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                                                                  EXHIBIT 10.27

                           STOCK OPTION AGREEMENT FOR
                      1997 INCENTIVE STOCK OPTION PLAN FOR
                        EMPLOYEES AND EMPLOYEE DIRECTORS
                                       OF
                           DYNACQ INTERNATIONAL, INC.

         The parties to this Agreement are DYNACQ INTERNATIONAL, INC., a Nevada
Corporation (the "Company") and PHILIP CHAN (the "Participant").

                                GRANT OF OPTION

         The Company hereby grants to Participant the right, privilege, and
option to purchase up to 80,000 (EIGHTY THOUSAND) shares of common stock of the
Company at a purchase (grant) price of $11/32 per share, in accordance with the
terms and conditions of the 1995 Incentive Stock Option Plan for Employees and
Employee Directors approved by the Company's Board of Directors on August 31,
1995 (the "Plan"). The Plan, a copy of which is attached hereto, is
incorporated herein by this reference.

         1.   Notice of Exercise. Subject to the provisions set forth in
              Paragraph 8 of the Plan, any option granted under this Agreement
              may be exercised at any time and from time to time in whole or in
              part by written notice delivered to the Company. Such notice
              shall state the number of shares being exercised and shall
              specify a date, not more than (10) days from the date of such
              notice, as the date on which full payment for the option price
              for the number of shares specified shall be made thereof at the
              principal office of the Company. Upon receipt of payment, the
              Company shall instruct its transfer agent to issue such shares
              provided that if any law or regulation requires the Company to
              take action with respect to the shares specified in the notice,
              before the issuance thereof, then the date of delivery of such
              shares shall be extended for the period necessary to take such
              action which may include registration of the stock under
              applicable law.

         2.   No Shareholder Rights. The Participant acknowledges that he has
              no rights as a shareholder with respect to shares for which the
              option has not been exercised, and the Participant shall have no
              rights with respect to such shares unless otherwise conferred
              hereby.

         3.   Option Rights and Holding Period. The options granted hereunder
              shall be fully vested and exercisable by the Participant one year
              from the Effective Date hereof. The option rights herein are
              exercisable for the full amount or for any part hereof from time
              to time during the period of five (5) years from the Effective
              Date hereof and only by each participant.



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         4.   Nontransferability. No option hereby shall be transferable other
              than by Will or by the laws of descent and distribution. No
              option or interest therein may be transferred, assigned, pledged,
              or hypothecated by the Participant during the lesser of (1) five
              years from the Effective Date hereof, or (2) his lifetime, by
              operation of law or otherwise, or be made subject to execution,
              attachment, or similar process.

         5.   Effective Date. The Effective Date of this Agreement shall be
              December 18, 1997.

         6.   Acknowledgement. The undersigned Participant has read and
              understands this Agreement and the law and the terms and
              conditions of the Plan and hereby agrees to be bound by all of
              the terms and conditions thereof.

                                  COMPANY:

                                  DYNACQ INTERNATIONAL, INC.

                                  By:   /s/ Chiu Chan
                                    ------------------------------
                                      Title: President & Chairman

                                  PARTICIPANT:

                                  /s/ Philip Chan
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