his death) brings any action at law or in equity to enforce any of the
provisions or rights hereunder, the Company shall pay all costs, expenses and
reasonable attorneys, fees incurred by the Officer.

         12. Headings. Sections or other headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

         13. Entire Agreement. Except as otherwise noted herein, this Agreement
constitutes the entire agreement between the parties concerning the subject
matter hereof and supersedes all prior and contemporaneous agreements, if any,
between the parties relating to the subject matter hereof (including, without
limitation, the Change in Control Agreement); provided, however, that nothing in
this Agreement shall be construed to limit any policy or agreement that is
otherwise applicable relating to confidentiality, rights to inventions,
copyrightable material, business and/or technical information, trade secrets,
solicitation of employees, interference with relationships with other
businesses, competition, and other similar policies or agreement for the
protection of the business and operations of the Company and the Subsidiaries.

         14. Severability. In the event that one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not be affected thereby.

         15. Governing Law. To the full extent controllable by stipulation of
the parties, this Agreement shall be interpreted and enforced under Michigan
law.

         16. Amendment. This Agreement may not be modified, amended,
supplemented or terminated except by a written agreement between the Company and
the Officer.

<PAGE>   16

         IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the Effective Date.

                                COMPANY:

                                OMEGA WORLDWIDE, INC.
                                a Maryland corporation

                                   /s/ Edward Lowenthal
                                ----------------------------
                                       Edward Lowenthal

                                Its:   Director
                                    ------------------------

                                OFFICER:

                                   /s/ James P. Flaherty
                                ----------------------------
                                       James P. Flaherty

                                Its:   President
                                    ------------------------<PAGE>   1
                                                                     EXHIBIT 4.6

                          Registration Rights Agreement

         The REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as
of April 12, 1996, by and between DRCA Medical Corporation, a Texas corporation
(the "Company"), and Chartwell Capital Investors, L.P., a Delaware limited
partnership (the "Investor").

                                  Introduction

         The Company and The Investor are parties to the Investment Agreement
dated April 12, 1996 (the "Sale Agreement"), pursuant to which the Investor has
acquired certain securities directly or indirectly convertible into shares of
Common Stock (as hereinafter defined) from the Company and pursuant to which
this Agreement has been executed and delivered.

              1. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:

         Commission: The Securities and Exchange Commission or any other Federal
         agency at the time administering the Securities Act.

         Common Stock: The shares of Common Stock, par value $. 001 per share,
         of the Company as existing on the date hereof.

         Company: As defined in the introductory paragraph of this Agreement.

         Effective Date: The earlier to occur of (i) the date six months after
         the Conversion Date (as defined in the Sale Agreement) or (ii) the
         Conversion Expiry Date (as defined in the Sale Agreement).

         Exchange Act: The Securities Exchange Act of 1934, or any similar
         Federal statute, and the rules and regulations of the Commission
         thereunder, all as the same shall be in effect at the time. Reference
         to a particular section of the Exchange Act shall include a reference
         to the comparable section, if any, of any such similar Federal statute.

         Initiating Holders: Any holder or holders of Registrable Securities
         holding greater than 50% of the Registrable Securities (by number of
         shares at the time issued and outstanding) and initiating a request
         pursuant to Section 2.1 hereof for the registration of all or part of
         such holder's or holders' Registrable Securities.

         Person: A corporation, an association, a partnership, an organization,
         business, an individual, a governmental or political subdivision
         thereof or a governmental agency.

         Registrable Securities: (a) any shares of Common Stock issued or
         issuable upon conversion of the convertible preferred stock issued upon
         conversion of the Note (as defined in the Sale Agreement), any shares
         of Common Stock issued or issuable upon exercise of the warrant issued
         pursuant to the Sale Agreement and (c) securities issued or issuable
         with respect to any Common Stock referred to in the foregoing
         subdivisions (a) and (b) by way of stock dividend or stock split or in
         connection with a combination of

<PAGE>   2

         shares, recapitalization, merger, consolidation or other reorganization
         or otherwise. As to any particular Registrable Securities, such
         securities shall cease to be Registrable Securities when (i) a
         registration statement with respect to the sale of such securities
         shall have become effective under the Securities Act and such
         securities shall have been disposed of in accordance with such
         registration statement, (ii) they shall have been distributed to the
         public pursuant to Rule 144 (or any successor provision) under the
         Securities Act, (iii) they shall have been otherwise transferred, new
         certificates for them not bearing a legend restricting further transfer
         shall have been delivered by the Company and subsequent disposition of
         them shall not require registration or qualification of them under the
         Securities Act or any similar state law then in force, or (iv) they
         shall have ceased to be outstanding.

         Registration Expenses: All expenses incident to the Company's
         performance of or compliance with Section 2 hereof, including, without
         limitation, all registration, filing and NASD fees, all fees and
         expenses of complying with securities or blue sky laws, all word
         processing, duplicating and printing expenses, messenger and delivery
         expenses, the fees and disbursements of counsel for the Company and of
         its independent public accountants, including the expenses of any
         special audits or "cold comfort" letters required by or incident to
         such performance and compliance, the reasonable fees and disbursements
         of not more than one counsel retained collectively by the holder or
         holders of more than 50% of the Registrable Securities being
         registered, and any fees and disbursements of underwriters customarily
         paid by issuers or sellers of securities, but excluding underwriting
         discounts and commissions and transfer taxes, if any, provided that, in
         any case where Registration Expenses are not to be borne by the
         Company, such expenses shall not include salaries of Company personnel
         or general overhead expenses of the Company, auditing fees, premiums or
         other expenses relating to liability insurance required by underwriters
         of the Company or other expenses for the preparation of financial
         statements or other data normally prepared by the Company in the
         ordinary course of its business or which the Company would have
         incurred in any event.

          Requesting Holder:  As defined in Section 2.6 hereof.

          Securities Act: The Securities Act of 1933, or any similar Federal
          statute, and the rules and regulations of the Commission thereunder,
          all as the same shall be in effect at the time. References to a
          particular section of the Securities Act shall include a reference to
          the comparable section, if any, of any such similar Federal statute.

              2. Registration under Securities Act, etc.

              2.1 Registration on Request.

                  (a) Request. At any time or from time to time after the
Effective Date until such time as the Investor shall be eligible to effect sales
pursuant to Rule 144(k) under the Securities Act or any similar rule or
regulation hereafter adopted by the Commission, upon the written request of one
or more Initiating Holders, requesting that the Company effect the registration
under the Securities Act of all or part of such Initiating Holders' Registrable
Securities and specifying the intended method of disposition thereof, the
Company will promptly

                                       2
<PAGE>   3

give written notice of such requested registration to all registered holders of
Registrable Securities, and thereupon the Company will use its best efforts to
effect the registration under the Securities Act of:

                                    (i) the Registrable Securities which the
                           Company has been so requested to register by such
                           Initiating Holders for disposition in accordance with
                           the intended method of disposition stated in such
                           request;

                                    (ii) all other Registrable Securities the
                           holders of which shall have made a written request to
                           the Company for registration thereof within 30 days
                           after the giving of such written notice by the
                           Company (which request shall specify the intended
                           method of disposition of such Registrable
                           Securities); and

                                    (iii) all shares of Common Stock which the
                           Company may elect to register in connection with the
                           offering of Registrable Securities pursuant to this
                           Section 2.1, all to the extent requisite to permit
                           the disposition (in accordance with the intended
                           methods thereof as aforesaid) of the Registrable
                           Securities and the additional shares of Common Stock,
                           if any, so to be registered, provided that the
                           Company shall not be required to effect (i) more than
                           two registrations pursuant to this Section 2.1, (ii)
                           a registration statement other than on Form S-3 or
                           any similar short form registration statement form
                           adopted by the Commission, unless such registration
                           statement form is unavailable solely because of the
                           failure by the Company to file timely periodic
                           reports under the Exchange Act, or (iii) any
                           registration of Registrable Securities pursuant to
                           this Section 2.1 unless the aggregate number of
                           shares of Registrable Securities requested to be
                           registered by all holders of Registrable Securities
                           is equal to or greater than 25% of the Registrable
                           Securities originally issuable under the Sale
                           Agreement.

                  (b) Certain Information. The Company agrees to include in any
registration statement filed under this Section 2.1 all information which
holders of Registrable Securities being registered shall reasonably request
(after giving due regard to the confidentiality of such information), provided,
however, that such inclusion shall be in the best interests of the Company as
shall be determined in good faith by its Board of Directors.

                  (c) Expenses. The Company will pay all Registration Expenses
in connection with any registration requested pursuant to this Section 2.1 by
any Initiating Holders.

                  (d) Effective Registration Statement. A registration requested
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective,
provided that a registration which does not become effective after the Company
has filed a registration statement with respect thereto solely by reason of the
refusal to proceed of the Initiating Holders (other than a refusal to proceed
based upon the advice of counsel relating to a matter with respect to the
Company) shall be deemed to have been effected by the Company at the request of
such Initiating Holders unless the Initiating

                                       3
<PAGE>   4

Holders shall have elected to pay all Registration Expenses in connection with
such registration, (ii) if, after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason, or (iii)
the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied,
other than by reason of some act or omission by such Initiating Holders.

                  (e) Priority in Requested Registrations. If any financial
advisor retained by more than 50% of the Registrable Securities being registered
shall advise the Company in writing that, in its opinion, the number of
securities requested to be included in such registration (including securities
of the Company which are not Registrable Securities) exceeds the number which
can be sold in the contemplated offering within a price range acceptable to the
holders of a majority of the Registrable Securities requested to be included in
such registration, the Company will include in such registration, to the extent
of the number which the Company is so advised can be sold in such offering, (i)
first, Registrable Securities requested to be included in such registration by
the holder or holders of Registrable Securities, pro rata among such holders on
the basis of the number of such securities requested to be included by such
holders; and (ii) second, securities the Company proposes to sell and other
securities of the Company included in such registration by the holders thereof.

              2.2 Incidental Registration.

                  (a) Right to Include Registrable Securities. If the Company at
any time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S-4, S-8, S-14 or S-15 or any successor or
similar forms and other than pursuant to Section 2.1 hereof), whether or not for
sale for its own account, it will each such time give prompt written notice to
all holders of Registrable Securities of its intention to do so and of such
holders' rights under this Section 2.2. Upon the written request of any such
holder made within 10 days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
holder and the intended method of disposition thereof), the Company will use its
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered, by inclusion of such Registrable Securities in
the registration statement which covers the securities which the Company
proposes to register, provided that if, at any time after giving written notice
of its intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason either not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to each holder of Registrable Securities and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under Section 2.1 hereof, and (ii) in
the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this Section
2.2

                                       4
<PAGE>   5

shall relieve the Company of its obligation to effect any registration upon
request under Section 2.1 hereof. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this Section 2.2.

                  (b) Priority in Incidental Registrations. If (i) a
registration pursuant to this Section 2.2 involves an underwritten offering of
the securities so being registered, whether or not for sale for the account of
the Company, to be distributed (on a firm commitment basis) by or through one or
more underwriters of recognized standing under underwriting terms appropriate
for such a transaction, (ii) the Registrable Securities so requested to be
registered for sale for the account of holders of Registrable Securities are not
also to be included in such underwritten offering (either because the Company
has not been requested so to include such Registrable Securities pursuant to
Section 2.4 (b) or, if requested to do so, is not obligated to do so under
Section 2.4(b)), and (iii) the managing underwriter of such underwritten
offering shall inform the Company and holders of the Registrable Securities
requesting such registration by letter of its belief that the distribution of
all or a specified number of such Registrable Securities concurrently with the
securities being distributed by such underwriters would interfere with the
successful marketing of the securities being distributed by such underwriters
(such writing to state the basis of such belief and the approximate number of
such Registrable Securities which may be distributed without such effect), then
the Company may, upon written notice to all holders of such Registrable
Securities, reduce pro rata (if and to the extent stated by such managing
underwriter to be necessary to eliminate such effect) the number of such
Registrable Securities the registration of which shall have been requested by
each holder of Registrable Securities so that the resultant aggregate number of
such Registrable Securities so included in such registration shall be equal to
the number of shares stated in such managing underwriter's letter.

              2.3 Registration Procedures. If and whenever (a) the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2 hereof
or (b) there is a Requesting Holder in connection with any other proposed
registration by the Company under the Securities Act, the Company shall, as
expeditiously as possible:

                                    (i) prepare and (within 90 days after the
                           end of the period within which requests for
                           registration may be given to the Company, or in any
                           event as soon thereafter as possible, and in the case
                           of a registration pursuant to Section 2.1 hereof such
                           filing to be made within 90 days after the initial
                           request of one or more Initiating Holders of
                           Registrable Securities or in any event as soon
                           thereafter as possible) file with the Commission the
                           requisite registration statement to effect such
                           registration (including such audited financial
                           statements as may be required by the Securities Act
                           or the rules and regulations promulgated thereunder)
                           and thereafter use its best efforts to cause such
                           registration statement to become and remain
                           effective, provided, however, that the Company may
                           discontinue any registration of its securities which
                           are not Registrable Securities (and, under the
                           circumstances specified in Section 2.2(a), its
                           securities which are Registrable Securities) at any
                           time prior to the effective date of the registration
                           statement relating thereto, and further

                                       5
<PAGE>   6

                           provided that if the Company shall furnish to the
                           Initiating Holders a certificate signed by the
                           President of the Company stating that in the good
                           faith judgment of the Board of Directors of the
                           Company it would be seriously detrimental to the
                           Company and its stockholders for such registration
                           statement to be filed at the date filing would be
                           required hereunder and it is therefore essential to
                           defer the filing of such registration statement, the
                           Company shall have an additional period of not more
                           than 60 days within which to file such registration
                           statement (which additional period may be extended to
                           90 days if such deferral will materially reduce the
                           expenses of such registration due to the elimination
                           of the need for any special audits to be performed in
                           connection with such registration), and further
                           provided that before filing such registration
                           statement or any amendments thereto, the Company will
                           furnish to the counsel selected by the holders of
                           Registrable Securities which are to be included in
                           such registration copies of all such documents
                           proposed to be filed, which documents will be subject
                           to the review of such counsel;

                                    (ii) prepare and file with the Commission
                           such amendments and supplements to such registration
                           statement and the prospectus used in connection
                           therewith as may be necessary to keep such
                           registration statement effective and to comply with
                           the provisions of the Securities Act with respect to
                           the disposition of all securities covered by such
                           registration statement until the earlier of such time
                           as all of such securities have been disposed of in
                           accordance with the intended methods of disposition
                           by the seller or sellers thereof set forth in such
                           registration statement or (A) in the case of a
                           registration pursuant to Section 2.1 hereof, the
                           expiration of two years after such registration
                           statement becomes effective, or (B) in the case of a
                           registration pursuant to Section 2.2 hereof, the
                           expiration of 90 days after such registration
                           statement becomes effective;

                                    (iii) furnish to each seller of Registrable
                           Securities covered by such registration statement and
                           each Requesting Holder and each underwriter, if any,
                           of the securities being sold by such seller such
                           number of conformed copies of such registration
                           statement and of each such amendment and supplement
                           thereto (in each case including all exhibits), such
                           number of copies of the prospectus contained in such
                           registration statement (including each preliminary
                           prospectus and any summary prospectus) and any other
                           prospectus filed under Rule 424 under the Securities
                           Act, in conformity with the requirements of the
                           Securities Act, and such other documents, as such
                           seller and Requesting Holder may reasonably request
                           in order to facilitate the public sale or other
                           disposition of the Registrable Securities owned by
                           such Seller;

                                    (iv) use its best efforts (A) to register or
                           qualify all Registrable Securities and other
                           securities covered by such registration statement
                           under such other securities laws or blue sky laws of
                           such jurisdictions as shall reasonably be requested
                           by such seller and any Requesting Holder,

                                       6
<PAGE>   7

                           (B) to keep such registrations or qualifications in
                           effect for so long as such registration statement
                           remains in effect, and (C) take any other action
                           which may be reasonably necessary or advisable to
                           enable Requesting Holder or seller to consummate the
                           disposition in such jurisdictions of the securities
                           owned by such seller, except that the Company shall
                           not for any such purpose be required to qualify
                           generally to do business as a foreign corporation in
                           any jurisdiction wherein it would not, but for the
                           requirements of this subdivision (iv), be obligated
                           to be so qualified, to subject itself to taxation in
                           any such jurisdiction or to consent to general
                           service of process in any such jurisdiction;

                                    (v) use its best efforts to cause all
                           Registrable Securities covered by such registration
                           statement to be registered with or approved by such
                           other governmental agencies or authorities as may be
                           necessary to enable the seller or sellers thereof to
                           consummate the disposition of such Registrable
                           Securities;

                                    (vi) notify each seller of Registrable
                           Securities covered by such registration statement and
                           each Requesting Holder, at any time when a prospectus
                           relating thereto is required to be delivered under
                           the Securities Act, upon the discovery that, or upon
                           the happening of any event as a result of which, the
                           prospectus included in such registration statement,
                           as then in effect, includes an untrue statement of a
                           material fact or omits to state any material fact
                           required to be stated therein or necessary to make
                           the statements therein not misleading in the light of
                           the circumstances under which they were made, and at
                           the request of any such seller or Requesting Holder
                           promptly prepare and furnish to such seller or
                           Requesting Holder (and each underwriter, if any) a
                           reasonable number of copies of a supplement to or an
                           amendment of such prospectus as may be necessary so
                           that, as thereafter delivered to the purchasers of
                           such securities, such prospectus shall not include an
                           untrue statement of a material fact or omit to state
                           a material fact required to be stated therein or
                           necessary to make the statements therein not
                           misleading in the light of the circumstances under
                           which they were made;

                                    (vii) otherwise use its best efforts to
                           comply with all applicable rules and regulations of
                           the Commission, and make available to its security
                           holders, as soon as reasonably practicable, an
                           earnings statement covering the period of at least
                           twelve months, but not more than eighteen months,
                           beginning with the first day of the full calendar
                           month after the effective date of such registration
                           statement, if such earnings statement is necessary to
                           satisfy the provisions of Section 11(a) of the
                           Securities Act, and will furnish to each such seller
                           and each Requesting Holder at least five business
                           days (or such shorter reasonable time period as given
                           circumstances shall dictate) prior to the filing
                           thereof a copy of any amendment or supplement to such
                           registration statement or prospectus and shall not
                           file any thereof to which any such seller or any
                           Requesting

                                       7
<PAGE>   8

                           Holder shall have reasonably objected on the grounds
                           that such amendment or supplement does not comply in
                           all material respects with the requirements of the
                           Securities Act or of the rules or regulations
                           thereunder; and

                                    (viii) enter into such agreements and take
                           such other actions as sellers of such Registrable
                           Securities holding more than 50% of the shares so to
                           be sold shall reasonably request in order to expedite
                           or facilitate the disposition of such Registrable
                           Securities.

              The Company may require each seller of Registrable Securities as
to which any registration is being effected to furnish the Company such
information regarding such seller and the distribution of such securities as the
Company may from time to time reasonably request in writing and as shall be
required by applicable law or the Commission in connection therewith.

              Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the occurrence of any event of the kind described in subdivision (vii) of this
Section 2.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.

              If any such registration or comparable statement refers to any
holder of Registrable Securities by name or otherwise as the holder of any
securities of the Company then such holder shall have the right to require (i)
the insertion therein of language, in form and substance satisfactory to such
holder, to the effect that the holding by such holder of such securities is not
to be construed as a recommendation by such holder of the investment quality of
the Company's securities covered thereby and that such holding does not imply
that such holder will assist in meeting any future financial requirements of the
Company or (ii) in the event that such reference to such holder by name or
otherwise is not required by the Securities Act or any similar federal statute
then in force, the deletion of the reference to such holder.

              2.4 Underwritten Offerings.

                  (a) Incidental Underwritten Offerings. If the Company at any
time proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 hereof and such securities are to be distributed by
or through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in Section 2.2 hereof and subject
to the provisions of Section 2. 2(b), use its reasonable best efforts to arrange
for such underwriters to include all the Registrable Securities to be offered
and sold by such holder among the securities to be distributed by such
underwriters, provided that if the managing underwriter of such underwritten
offering shall inform the holders of the Registrable Securities requesting such
registration and the holders of any other securities which shall have exercised,
in respect of such underwritten offering, registration rights comparable to the
rights under Section

                                       8
<PAGE>   9

2.2 hereof by letter of its belief that inclusion in such underwritten
distribution of all or a specified number of such Registrable Securities or of
such other securities so requested to be included would interfere with the
successful marketing of the securities (other than such Registrable Securities
and other securities so requested to be included) by the underwriters (such
writing to state the basis of such belief and the approximate number of such
Registrable Securities and other securities so requested to be included which
may be included in such underwritten offering without such effect), then the
Company may, upon written notice to all holders of such Registrable Securities
and of such other securities so requested to be included, exclude pro rata from
such underwritten offering (if and to the extent stated by such managing
underwriter to be necessary to eliminate such effect) the number of such
Registrable Securities and shares of such other securities so requested to be
included the registration of which shall have been requested by each holder of
Registrable Securities and by the holders of such other securities so that the
resultant aggregate number of such Registrable Securities and of such other
securities so requested to be included which are included in such underwritten
offering shall be equal to the approximate number of shares stated in such
managing underwriter's letter, provided that such other securities shall first
be so excluded, and thereafter, Registrable Securities shall be so excluded pro
rata based on the number of shares so requested to be included.

              The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable Securities
shall not be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation required
by law.

                  (b) Holdback Agreements.

                           (i) Each holder of Registrable Securities agrees by
                  acquisition of such Registrable Securities, if so required by
                  the managing underwriter, not to effect any public sale or
                  distribution of any securities of the Company, during the
                  seven days prior to and the 90 days after any underwritten
                  registration pursuant to Section 2.2 hereof has become
                  effective, except as part of such underwritten registration,
                  but only if such holder participates in such registration, and
                  except for any incidental registration pursuant to Section 2.2
                  hereof with respect to any distribution or public sale in
                  which the managing underwriter has agreed to include such
                  securities in the registration or public distribution.

                           (ii) The Company agrees (x), if so required by the
                  managing underwriter, not to effect any public sale or
                  distribution of its equity securities or securities
                  convertible into or exchangeable or exercisable for any of
                  such securities during the seven days prior to and the 90 days
                  after

                                       9
<PAGE>   10

                  any underwritten registration pursuant to Section 2.2 hereof
                  has become effective, except as part of such underwritten
                  registration and except pursuant to registrations on Form S-4,
                  S-8, S-14 or S-15 or any successor or similar forms thereto,
                  and (y) use its best efforts to cause each holder of its
                  securities or any securities convertible into or exchangeable
                  or exercisable for any of such securities, in each case
                  purchased directly from the Company at any time after the date
                  of this Agreement (other than in a public offering) to agree
                  not to effect any such public sale or distribution of such
                  securities during such period.

              2.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, each Requesting Holder and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them such access
to its books and records and such opportunities to discuss the business of the
Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of such
holders' and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.

              2.6 Rights of Requesting Holders. The Company will not file any
registration statement under the Securities Act (other than by a registration on
Form S-8), unless it shall first have given to each holder of Registrable
Securities at the time outstanding (other than any such person who acquired all
such securities held by such person in a public offering registered under the
Securities Act or as the direct or indirect transferee of shares initially
issued in such an offering), at least 30 days prior written notice thereof. Any
such person who shall so request within 30 days after such notice (a "Requesting
Holder") shall have the rights of a Requesting Holder provided in Sections 2.3,
2.5 and 2.7 hereof. In addition, if any such registration statement refers to
any Requesting Holder by name or otherwise as the holder of any securities of
the Company, then such Requesting Holder shall have the right to require (a) the
insertion therein of language, in form and substance reasonably satisfactory to
such holder and the Company, to the effect that the holding by such holder of
such securities does not necessarily make such holder of a "controlling person"
of the Company within the meaning of the Securities Act and is not to be
construed as recommendation by such holder of the investment quality of the
Company's debt or equity securities covered thereby and that such holding does
not imply that such holder will assist in meeting any future financial
requirements of the Company, or (b) in the event that such reference to such
holder by name or otherwise is not required by the Securities Act or any rules
and regulations promulgated thereunder, the deletion of the reference to such
holder.

              2.7 Indemnification.

                  (a) Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless (i) in the case of
any registration statement filed pursuant to

                                       10
<PAGE>   11

Section 2.1 or 2.2 hereof, the holder of any Registrable Securities covered by
such registration statement, its directors and officers, each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such holder or any such underwriter
within the meaning of the Securities Act, and (ii) in the case of any
registration statement of the Company, any Requesting Holder, its directors and
officers and each other Person, if any who controls such Requesting Holder
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such holder or Requesting Holder or any
such director or officer or underwriter or controlling Person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon, any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such holder, such Requesting Holder and each such director, officer,
underwriter and controlling Person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by such holder or Requesting
Holder, as the case may be, specifically stating that it is for use in the
preparation thereof and, provided further that the Company shall not be liable
to any Person who participates as an underwriter, in the offering or sale of
Registrable Securities or to any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
to the Person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such holder
or such Requesting Holder or any such director, officer, underwriter or
controlling person and shall survive the transfer of such securities by such
holder.

                  (b) Indemnification by the Sellers. The Company may require,
as a condition to including any Registrable Securities in any registration
statement filed pursuant to

                                       11
<PAGE>   12

Section 2.3 hereof, that the Company shall have received an undertaking
satisfactory to it from the prospective seller of such Registrable Securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 2.7) the Company, each director of the
Company, each officer of the Company and each other Person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall be limited to the extent allowable by
applicable law and shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling person and shall survive the transfer of such securities by such
seller.

                  (c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 2.7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability, or a covenant not to sue, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.

                  (d) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this Section 2.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.

                  (e) Indemnification Payments. The indemnification required by
this Section 2.7 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.

                  (f) Contribution. If the indemnification provided for in the
preceding subdivisions of this Section 2.7 is unavailable to an indemnified
party in respect of any expense, loss, damage or liability referred to therein,
then each indemnifying party, in lieu of

                                       12
<PAGE>   13

indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such expense, loss, damage or
liability (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the holder or underwriter,
as the case may be, on the other from the distribution of the Registrable
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and of the holder or underwriter, as the
case may be, on the other in connection with the statements or omissions which
resulted in such expense, loss, damage or liability, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of the holder or underwriter, as the case may be, on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder or by the underwriter and
the parties, relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, that the foregoing
contribution agreement shall not inure to the benefit of any indemnified Person
if indemnification would be unavailable to such indemnified Person by reason of
the proviso contained in the first sentence of subdivision (a) of this Section
2.7, and in no event shall the obligation of any indemnifying party to
contribute under this subdivision (f) exceed the amount that such indemnifying
party would have been obligated to pay by way of indemnification if the
indemnification provided for under subdivisions (a) or (b) of this Section 2.7
had been available under the circumstances.

              The Company and the holders of Registrable Securities agree that
it would not be just and equitable if contribution pursuant to this subdivision
(f) were determined by pro rata allocation (even if the holders and any
underwriters were treated as one entity for such purpose) or by any other method
of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth in the preceding sentence and
subdivisions (c) of this Section 2.7, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim.

              Notwithstanding the provisions of this subdivision (f), no holder
of Registrable Securities or underwriter shall be required to contribute any
amount in excess of the amount by which (i) in the case of any such holder, the
net proceeds received by such holder from the sale of Registrable Securities or
(ii) in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.

              3. Rule 144 The Company shall timely file the reports required to
be filed by it under the Securities Act and the Exchange Act (including but not
limited to the reports under Sections 13 and 15(d) of the Exchange Act referred
to in subparagraph (c)(1) of Rule 144

                                       13
<PAGE>   14

adopted by the Commission under the Securities Act) and the rules and
regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, will, upon the request of any holder of
Registrable Securities, make publicly available other information) and will take
such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any holder
of Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.

              4. Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of more than 50% of the shares of Registrable Securities. Each holder of
any Registrable Securities at the time or thereafter outstanding shall be bound
by any consent authorized by this Section 4, whether or not such Registrable
Securities shall have been marked to indicate such consent; provided, however,
that no amendment shall be made to Section 2.7 hereof without the written
consent of the Company and the holder or holders of 100% of the shares of
Registrable Securities.

              5. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election, be treated as the holder of
such Registrable Securities for purposes of any request or other action by any
holder or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.

              6. Notices. Except as otherwise provided in this Agreement, all
communications provided for hereunder shall be in writing and either hand
delivered or sent by prepaid commercial courier, telecopy or first-class
registered or certified mail, postage prepaid, and addressed

              if to the Investor:

                                    Attention:
                                    FAX:

              with a copy to:       Kirschner, Main, Graham, Tanner & Demont
                                    One Independent Drive, Suite 2000
                                    Jacksonville, Florida 32202
                                    (Mailing Address: Post Office Box 1559
                                                      Jacksonville, Florida
                                                      32201-1559)
                                    Attention:   James L. Main, Esq.
                                    FAX:         (904) 358-2199

                                       14
<PAGE>   15

              if to any other
              holder of Registrable
              Securities:                 The address that such holder shall
                                          have furnished to the Company in
                                          writing, or, until any such other
                                          holder so furnishes to the Company an
                                          address, then to and at the address of
                                          the last holder of such Registrable
                                          Securities who has furnished an
                                          address to the Company

              if to the Company:          DRCA Medical Corporation
                                          Three Riverway
                                          Suite 1430
                                          Houston, Texas 77056
                                          Attention: President
                                          FAX: (713) 439-0826

              with a copy to:             Hutcheson & Grundy, L.L.P.
                                          3300 Two Allen Center
                                          1200 Smith Street
                                          Houston, Texas  77002
                                          Attention: E. Scott Lineberry, Esq.
                                          FAX:  (713) 951-2925

or at such other address the Investor or the Company shall have given notice to
other. Notices sent by commercial courier services for next day delivery shall
be deemed given and received the day after they are sent, notices sent by
telecopy shall be deemed given and received the day they are sent, and notices
sent by mail shall be deemed given and received five (5) days after being mailed
as aforesaid.

              7. Assignment. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit of
and enforceable by any subsequent holder of any Registrable Securities, subject
to the provisions respecting the minimum numbers or percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein.

              8. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.

              9. Governing Law. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the laws
of the State of Texas without reference to the principles of conflicts of laws.

                                       15
<PAGE>   16

         IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year set forth above.

                        CHARTWELL CAPITAL INVESTORS, L.P.

                            BY:  CHARTWELL CAPITAL PARTNERS, L.P.,
                                 ITS GENERAL PARTNER

                                 BY: CHARTWELL PARTNERS, L.P., ITS
                                     GENERAL PARTNER

                                     BY: CHARTWELL, INC.,
                                         ITS GENERAL PARTNER

                                         BY:/s/ ANTHONY MARINATOS
                                            -------------------------
                                              NAME: ANTHONY MARINATOS
                                              TITLE: PRESIDENT

                            DRCA MEDICAL CORPORATION

                            BY:/s/ JOSE E. KAUACHI
                               --------------------------------------
                               NAME: JOSE E. KAUACHI
                               TITLE: CHAIRMAN OF THE BOARD AND CEO

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