EX-10.2 INCENTIVE COMPENSATION PLAN

EX-10.2 3 g02020exv10w2.txt EX-10.2 INCENTIVE COMPENSATION PLAN EXHIBIT 10.2 2006 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 presidents, 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 2006 Incentive Compensation Plan is designed to award lump-sum bonuses to eligible employees based on the financial performance of the company, regions and local sites. The 2006 Corporate Adjusted Pre-Tax Income target is determined by the Board of Directors and will be exclusive of all costs related to the investigation conducted by the Audit Committee, share-based compensation expense, and earnings from acquisitions during the year. Incentive Opportunities by position 2006 targeted payouts (as a percentage of base salary) are outlined below: Executive Management Chairman and CEO -- ASG, 50% ASG, COO/President - PHS, CFO, CAO, CIO, CLO, Corporate Medical Director, Operations Group Vice-Presidents Operations Division Vice Presidents 40% Regional Vice Presidents 30% Regional Directors 20% Health Services Administrators (HSAs) 15% Corporate Staff Corporate Controller, VP-Finance/Asst. Treasurer, 35% VP Network Development, VP Human Resources, VP Ethics and Compliance Corporate Vice Presidents 30% Corporate Middle Managers 20% Non-Management Corporate Office Employees Key Contributor Pool 10% EXECUTIVE MANAGEMENT o No bonus paid if corporate Adjusted Pre-tax Income is below 100% of Corporate Adjusted Pre-Tax Income Target. o After Operations bonuses for division, region, district and site financial performance are accrued as per their respective plans and the 2006 Corporate Adjusted Pre-Tax Income Target is reached, 50% of earnings generated above the Corporate Adjusted Pre-Tax Income Target will be used for incentive funding. o Incentives above individual target payouts to a maximum of 200% can be earned. FOR 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 work as follows: o Incentive will be up to 200% of individual targeted payout based on the achievement of qualitative goals as determined by the CEO with the approval of the Ethics and Quality Assurance Committee of the Board of Directors. CORPORATE MANAGEMENT o No bonus paid if corporate Adjusted Pre-Tax Income is below 100% of the Corporate Adjusted Pre-Tax Income Target. o After Operations bonuses for division, region, district and site financial performance are accrued as per their respective plans and the 2006 Corporate Adjusted Pre-Tax Income Target is reached, 50% of earnings generated above the Corporate Adjusted Pre-Tax Income Target will be used for incentive funding. 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. 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. OPERATIONS/REGIONAL POSITIONS (DIVISION VICE PRESIDENTS, REGIONAL VICE PRESIDENTS, REGIONAL DIRECTORS) 1. If regional operating margin is 100% of 'Plan' (defined as original budget plus new business pricing forecasts) or more, 50% of target incentive may be earned. Once division, region, or district Plan is reached, 50% of earnings generated above Plan will be used for operating margin incentive funding. 2. After Operations bonuses for division, region, district and site financial performance are accrued as per their respective plans and the 2006 Corporate Adjusted Pre-Tax Income Target is reached, 50% of target incentive may be earned. Fifty percent (50%) of earnings generated above the Corporate Adjusted Pre-Tax Income Target will be used for incentive funding. 3. For participants in multi-facility contract systems (e.g. Virginia DOC, Pennsylvania DOC, Alabama DOC, etc.), the entire multi-facility system must make Plan to be eligible to receive an 'operating margin' bonus payment. HSAS 1. If SITe operating margin is 100% of 'Plan' (defined as original budget plus new business pricing forecasts) or greater, 50% of target incentive may be earned. Once site Plan is reached, 50% of earnings generated above site Plan will be used for site operating margin incentive funding. 2. After Operations bonuses for division, region, district and site financial performance are accrued as per their respective plans and the 2006 Corporate Adjusted Pre-Tax Income Target is reached, 50% of target incentive may be earned. Fifty percent (50%) of earnings generated above Corporate Adjusted Pre-Tax Income Target will be used for incentive funding. 3. For participants in multi-facility contract system (e.g. Virginia DOC, Pennsylvania DOC, Alabama DOC, etc.) the entire multi-facility system must make Plan to be eligible to receive a 'site operating margin' bonus payment. BONUS PAYMENT (APPLIES TO ALL EMPLOYEE CATEGORIES COVERED IN THIS PLAN) All bonus payments will be made to the extent of available funding. Eligible employees must be employed by the company at the time of bonus distribution to be eligible to receive the bonus amount. The bonuses 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 a bonus payment. The bonus payments for newly hired eligible employees hired 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% (9/12ths) 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 bonus payment checks will be distributed to employees after applicable annual financial closings and related earnings releases. DESIGNATED PARTICIPANTS All eligible employees except HSAs and managers working in conjunction with the Philadelphia contract and Rikers Island contract. THE 2006 INCENTIVE PLAN 'CORPORATE ADJUSTED PRE-TAX INCOME TARGET IS $16.5 MILLION.