America Service Group Inc. 2011 Incentive Compensation Plan

Exhibit 10.2

2011 INCENTIVE COMPENSATION PLAN
America Service Group Inc.

Overall Compensation Philosophy: America Service Group (ASG) strives to provide an equitable and market-based compensation program for employees. In addition to a comprehensive benefit program, ASG compensates employees through competitive base salaries, a merit system and an incentive compensation plan. Eligible employees include designated executive managers, corporate managers, corporate employees, division vice presidents, regional vice president, regional directors and health services administrators.

In accordance with the PHS Policy on Medical Autonomy, clinical decisions and actions regarding health care provided to inmates to meet their serious medical needs are the sole responsibility of qualified health care professionals. No financial incentives are available to clinicians based upon medical utilization.

The 2011 Incentive Compensation Plan is designed to foster the accomplishment of several of the key objectives of the Company set forth at the beginning of the year. Three goals were established. These three goals will be used for all positions covered by the 2011 program.

Overall Structure of the Plan

The plan is composed of two parts, each of which work independently of the other (except for the Company’s Chief Medical Officer):

1)

Adjusted EBITDA based bonus (50% of total bonus target as a percent of base pay)

	•		No bonus paid if corporate Earnings before share-based compensation, interest, taxes, depreciation, and amortization (Adjusted EBITDA) is 100% of Target or less. Adjusted EBITDA Target is defined as that amount set forth as Earnings Guidance in March 2011.
	•		After bonuses derived from the Other Key Company Goals based bonus are accrued and the 2011 Adjusted EBITDA Target is reached, 50% of earnings generated above the Adjusted EBITDA Target will be used to fund this portion of the incentive, to the maximums as set forth later in this document.
	•		Payout is subject to Board confirmation of satisfactory balance sheet management.

2)

Other Key Company Goals based bonus (50% of total bonus target as a percent of base pay)

•

Net New Revenue goal accounts for 30% of bonus award.

	•		Obtain one new DOC contract that will be bid in 2011. If two or more DOC Greenfield opportunities are awarded in 2011, we must win two total DOC new contracts with one of those being a Greenfield opportunity.
	•		Obtain $10mm in net new revenue combined from County/Metro business.
	•		Successfully retain 3 out of 4 of the following rebids of current contracts:
	•		Arlington
	•		Gwinnett
	•		Hudson
	•		Guilford

•

Catalyst goal accounts for 20% of bonus award.

	•		Upgrade all currently deployed Catalyst sites (11) to current version.
	•		Deploy Catalyst to all three women facilities, the Pennsylvania DOC main site facilities co-located with the intake sites and two other PA DOC sites.
	•		Release at least four feature releases in 2011 to include CPOE (Labs, Meds/eRx), Chronic Care, NETS, Tasking/Messaging, Exam Engine, and Document Management.
	•		Deploy to eight non PA sites.
	•		Implement Client and PHS satisfaction surveys to new Catalyst installations.

•

For the non-financial objectives, there are two possible levels of achievement under this plan portion of the bonus — Minimum achievement to get an award for that portion of the plan and Target achievement. For the financial objectives, achievement between Minimum and Target will be interpolated.

Incentive Opportunities by position

2011 targeted payouts (as a percentage of base salary) are outlined as follows:

		Target as a percent
Position		of base pay
Executive Management
President and Chief Executive Officer			70	%
Executive Vice President and Chief Financial Officer			60	%
Chief Human Resource Officer, Chief Risk Officer, Chief Information Officer, Chief Legal Officer, Chief Medical Officer, SVP Business Development, Operating Presidents, Operations Group Vice Presidents			50	%

Operating Positions
Division Vice Presidents		40%
Regional Vice Presidents		30%
Regional Directors		20%
Regional Mgrs, Health Service Administrators (HSAs), District Administrators and Regional Managers		15%

Corporate Positions
Corporate Controller, VP-Finance/Asst. Treasurer, VP Project Development		35%
Corporate Vice Presidents		30%
Corporate Middle Managers		20%
Non-Management Corporate Office Employees		10%

Executive Management (other than CMO)

Positions covered:

	•		President and Chief Executive Officer
	•		Executive Vice President and Chief Financial Officer
	•		Chief Human Resource Officer
	•		Chief Risk Officer
	•		Chief Information Officer
	•		Chief Legal Officer
	•		SVP, Business Development
	•		Operating Presidents
	•		Operations Group Vice Presidents

1)

Adjusted EBITDA based bonus (50% of total bonus target for those positions as a percent of base pay)

	•		No bonus paid if corporate Earnings before share-based compensation, interest, taxes, depreciation, and amortization (Adjusted EBITDA) is 100% of Target or less.
	•		After bonuses derived from the Other Key Company Goals based bonus are accrued and the 2011 Adjusted EBITDA Target is reached, 50% of earnings generated above the Adjusted EBITDA Target will be used for this portion of the incentive funding, to a maximum of 150% of Target payout*.
	•		Payout is subject to Board confirmation of satisfactory balance sheet management.

2)

Other Key Company Goals based bonus (50% of total bonus target for this position as a percent of base pay)

•

Pre-selected goals will be used for this part of the incentive program, as follows:

		-     Corporate Net New Revenue		-     30% of target award
		-     Catalyst		-     20% of target award

Corporate Medical Director

Given the unique nature of the Corporate Medical Director job in ensuring the quality of the delivery of health care by setting standards and monitoring care, the incentive for this position will not be a function of financial performance, but emphasize the achievement of critical quality and patient care initiatives. It will work as follows:

1.

Deployment of Telemedicine: 30% of target award

	a.		Increase use of Telemedicine at Jail facilities by 100%
	b.		Telemedicine Presentation at 2 national meetings

	i.		ACHSA
	ii.		ATA

c.

Audio Visual conferencing for Patient Safety Committee attendance by RMDs

*

RMDs will rotate weekly attendance at PSC by AV teleconference beginning March 1, 2011

2.

Catalyst: 30% of target award

	a.		Upgrade all currently deployed Catalyst ® sites (11) to current version
	b.		Re-establish PADOC deployments by second quarter
	c.		Deploy Catalyst ® to all three women facilities, the Pennsylvania DOC main side
			facilities co-located with the intake sites, and 2 other PA DOC sites.
	d.		Release at least four feature releases in 2011
	e.		Enhance Catalyst ® functionality to include CPOE (Labs, Meds /eRX), Chronic Care, NETS, Tasking/Messaging, Exam Engine, Document Management
	f.		Deploy to eight non PA sites
	g.		Implement Client and PHS satisfaction surveys to new Catalyst installations
	h.		Deploy Medical Watch Application to bring high risk patient to attention of

	i.		Site Medical Director
	ii.		Regional Medical Director
	iii.		Specialty Panel Clinicians

	3.		Improve Patient Safety and Risk Management 30% of target award
			The creation of a health care Culture of Safety with specific deliverables to include:

	a.		Article in every issue of Beyond the Bars
	b.		Presentation at all regional meetings
	c.		Update new hire orientation to include this training
	d.		Participate in National Patient Safety Week
	e.		Perform Clinical/Operations Site Audits at each facility
	f.		Leverage membership in National Patient Safety Foundation
	g.		Coordinate Activities with Chief Risk Officer

4.

Attain Just Culture Certification 10% of target award

Corporate Management

Positions covered:

	•		Corporate Controller, VP-Finance/Asst. Treasurer
	•		Corporate Vice Presidents
	•		Corporate Middle Managers

1)

Adjusted EBITDA based bonus (50% of total bonus target for those positions as a percent of base pay)

	•		No bonus paid if corporate Earnings before share-based compensation, interest, taxes, depreciation, and amortization (Adjusted EBITDA) is 100% of Target or less.
	•		After bonuses derived from the Other Key Company Goals based bonus are accrued and the 2011 Adjusted EBITDA Target is reached, 50% of earnings generated above the Adjusted EBITDA Target will be used for this portion of the incentive funding, to a maximum of 70% of Target payout*.
	•		Payout is subject to Board confirmation of satisfactory balance sheet management.

2)

Other Key Company Goals based bonus (50% of total bonus target for this position as a percent of base pay)

•

Pre-selected goals will be used for this part of the incentive program, as follows:

		-     Corporate Net New Revenue		-     30% of target award
		-     Catalyst		-     20% of target award

Division VP, Regional VP, Regional Directors, Regional Managers

1)

Adjusted EBITDA based bonus (50% of total bonus target for those positions as a percent of base pay)

	•		No bonus paid if corporate Earnings before share-based compensation, interest, taxes, depreciation, and amortization (Adjusted EBITDA) is 100% of Target or less.
	•		After bonuses derived from the Other Key Company Goals based bonus are accrued and the 2011 Adjusted EBITDA Target is reached, 50% of earnings generated above the Adjusted EBITDA Target will be used for this portion of the incentive funding, to a maximum of 70% of Target payout*.
	•		Payout is subject to Board confirmation of satisfactory balance sheet management.

2)

Other Key Company Goals based bonus (50% of total bonus target for this position as a percent of base pay)

•

Pre-selected goals will be used for this part of the incentive program, as follows:

		-     Market Operating Earnings		-     30% of target award
		-     Corporate New New Revenue		-     20% of target award

HSA

1)

Adjusted EBITDA based bonus (50% of total bonus target for those positions as a percent of base pay)

	•		No bonus paid if corporate Earnings before share-based compensation, interest, taxes, depreciation, and amortization (Adjusted EBITDA) is 100% of Target or less.
	•		After bonuses derived from the Site Operating Earnings based bonus are accrued and the 2011 Adjusted EBITDA Target is reached, 50% of earnings generated above the Adjusted EBITDA Target will be used for this portion of the incentive funding, to a maximum of 70% of Target payout*.
	•		Payout is subject to Board confirmation of satisfactory balance sheet management.

2)

Other Key Company Goals based bonus (50% of total bonus target for this position as a percent of base pay)

•

The pre-selected goal used for this part of the incentive program is:

-

Site Operating Earnings — 50% of target award

	•		The Minimum level is 90% of Target, and for achievements between Minimum and Target, payouts will be interpolated.
	•		The Minimum payout will be 50% of Target Payout for that level, or 25% of the overall
			Target bonus (50% X 50%).

*

Total Maximum under the plan equals the maximums as indicated for the Adjusted EBITDA base portion of the plan plus Target amounts earned under the Other Key Company Goals based bonus portion of the plan, or 120% of Target.

For Non-Management Corporate Office Employees — Key Contributor Pool

At the end of the year, those corporate employees who are considered to have made a significant contribution to the company’s success will be considered for a “key contributor” bonus. When Adjusted EBITDA Target is exceeded, a pool of up to 10% of underlying base salaries will be funded and distributed based on the recommendation of individual corporate managers, with the approval of executive management. Payment requirements for ‘Corporate Management’ positions apply to ‘Key Contributor Pool’ funding.

Bonus Payment (applies to all employee categories covered in this Plan)

All incentive compensation payments will be made to the extent of available funding. Eligible employees must be employed by the company at the time of incentive compensation distribution to be eligible to receive the incentive compensation amount. The incentive compensation of employees transferring within the company will be prorated between the sites. The proration is based upon the total number of months at each site. Employees hired after July 1 will not be eligible for an incentive compensation payment. The incentive compensation payments for newly hired eligible employees or employees promoted to bonus eligible positions on July 1 or earlier will be prorated based on the full calendar months of employment. (For example, an employee hired on April 1 is eligible for 75% (9/12^ths) of the bonus amount earned.) Bonus payments for employees terminated as a result of a change in control or in connection with death or permanent disability will also be prorated. The incentive compensation payment checks will be distributed to employees after applicable annual financial audits are completed and related earnings releases. The Company reserves the right, at the sole discretion of the Board of Directors, to alter or eliminate this Plan or a Participant’s Award at any time without prior notice to Participants.

The 2011 Incentive Plan Adjusted EBITDA Target is $26.0 million.