AMERICA SERVICE GROUP INC /DE
EX-10.31 2008 INCENTIVE COMPENSATION PLAN
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<TYPE>EX-10.31
<SEQUENCE>3
<FILENAME>g12127exv10w31.htm
<DESCRIPTION>EX-10.31 2008 INCENTIVE COMPENSATION PLAN
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<TITLE>Ex-10.31</TITLE>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;10.31</B>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>2008 INCENTIVE COMPENSATION PLAN<BR>
America Service Group Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B><I>Overall Compensation Philosophy</I></B></U><B><I>: </I></B>America Service Group (ASG)&nbsp;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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The 2008 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 2008 corporate
adjusted EBITDA 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Incentive Opportunities by position</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2008 targeted payouts (as a percentage of base salary) are outlined below:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
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<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Executive Management</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chairman and
CEO &#151; ASG, ASG COO (President and CEO &#151; PHS),
CFO, CAO, CIO, CDO,
Corporate Medical Director,
Operations Group Vice Presidents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">50</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Division Vice Presidents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">40</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Regional Vice Presidents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">30</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Regional Directors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Health Service Administrators (HSAs)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Staff</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate
Controller, VP-Finance/Asst. Treasurer, VP Provider Operations, VP
Human Resources, General Counsel &#151; PHS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">35</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Vice Presidents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">30</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate Middle Managers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-Management Corporate Office Employees
Key Contributor Pool</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">10</TD>
    <TD nowrap>%</TD>
</TR>
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B><I>Executive Management</I></B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>No incentive compensation paid if actual corporate adjusted EBITDA is below 100% of
corporate adjusted EBITDA target.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>After Operations incentive compensation for division, region, district and site financial
performance are accrued as per their respective plans and the 2008 corporate adjusted EBITDA
target is reached, 50% of earnings generated above the actual corporate adjusted EBITDA target
will be used for incentive funding.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><B><I>For Group Vice Presidents</I></B></U></TD>
</TR>

</TABLE>
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<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Once the incentive is funded, it will be subject to a Modifier as follows:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If individual performance as determined by the President of PHS is below standard,
the incentive pay will be the amount funded above multiplied by 80% to 99%.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If individual performance as determined by the President of PHS is at standard, the
incentive payout will be the amount funded above multiplied by 100%.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If individual performance as determined by the President of PHS is above standard,
the incentive payout will be the amount funded above multiplied by
101% to 120%.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Incentives above individual target payouts to a maximum of 200% can be earned.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B><I>For Corporate Medical Director</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Incentive will be up to 200% of individual targeted payout based on the
achievement of qualitative goals as determined by the ASG COO with the approval of
the Ethics and Quality Assurance Committee of the Board of Directors.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B><I>Corporate Management</I></B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>No incentive compensation paid if actual corporate adjusted EBITDA is below 100% of the
corporate adjusted EBITDA target.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>After Operations bonuses for division, region, district and site financial performance are
accrued as per their respective plans and the 2008 corporate EBITDA target is reached, 50% of
earnings generated above the actual corporate adjusted EBITDA target will be used for
incentive funding.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B><I>For Non-Management Corporate Office Employees &#151; Key Contributor Pool</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At the end of the year, those corporate employees who are considered to have made a significant
contribution to the company&#146;s success will be considered for a &#147;key contributor&#148; bonus. A pool of
up to 10% of underlying base salaries will be funded and distributed based on the recommendation of
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">individual corporate managers, with the approval of executive management. Payment requirements for
&#145;Corporate Management&#146; positions apply to &#145;Key Contributor Pool&#146; funding.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B><I>Operations/Regional Positions (Division Vice Presidents, Regional Vice Presidents,<BR>
Regional Directors)</I></B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>50% of the incentive funding will be based on regional results. Therefore, if regional
operating margin is 100% of &#145;Plan&#146; (defined as original budget amount regardless if current
contracts are lost or new contracts are added during the course of the year) or more, up to 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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>After Operations bonuses for division, region, district and site financial performance are
accrued as per their respective plans and the 20078corporate adjusted EBITDA target is reached, 50%
of target incentive may be earned. Fifty percent (50%) of earnings generated above the Corporate
adjusted EBITDA target will be used for incentive funding.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Once the incentive is funded, it will be subject to a Modifier as follows:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If individual Performance as determined by the President of PHS is below standard,
the incentive pay will be the amount funded from items 1. and 2. above multiplied by
80% to 99%.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If Individual Performance as determined by the President of PHS is at standard, the
incentive payout will be the amount funded from items 1. and 2. above multiplied by
100%.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If Individual Performance as determined by the President of PHS is above standard,
the incentive payout will be the amount funded from items 1. and 2. above multiplied by
101% to 120%.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For participants in multi-facility contract systems (e.g. Virginia DOC, Pennsylvania DOC,
etc.), the entire multi-facility system must make Plan to be eligible to receive an &#145;operating
margin&#146; bonus payment.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B><I>HSAs</I></B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If <B>site</B> operating margin is 100% of &#145;Plan&#146; (defined as original budget or 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.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>After Operations bonuses for division, region, district and site financial performance are
accrued as per their respective plans and the 2008 corporate adjusted EBITDA target is
reached, 50% of target incentive may be earned. Fifty percent (50%) of earnings generated
above corporate adjusted EBITDA target will be used for incentive funding,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>An incentive payout pool will be calculated from items 1 and 2 above. Payments to HSAs will
be subject to a modifier as follows:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If individual Performance as determined by the President of PHS is below standard,
the incentive pay will be the amount funded from items 1. and 2. above multiplied by
80% to 99%.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If Individual Performance as determined by the President of PHS is at standard, the
incentive payout will be the amount funded from items 1. and 2. above multiplied by
100%.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If Individual Performance as determined by the President of PHS is above standard,
the incentive payout will be the amount funded from items 1. and 2. above multiplied by
101% to 120%.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For participants in multi-facility contract system (e.g. Virginia DOC, Pennsylvania DOC,
etc.) the entire multi-facility system must make Plan to be eligible to receive a &#145;site
operating margin&#146; bonus payment.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B><I>Bonus Payment (applies to all employee categories covered in this Plan)</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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<SUP style="font-size: 85%; vertical-align: text-top">ths</SUP>) 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 closings and related earnings releases.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B><I>Designated Participants</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All eligible employees except HSAs and managers working in conjunction with the Philadelphia
contract and Rikers Island contract.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The 2008 Incentive Plan &#145;corporate adjusted EBITDA target&#146; is $14,000,000.
</DIV>


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