Document:

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                                                                   Exhibit 10.24

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into effective
December 6, 2000 (the "Effective Date") between DYNACQ INTERNATIONAL, INC., a
Nevada corporation (the "Company"), and SARAH C. GARVIN, of 4301-A Vista Road,
Pasadena, Texas 77504 ("Employee"). All capitalized terms not defined herein
shall have the meanings ascribed to such terms in the "Merger Agreement" (as
defined below). This Agreement is one of several contemplated by the Merger
Agreement and related agreements (the "Merger Documentation"). The Company by
this Agreement employs Employee and Employee accepts employment on the terms and
conditions that follow:

         1.    POSITION; DUTIES; PRINCIPAL OFFICE. Employee will be employed
with the titles, positions, and responsibilities (the "Duties") of Vice
President-Operations and Strategic Planning of the Company and she shall serve
as one of three (3) Directors on the Board of Directors of Surgi+Group, Inc., a
Texas corporation and a wholly owned subsidiary of the Company ("SGI" f/k/a DII
New Corp., a Texas corporation) into which the former Texas corporation known as
Surgi+Group, Inc. (the "Target") was merged (the "Merger) on February 7, 2001
(the "Effective Time") and in connection therewith DII New Corp. as the
surviving corporation amended its Articles of Incorporation pursuant to the
Articles of Merger to change its name to Surgi+Group, Inc. (the same "SGI" as
referred to above) as described in the Agreement and Plan of Merger (the "Merger
Agreement") by and among the foregoing parties and the shareholders of Target.
This Employment Agreement shall continue to be effective, as well as the "ISO
Agreement"(defined below) whether or not the Merger becomes effective at the
Effective Time or any later date.

         Employee shall perform her Duties to the best of her ability and with
diligence and competence. Her Duties shall include such executive duties on
behalf of the Company and its subsidiaries or affiliates as may from time to
time be assigned to her by the Board of Directors of the Company, its CEO or
President or any other senior officer of the Company. Employee shall devote her
full time, attention, loyalty and energies to the business of the Company, and
shall not, during the term of this Agreement, be engaged in any other business
activity whether or not such business activity is pursued for gain, profit or
other pecuniary advantages; but this shall not be construed as preventing
Employee from investing her assets in stocks, bonds, commodities or other
securities or forms of passive investments, provided that such investments do
not detract from her devotion of time or attention to the Company and will not
require any services on the part of Employee in the operation of the affairs of
the companies or entities in which such investments are made. Employee further
agrees that during the term of this Agreement, she will act exclusively for the
Company performing services in the field of healthcare services and, in
particular, the development and expansion of the Company's ambulatory surgical
center ("ASC") business. Employee shall not solicit business opportunities for
any other persons or entities or for personal gain (except for passive
investments of the type referred to above). Employee shall follow the Company's
rules and regulations applicable to its employees. Employee may devote
reasonable time to participating in professional, educational, philanthropic,
public interest and social and charitable activities provided that such
activities do not materially interfere with the regular performance of her
Duties and responsibilities hereunder.

         Employee shall have day-to-day authority and control over the
development of the Company's ASC business and shall form a strategic business
plan and goals for the direction of such business group and shall have such
powers, duties, authority and responsibility usually incident to the positions
and office of a senior executive officer of a public corporation in charge of
the strategic growth and development of its core business division. Employee
shall supervise the growth and strategic planning for the Company's ASC
development subsidiary SGI and shall work closely with its President, Irvin T.
Gregory, who shall report to the Company through Employee.

         Employee shall perform her Duties at the principal offices of the
Company located in Houston, Texas, and her primary residence currently is and
shall be in Houston, Texas. Employee shall also be required to travel as
necessary to develop the Company's ASC business nationwide.

         2.    SALARY. Employee will be paid an annual salary (the "Base
Salary") of $120,000, payable in accordance with the normal payroll practices of
the Company.

         3.    TERM. The term of employment under this Agreement shall be a
period of three (3) years commencing on the Effective Date of this Agreement,
and ending on the third anniversary of such date, unless earlier terminated as
provided in this Agreement.
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         4.  EXPENSES. Employee will be reimbursed for all reasonable expenses
incurred in the performance of Employee's duties and Employee will receive an
expense grant of $3,300 per month; any undocumented or documented expenses not
in accordance with the Company's standard expense policies shall be accounted
for as required by the Company's policies and applicable legal requirement.

         5.  EMPLOYEE BENEFITS AND VACATION. Employee will be entitled to
participate in the Company's health plan and in any other benefit plans provided
by the Company to its employees, subject to Employee's qualification to
participate on the same basis as other employees (length of service, health
status, etc.). In addition, Employee shall be entitled to a minimum three (3)
weeks of paid vacation per year, and additional time if needed and agreed to by
the CEO.

         6.  EXECUTIVE BENEFITS. Employee will be provided an automobile
allowance of $750.00 per month to purchase and/or lease an automobile of recent
make that befits her professional and business status with the Company and shall
be eligible to participate in the Company's executive bonus plans or programs
which may be adopted from time-to-time by the Company on the same or a similar
basis with the other executive officers of her level and productivity, subject
to the final determination and approval of the Compensation Committee of the
Board of Directors in its sole discretion in view of Employee's existing
benefits, bonus participation, salary, stock options and other remuneration, all
of which shall be considered.

         7.  INCENTIVE STOCK OPTION GRANT - UPON EMPLOYMENT. Employee is hereby
granted an incentive stock option grant the ("Option") pursuant to the ISO
Agreement referred to below under the Dynacq International, Inc. Year-2000 Stock
Incentive Plan a copy of which has been provided to Employee to purchase 100,000
shares of the Company's common stock, $.001 par value (the "Common Stock") at an
exercise price equal to the Fair Market Value as defined in Section 2.22 of the
Stock Plan ($8.875 per share) which represents the closing sales price per share
on the date the Company and Employee agreed to the material Employment Agreement
terms and material Option terms, including the number thereof, the expiration
date for vesting and exercise, the exercise price, and other terms and
conditions on December 6, 2000. The right to purchase Common Stock issuable
pursuant to the Option (the "Option Shares") will vest over a three-year period
with: (i) 30% vesting after the first full year of employment; (ii) 30% vesting
after the second full year of employment; and (iii) 40% vesting after the third
full year of employment. Except as specifically provided to the contrary in the
event of termination of Employee without cause in years two and three of the
vesting period as set forth in the ISO Agreement, vesting shall be contingent
upon the achievement of the "Final Performance Goals" of the Company as defined
and set forth in the Incentive Stock Option Agreement entered into between the
Company and Employee effective December 6, 2000 (the "ISO Agreement"), a copy of
which is attached hereto as EXHIBIT A and incorporated herein by reference.
Notwithstanding anything in this Agreement to the contrary with respect to the
grant of the Option, the terms thereof, the rights and obligations of Employee
with respect thereto or any ambiguity, conflict, interpretive question or matter
not specifically addressed and answered herein which rise out of this Employment
Agreement, the ISO Agreement or the Stock Plan (the "ISO Issues") the terms of
the Stock Plan shall first control, secondly the terms of the ISO Agreement
shall control subject to the terms of the Stock Plan and lastly the terms of
this Employment Agreement shall control. If ISO Issues remain after reviewing
the foregoing agreements the Employee and Company agree that the Compensation
Committee (the "Committee") shall be entitled to resolve any ISO Issues as
provided for in Section 3 of the Stock Plan and elsewhere therein. In addition,
the Company shall cause its Compensation Committee to provide Employee with
evidence of its separate and formal approval acting in its official capacity of
the ISO Agreement and this Agreement, although its members have previously
approved the ISO Agreement, the Employment Agreement, and all other Merger
documentation (with the exception of Schedule 1 to the ISO Agreement which has
not been completed, but which shall be completed as to the Final Performance
Goals on or before March 9, 2001.

         If Employee and the Company are not able to agree within the thirty
(30) day period ending March 9, 2001, as to the Final Performance Goals to be
utilized in connection with the performance vesting requirements of the Option,
each of Chiu Chan, Philip Chan and Employee shall submit a written position
paper outlining their material concerns and proposals including what has been
previously agreed to (if in writing) and the Compensation Committee shall
conclusively determine the Final Performance Goals to include in SCHEDULE 1 to
the ISO Agreement in their sole discretion, which goals may include, but are not
limited to:

         a.  Net Profit or Profit Growth.
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          b.   Revenue Growth.

          c.   EPS or EPS Growth.

          d.   Return on Equity or Assets.

          e.   The number of ASC's acquired and the number of start-up denovo
               ASC developments.

          f.   Overall compensatory arrangements within the industry including
               performance goal benefits available under benefit plans for
               similarly situated public companies.

The Final Performance Goals may be subject to yearly change as approved by the
Compensation Committee and Employee. The Compensation Committee shall be
authorized in advance to have prepared a peer review compensation survey by a
reputable executive benefits consulting firm comparing the benefits and
remuneration provided by other public companies of similar size and success to
those provided by the Company for its executive officers and directors.

         8.    TERMINATION OF EMPLOYMENT - WITHOUT CAUSE.  If Employee is
terminated without cause, all of Employee's Options outstanding under the ISO
Agreement (but only to the extent specifically provided for therein) and/or the
Stock Plan (if not previously forfeited and/or vested and subject to the terms
of the ISO Agreement) on the date of such termination shall immediately vest and
become immediately and fully exercisable for a period of three (3) months from
the date of termination, and Employee will receive six months severance pay
(based on Employee's base salary during the year of termination) within 30 days
of such termination in addition to the consideration payable pursuant to Section
15 below for Employee's Non-Compete Covenant, if the covenant is not waived by
the Company in its sole and absolute discretion.

         9.    CHANGE OF CONTROL - In the event of a "Change in Control", as
defined in the Stock Plan ("Change in Control"), all of Employee's outstanding
incentive stock options will immediately vest and become immediately and fully
exercisable, as provided herein or in any stock-option or incentive agreement or
in the Stock Plan, whichever shall provide the greatest benefit to Employee as
Employee may elect, and if Employee is terminated within six (6) months
following the Change-in-Control (and the Company shall use its best efforts to
require the corporation acquiring control to assume the terms of this Agreement)
other than for cause, death or disability, Employee will receive six (6) months
severance pay in addition to the consideration provided for in Section 15 below
for Employee's Non-Compete Covenant, if the covenant is not waived by the
Company or its legal successor in interest in its sole and absolute discretion.

         10.   EMPLOYMENT AGREEMENT. At such time as the Company enters into
employment and/or incentive agreements with its key employees, Employee shall
have the opportunity to negotiate for substantially equivalent terms with the
Company and the Company shall negotiate in good faith with Employee to achieve a
result in the best interests of the Company and its shareholders; provided,
however, the terms of this Employment Agreement shall not be changed unless
Employee and the Company (through the Compensation Committee) enter into a new
written agreement, duly executed by both parties, in form and substance
satisfactory to each in their sole and absolute discretion.

         11.   DIRECTORS AND OFFICERS INSURANCE. As an executive officer,
Employee will be provided with evidence of adequate director and officer
insurance coverage when and if obtained by the Company upon terms and at a cost
acceptable to the Company in its sole discretion. If not obtained by August 7,
2001, the Company and Employee shall negotiate an Indemnification Agreement
providing Employee with the maximum indemnification provided by Nevada or other
applicable law and such other permissible benefits, including the advancement of
expenses to Employee to cover reasonable defense fees and costs, to the maximum
extent permitted by applicable laws.

         12.   PROPRIETARY INFORMATION.

               (a)  In connection with the performance of the Duties, the
                    Employee acknowledges that she may acquire Proprietary
                    Information (as defined below) from the Company and/or its
                    affiliates (collectively the "Company Group"). The use of
                    the word Company in this Agreement shall also include when
                    referring to the rights or obligations of the Company or
                    Employee
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                    hereunder shall include the Company Group as appropriate or
                    applicable in the context used. Accordingly, the Employee
                    agrees that all Proprietary Information acquired by her
                    hereunder shall be safeguarded with the same degree of
                    control and care as a reasonably prudent person would
                    exercise with respect to his or her own similar information,
                    and that the same shall be returned to the owner of such
                    Proprietary Information upon the owner's request.

               (b)  The Employee agrees (i) to treat in strict confidence any
                    proprietary or other confidential information received from
                    the Company Group (whether tangible or intangible),
                    including, without limitation, client lists, lists of
                    referral sources, business prospects, pricing and cost
                    information, operating results of individual healthcare
                    facilities, employees' names, compensation and other
                    information, regulatory and legal issues, accounting and
                    reporting matters, trade secrets, patents, copyrights,
                    concepts, inventions, processes, formulas, know-how, data
                    and information, whether such information is of a technical
                    or a business nature, and all copies of any of the foregoing
                    whether or not in writing or in any electronic or computer
                    storage medium ("Proprietary Information"), (ii) that she
                    will not disclose any Proprietary Information to third
                    parties, except as specifically permitted herein, and (iii)
                    that she will not use any Proprietary Information for any
                    purpose not contemplated by this Agreement without the
                    written permission of the Company, including any use for
                    personal gain or benefit whether directly or indirectly.

               (c)  Information that is to be excluded from the term
                    "Proprietary Information" is any information that:

                    (i)    has been published or is otherwise in the public
                           domain at the time of the disclosure;

                    (ii)   becomes public through no fault of Employee or of the
                           party receiving such information;

                    (iii)  was already in the possession of Employee prior to
                           employment or the party receiving such information is
                           rightfully in possession thereof without knowledge
                           of, or a breach of, any applicable confidentiality
                           requirements or other restrictions;

                    (iv)   is obtained from a third party who is lawfully in
                           possession of said information and is not subject to
                           a contractual or fiduciary relationship to the party
                           receiving or providing such information or any other
                           person; or

                    (v)    is disclosed pursuant to a mandatory requirement of a
                           governmental agency or by operation of law.

               (d)  The provisions of this Section 12 shall apply for so long as
                    Employee provides services to the Company Group in any
                    capacity, whether or not pursuant to this Agreement, and
                    shall survive the termination of this Agreement for so long
                    as the information remains Proprietary Information.

         13.   INTELLECTUAL PROPERTY RIGHTS. Except for Proprietary Information
owned by the Employee which is designated in writing to the Company prior to the
execution hereof as EXHIBIT B hereto, the Employee agrees that all ideas,
proposals, valuation processes, ASC economic models, profiles or operating
processes or architectural designs, insights, knowledge, writing, drawings,
inventions, designs, parts, machines or processes developed as a result of, or
in the course of, the Duties rendered to the Company Group or by the Employee
during the term of this Agreement, whether or not patentable or subject to
copyright, shall be the property of the Company Group. Subject to the foregoing
exception, the Employee herewith assigns all rights in the foregoing
intellectual property to the Company Group and shall supply all assistance, both
while an Employee of the Company and after leaving the Company, reasonably
requested in securing for the Company Group's benefit any patent, copyright,
trademark, service mark, license, right or other evidence of ownership of any
such intellectual property, and shall provide full information
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regarding any such item and execute all appropriate documentation prepared by
the Company Group in applying or otherwise registering, in the name of the
appropriate entity comprising part of the Company Group, all rights, to any such
item. The Employee shall prominently mark all written information with an
appropriate legend that the material contained therein is the property of the
Company and that the information is confidential and proprietary and not to be
reproduced or used by other parties. The Company Group shall have the right to
sell, or grant licenses to use, any of such intellectual property to others,
including, without limitation, any such intellectual property derived from any
business practices journal prepared in connection with the Duties provided. If
the Employee's assistance is required after the departure of the Employee from
the Company, the Company will reimburse Employee for any out-of-pocket expenses
incurred in the performance of the needed assistance.

          14.  TERMINATION OF EMPLOYMENT.

          (a)  FOR CAUSE. Nothing herein shall prevent the Company from
               terminating the Employee, without prior notice, for "Cause" (as
               hereinafter defined), in which event the Employee shall be
               entitled to receive her Base Salary on a pro rata basis to the
               date of termination. In the event of such termination for Cause,
               all other rights and benefits the Employee may have under any
               employee benefit, bonus and stock option plans and programs of
               the Company shall be determined in accordance with the terms and
               conditions of Section 15 of this Agreement and any loans,
               advances or undocumented expenses (not previously included by the
               Company in a W-2 or Form 1099) shall be immediately due and
               payable. The term "Cause" shall mean (i) the Employee has
               committed a willful serious act, such as fraud, embezzlement or
               theft, against the Company, intending to enrich herself at the
               expense of the Company, (ii) the Employee has been convicted of a
               felony (or entered a plea of nolo contendere to a felony charge),
               (iii) the Employee has engaged in conduct that has caused
               material injury, monetary or otherwise, to the Company, including
               the violation of any material law or regulation applicable to the
               Company, (iv) the Employee, in carrying out her Duties hereunder,
               has been guilty of gross neglect or gross misconduct, or any act
               or omission involving intentional misconduct or a knowing
               violation of law, (v) the Employee has refused to carry out her
               Duties as they now exist or as changed from time-to-time or to
               follow the reasonable written direction of the Board of Directors
               of the Company or any senior officer and, after receiving written
               notice to such effect from the Compensation Committee, and the
               Employee fails to cure the existing problem within fifteen (15)
               days, with notice not being required if it is determined the
               problem is not curable, (vi) the Employee has materially breached
               this Agreement and has not remedied such breach within fifteen
               (15) days after receipt of written notice from the Compensation
               Committee that a breach of this Agreement has occurred (written
               notice being required only if the breach can be remedied or
               cured), or (vii) the Employee has breached (as determined by
               legal advice of independent outside counsel appointed by the
               Compensation Committee) any legal duties to the Company provided
               by the laws of its state of incorporation, whether Nevada or any
               other state (if reincorporated by merger or otherwise to another
               state), including, primarily, those applicable to officers and
               directors including, but not limited to, breach of the duty of
               loyalty, receiving improper benefits, not disclosing material
               conflicts of interest or an act or omission for which the
               liability of an officer or director is expressly provided for by
               statute.

          (b)  DEATH. If the Employee dies, this Agreement shall terminate on
               the date of death. In the event of such termination due to death,
               all other rights and benefits the Employee (or her estate) may
               have under the employee benefit, bonus and/or stock option plans
               and programs of the Company, generally, shall be determined in
               accordance with the terms and conditions of such plans and
               programs.

          (c)  DISABILITY. In the event the Employee suffers a "disability" (as
               hereinafter defined), this Agreement shall terminate on the date
               on which the Disability occurs and the Employee shall be entitled
               to her Base Salary for six (6) months offset by any Disability
               pay under the Company's Disability insurance program or any
               applicable disability policy even if the policy is not maintained
               by the Company. In the event of such termination due to
               Disability, all other rights and benefits the Employee may have
               under the employee benefit, bonus and/or stock option plans and
               programs of the Company shall be determined in accordance with
               the terms and conditions of such plans and programs. For purpose
               of this Agreement, "Disability" shall mean the inability or
               incapacity (by
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               reason of a medically determinable physical or mental impairment)
               of the Employee to perform the duties and responsibilities
               related to the job or position with the Company described in
               Section 1 for a period that can be reasonably expected to last
               more than ninety (90) days. Such inability or incapacity shall be
               documented to the reasonable satisfaction of the Company by
               appropriate correspondence from registered physicians reasonably
               satisfactory to the Company. Nothing in this Section 14 or in
               this Agreement shall be deemed to require or permit the Company
               to take an illegal or wrongful act under the Americans With
               Disabilities Act or any other applicable law or regulation.

          (d)  CESSATION OF OPERATIONS. In the event the Board of Directors
               determines that the Company should cease operations, whether
               through dissolution and liquidation or otherwise, this Agreement
               shall terminate thirty (30) days following the date of such
               determination or at such earlier time as the parties may agree.
               In such event: (i) Employee shall be entitled to receive her Base
               Salary for six (6) months after termination of her employment
               hereunder, as liquidated damages under this Agreement, (ii) the
               Company shall be deemed to have performed all of its obligations
               under this Agreement, and (iii) all rights and benefits the
               Employee may have under any employee benefit, bonus and/or stock
               option plans of the Company shall be determined in accordance
               with the terms and conditions of such plans and programs.

          (e)  VOLUNTARY TERMINATION. The Employee may voluntarily terminate her
               employment under this Agreement at any time by providing at least
               ninety (90) days' prior written notice to the Company, provided,
               however, the notice requirement and the remaining employment
               period may be waived or reduced, respectively, by the Company in
               whole or in part. In such event, the Employee shall be entitled
               to receive her Base Salary until the date her employment
               terminates, and all other benefits the Employee may have under
               any employee benefit, bonus and/or stock option plans and
               programs of the Company shall be determined in accordance with
               the terms and conditions of such plans and programs. Voluntary
               Termination shall not include "Resignation For Good Reason"
               defined as follows:

               (i)    the assignment to the Employee of any lesser duties
                      inconsistent with the Employee's executive position
                      (including status, offices, titles or reporting
                      relationships), authority, duties or responsibilities as
                      contemplated by Section 1 hereof, that results in a long-
                      term material diminution in such position, authority,
                      duties or responsibilities, but excluding for these
                      purposes (i) any isolated and insubstantial action not
                      taken in bad faith and which is remedied by the Company
                      promptly after receipt of notice thereof given by
                      Employee; or (ii) the hiring of additional senior offices
                      whose rank may exceed Employees or changes in, or the
                      assignment of, additional duties which are required as
                      part of the Company's business needs but do not result in
                      a substantial and material diminution of Employee's
                      position and responsibilities as a senior officer;

               (ii)   any material failure by the Company to honor its material
                      obligations under this Agreement but only after Employee
                      provides the Company thirty (30) days written notice and
                      an opportunity to cure such failure within such period;

               (iii)  any failure by the Company to obtain an assumption of this
                      Agreement by a successor corporation as required under
                      Subsection 14(f) hereof;

               (iv)   any purported termination by the Company of the Employee's
                      employment otherwise than as expressly permitted by this
                      Agreement; or

               (v)    A material reduction in salary, bonus, benefits or overall
                      remuneration unrelated to the performance of Employee's
                      Duties, or as a result of the Company's financial
                      condition, in which case the compensatory and benefit
                      reductions shall be on a basis not materially inconsistent
                      with those of other executive officers.

          (f)  TERMINATION IN THE EVENT OF A CHANGE OF CONTROL. In the event of
               a Change of Control (as defined in the Stock Plan) of the Company
               in which subsection (d) above does not apply,
<PAGE>

                    either Company or Employee may terminate this Agreement upon
                    written notice at any time after such Change of Control
                    occurs (but in any event not later than six (6) months after
                    the Change of Control). In the event of the termination of
                    this Agreement by either party under this subsection, (i)
                    all of Employee's outstanding incentive stock options or
                    other awards granted under the Stock Plan will immediately
                    vest and become immediately and fully exercisable and any
                    restrictions or requirements with respect to any prior
                    grants of Restricted Stock or, Performance Shares as defined
                    in the Stock Plan or other awards thereunder will be deemed
                    waived or met, and (ii) the Company or its successor shall
                    be obligated (Y) to pay Employee the consideration provided
                    in Section 9 above and in Section 15 below (unless the Non-
                    Compete Covenant is waived or not enforced by the Company or
                    its successors and assigns), and (Z) to continue the
                    Employee under the Company's health plan and to pay the
                    premiums therefor to the extent such plan remains in effect
                    and Employee remains eligible to participate in same, in
                    lieu of any other rights, claims or benefits created or
                    receivable under this Agreement.

               15.  COVENANT NOT TO COMPETE. It was a mandatory and material
condition imposed by the Company and SGI for Employee to enter into this
Agreement in connection with the Merger Agreement, the Success Fee Agreement and
the other Merger Documentation and grant the Company and SGI the Non-Compete
Covenant contained herein, and in consideration of those agreements and the
consideration provided for therein and herein Employee agrees with the Company
that during the period of her employment and for a period of two (2) years
following her termination of employment for any reason, whether by resignation
(with or without good reason), termination by the Company for cause or without
cause, or any other reason whatsoever, Employee will not compete, whether
directly or indirectly as an owner, partner, shareholder, member, sole
proprietor, consultant, manager, officer, director or in any other capacity
except as a passive investor without managerial responsibilities, with the
Company Group in the ownership or operation of ASC's or hospitals in (i)
Houston, Texas, Harris County, Texas, and in all contiguous counties and (ii) in
such other counties (including all contiguous counties) where the Company Group
or its affiliates own and/or operate, whether directly or indirectly, any ASC or
hospital in the State of Texas or any other of the forty-nine (49) states of the
United States of America. In the event Employee voluntarily terminates her
employment, she shall not be entitled to severance pay or any other additional
payments of consideration for this covenant not to compete. In the event
Employee's employment is terminated without cause, she shall be entitled to the
consideration provided for in Section 8 and she shall be additionally entitled
to her full Base Salary in effect as of the date of termination, payable in
monthly installments commencing in month seven (7) following her termination of
employment through the final month of this covenant not to compete. If
Employee's employment is terminated for cause or if Employee resigns without
good reason, Employee shall not be entitled to any severance benefits, and
Employee's outstanding incentive stock options under the Stock Plan or any other
benefits provided for thereunder including but not limited to restricted stock,
stock appreciation rights, performance shares or cash bonus programs which are
not then vested, exercised and paid or performed in full will terminate and
Employee shall receive no additional consideration for Employee's covenant not
to compete. The Company or its legal successors or permitted assigns may waive
its rights under this Section 15 and in that event Employee shall not be
entitled to the consideration for this covenant not to compete specified in this
Section 15 and may compete with the Company in any area or in any legal manner;
provided, however, the provisions and restrictions relating to the use or
disclosure of Proprietary Information shall continue to apply.

               16.  NOTICES. Any notices required or permitted hereunder shall
be sufficient if in writing and sent by certified mail, return receipt requested
with postage prepaid to the other party at the appropriate address set forth
below, or to such other address as may be designated by written notice similarly
given by either party to the other. All notices shall also be effective if in
writing, when received, with confirmation thereof, by mail as provided above,
fax, personal delivery, courier service or electronic transmission if proof of
delivery is obtained, and if sent via e-mail, proof of sending and the opening
of the e-mail is required, followed by written notification in any manner
provided above.

                         (i)  If to the Company:

                                   Dynacq International, Inc.
                                   4301 A Vista
                                   Pasadena, Texas 77504
                                   Attn: Chairman and CEO
                                   cc:  Philip Chan, CFO
<PAGE>

                                   cc:  Eric Carter, General Counsel

                         (ii) If to the Employee:

                                    Sarah C. Garvin
                                    4301-A Vista Road
                                    Pasadena, Texas 77504

          17.  GOVERNING LAW, JURISDICTION, VENUE, AND ATTORNEYS' FEES. THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICT OF LAWS PRINCIPLES THEREOF. IN THE EVENT OF ANY CONFLICT RELATING
TO OR ARISING OUT OF THIS AGREEMENT, IN WHOLE OR IN PART, THE PARTIES AGREE TO
THE EXCLUSIVE JURISDICTION OF THE STATE OR FEDERAL DISTRICT COURTS IN HOUSTON,
HARRIS COUNTY, TEXAS AND AGREE TO EXCLUSIVE VENUE IN SUCH COURTS. IN THE EVENT
OF LEGAL PROCEEDINGS HEREUNDER, THE PARTY SUBSTANTIALLY PREVAILING ON THE MERITS
SHALL BE ENTITLED TO AN AWARD OF ATTORNEYS' FEES AND COSTS. ANY PARTY MAY
REQUEST AND OBTAIN A NON-BINDING MEDIATION HEARING AFTER FILING A LAWSUIT
HEREUNDER IN HOUSTON, TEXAS, WITH COSTS TO BE SHARED EQUALLY, AND THE MEDIATOR
SHALL BE APPOINTED BY THE COURT IF THE PARTIES CANNOT AGREE TO A MEDIATOR.

          18.  ENTIRE AGREEMENTS AND AMENDMENTS. This Agreement together with
the Merger Agreement and Merger Documentation contain the entire agreement of
the Employee and the Company relating to the matters contained herein (except
with respect to "Options" or "Awards" as defined in the Stock Plan, whether
referred to herein or hereafter arising, the terms of the Stock Plan and/or the
later agreement relating to any Stock Plan Award or Option shall control) and
this Agreement supersedes all prior agreements and understandings, oral or
written, between the Employee and the Company with respect to the subject matter
hereof; this Agreement may not be amended or modified except by an agreement in
writing signed by the party against whom enforcement of any waiver or
modification is sought. In the event of any conflict, ambiguity, inconsistency,
or outright differences between the parties' rights under the Merger
Documentation, the agreement that addresses the matter with the greatest
specificity shall control.

          19.  HEADINGS. The headings of Sections and subsections hereof are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.

          20.  SEPARABILITY. If any provisions of this Agreement are rendered or
declared illegal, invalid, or unenforceable by reason of any existing or
subsequently enacted legislation or by the final judgment of any court of
competent jurisdiction, the Employee and the Company shall promptly meet and
negotiate substitute provisions for those rendered or declared illegal or
unenforceable to preserve the original intent of this Agreement to the extent
legally possible, but all other provisions of this Agreement shall remain in
full force and effect.

          21.  ASSIGNMENTS. The Company may assign this Agreement to any person
or entity succeeding to all or substantially all the business interests of the
Company by merger or otherwise. The rights and obligations of the Employee under
this Agreement are personal to him, and no such rights, benefits or obligations
shall be subject to voluntary or involuntary alienation, assignment or transfer,
except to a successor in interest to substantially all of the assets or business
interests or ownership of the Company or the Company Group, whether directly or
indirectly, as provided above.

          22.  COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by facsimile, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.

          23.  SURVIVAL OF CERTAIN TERMS. The terms contained in Sections 12,
13, 14 and 15 shall survive the termination of this Agreement for any reason,
whether terminated by Company or Employee.

          24.  CONSTRUCTION OF AGREEMENT. The parties hereto acknowledge,
stipulate and agree that this Agreement was jointly prepared, negotiated and
drafted by the parties and their respective counsel, and agree that the
<PAGE>

presumption of a favorable interpretation for the nondrafting party in the event
of ambiguity or any other matter of interpretation shall not apply.

     25.  BREACH OF EMPLOYEE'S COVENANTS. If Employee breaches or threatens to
breach Sections 12, 13 or 15 hereof, Employee specifically acknowledges that
such breach or breaches shall be conclusively presumed to cause irreparable harm
to the Company or Company Group entitling it to all equitable relief available
at law or in equity including but not limited to a temporary restraining order,
a temporary injunction and a permanent injunction and Employee stipulates and
acknowledges that monetary recovery shall not be sufficient alone to compensate
the Company in such events and waives proof thereof and the necessity for the
Company to post a bond, except for the minimum amount permitted by law.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date stated in the initial paragraph above.

                                    EMPLOYEE:

                                    _____________________________________
                                    Sarah C. Garvin

                                    EMPLOYER:

                                    Dynacq International, Inc.

                                    By:__________________________________
                                        Philip Chan, CEO

                                   EXHIBIT A

                       INCENTIVE STOCK OPTION AGREEMENT

                                   EXHIBIT B

                       EMPLOYEE'S INTELLECTUAL PROPERTY

                       RIGHTS OR PROPRIETARY INFORMATION

                              PRIOR TO EMPLOYMENT

                                     NONE.<PAGE>

                                                                   Exhibit 10.25

                             EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into effective
January 31, 2001, (the "Effective Date") between SURGI+GROUP, INC., a Texas
corporation (the "Company"), and IRVIN T. GREGORY, of 1614 Corral Drive,
Houston, Texas 77090 ("Employee"). All capitalized terms not defined herein
shall have the meanings ascribed to such terms in the "Merger Agreement" (as
defined below). This Agreement is one of several contemplated by the Merger
Agreement and related agreements (the "Merger Documentation"). The Company by
this Agreement employs Employee and Employee accepts employment on the terms and
conditions that follow:

         1. POSITION; DUTIES; PRINCIPAL OFFICE. Employee will be employed with
the titles, positions, and responsibilities (the "Duties") of President of the
Company, a wholly owned subsidiary of Dynacq International, Inc., a Nevada
corporation ("DYI") and he shall serve as one of three (3) Directors serving on
the Board of Directors of the Company (f/k/a DII New Corp., a Texas corporation)
into which the former Texas corporation known as Surgi+Group, Inc. (the
"Target") merged (the "Merger) on or about February 7, 2001 (the "Effective
Time") and in connection therewith DII New Corp. as the surviving corporation
amended its Articles of Incorporation pursuant to the Articles of Merger to
change its name to Surgi+Group, Inc. as described in the Agreement and Plan of
Merger (the "Merger Agreement") by and among the foregoing parties and the
shareholders of Target. This Employment Agreement shall be null and void
together with the Incentive Stock Option Agreement (the "ISO Agreement")
referred to below if the Merger does not become effective.

         Employee shall perform his Duties to the best of his ability and with
diligence and competence. His Duties shall include such executive duties on
behalf of the Company and its subsidiaries or affiliates (the "Company Group")
as may from time to time be assigned to him by the Board of Directors of the
Company, its CEO or a senior officer of the Board of Directors of DYI. Employee
shall devote his full time, attention, loyalty and energies to the business of
the Company, and shall not, during the term of this Agreement, be engaged in any
other business activity whether or not such business activity is pursued for
gain, profit or other pecuniary advantages; but this shall not be construed as
preventing Employee from investing his assets in stocks, bonds, commodities or
other securities or forms of passive investments, provided that such investments
do not detract from his devotion of time or attention to the Company and will
not require any services on the part of Employee in the operation of the affairs
of the companies or entities in which such investments are made. Notwithstanding
the foregoing, it is acknowledged that Employee is involved pursuant to an
existing agreement with Vital Weight Control, Inc. d/b/a NeWeigh, to provide
limited marketing services which will not detract from his Duties and full-time
employment responsibilities and commitment hereunder. Employee further agrees
that during the term of this Agreement, he will act exclusively for the Company
Group performing services in the field of healthcare services and, in
particular, the development and expansion of the Company's ambulatory surgical
center ("ASC") business. Employee shall not solicit business opportunities for
any other persons or entities or for personal gain (except for passive
investments of the type referred to above). Employee shall follow the Company's
rules and regulations applicable to its employees and those of its affiliates
including DYI. Employee may devote reasonable time to participating in
professional, educational, philanthropic, public interest and social and
charitable activities provided that such activities do not materially interfere
with the regular performance of his Duties and responsibilities hereunder.

         Employee shall have day-to-day supervision and control over the
development of the Company's ASC business and shall form a strategic business
plan and goals for the direction of such business group and shall have such
powers, duties, authority and responsibility usually incident to the positions
and office of a senior executive officer of a subsidiary of a public corporation
in charge of the strategic growth and development of its core business division.
Employee shall supervise and have general day-to-day control over the Company,
as DYI's ASC development subsidiary, and shall work closely with DYI's Vice
President - Operations and Strategic Planning and report to DYI directly through
such officer.

         Employee shall perform his Duties at 17101 Kuykendahl Road, Suite 100,
located in Houston, Texas 77068-1629 and at DYI's offices if and when requested.
Employee shall be required to travel as frequently as necessary to develop the
Company's ASC business nationwide. Employee may continue to office out of his
current location referenced above with the costs of such location to be paid by
Employee out of the expense allowance referred to in Section 4 below.
<PAGE>

         2. SALARY. Employee will be paid an annual salary (the "Base Salary")
of $120,000, payable in accordance with the normal payroll practices of the
Company.

         3. TERM. The term of employment under this Agreement shall be a period
of three (3) years commencing on the Effective Date of this Agreement, and
ending on the third anniversary of such date, unless earlier terminated as
provided in this Agreement.

         4. EXPENSES. Employee will be reimbursed for all reasonable expenses
incurred in the performance of Employee's Duties including, but not limited to
travel and entertainment expenses, hotel and/or lodging expenses while traveling
or on temporary assignment of Company business. Employee will receive an expense
grant of $3,300 per month, out of which Employee shall pay the office expenses
for his separate office referred to above. Any undocumented or documented
expenses not in accordance with the Company's standard expense policies shall be
accounted for as required by the Company's policies and applicable legal
requirements.

         5. EMPLOYEE BENEFITS AND VACATION. Employee will be entitled to
participate in the Company's health plan and in any other benefit plans provided
by DYI or the Company to its employees, subject to Employee's qualification to
participate on the same basis as other employees (length of service, health
status, etc.). In addition, Employee shall be entitled to a minimum three (3)
weeks of paid vacation per year, and additional time if needed and agreed to by
the CEO of the Company.

         6. EXECUTIVE BENEFITS. Employee will be provided an automobile
allowance of $750.00 per month to purchase and/or lease an automobile of recent
make that befits his professional and business status with the Company and shall
be eligible to participate in the Company's executive bonus plans or programs
which may be adopted from time-to-time by the Company or DYI on the same or a
similar basis with other executive officers of his level and productivity,
subject to a final determination by the Compensation Committee of the Board of
Directors of DYI in its sole discretion in view of Employee's existing benefits,
bonus participation, salary, stock options and other remuneration, all of which
shall be considered.

         7. INCENTIVE STOCK OPTION GRANT. Employee is hereby granted an
incentive stock option grant the ("Option") pursuant to the ISO Agreement
referred to below with respect to options under the Dynacq International, Inc.
Year-2000 Stock Incentive Plan (the "Stock Plan"), a copy of which has been
provided to Employee to purchase 100,000 shares of the Company's common stock,
$.001 par value (the "Common Stock") at an exercise price equal to the Fair
Market Value as defined in Section 2.22 of the Stock Plan ($8.875 per share)
which represents the closing sales price per share on the date the Company and
Employee agreed to the material Employment Agreement terms and material Option
terms, including the number thereof, the expiration date for vesting and
exercise, the exercise price, and other terms and conditions on December 6,
2000. The right to purchase Common Stock issuable pursuant to the Option (the
"Option Shares") will vest over a three-year period with: (i) 30% vesting after
the first full year of employment; (ii) 30% vesting after the second full year
of employment; and (iii) 40% vesting after the third full year of employment.
Except as specifically provided for to the contrary in the event of termination
without cause in years two and three of the vesting period as set forth in the
ISO Agreement, vesting shall be contingent upon the achievement of the "Final
Performance Goals of the Company and/or DYI as defined and set forth in the ISO
Agreement entered into between DYI and Employee effective December 6, 2000, when
they agreed to the material Option terms (the "ISO Agreement"), which is
attached hereto as EXHIBIT A and incorporated herein by reference.
Notwithstanding anything in this Agreement to the contrary with respect to the
grant of the Option, the terms thereof, the rights and obligations of Employee
with respect thereto or any ambiguity, conflict, interpretive question or matter
not specifically addressed and answered herein which may arise out of this
Employment Agreement, the ISO Agreement or the Stock Plan (the "ISO Issues") the
terms of the Stock Plan shall first control, secondly the terms of the ISO
Agreement shall control subject to the terms of the Stock Plan and lastly the
terms of this Employment Agreement shall control. If ISO Issues remain after
reviewing the foregoing agreements the Employee and Company agree that the
Compensation Committee of DYI (the "Compensation Committee" or the "Committee")
shall be entitled to resolve any ISO Issues as provided for in Section 3 of the
Stock Plan and elsewhere therein. In addition, the Company shall cause its
Compensation Committee to provide Employee with evidence of its separate and
formal approval acting in its official capacity as the Compensation Committee of
the ISO Agreement and this Agreement, although its members have previously
approved the ISO Agreement, the Employment Agreement and all other Merger
Documentation (with the exception of Schedule
<PAGE>

1 to the ISO Agreement which has not been completed, but which shall be
completed as to the Final Performance Goals on or before March 9, 2001.

         If Employee and DYI are not able to agree within the thirty (30) day
period ending March 9, 2001, as to the Final Performance Goals to be utilized in
connection with the performance vesting requirements of the Option, each of Chiu
Chan, Philip Chan and Employee shall submit a written position paper outlining
their material concerns and proposals including what has been agreed to and the
Compensation Committee shall conclusively determine the Final Performance Goals
to include in SCHEDULE 1 to the ISO Agreement in their sole discretion, which
goals may include, but are not limited to:

         a.  Net Profit or Profit Growth.

         b.  Revenue Growth.

         c.  EPS or EPS Growth.

         d.  Return on Equity or Assets.

         e.  The number of ASC's acquired and the number of start-up de novo ASC
             developments undertaken.

         f.  Overall compensatory arrangements within the industry including
             performance goal benefits available under benefit plans for
             similarly situated public companies.

The Final Performance Goals may be subject to yearly change as approved by the
Compensation Committee and Employee. The Compensation Committee shall be
authorized in advance to have prepared a peer review compensation survey by a
reputable executive benefits consulting firm comparing the benefits and
remuneration provided by other public companies of similar size and success to
those provided by the Company or DYI for executive officers and directors.

         8.  TERMINATION OF EMPLOYMENT - WITHOUT CAUSE. If Employee is
terminated without cause, all of Employee's Options outstanding under the ISO
Agreement (but only to the extent specifically provided for therein) and/or the
Stock Plan (if not previously forfeited and/or vested and subject to the terms
of the ISO Agreement) on the date of such termination shall immediately vest and
become immediately and fully exercisable for a period of three (3) months from
the date of termination, and Employee will receive six months severance pay
(based on Employee's base salary during the year of termination) within 30 days
of such termination in addition to the consideration payable pursuant to Section
15 below for Employee's Covenant Not to Compete (the "Non-Compete Covenant"), if
such covenant is not waived by the Company in its sole and absolute discretion.

         9.  CHANGE OF CONTROL - In the event of a "change in control", as
defined in the Stock Plan ("Change in Control"), all of Employee's outstanding
incentive stock options will immediately vest and become immediately and fully
exercisable, as provided herein or in accordance with the terms of any other
applicable stock option or other agreement or in the Stock Plan, whichever shall
provide the greatest benefit to Employee as Employee may elect, and if Employee
is terminated within six (6) months following the Change-in-Control, (and the
Company shall have used its best efforts to require the corporation or person
acquiring control to assume the terms of this Agreement) other than for cause,
death or disability, Employee will receive six (6) months severance pay in
addition to the consideration provided for in Section 15 below for the
Non-Compete Covenant, if the covenant is not waived by the Company or its legal
successor in interest or assigns in its sole and absolute discretion.

         10. EMPLOYMENT AGREEMENT. At such time as the Company Group enters into
employment and/or incentive agreements with its key employees, Employee shall
have the opportunity to negotiate for substantially equivalent terms with the
Company Group and the Company Group shall negotiate in good faith with Employee
to achieve a result in the best interests of the Company and its shareholders;
provided, however, the terms of this Employment Agreement and any stock
incentive or performance related agreement shall not be changed unless Employee
and the Company (through the Compensation Committee of DYI) enter into a new
written agreement, duly executed by both parties, in form and substance
satisfactory to each in their sole and absolute discretion.
<PAGE>

         11. DIRECTORS AND OFFICERS INSURANCE. As an executive officer, Employee
will be provided with evidence of adequate director and officer insurance
coverage when and if obtained by the Company and/or DYI upon terms and at a cost
acceptable to the Company and/or DYI in its or their sole discretion. If not
obtained by August 7, 2001, the Company and DYI, on one hand and Employee on the
other, shall negotiate an Indemnification Agreement providing Employee with the
maximum indemnification provided by Texas and/or Nevada law and such other
permissible benefits, including the advancement of expenses to Employee to cover
reasonable legal fees and costs, to the maximum extent permitted by the
applicable laws of such states.

         12. PROPRIETARY INFORMATION.

             (a) In connection with the performance of the Duties, the Employee
                 acknowledges that he may acquire Proprietary Information (as
                 defined below) from the Company and/or its affiliates
                 (collectively the "Company Group"). The use of the word Company
                 in this Agreement when referring to the rights and obligations
                 of the Company or Employee hereunder shall include the Company
                 Group as appropriate or applicable in the context used.
                 Accordingly, the Employee agrees that all Proprietary
                 Information acquired by him hereunder shall be safeguarded with
                 the same degree of control and care as a reasonably prudent
                 person would exercise with respect to his or her own similar
                 information, and that the same shall be returned to the owner
                 of such Proprietary Information upon the owner's request.

             (b) The Employee agrees (i) to treat in strict confidence any
                 proprietary or other confidential information received from the
                 Company Group (whether tangible or intangible), including,
                 without limitation, client lists, lists of referral sources,
                 business prospects, pricing and cost information, operating
                 results of individual healthcare facilities, employees' names,
                 compensation and other information, regulatory and legal
                 issues, accounting and reporting matters, trade secrets,
                 patents, copyrights, concepts, inventions, processes, formulas,
                 know-how, data and information, whether such information is of
                 a technical or a business nature, and all copies of any of the
                 foregoing whether or not in writing or in any electronic or
                 computer storage medium ("Proprietary Information"), (ii) that
                 he will not disclose any Proprietary Information to third
                 parties, except as specifically permitted herein, and (iii)
                 that he will not use any Proprietary Information for any
                 purpose not contemplated by this Agreement without the written
                 permission of the Company, including any use for personal gain
                 or benefit whether directly or indirectly.

             (c) Information that is to be excluded from the term "Proprietary
                 Information" is any information that:

                 (i)   has been published or is otherwise in the public domain
                       at the time of the disclosure;

                 (ii)  becomes public through no fault of Employee or of the
                       party receiving such information;

                 (iii) was already in the possession of Employee prior to
                       employment or the party receiving such information is
                       rightfully in possession thereof without knowledge of, or
                       a breach of, any applicable confidentiality requirements
                       or other restrictions;

                 (iv)  is obtained from a third party who is lawfully in
                       possession of said information and is not subject to a
                       contractual or fiduciary relationship to the party
                       receiving or providing such information or any other
                       person; or

                 (v)   is disclosed pursuant to a mandatory requirement of a
                       governmental agency or by operation of law.
<PAGE>

             (d)  The provisions of this Section 12 shall apply for so long as
                  Employee provides services to the Company Group in any
                  capacity, whether or not pursuant to this Agreement, and shall
                  survive the termination of this Agreement for so long as the
                  information remains Proprietary Information.

         13. INTELLECTUAL PROPERTY RIGHTS. Except for Proprietary Information
owned by the Employee which is designated in writing to the Company prior to the
execution hereof in EXHIBIT B hereto, the Employee agrees that all ideas,
business contacts, proposals, valuation processes, ASC economic models, profiles
or operating processes or architectural design, insights, knowledge, writings,
drawings, inventions, designs, parts, machines or processes developed as a
result of, or in the course of, the Duties rendered to the Company Group or by
the Employee during the term of this Agreement, whether or not patentable or
subject to copyright, shall be the property of the Company Group. Subject to the
foregoing exception, the Employee herewith assigns all rights in the foregoing
intellectual property to the Company Group and shall supply all assistance, both
while an Employee of the Company and after leaving the Company for any reason,
reasonably requested in securing for the benefit of the Company Group any
patent, copyright, trademark, service mark, license, right or other evidence of
ownership of any such intellectual property, and shall provide full information
regarding any such item and execute all appropriate documentation prepared by
the Company Group in applying or otherwise registering, in the name of the
appropriate entity comprising part of the Company Group, all rights, to any such
item. The Employee shall prominently mark all written information with an
appropriate legend that the material contained therein is the property of the
Company and that the information is confidential and proprietary and not to be
reproduced or used by other parties. The Company Group shall have the right to
sell, or grant licenses to use, any of such intellectual property to others,
including, without limitation, any such intellectual property derived from any
business practices journal prepared in connection with the Duties provided. If
the Employee's assistance is required after the departure of the Employee from
the Company, the Company will reimburse Employee for any out-of-pocket expenses
incurred in the performance of the needed assistance.

         14. TERMINATION OF EMPLOYMENT.

         (a) FOR CAUSE. Nothing herein shall prevent the Company from
             terminating the Employee, without prior notice, for "Cause" (as
             hereinafter defined), in which event the Employee shall be entitled
             to receive his Base Salary on a pro rata basis to the date of
             termination. In the event of such termination for Cause, all other
             rights and benefits the Employee may have under any employee
             benefit, bonus and stock option plans and programs of the Company
             shall be determined in accordance with the terms and conditions of
             Section 15 of this Agreement and any loans, advances or
             undocumented expenses (not previously included by the Company in a
             W-2 or Form 1099) shall be immediately due and payable. The term
             "Cause" shall mean (i) the Employee has committed a willful serious
             act, such as fraud, embezzlement or theft, against the Company
             Group, intending to enrich himself at the expense of the Company
             Group, (ii) the Employee has been convicted of a felony (or entered
             a plea of nolo contendere to a felony charge), (iii) the Employee
             has engaged in conduct that has caused material injury, monetary or
             otherwise, to the Company Group, including the violation of any
             material law or regulation applicable to the Company Group, (iv)
             the Employee, in carrying out his Duties hereunder, has been guilty
             of gross neglect or gross misconduct, or any act or omission
             involving intentional misconduct or a knowing violation of law, (v)
             the Employee has refused to carry out his Duties as they now exist
             or as changed from time-to-time or to follow the reasonable written
             direction of the Board of Directors of the Company or DYI or any
             senior officer of the foregoing and, after receiving written notice
             to such effect from the Compensation Committee of DYI, and the
             Employee fails to cure the existing problem within fifteen (15)
             days, with notice not being required if it is determined the
             problem is not curable, (vi) the Employee has materially breached
             this Agreement and has not remedied such breach within fifteen (15)
             days after receipt of written notice from the Compensation
             Committee of DYI that a breach of this Agreement has occurred
             (written notice being required only if the breach can be remedied
             or cured), or (vii) the Employee has breached (as determined by the
             written legal advice or opinion of independent outside counsel
             appointed by the Compensation Committee) any legal duties to the
             Company or the Company Group as provided by the laws of any
             applicable state of incorporation, whether Texas or any other state
             (if reincorporated by merger or otherwise, to another state),
             including, primarily, those applicable to officers and directors
             including, but not limited to, breach of the duty of loyalty,
             receiving improper benefits, not
<PAGE>

             disclosing material conflicts of interest or an act or omission for
             which the liability of an officer or director is expressly provided
             for by statute.

         (b) DEATH. If the Employee dies, this Agreement shall terminate on the
             date of death. In the event of such termination due to death, all
             other rights and benefits the Employee (or his estate) may have
             under any employee benefit, bonus and/or stock option plans and
             programs of the Company or the Company Group, generally, shall be
             determined in accordance with the terms and conditions of such
             plans and programs.

         (c) DISABILITY. In the event the Employee suffers a "disability" (as
             hereinafter defined), this Agreement shall terminate on the date on
             which the Disability occurs and the Employee shall be entitled to
             his Base Salary for six (6) months offset by any Disability pay
             under the Company's Disability insurance program which shall apply
             first in any such determination of salary payable. In the event of
             such termination due to Disability, all other rights and benefits
             the Employee may have under the employee benefit, bonus and/or
             stock option plans and programs of the Company shall be determined
             in accordance with the terms and conditions of such plans and
             programs. For purpose of this Agreement, "Disability" shall mean
             the inability or incapacity (by reason of a medically determinable
             physical or mental impairment) of the Employee to perform the
             duties and responsibilities related to the job or position with the
             Company described in Section 1 for a period that can be reasonably
             expected to last more than ninety (90) days. Such inability or
             incapacity shall be documented to the reasonable satisfaction of
             the Company by appropriate correspondence from registered
             physicians reasonably satisfactory to the Company. Nothing in this
             Section 14 or in this Agreement shall be deemed to require or
             permit the Company to take an illegal or wrongful act under the
             Americans With Disabilities Act or any other applicable law or
             regulation.

         (d) CESSATION OF OPERATIONS. In the event the Board of Directors
             determines that the Company should cease operations, whether
             through dissolution and liquidation or otherwise, this Agreement
             shall terminate thirty (30) days following the date of such
             determination or at such earlier time as the parties may agree. In
             such event: (i) Employee shall be entitled to receive his Base
             Salary for six (6) months after termination of his employment
             hereunder, as liquidated damages under this Agreement, (ii) the
             Company shall be deemed to have performed all of its obligations
             under this Agreement, and (iii) all rights and benefits the
             Employee may have under any employee benefit, bonus and/or stock
             option plans of the Company shall be determined in accordance with
             the terms and conditions of such plans and programs.

         (e) VOLUNTARY TERMINATION. The Employee may voluntarily terminate his
             employment under this Agreement at any time by providing at least
             ninety (90) days' prior written notice to the Company, provided,
             however, the notice requirement and the remaining employment period
             may be waived or reduced, respectively, by the Company in writing.
             In such event, the Employee shall be entitled to receive his Base
             Salary until the date his employment terminates, and all other
             benefits the Employee may have under the employee benefit, bonus
             and/or stock option plans and programs of the Company shall be
             determined in accordance with the terms and conditions of such
             plans and programs. Voluntary Termination shall not include
             "Resignation For Good Reason" defined as follows:

             (i) the assignment to the Employee of any lesser duties
                 inconsistent with the Employee's executive position (including
                 status, offices, titles or reporting relationships), authority,
                 duties or responsibilities as contemplated by Section 1 hereof,
                 that results in a long-term material diminution in such
                 position, authority, duties or responsibilities, but excluding
                 for these purposes (i) any isolated and insubstantial action
                 not taken in bad faith and which is remedied by the Company
                 promptly after receipt of notice thereof given by the Employee,
                 (ii) the hiring of additional senior officers whose rank may
                 exceed Employee's or changes in, or the assignment of
                 additional Duties which are required as part of the Company's
                 business needs but do not result in a substantial and material
                 diminution of Employee's position and responsibilities as a
                 senior officer, or (iii) any lesser Duties, position or rank or
<PAGE>

                   office associated with a determination by the Compensation
                   Committee that Employee is not satisfactorily complying with
                   or carrying out the Duties assigned.

             (ii)  any material failure by the Company to honor its material
                   obligations under this Agreement but only after Employee
                   provides the Company thirty (30) days written notice and an
                   opportunity to cure such failure within such period;

             (iii) any failure by the Company to obtain an assumption of this
                   Agreement by a successor corporation as required under
                   Subsection 14(f) hereof;

             (iv)  any purported termination by the Company of the Employee's
                   employment otherwise than as expressly permitted by this
                   Agreement; or

             (v)   a material reduction in salary, bonus, benefits or overall
                   remuneration unrelated to the performance of Employee's
                   Duties or as a result of the Company's financial condition,
                   in which case the compensatory and benefit reductions shall
                   be on a basis not materially inconsistent with those of other
                   executive officers.

         (f) TERMINATION IN THE EVENT OF A CHANGE OF CONTROL. In the event of a
             Change of Control (as defined in DYI's Stock Plan) in which
             subsection (d) above does not apply, either Company or Employee may
             terminate this Agreement upon written notice at any time after such
             Change of Control occurs (but in any event not later than six (6)
             months after the Change of Control). In the event of the
             termination of this Agreement by either party under this
             subsection, (i) all of Employee's outstanding incentive stock
             options or other awards granted under the Stock Plan will
             immediately vest and become immediately and fully exercisable and
             any restrictions or requirements with respect to any prior grants
             of Restricted Stock or Performance Shares as defined in the Stock
             Plan will be deemed waived or met, and (ii) the Company or its
             successor shall be obligated (Y) to pay Employee the consideration
             provided in Section 9 above and in Section 15 below (unless the
             Non-Compete Covenant is waived or not enforced by the Company or
             its successors or assigns), and (Z) to continue the Employee under
             the Company's health plan and to pay the premiums therefor to the
             extent such plan remains in effect and Employee remains eligible to
             participate in same, in lieu of any other rights, claims or
             benefits created or receivable under this Agreement.

         15. COVENANT NOT TO COMPETE. It was a mandatory and material condition
imposed by the Company and DYI for Employee to enter into this Agreement in
connection with the Merger Agreement, the Success Fee Agreement and the other
Merger Documentation by the Company and DYI in exchange for the Non-Compete
Covenant not to compete contained herein, and in consideration of those
agreements and the consideration provided for thereunder and herein. Employee
agrees with the Company that during the period of his employment and for a
period of two (2) years following his termination of employment for any reason,
whether by resignation (with or without good reason), termination by the Company
for cause or without cause, or any other reason whatsoever, Employee will not
compete, whether directly or indirectly as an owner, partner, shareholder,
member, sole proprietor, consultant, manager, officer, director or in any other
capacity except as a passive investor without managerial responsibilities, with
the Company Group in the ownership or operation of ASC's or hospitals in (i)
Houston, Texas, Harris County, Texas, and in all contiguous counties, and (ii)
in such other counties (including all contiguous counties) where the Company
Group or its affiliates own and/or operate, whether directly or indirectly, any
ASC or hospital in the State of Texas or any other of the forty-nine (49) states
of the United States of America. In the event Employee voluntarily terminates
his employment, he shall not be entitled to severance pay or any additional
payments of consideration for this covenant not to compete. In the event
Employee's employment is terminated without cause, he shall be entitled to the
consideration provided for in Section 8 and he shall be additionally entitled to
his full Base Salary in effect as of the date of termination, payable in monthly
installments commencing in month seven (7) following his termination of
employment through the final month of this covenant not to compete. If
Employee's employment is terminated for cause, Employee shall not be entitled to
any severance benefits, and Employee's outstanding Options under the Stock Plan
or any other benefits provided for thereunder including but not limited to
restricted stock, stock appreciation rights, performance shares or cash bonus
programs which are not then vested, exercised and paid in full will terminate
and Employee shall receive no additional consideration for Employee's covenant
not to compete. The Company or its legal successors or
<PAGE>

permitted assigns may waive its rights under this Section 15 and in that event
Employee shall not be entitled to the consideration for the covenant not to
compete specified in this Section 15 and may compete with the Company or Company
Group in any area or in any legal manner; provided, however, the provisions and
restrictions relating to the use or disclosure of Proprietary Information shall
continue to apply.

         16. NOTICES. Any notices required or permitted hereunder shall be
sufficient if in writing and sent by certified mail, return receipt requested
with postage prepaid to the other party at the appropriate address set forth
below, or to such other address as may be designated by written notice similarly
given by either party to the other. All notices shall also be effective if in
writing, when received, with confirmation thereof, by mail as provided above,
fax, personal delivery, courier service or electronic transmission if proof of
delivery is obtained, and if sent via e-mail, proof of sending and the opening
of the e-mail is required, followed by written notification in any manner
provided above.

                              (i)   If to the Company:

                                    Dynacq International, Inc.
                                    4301 A Vista
                                    Pasadena, Texas  77504
                                    Attn:  Chairman and CEO
                                    cc:  Philip Chan, CFO
                                    cc:  Eric Carter, General Counsel

                              (ii)  If to the Employee:

                                    Irvin T. Gregory
                                    1614 Corral Drive
                                    Houston, Texas  77090

         17. GOVERNING LAW, JURISDICTION, VENUE, AND ATTORNEYS' FEES. THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICT OF LAWS PRINCIPLES THEREOF. IN THE EVENT OF ANY CONFLICT RELATING
TO OR ARISING OUT OF THIS AGREEMENT, IN WHOLE OR IN PART, THE PARTIES AGREE TO
THE EXCLUSIVE JURISDICTION OF THE STATE OR FEDERAL DISTRICT COURTS IN HOUSTON,
HARRIS COUNTY, TEXAS AND AGREE TO EXCLUSIVE VENUE IN SUCH COURTS. IN THE EVENT
OF LEGAL PROCEEDINGS HEREUNDER, THE PARTY SUBSTANTIALLY PREVAILING ON THE MERITS
SHALL BE ENTITLED TO AN AWARD OF ATTORNEYS' FEES AND COSTS. ANY PARTY MAY
REQUEST AND OBTAIN A NON-BINDING MEDIATION HEARING AFTER FILING A LAWSUIT
HEREUNDER IN HOUSTON, TEXAS, WITH COSTS TO BE SHARED EQUALLY, AND THE MEDIATOR
SHALL BE APPOINTED BY THE COURT IF THE PARTIES CANNOT AGREE TO A MEDIATOR.

         18. ENTIRE AGREEMENTS AND AMENDMENTS. This Agreement together with the
Merger Agreement and Merger Documentation contains the entire agreement of the
Employee and the Company relating to the matters contained herein (except with
respect to the Options as defined in the Stock Plan, whether referred to herein
or hereafter arising, the terms of the Stock Plan and/or any agreement relating
to any grant of benefits thereunder shall control) and supersedes all prior
agreements and understandings, oral or written, between the Employee and the
Company with respect to the subject matter hereof; this Agreement may not be
amended or modified except by an agreement in writing signed by the party
against whom enforcement of any waiver or modification is sought. In the event
of any conflict, ambiguity, inconsistency, or outright differences between the
parties' rights under the Merger Documentation, the agreement that addresses the
matter with the greatest specificity shall control.

         19. HEADINGS. The headings of Sections and subsections hereof are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.

         20. SEPARABILITY. If any provisions of this Agreement are rendered or
declared illegal, invalid, or unenforceable by reason of any existing or
subsequently enacted legislation or by the final judgment of any court of
<PAGE>

competent jurisdiction, the Employee and the Company shall promptly meet and
negotiate substitute provisions for those rendered or declared illegal or
unenforceable to preserve the original intent of this Agreement to the extent
legally possible, but all other provisions of this Agreement shall remain in
full force and effect.

         21. ASSIGNMENTS. The Company may assign this Agreement to any person or
entity succeeding to all or substantially all the business interests of the
Company by merger or otherwise. The rights and obligations of the Employee under
this Agreement are personal to him, and no such rights, benefits or obligations
shall be subject to voluntary or involuntary alienation, assignment or transfer,
except to a successor in interest to substantially all of the assets or business
interests or ownership of the Company or the Company Group, whether directly or
indirectly, as provided above.

         22. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and by facsimile, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.

         23. SURVIVAL OF CERTAIN TERMS. The terms contained in Sections 12, 13,
14 and 15 shall survive the termination of this Agreement for any reason,
whether terminated by Company or Employee.

         24. CONSTRUCTION OF AGREEMENT. The parties hereto acknowledge,
stipulate and agree that this Agreement was jointly prepared, negotiated and
drafted by the parties and their respective counsel, and agree that the
presumption of a favorable interpretation for the non-drafting party in the
event of ambiguity or any other matter of interpretation shall not apply.

         25. BREACH OF EMPLOYEE'S COVENANTS. If Employee breaches or threatens
to breach Sections 12, 13 or 15 hereof, Employee specifically acknowledges that
such breach or breaches shall be conclusively presumed to cause irreparable harm
to the Company and the Company Group entitling it to all equitable relief
available at law or in equity including but not limited to a temporary
restraining order, a temporary injunction and a permanent injunction and
Employee stipulates and acknowledges that monetary recovery shall not be
sufficient alone to compensate the Company in such events and waives proof
thereof and the necessity for the Company to post a bond, except for the minimum
amount permitted by law.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date stated in the initial paragraph above.

                                     EMPLOYEE:

                                     ___________________________
                                     Irvin T. Gregory

                                     EMPLOYER:
                                     SURGI+GROUP, INC.

                                     By: ________________________
                                          Philip Chan, CEO

                                     EXHIBIT A

                       INCENTIVE STOCK OPTION AGREEMENT

                                   EXHIBIT B

                       EMPLOYEE'S INTELLECTUAL PROPERTY

                       RIGHTS OR PROPRIETARY INFORMATION

                              PRIOR TO EMPLOYMENT
<PAGE>

                                     NONE.

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