UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by
the Registrant
¨
Filed by
a Party other than the Registrant
x
Check the
appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for use of the Commission
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Definitive
Proxy Statement
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only
(as permitted by Rule 14a-6(e)(2))
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Definitive
Additional Materials
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Soliciting
Material under Rule 14a-12
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THE
PROVIDENCE SERVICE CORPORATION
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(Name
of Registrant as Specified in Its Charter)
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AVALON
CORRECTIONAL SERVICES, INC.
DONALD
E. SMITH
TIFFANY
SMITH
MICHAEL
BRADLEY
ERIC
S. GRAY
73114
INVESTMENTS, L.L.C.
(referred
to as “The Providence Committee for Accountability”)
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(Name
of Persons(s) Filing Proxy Statement, if Other Than the
Registrant)
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of Filing Fee (Check the appropriate box):
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fee required.
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computed on table below per Exchange Act Rules 14a-6(i)(1) and
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previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
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PRELIMINARY
PROXY STATEMENT, SUBJECT TO COMPLETION
DATED
APRIL 30, 2009
THE
PROVIDENCE COMMITTEE FOR ACCOUNTABILITY
May __,
2009
Dear
Fellow Stockholders:
The
members of the Providence Committee for Accountability (the “Committee” or “we”)
are the beneficial owners of an aggregate of 2,302,095 shares of common stock of
the Providence Service Corporation (“Providence” or the “Company”), representing
approximately 17.9% of the outstanding shares of common stock of the
Company. For the reasons set forth in the attached Proxy Statement,
we do not believe the Board of Directors of the Company (the “Board”) is acting
in the best interests of its stockholders. We are therefore seeking
your support at the annual meeting of the stockholders (the “Annual Meeting”)
scheduled to be held on
{day}
,
{date}
, 2009,
beginning at
{time}
A.M., local
time, at
{location
}, for the
following:
1.
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To
elect the Committees slate of two director nominees, Michael C. Bradley
and Captain Brian T. Costello (ret.) (the “Nominees”), to serve as class 3
directors of the Company for a three-year term until the 2012 Annual
Meeting, in opposition to the Company’s incumbent
directors.
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2.
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To
ratify the appointment of KPMG LLP as the independent registered public
accounting firm of the Company to serve for the 2009 fiscal year;
and
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3.
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To
transact such other business as may properly come before the Annual
Meeting or any of its adjournments, postponements or
reschedulings.
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We are
not seeking control of the Board of Directors. Through the attached
Proxy Statement, we are soliciting proxies to elect our two nominees on the
enclosed
[BLUE]
proxy
card. The background and qualifications of the Nominees can be found
in the attached Proxy Statement.
We urge
you to carefully review the information contained in the attached Proxy
Statement and then support our efforts by signing, dating and returning the
enclosed
[BLUE]
proxy
card today. The attached Proxy Statement and the enclosed
[BLUE]
proxy card are first
being furnished to the stockholders on or about May __, 2009.
If you
have already voted a proxy card furnished by the Company’s management, you have
every right to change your vote by signing, dating and returning a later dated
proxy.
If you
have any questions or require any assistance with your vote, please contact D.F.
King & Co., Inc., at their address or toll-free numbers listed on the
following page.
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Thank
you for your support,
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The
Providence Committee for
Accountability
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If
you have any questions, require assistance in submitting your
[BLUE]
proxy
card,
or
need additional copies of the Committee’s proxy statement materials,
please call
D.F.
King & Co., Inc. at the phone numbers listed below.
D.F.
King & Co., Inc.
48
Wall Street, 22nd Floor
New
York, NY 10005
Stockholders
Call Toll-Free at: (800) 848-3416
Banks
and Brokers Call Collect at: (212)
269-5550
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PRELIMINARY
PROXY STATEMENT, SUBJECT TO COMPLETION
DATED
APRIL 30, 2009
2009
ANNUAL MEETING OF STOCKHOLDERS
OF
THE
PROVIDENCE SERVICE CORPORATION
______________________________________
PROXY
STATEMENT
OF
THE
PROVIDENCE COMMITTEE FOR ACCOUNTABILITY
______________________________________
PLEASE
SIGN, DATE AND MAIL THE ENCLOSED [BLUE] PROXY CARD TODAY
The
members of the Providence Committee for Accountability (the “Committee” or “we”)
are the largest stockholders of the Providence Service Corporation (“Providence”
or the “Company”). We are seeking your support at the annual meeting
of the stockholders (the “Annual Meeting”) scheduled to be held on
Monday
,
June 15
, 2009,
beginning at
{time}
A.M., local
time, at
{location
}, for the
following:
1.
|
To
elect the Committees slate of two director nominees, Michael C. Bradley
and Captain Brian T. Costello (ret.) (the “Nominees”), to serve as class 3
directors of the Company for a three-year term until the 2012 Annual
Meeting, in opposition to the Company’s incumbent
directors.
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2.
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To
ratify the appointment of KPMG LLP as the independent registered public
accounting firm of the Company to serve for the 2009 fiscal year;
and
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3.
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To
transact such other business as may properly come before the Annual
Meeting or any of its adjournments, postponements or
reschedulings.
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This
Proxy Statement is soliciting proxies to elect our two nominees using the
attached
[BLUE]
proxy
card. We are not seeking control of the Board of
Directors.
As of May
__, 2009, the approximate date on which this Proxy Statement and the enclosed
[BLUE]
proxy card are
first being mailed to stockholders, the members of the Committee were
collectively the beneficial owners of an aggregate of 2,302,095 shares of common
stock of the Company, par value $0.001 per share (the “Shares”), which currently
represent approximately 17.9% of the issued and outstanding
Shares. The Committee is composed of Avalon Correctional Services,
Inc., a Nevada corporation (“Avalon”), 73114 Investments, LLC, an Oklahoma
limited liability corporation (“73114”), Donald E. Smith, Tiffany Smith, Michael
C. Bradley, and Eric S. Gray. Each of these entities, and the
Nominees, are deemed to be participants in this proxy solicitation.
Providence
has set the record date for determining stockholders entitled to notice of and
to vote at the Annual Meeting as April 20, 2009 (the “Record
Date”). As of the Record Date, the members of the Committee were
collectively the beneficial owners of an aggregate of 2,302,095 Shares, all of
which Shares are entitled to be voted at the Annual Meeting. The
mailing address of the principal executive offices of the Company is 5224 East
Fourth Street, Tucson, Arizona 85711. Shares of record at the close
of business on the Record Date will be entitled to vote at the Annual
Meeting. According to the Company, as of the Record Date, there were
12,855,091 Shares outstanding and entitled to vote at the Annual
Meeting. The participants in this solicitation intend to vote all of
their Shares
FOR
(i) the election of the Nominees and (ii) the ratification of the
appointment of KPMG LLP, as described in more detail herein.
IF
ELECTED, CONSISTENT WITH THEIR FIDUCIARY DUTY, OUR NOMINEES ARE COMMITTED TO
ACTING IN THE BEST INTERESTS OF ALL STOCKHOLDERS OF PROVIDENCE. WE
URGE YOU TO VOTE YOUR [BLUE] PROXY CARD FOR MICHAEL C. BRADLEY AND CAPTAIN BRIAN
T. COSTELLO (RET.).
THIS
SOLICITATION IS BEING MADE BY THE COMMITTEE AND NOT ON BEHALF OF THE BOARD OF
DIRECTORS OR MANAGEMENT OF PROVIDENCE. THE COMMITTEE IS NOT AWARE OF
ANY OTHER MATTERS TO BE BROUGHT BEFORE THE ANNUAL MEETING. IF OTHER
MATTERS ARE BROUGHT BEFORE THE ANNUAL MEETING, THE PERSONS NAMED AS PROXIES IN
THE ENCLOSED [BLUE] PROXY CARD WILL VOTE ON SUCH MATTERS IN THEIR
DISCRETION.
IF
YOU PREVIOUSLY SENT A PROVIDENCE [WHITE] PROXY CARD TO PROVIDENCE, YOU MAY
REVOKE THAT PROXY AND VOTE AGAINST THE ELECTION OF PROVIDENCE’S NOMINEES BY
SIGNING, DATING AND RETURNING THE ENCLOSED [BLUE] PROXY CARD. THE
LATEST DATED PROXY IS THE ONLY ONE THAT COUNTS. ANY PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO THE ANNUAL MEETING BY DELIVERING A WRITTEN NOTICE
OF REVOCATION OR A LATER DATED PROXY FOR THE ANNUAL MEETING TO OUR PROXY
SOLICITOR, D.F. KING & CO., INC. OR BY VOTING IN PERSON AT THE ANNUAL
MEETING.
IMPORTANT
YOUR
VOTE IS IMPORTANT, NO MATTER HOW MANY SHARES YOU OWN. THE COMMITTEE
URGES YOU TO SIGN, DATE AND RETURN THE ENCLOSED [BLUE] PROXY CARD TODAY TO VOTE
FOR THE ELECTION OF THE COMMITTEE’S NOMINEES.
·
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If
your Shares are registered in your own name, please sign and date the
enclosed
[BLUE]
proxy card and return it to the Committee, c/o D.F. King & Co., Inc.,
in the enclosed envelope today.
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·
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If
your shares are held in a brokerage account or bank, you are considered
the beneficial owner of the Shares, and these proxy materials, together
with a
[
BLUE
]
voting form, are being
forwarded to you by your broker or bank. As a beneficial owner,
you must instruct your broker, trustee, or other representative how to
vote. Your broker cannot vote your shares on your behalf
without your instructions.
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·
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Depending
on your broker or custodian, you may be able to vote either by toll-free
telephone or by the Internet. Please refer to the enclosed
voting form for instructions on how to vote electronically. You
may also vote by signing, dating and returning the enclosed voting
form.
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Since
only your latest proxy card will count, we urge you not to return any proxy card
you receive from the Company. Even if you return a management proxy
card marked “withhold” as a protest against the incumbent directors, it will
revoke any proxy card you may have previously sent to the
Committee. Remember, you can vote for our two independent nominees
only on our
[BLUE]
proxy
card, so please make certain that the latest dated proxy card you return is the
[BLUE]
proxy
card.
If
you have any questions, require assistance in submitting your
[BLUE]
proxy
card,
or
need additional copies of the Committee’s proxy statement materials,
please call
D.F.
King & Co., Inc. at the phone numbers listed below.
D.F.
King & Co., Inc.
48
Wall Street, 22nd Floor
New
York, NY 10005
Stockholders
Call Toll-Free at: (800) 848-3416
Banks
and Brokers Call Collect at: (212)
269-5550
|
BACKGROUND
TO SOLICITATION
From
October 24, 2008, through November 20, 2008, the Committee acquired
2,302,095 shares of common stock of Providence believing the shares to be
undervalued. Its shares then represented approximately 18.7% of the
issued and outstanding shares of Providence common stock based on the 12,313,261
shares of Providence common stock outstanding as of September 30, 2008 (now
17.9% based on 12,855,091 shares outstanding as of the record
date).
On
November 10, 2008, the Committee filed an initial Schedule 13D (the “Schedule
13D”) with the Securities and Exchange Commission (the “SEC”). In the
Schedule 13D, the Committee indicated its belief that the Providence’s shares
were undervalued and were acquired for, and are being held for, investment
purposes. The Committee also indicated that it intended to seek
representation on the Providence Board if the representation could be
accomplished without triggering existing change of control provisions in
agreements between Providence and third parties.
Also on
November 10, 2008, Donald E. Smith, the Chief Executive Officer of Avalon,
called Fletcher Jay McCusker, Providence’s Chief Executive Officer, requesting a
meeting with members of Providence’s management. Mr. Smith and
Mr. McCusker eventually agreed to meet on November 22, 2008.
On
November 18, 2008, the Providence Board appointed Craig A. Norris, the Chief
Operating Officer of the Company, to fill a vacant board
position. The position had been vacant since the April 10, 2008
resignation of Steven I. Geringer, an independent director.
On
November 20, 2008, the Board amended and restated the bylaws of the
Company. The amendments included provisions
that: (a) limited those who might call a special meeting to
stockholders holding 50% or more of the voting stock; (b) added disclosure
requirements for a stockholder to call special meetings and to make proposals or
nominate directors at an annual or special meeting; (c) permitted the
chairman to adjourn a stockholders meeting without stockholder consent even if a
quorum is present; (d) allowed only the Board to fill board vacancies; and
(d) required stockholders to “request” a record date before soliciting
consents.
On
November 21, 2008, Providence issued a press release announcing that it was
pursuing several strategic options to enhance stockholder value, including the
sale of its “non-core assets”, and that it had retained a financial advisor to
assist it in the sale. In the release, Providence stated that it
“provides home and community based social services and non-emergency
transportation services” and described its core assets as its “social services
business”. The Committee believes that the non-core assets are its
non-emergency transportation services assets, which are the assets of
LogistiCare Solutions, LLC that it had acquired in December 2007.
On
November 22, 2008, Mr. Smith, Mr. Bradley and Mr. Gray met with
Mr. McCusker and Fred D. Furman, Providence’s Executive Vice President and
General Counsel, at the Company’s offices in Tucson, Arizona, for about an
hour. After introductions, the Avalon participants asked questions
about Providence, including management’s plan for dealing with the Company’s
debt levels and maintaining debt covenant compliance. The Avalon
participants also indicated an interest in board
representation. Messrs. McCusker and Furman responded generally
that they were unable to discuss any operational matters or matters associated
with the debt as they were restricted by Regulation FD. The Avalon
participants asked if Providence would have any interest in exchanging stock for
outstanding indebtedness, which they suggested would allow Providence to reduce
its debt without spending cash and increase Providence’s ability to meet its
debt covenants. No agreement or understandings were reached with
regard to this or other matters. The Avalon participants were unaware
that the Board had adopted the bylaw amendments.
Concerned
about the Company’s continued compliance with its coverage ratios and debt
covenants, on November 24, 2008, Mr. Smith wrote to Mr. McCusker
(by letter mistakenly dated November 21, 2008) outlining a suggestion to
swap some of the Company’s debt for newly-issued equity to improve the debt
coverage ratio compliance and to delever the Company.
Also on
November 24, 2008, Mr. Gray wrote two letters to
Mr. Furman. In one letter, Mr. Gray indicated that three
members of the Avalon group were interested in joining the Providence Board and
requested policies relating to board service, which were mentioned in the prior
meeting. In a second letter, Mr. Gray expressed his surprise at
learning the Providence Board had adopted Bylaw amendments and inquired whether
the Company had requested and received waivers from its senior credit facility
lenders regarding the Company’s covenant not to amend, modify or change its
organizational documents in a manner materially adverse to the interests of the
lenders.
On
December 3, 2008, Mr. McCusker responded in writing to the correspondence
that he had received from Mr. Smith on November 25, 2008. In his
letter, Mr. McCusker said that he had referred the debt swap transaction
suggested by Mr. Smith to the Providence Board, which had determined that
the transaction was not in the best interests of the Company or its
stockholders.
Also on
December 3, 2008, Mr. Furman responded in writing to the correspondence
that he had received from Mr. Gray on November 25, 2008. In his
letter, Mr. Furman addressed the interest expressed by Mr. Gray in
having three members of the Avalon group join the Providence Board by stating
that there were no vacancies and that only two directors would be elected at the
upcoming annual meeting. Mr. Furman finally stated that he did
not advise the lenders about the Bylaw amendments based on his opinion that the
amendments could not be construed as adversely affecting the
lenders.
On
December 10, 2009, the Company issued a press release announcing the
Board’s adoption on December 9, 2008, of a stockholder rights plan, as
known as a “poison pill”.
As
disclosed in a Form 8-K filed with the SEC on January 5, 2009, on
December 30, 2008, the Providence Compensation Committee awarded 380,000
shares of stock to the executive officers and non-employee
directors. They further announced that all of these awards vest
immediately. The Compensation Committee also elected to accelerate
the vesting dates of all unvested stock options and restricted stock previously
awarded to eligible employees and consultants, including stock options and
restricted stock granted to senior management and non-employee
directors. The result of these actions was an expense charge to the
Company of approximately $5.8 million.
While the
Committee had purchased its shares of Common Stock believing the shares were
undervalued and represented an attractive investment opportunity, these
subsequent developments caused the Committee to reassess its
position. The Committee was troubled by the impairment charges and
debt covenant problems, the executive compensation levels, and the possible
disposition of LogistiCare one year after Providence had acquired
it. The Committee was also troubled by the Providence Board’s
adoption of the Bylaw amendments and the shareholder rights plan (the poison
pill), the December 2008 grant of new stock representing 3.0% of the outstanding
shares, and the immediate acceleration of any vesting restriction (which
increased the officer and director voting power). The Committee began
considering ways to raise its concerns.
On
January 21, 2009, 73114 Investments, L.L.C. (“73114”) sent a stockholder
demand for books and records as well as a separate stockholder demand for
inspection of the stockholder list to the Company to facilitate communication
with fellow stockholders, investigate potential wrongdoing, mismanagement, waste
of corporate assets and breaches of fiduciary duties by members of the Company’s
Board and to assess the ability of the Board to impartially consider a demand
for action related to the items described in the demands. The
Committee stated that it had become increasingly concerned about the Board’s
oversight of the Company and management’s actions at a critical juncture in the
Company’s business, particularly in connection with (a) the authorization
of large increases in the levels of executive compensation; (b) the award
of restricted stock grants under the Company’s 2006 Long Term Incentive Plan and
the acceleration of the incentive awards and grants; (c) the amendments to
the employment agreements between the Company and Messrs. McCusker, Deitch,
Furman and Norris and the financial impact thereof; (d) possible accounting
irregularities in the recording of asset values; and (e) the annual
incentive compensation program of the Company. The Committee also
expressed concern about management’s unwillingness to communicate with them
about these matters. The demands were included as exhibits to an
Amendment No. 1 to Schedule 13D, which the Committee filed with the SEC on
January 22, 2009. In the amended Schedule 13D, the Committee
stated that it was considering both a proxy contest and a consent solicitation
against Providence.
On
January 25, 2009, Mr. Gray wrote Michael N. Deitch, Providence’s Chief
Financial Officer and Corporate Secretary, advising Providence that the
Committee was considering nominating persons for election to the Providence
Board at the 2009 Annual Meeting and asking that Mr. Deitch provide the
Committee with the director and officer questionnaire (the “Questionnaire”) and
director agreement (the “Director Agreement”) contemplated by the Providence
Bylaws.
In
letters dated January 26, 2009, Providence’s outside legal counsel
responded to the two inspection demands. As to the demand for
inspection of the stockholder list, counsel stated that Providence would make
the requested list available and the Committee has obtained the stockholder
list. As to the books and records demand, counsel for Providence
refused to make any books and records available asserting that the demand was
“extraordinarily overbroad, patently inappropriate, unduly burdensome and devoid
of a proper purpose, and, as such, represent an egregious abuse of the
Section 220 demand process.” The full text of these response
letters and a press release issued by Providence were attached as exhibits in
Form 8-K filed by Providence on January 26, 2009.
On
January 30, 2009, Mr. Deitch responded by letter to Mr. Gray and
enclosed copies of the requested Questionnaire and Director
Agreement.
On
February 5, 2009, the Committee filed a preliminary consent solicitation
statement with the SEC, through which the Committee would conduct a consent
solicitation to seek stockholder support for nine proposals to amend the
Providence Bylaws.
On
February 10, 2009, 73114 sent a second demand for books and records to address
the issues raised in the response letter and to narrow the documents
requested. Providence’s outside legal counsel responded in a letter
dated February 18, 2009, in which counsel for Providence refused to make any
books and records available for the same reasons identified in the first
response letter and accused 73114 of including “false and misleading statements”
under oath that rendered the demand “defective
ab initio
”.
On
February 12, 2009, Providence filed its preliminary consent revocation statement
with the SEC opposing the bylaw proposals in the Committee’s preliminary consent
solicitation statement.
On
February 19, 2009, the Committee officially notified Providence that it intended
to nominate two candidates for election as directors to the Providence Board at
the 2009 Annual Meeting.
On
February 24, 2009, the Providence Board approved amended and restated
bylaws of the Company. In a February 24, 2009 press release
(Exhibit 99.1 to its Form 8-K dated February 25, 2009), Providence
stated that the amendments made “various enhancements to the Company’s corporate
governance practices. The specific corporate governance enhancements
unanimously approved by Providence’s Board of Directors include bylaw amendments
to adopt and implement a majority standard for the election of directors in
uncontested elections, bylaw amendments to make it easier for stockholders to
call a special meeting of stockholders, and bylaw amendments that make it easier
for stockholders to nominate candidates for election at the Company’s annual
meetings.”
On
February 27, 2009, in response to the Bylaw amendments by the Providence Board,
the Committee issued a press release announcing that it was withdrawing its
consent solicitation statement and discontinuing the consent
solicitation.
On March
2, 2009, the Committee amended its Schedule 13D to report that it had withdrawn
its consent solicitation statement and discontinued the consent
solicitation.
On April
10, 11, and 12 2009, Mr. McCusker and Mr. Smith had a number of
telephone conversations. During those conversations, which focused on
whether there was a path to avoid a contested proxy solicitation, the two
discussed a termination of the Committee’s proxy solicitation if Providence
would appoint a certain shareholder representative to the Providence
Board. Except for his share ownership in Providence, the named
representative was not affiliated with the Committee or Providence.
On April
14, 2009, counsel for Providence sent counsel for the Committee a draft form of
settlement agreement relating to the Committee’s proxy
solicitation.
On April
15, 2009, counsel for the Committee e-mailed counsel for Providence advising
that the Committee had rejected the settlement offer and form of proposed
settlement agreement since the agreement provided only for a representative to
be designated by the Providence Board and not the representative named in
earlier discussions. Following the rejection, the Committee and
Providence management learned independently that the named representative was
unwilling to serve on the Providence Board.
On April
16, 2009, Providence issued a press release to announce that its settlement
offer and form of proposed settlement agreement had been rejected by the
Committee.
On April
20, 2009, Mr. Smith sent a letter to each of Providence’s independent
directors requesting a meeting to discuss the Committee’s concerns about
Providence.
On April
25, 2009, Warren S. Rustand, Providence’s lead director, replied to
Mr. Smith indicating that he and members of Providence’s executive
management team were willing to meet with Mr. Smith during the week of
April 27, 2009.
On April
28, 2009, Mr. Smith, Mr. Bradley, Mr. Gray and outside legal
counsel for the Committee met with Mr. Rustand, Ms. Meints,
Mr. McCusker, Mr. Furman and outside legal counsel for Providence to
discuss a possible settlement relating to the Committee’s proxy
solicitation. The meeting occurred in Providence’s offices in Tucson,
Arizona, and lasted about two hours. The parties were unable to reach
an agreement.
On April
29, 2009, Mr. Smith wrote to Mr. Rustand responding to certain
allegations made in Mr. Rustand’s April 25, 2009 letter to
Mr. Smith.
REASONS
FOR OUR SOLICITATION
The
Providence Committee for Accountability is seeking your support for the election
of our Nominees. We believe the election of our Nominees represent
the best means for stockholders to ensure independent voices in the Providence
boardroom and will focus on the best interests of the
stockholders. Our Nominees are committed to exploring all
opportunities to maximize stockholder value.
In our
opinion, the election of the Nominees represents the best means for Providence’s
stockholders to maximize the value of their shares. If elected, our
Nominees will attempt to work with the other members of the Board to pursue
options that we believe are in the best interests of all
stockholders. In particular, our Nominees would seek to curb existing
compensation practices to officers and Directors, provide better oversight and
accountability applicable to acquisitions and dispositions, and provide a voice
for stockholder interests.
We do not
seek to gain control of Providence’s Board, to make any merger, tender offer or
other acquisition proposal, or to engage in any transaction that would make us
an “acquiring person” under Providence’s recently adopted stockholder rights
plan.
·
|
We
believe the Board has excessively increased executive and director
compensation.
|
Based on
total compensation levels reported in the Company’s 2007, 2008 and 2009 proxy
statements filed with the SEC, from January 1, 2006, through
December 31, 2008, management’s total compensation appears to have
increased approximately 390% for Fletcher J. McCusker, the Chairman and
Chief Executive Officer, 280% for Craig A Norris, the Chief Operating
Officer, 260% for Michael N. Deitch, the Chief Financial Officer, and 280% for
Fred D. Furman, the General Counsel.
As stated
in Providence’s 2009 proxy statement, the Compensation Committee approved the
increases to bring executive compensation to the 50
th
percentile when comparing compensation levels at Providence with levels in a
selected peer group of companies. We contend that the comparison was
flawed in that Providence did not fit the peer group. Of the 14
companies in the peer group, Providence’s market capitalization was ranked
13
th
at December 31, 2007, its 2007 annual revenues were ranked 13
th
, and
its 2007 earnings were ranked 11
th
.
In
addition, on December 30, 2008, the Board granted stock totaling 380,000 shares
of common stock representing 3.1% of the then issued and outstanding shares to
four executives and four Directors. The Board accelerated the normal
three-year vesting period for the stock grants, and all previously issued stock
options and restricted stock grants were vested immediately. As
stated by Providence in its Form 10-K for 2008, these awards and the
acceleration of vesting resulted in a $5.8 million charge to the Company’s
financials in the fourth quarter of 2008.
We
believe the compensation increases, large stock grants, and the acceleration of
vesting periods were unwarranted and are examples of the failure of the Board to
focus on the best interests of the stockholders.
·
|
We
believe the Board has not provided adequate oversight and accountability
for acquisitions and dispositions.
|
In
December 2007, Providence acquired LogistiCare for approximately
$229 million, all of which was funded by new borrowings. The
acquisition greatly increased Providence’s debt levels. It did so
despite LogistiCare’s history of losses, weak EBITDA, interest deferrals and
debt covenant breaches.
On
October 22, 2008, Providence announced an estimated impairment charge related
specifically to the LogistiCare acquisition of $90 to $120 million in the
third quarter of 2008. Also, in a November 5, 2008 conference
call, management stated Providence had a debt to EBITDA coverage ratio of
4.73. They stated that the senior debt covenants required a maximum
ratio of 4.75, meaning that the Company was within two-one hundredths of a point
from a default on its senior debt.
On
November 5, 2008, Providence finalized its earlier estimate by announcing
impairment charges relating to LogistiCare of $107 million. It
also announced additional impairment charges of $34 million relating to
other acquisitions.
On
December 18, 2008, the Company announced it was seeking strategic
alternative options, including the sale of LogistiCare.
In its
2008 Annual Report, the Company recorded an additional impairment charge of
$28.9 million relating to other acquisitions. The total impairment of
intangible assets for the Company in 2008 was $169.9 million.
Within a
year, Providence bought LogistiCare, wrote off more than half of the purchase
price, announced it was near a default on the senior debt incurred in the
acquisition, and disclosed it would pursue the sale of LogistiCare. Providence
also wrote off $62.9 million of carrying value of other company assets in
2008.
We
believe these events indicate poor strategic planning, poor implementation, and
a lack of oversight by the Board with respect tothe LogistiCare and other
acquisitions.
·
|
We
question whether the majority of the Board is truly independent, and able
to make independent decisions.
|
According
to the Company’s 2009 Proxy Statement, the Board has determined that only
Fletcher J. McCusker and Craig A. Norris, executive officers of Providence,
are not independent. Providence contends that none of the other four
directors currently serving on the Board have a material relationship with
Providence other than serving in their position as a director.
We
question Providence’s conclusions about director Warren R. Rustand’s
independence. Mr. Rustand acts as Providence’s “lead director”,
chairs its Compensation Committee and serves on its Audit Committee and
Nominating and Governance Committee. In all of these positions, his
independence is critical.
However
, Providence discloses
that Providence currently engages a consultant, CBIZ Benefits and Insurance
Services, Inc. (“CBIZ”), to administer its employee benefit plans and that CBIZ
employs three of Warren R. Rustand’s sons, who receive compensation from
Providence. For 2008, CBIZ received approximately $345,500,
consisting of both fees and commissions, in regards to the services that CBIZ
provides to Providence. One of Mr. Rustand’s sons, Eric Rustand, is
the Vice President of Business Development for CBIZ and is the lead consultant
on the employee health benefit plans of Providence. A second son,
Garrett Rustand, is the Vice President of Wealth Management for CBIZ and is one
of three wealth management practitioners overseeing the 401(k) and deferred
compensation plans of Providence. For 2008, Eric Rustand personally
received approximately $64,000 in commissions from CBIZ for services provided to
Providence and Garrett Rustand personally received approximately $8,400 in
commissions from CBIZ for services provided to Providence.
Providence
contends that the related party payments are below the $120,000 threshold level
set by applicable Nasdaq requirements, are thus immaterial and do not impair
Mr. Rustand’s independence. We would note that the Nasdaq
requirement is not the only measure of independence. Under the 2009
U.S. Proxy Voting Guidelines for Risk Metrics Group, a prominent proxy advisory
service, Mr. Rustand would be an “affiliated outside director” since his
sons provide professional services to Providence in excess of $10,000 per
year. We believe that the critical positions held by Mr. Rustand
warrant a higher standard and must question whether he can be truly independent
given the involvement of his sons in Providence’s employee benefits plan
administration and management.
Not only
are Mr. Rustand’s positions with the Board critical, but if he is not
deemed independent, then a majority of Providence’s board is not independent,
nor are the compensation and audit committees comprised solely of independent
directors. We believe that having a majority of independent directors
on the Board is critical to good corporate governance and the issue should not
rest on an independence determination about which reasonable people may
differ.
Our
Nominees are committed to a course of action for the Company that supports
a
thorough
and comprehensive strategic review of the Company’s corporate
governance
practices. In particular, the Nominees will:
·
|
Articulate
and raise their concerns about Providence’s corporate governance practices
with the rest of the Providence Board members and urge implementation of
best practices.
|
·
|
Seek
to adopt compensation practices that tie executive pay to Providence’s
performance.
|
·
|
Act
independently and provide necessary supervision to the senior management
of the Company.
|
·
|
Provide
an independent voice in the boardroom that we believe is necessary to
ensure the Board focuses on the interests of
stockholders.
|
If
elected, the Nominees will constitute a minority of the Providence
Board. Accordingly, the Nominees will, as is their fiduciary duty as
directors, work with the other members of the Board to take those steps that
they deem necessary to maximize stockholder value.
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
The
Providence Board is currently composed of six directors divided into three
classes serving staggered three-year terms. One class of directors is
elected by the stockholders annually. Two directors will be elected
at the 2009 Annual Meeting. The Committee is seeking your support at
the Annual Meeting to elect the Nominees in opposition to Providence’s director
nominees to serve until the 2012 annual meeting of stockholders and until their
successors are duly elected and qualified.
The
Nominees
The
Committee has nominated a slate of highly qualified nominees who we believe
possess the expertise necessary to act with the interests of stockholders in
mind. The Nominees are independent of the Company in accordance with
SEC and NASDAQ Marketplace rules on director independence and are committed to
explore all alternatives to increase stockholder value. If elected,
the Nominees are committed to acting in the best interests of Providence
stockholders and will pursue their efforts diligently and promptly.
Set forth
below are the name, age, business address, present principal occupation,
employment history and directorships of publicly-held companies of each of the
Nominees for at least the past five years. This information has been
furnished to the Committee by the respective Nominees. Each of the
Nominees is a citizen of the United States of America. None of the
entities referenced below is a parent or subsidiary of the Company.
Name
|
Age
|
Present
Principal Occupation
and
Five Year Employment History
|
Michael
C. Bradley
|
37
|
Michael
Bradley has served as the Chief Financial Officer of Avalon Correctional
Services, Inc. since June 2004. He was instrumental in Avalon’s
debt restructuring from 2004 to 2006, negotiating and implementing credit
instruments that better aligned Avalon’s operating and debt service
needs. He has extensive experience in project due diligence,
mergers and acquisitions, and post-implementation financial
analysis. Immediately before his employment with Avalon,
Mr. Bradley was self-employed and focused his business on consulting
services relating to Sarbanes-Oxley Act compliance, business process
evaluation and integration, and litigation support. Earlier in
his career, Mr. Bradley specialized in IPO transactions and loan workouts
for the Resolution Trust Corporation as an auditor for Ernst &
Young. He received his bachelor’s of science degree in business
administration as an accounting major from Oklahoma State University in
1993, and is licensed as a Certified Public Accountant in Texas and
Oklahoma. Mr. Bradley is not currently serving as a director of
any company with a class of securities registered pursuant to Section 12
of the Exchange Act, subject to the requirements of Section 15(d) of the
Exchange Act or registered as an investment company under the Investment
Company Act of 1940. Mr. Bradley’s principal business address
is 13401 Railway Drive, Oklahoma City, Oklahoma 73114.
|
|
|
|
Captain
Brian T. Costello (ret)
|
47
|
Captain
Costello has over 25 years of leadership and management experience with
extensive knowledge in command, control and
communications. From March 2006 until April 2009, he served as
Captain of the United States Navy as the Wing Commander and Deputy Wing
Commander for Strategic Communications, Wing One, at Tinker Air Force Base
in Oklahoma City. As Wing Commander, he was responsible for the
management of over 1,600 military and civilian personnel, a $120 million
operating budget, and $3.8 billion in assets. Captain Costello
was also responsible for maintaining a Lean/Six Sigma based process
improvement program that focused on cost avoidance, theory, and best
practices. From March 2005 to March 2006, Captain Costello
served as the Assistant Chief of Staff for Plans and Policy for the United
States Navy Central Command and the 5th Fleet of the United States Navy in
Bahrain. From 2002 to 2005, Captain Costello served as Deputy
for Operations for Strategic Communications Wing One at Tinker Air Force
Base. He retired from the United States Navy in April 2009 and
is currently the Principal Accounts Manager of Business
Development/Midwest Region – Government Systems for Rockwell Collins,
Inc. Captain Costello received his bachelor’s of science degree
from the United States Naval Academy in
1983. Captain Costello is not currently serving as
a director of any company with a class of securities registered pursuant
to Section 12 of the Exchange Act, subject to the requirements of Section
15(d) of the Exchange Act or registered as an investment company under the
Investment Company Act of 1940. Captain Costello’s principal
business address is 2501 Liberty Parkway, Suite 650, Midwest City,
Oklahoma 73110.
|
|
|
|
There are
no arrangements or understanding between any of the Nominees and any member of
the Committee pursuant to which any of the Nominees was selected as a
nominee. No family member of any of the Nominees is an executive
officer, director or person nominated or chosen to become a director or
executive officer of the Company. Other than as disclosed in this
Proxy Statement or in the Schedule 13D (as amended to date) filed by the
Committee with the SEC, available at the SEC’s website, www.sec.gov, none of the
participants or the Nominees is, or was within the past year, a party to any
contract, arrangement or understanding with any person with respect to any
securities of Providence, including, but not limited to, joint ventures, loan or
option arrangements, puts or calls, guarantees against loss or guarantees of
profit, division of losses or profits, or the giving or withholding of
proxies. Mr. Bradley failed to timely file a Form 3 to report
his beneficial ownership of Company common stock upon the initial formation of
the Committee on or about October 30, 2008. This Form 3 was filed
late on February 17, 2009.
The
Nominees will, if elected, constitute a minority of the
Board. Accordingly, the Nominees will not be able to adopt any
measures without the support of at least some members of the current
Board. The Nominees therefore should be expected to articulate and
raise their concerns about Providence’s business activities and strategy with
the other members of the Board.
The
Nominees understand that, if elected as directors of Providence, each of them
will have an obligation under Delaware law to discharge his duties as a director
in good faith, consistent with his fiduciary duties to Providence and its
stockholders.
There can
be no assurance that the actions the Nominees intend to take as described above
will be implemented if they are elected or that the election of the Nominees
will improve the Company’s business or otherwise enhance stockholder
value. Your vote to elect the Nominees does not constitute a vote in
favor of the Committee’s plans for Providence. If we are successful
in our campaign in support of our Nominees, your vote to elect the Nominees will
only have the legal effect of replacing two incumbent directors of Providence
with our Nominees.
The
Committee does not expect that the Nominees will be unable to stand for
election, but, in the event that such persons are unable to serve or for good
cause will not serve, the Shares represented by the enclosed
[BLUE]
proxy card will be
voted for substitute nominees. In addition, the Committee reserves
the right to nominate substitute persons or vote against the Providence nominees
if Providence makes or announces any changes to the Bylaws or its Certificate of
Incorporation or takes or announces any other action that has, or if consummated
would have, the effect of disqualifying the Nominees. In any such
case, the Shares represented by the enclosed
[BLUE]
proxy card will be
voted for such substitute nominees or against the Providence
nominees. The Committee reserves the right to nominate additional
persons if Providence increases the size of the Providence Board above its
existing size or increases the number of directors whose terms expire at the
Annual Meeting. Additional nominations made pursuant to the preceding
sentence are without prejudice to the position of the Committee that any attempt
to increase the size of the current Providence Board or to reconstitute or
reconfigure the classes on which the current directors serve constitutes an
unlawful manipulation of Providence’s corporate machinery.
YOU
ARE URGED TO VOTE “FOR” THE ELECTION OF THE COMMITTEE’S NOMINEES ON THE ENCLOSED
[BLUE] PROXY CARD
PROPOSAL
NO. 2
COMPANY
PROPOSAL TO RATIFY SELECTION OF
INDEPENDENT
AUDITORS
As
discussed in further detail in the Company’s proxy statement, the Audit
Committee of the Board has selected KPMG LLP as the Company’s independent
registered public accounting firm to audit the Company’s consolidated financial
statements for the fiscal year ending December 31, 2009. The Company
has submitted this proposal to stockholders for ratification as its independent
registered public accounting firm.
We intend
to vote for the ratification of the appointment of KPMG LLP as the Company’s
independent registered public accounting firm for the fiscal year ending
December 31, 2009.
OTHER
PROPOSALS
The
Committee and the other Participants know of no other business to be presented
at the Annual Meeting. If any other matters should properly come
before the Annual Meeting, it is intended that the persons named on the enclosed
[BLUE]
proxy card will
vote that proxy on such other matters in accordance with their
discretion.
RECORD
DATE AND VOTING
According
to the Company’s proxy statement, as of April 20, 2009, the Company had issued
and outstanding 12,855,091 Shares entitled to be voted at the Annual
Meeting. Each Share is entitled to one vote on each matter submitted
to a vote of stockholders. Only stockholders of record at the close of business
on April 20, 2009 will be entitled to vote at the Annual
Meeting. Based on publicly available information, the Committee
believes that the only outstanding class of securities of Providence entitled to
vote at the Annual Meeting is the Shares. Shares represented by
properly executed
[BLUE]
proxy cards will be voted at the Annual Meeting as marked and, in the absence of
specific instructions, will be voted
FOR
(i) the election of
the Nominees to the Providence Board, (ii) the ratification of the
appointment of KPMG LLP and (iii) in the discretion of the persons named as
proxies on all other matters as may properly come before the Annual
Meeting. You are being asked to elect the Nominees. The
enclosed
[BLUE]
proxy
card may only be voted for the Nominees and does not confer voting power with
respect to the Company’s nominees. Accordingly, you will not have the
opportunity to vote for any of Providence’s nominees. You can only
vote for Providence’s nominees by executing a proxy card provided by the
Company. Stockholders should refer to the Company’s proxy statement
for the names, backgrounds, qualifications and other information concerning the
Company’s nominees. The participants in this solicitation intend to
vote all of their Shares in favor of the Nominees.
If your
shares are held in a stock brokerage account or by a bank or other nominee, you
are considered the beneficial owner of shares. These proxy materials
are being forwarded to you by your broker who is considered, with respect to
those shares, the stockholder of record. As the beneficial
owner, you have the right to direct your broker to vote your shares, and your
broker or nominee has enclosed a voting instruction card for you to
use. If your shares are held by a broker or nominee, please return
your voting card as early as possible to ensure that your shares will be voted
in accordance with your instructions. You are also invited to attend
the Annual Meeting; however, since you are not a stockholder of record, you may
not vote these shares in person at the meeting.
QUORUM
Under
Delaware law and the Bylaws, the presence of a quorum is required to transact
business at the Annual Meeting. To be considered at the Annual
Meeting, the presence, in person or by proxy, of a majority of the votes that
stockholders are entitled to cast on the proposals is necessary to constitute a
quorum for action on that matter. Abstentions, votes withheld from
any nominee and broker non-votes will be counted as present for purposes of
determining the presence or absence of a quorum with regard to any proposal at
the annual meeting.
VOTES
REQUIRED FOR APPROVAL
Vote Required for the Election of
Directors
.
With regard to the election of two Class 3 directors, each director must be
elected by a plurality of the votes cast at the Annual Meeting by the holders of
Shares entitled to vote. The two nominees for election as directors
who receive the greatest number of votes will be elected
directors. Stockholders may vote “for” all of the director nominees,
“withhold” authority to vote for all of the nominees or “withhold” authority to
vote for any individual nominee but vote for all other
nominees. Shares that are withheld from voting as to any nominee and
broker non-votes will not affect the outcome.
Ratification of Appointment of KPMG
LLP
. The affirmative vote of the majority of the Shares
present in person or by proxy at the Annual Meeting and entitled to vote on the
matter is required to ratify the appointment of KPMG LLP as the Company's
independent registered public accounting firm for the fiscal year ending
December 31, 2009. Abstentions will have the same effect as a vote
against the approval of this proposal.
Stockholders
of record may appoint proxies to vote their shares by signing, dating and
mailing the
[BLUE]
proxy
card in the envelope provided. Shares represented by properly
executed, but unmarked,
[BLUE]
proxy cards will be
voted at the Annual Meeting as marked and will be voted
FOR
(i) the election of
the Nominees to the Providence Board, (ii) the ratification of the
appointment of KPMG LLP and (iii) in the discretion of the persons named as
proxies on all other matters as may properly come before the Annual
Meeting.
You are
being asked to elect the Nominees. The enclosed
[BLUE]
proxy card may only be
voted for the Nominees and does not confer voting power with respect to the
Company’s nominees. Accordingly, you will not have the opportunity to
vote for any of Providence’s nominees. You can only vote for
Providence’s nominees by executing a proxy card provided by the
Company. Stockholders should refer to the Company’s proxy statement
for the names, backgrounds, qualifications and other information concerning the
Company’s nominees. The participants in this solicitation intend to
vote all of their Shares in favor of the Nominees.
REVOCATION
OF PROXIES
Stockholders
of Providence may revoke their proxies at any time prior to exercise by
attending the Annual Meeting and voting in person (although attendance at the
Annual Meeting will not in and of itself constitute revocation of a proxy) or by
delivering a written notice of revocation. The delivery of a
subsequently dated proxy which is properly completed will constitute a
revocation of any earlier proxy. The revocation may be delivered either to the
Committee in care of D.F. King & Co., Inc. at the address set forth on the
back cover of this Proxy Statement or to Providence at 5224 East Fourth Street,
Tucson, Arizona 85711 or any other address provided by
Providence. Although a revocation is effective if delivered to
Providence, the Committee requests that either the original or photostatic
copies of all revocations be mailed to the Committee in care of D.F. King &
Co., Inc. at the address set forth on the back cover of this Proxy Statement so
that the Committee will be aware of all revocations and can more accurately
determine if and when proxies have been received from the holders of record on
the Record Date of a majority of the outstanding
Shares. Additionally, D.F. King & Co., Inc. may use this
information to contact stockholders who have revoked their proxies in order to
solicit later dated proxies for the election of the Nominees.
IF
YOU WISH TO VOTE FOR THE ELECTION OF THE COMMITTEE’S NOMINEES TO THE BOARD,
PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED [BLUE] PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
ADDITIONAL
INFORMATION
The
principal executive offices of The Providence Service Corporation are located at
5224 East Fourth Street, Tucson, Arizona 85711. Except as otherwise
noted herein, the information concerning Providence has been taken from or is
based upon documents and records on file with the SEC and other publicly
available information.
Additional
information about the Committee may be found in the Schedule 13D filed by the
Committee with the SEC on March 2, 2009 (as amended to date), available at the
SEC’s website, www.sec.gov.
PROXY
SOLICITATION; EXPENSES
Executed
proxies may be solicited in person, by mail, advertisement, telephone,
telecopier, telegraph or email. Solicitation may be made by the
Committee, including the Nominees, employees of Avalon, 73114 and their
affiliates, none of whom will receive additional compensation for such
solicitation. Proxies will be solicited from individuals, brokers,
banks, bank nominees and other institutional holders. We have
requested banks, brokerage houses and other custodians, nominees and fiduciaries
to forward all solicitation materials to the beneficial owners of the Shares
they hold of record. We will reimburse these record holders for their
reasonable out-of-pocket expenses.
In
addition, the Committee has retained D.F. King & Co., Inc. (“D.F. King”) to
solicit proxies on its behalf in connection with the 2009 Annual
Meeting. D.F. King will employ approximately 30 people in its
efforts. We have agreed to reimburse D.F. King for its reasonable
expenses and to pay to D.F. King a fee of up to $75,000.
The
entire expense of our proxy solicitation is being borne by us. In the
event that the Nominees are elected to the Providence Board, we will seek
reimbursement of such expenses from Providence and will not submit such
reimbursement to a vote of stockholders. In addition to the
engagement of D.F. King described above, costs related to the solicitation of
proxies include expenditures for printing, postage, legal and related expenses
and are expected to total approximately $250,000, of which approximately $40,000
has been paid to date.
ADDITIONAL
INFORMATION CONCERNING THE PARTICIPANTS
The
participants in the proxy solicitation are Avalon Correctional Services, Inc., a
Nevada corporation (“Avalon”), Donald E. and Tiffany Smith, Michael Bradley,
Eric S. Gray, and 73114 Investments, L.L.C., an Oklahoma limited liability
company. Avalon is a leading developer and manager of private community
correctional facilities and alternative correctional programming in the United
States.
Donald E.
Smith is the Chairman, Chief Executive Officer and principal stockholder of
Avalon. Tiffany Smith is the Vice President of Communications and
principal stockholder of Avalon and the spouse of
Mr. Smith. Michael Bradley is Avalon’s Chief Financial
Officer. Eric S. Gray is Avalon’s Vice President and Corporate
Counsel. 73114 is a wholly-owned subsidiary of Avalon, which is
managed by Messrs. Smith, Bradley and Gray. The principal
business address of each member of the Committee is 13401 Railway Drive,
Oklahoma City, Oklahoma 73114.
As of the
date of this filing, the Committee members beneficially own in the
aggregate 2,302,095 Shares, or approximately 17.9% of the Shares
outstanding, based on the 12,855,091 shares outstanding as of the record
date. As disclosed in the most recent amendment to Schedule 13D
filed with the SEC on March 2, 2009, 73114 Investments, L.L.C. owns of record
2,292,895 Shares, Donald E. and Tiffany Smith own of
record 7,200 Shares, Michael Bradley owns of
record 1,000 Shares, and Eric S. Gray owns of record 1,000
Shares. For purposes of Rule 13d-5(b)(1) of the Securities Exchange
Act of 1934, as amended, each member of the Committee is deemed to beneficially
own the Shares of the Company beneficially owned in the aggregate by all other
members of the Committee, which means that each member of the Committee may be
deemed to beneficially own 2,302,095 Shares. The Smiths, Bradley and
Gray disclaim beneficial ownership of the Shares held by the others, and Bradley
and Gray disclaim any beneficial ownership of the Shares held by
73114. 73114 and Avalon disclaim beneficial ownership of the Shares
held by the individual Committee members.
Apart
from their stock ownership in the Company, none of the Committee members or the
Nominees has any interest in, or relationship with, the Company or any
substantial interest in any matter to be acted upon at the Annual
Meeting. Until accumulating their shares in Providence, the Committee
members had not previously accumulated a significant stock position in a
publicly held company other than Avalon. None of the members have
previously engaged in a proxy or consent solicitation contest or a hostile
takeover. Neither the Committee nor any of its members seeks to
acquire control of Providence or to take it private, to make any merger, tender
offer or other acquisition proposal, or to engage in any transaction that would
make us an “acquiring person” under Providence’s recently adopted stockholder
rights plan.
For
information regarding purchases and sales of securities of Providence during the
past two years by members of the Committee, see Schedule I.
The
Committee may seek reimbursement from Providence of all expenses it incurs in
connection with the solicitation. The Committee does not intend to
submit the question of such reimbursement to a vote of security holders of the
Company.
The
members of the Committee have entered into a Joint Filing and Solicitation
Agreement in which, among other things, (i) the parties agree to the joint
filing on behalf of each of them of statements on Schedule 13D with respect to
the securities of Providence, (ii) the parties agree to solicit proxies in favor
of the Proposals and to take all other action necessary or advisable to achieve
the foregoing (the “Solicitation”), and (iii) the Committee agrees to bear all
expenses incurred in connection with the Committee’s activities,
including approved expenses incurred by any of the parties in
connection with the Solicitation, subject to certain limitations.
Except as
set forth in this Proxy Statement (including the Schedules hereto),
(i) during the past 10 years, no participant in this solicitation has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors); (ii) no participant in this solicitation directly or
indirectly beneficially owns any securities of Providence; (iii) no
participant in this solicitation owns any securities of Providence which are
owned of record but not beneficially; (iv) no participant in this
solicitation has purchased or sold any securities of Providence during the past
two years; (v) no part of the purchase price or market value of the
securities of Providence owned by any participant in this solicitation is
represented by funds borrowed or otherwise obtained for the purpose of acquiring
or holding such securities; (vi) no participant in this solicitation is, or
within the past year was, a party to any contract, arrangement or understanding
with any person with respect to any securities of Providence, including, but not
limited to, joint ventures, loan or option arrangements, puts or calls,
guarantees against loss or guarantees of profit, division of losses or profits,
or the giving or withholding of proxies; (vii) no associate of any
participant in this solicitation owns beneficially, directly or indirectly, any
securities of Providence; (viii) no participant in this solicitation owns
beneficially, directly or indirectly, any securities of any parent or subsidiary
of Providence; (ix) no participant in this solicitation or any of his or
its associates was a party to any transaction, or series of similar
transactions, since the beginning of Providence’s last fiscal year, or is a
party to any currently proposed transaction, or series of similar transactions,
to which Providence or any of its subsidiaries was or is to be a party, in which
the amount involved exceeds $120,000; (x) no participant in this
solicitation or any of his or its associates has any arrangement or
understanding with any person with respect to any future employment by
Providence or its affiliates, or with respect to any future transactions to
which Providence or any of its affiliates will or may be a party; and
(xi) no person, including any of the participants in this solicitation, who
is a party to an arrangement or understanding under which the Nominees are
proposed to be elected has a substantial interest, direct or indirect, by
security holdings or otherwise in any matter to be acted on as set forth in this
Proxy Statement. There are no material proceedings to which any
participant in this solicitation or any of his or its associates is a party
adverse to Providence or any of its subsidiaries or has a material interest
adverse to Providence or any of its subsidiaries. With respect to
each of the participants in this solicitation, none of the events enumerated in
Item 401(f)(1)-(6) of Regulation S-K of the Exchange Act occurred during the
past five years.
INFORMATION
CONCERNING PROVIDENCE
Although
we do not have any knowledge indicating that any statement made herein is
untrue, we do not take any responsibility for the accuracy or completeness of
statements taken from public documents and records that were not prepared by or
on our behalf, or for any failure by Providence to disclose events that may
affect the significance or accuracy of such information. See Schedule
II for information regarding persons who beneficially own more than 5% of the
Shares and the ownership of the Shares by the directors and management of
Providence.
The Committee has omitted from this
Proxy Statement certain disclosures required by applicable law that is expected
to be included in the Company’s proxy statement relating to the Annual
Meeting. This disclosure is expected to include, among other things,
current biographical information on Providence’s current directors, information
concerning executive compensation and other important
information.
WE
URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED [BLUE] PROXY CARD
IN
FAVOR OF THE ELECTION OF OUR NOMINEES
THE
PROVIDENCE COMMITTEE FOR ACCOUNTABILITY
May
___, 2009
SCHEDULE
I
TRANSACTIONS
IN SECURITIES OF
THE
PROVIDENCE SERVICE CORPORATION
DURING
THE PAST TWO YEARS
Filing Party
|
|
Date
|
|
Buy or Sell
|
|
No.
of Common
Shares
|
|
|
Price
|
|
Eric
S. Gray
|
|
10/30/2008
|
|
Buy
|
|
|
1,000
|
|
|
$
|
0.86
|
|
Michael
Bradley
|
|
10/30/2008
|
|
Buy
|
|
|
1,000
|
|
|
$
|
0.85
|
|
Donald
E. Smith and Tiffany Smith
|
|
10/24/2008
|
|
Buy
|
|
|
1,500
|
|
|
$
|
1.01
|
|
|
|
10/30/2008
|
|
|
|
|
5,000
|
|
|
$
|
0.85
|
|
|
|
11/04/2008
|
|
|
|
|
100
|
|
|
$
|
2.63
|
|
|
|
11/05/2008
|
|
|
|
|
600
|
|
|
$
|
2.51
|
|
73114
Investments, L.L.C.
|
|
10/27/2008
|
|
Buy
|
|
|
4,092
|
|
|
$
|
0.98
|
|
|
|
|
|
Buy
|
|
|
5,800
|
|
|
$
|
0.99
|
|
|
|
|
|
Buy
|
|
|
94,422
|
|
|
$
|
1.00
|
|
|
|
|
|
Buy
|
|
|
39,308
|
|
|
$
|
1.01
|
|
|
|
|
|
Buy
|
|
|
93,550
|
|
|
$
|
1.02
|
|
|
|
|
|
Buy
|
|
|
57,285
|
|
|
$
|
1.03
|
|
|
|
|
|
Buy
|
|
|
32,600
|
|
|
$
|
1.04
|
|
|
|
|
|
Buy
|
|
|
37,800
|
|
|
$
|
1.05
|
|
|
|
|
|
Buy
|
|
|
42,300
|
|
|
$
|
1.06
|
|
|
|
|
|
Buy
|
|
|
26,865
|
|
|
$
|
1.07
|
|
|
|
|
|
Buy
|
|
|
4,092
|
|
|
$
|
0.98
|
|
|
|
|
|
Buy
|
|
|
5,800
|
|
|
$
|
0.99
|
|
|
|
|
|
Buy
|
|
|
94,422
|
|
|
$
|
1.00
|
|
|
|
|
|
Buy
|
|
|
39,308
|
|
|
$
|
1.01
|
|
|
|
|
|
Buy
|
|
|
93,550
|
|
|
$
|
1.02
|
|
|
|
|
|
Buy
|
|
|
57,285
|
|
|
$
|
1.03
|
|
|
|
|
|
Buy
|
|
|
32,600
|
|
|
$
|
1.04
|
|
|
|
|
|
Buy
|
|
|
37,800
|
|
|
$
|
1.05
|
|
|
|
|
|
Buy
|
|
|
42,300
|
|
|
$
|
1.06
|
|
|
|
|
|
Buy
|
|
|
26,865
|
|
|
$
|
1.07
|
|
|
|
10/28/2008
|
|
Buy
|
|
|
10,815
|
|
|
$
|
0.83
|
|
|
|
|
|
Buy
|
|
|
10,000
|
|
|
$
|
0.85
|
|
|
|
|
|
Buy
|
|
|
10,000
|
|
|
$
|
0.87
|
|
|
|
|
|
Buy
|
|
|
10,000
|
|
|
$
|
0.89
|
|
|
|
|
|
Buy
|
|
|
10,519
|
|
|
$
|
0.92
|
|
|
|
|
|
Buy
|
|
|
9,581
|
|
|
$
|
0.93
|
|
|
|
10/29/2008
|
|
Buy
|
|
|
34,317
|
|
|
$
|
0.71
|
|
|
|
|
|
Buy
|
|
|
10,000
|
|
|
$
|
0.76
|
|
|
|
|
|
Buy
|
|
|
500
|
|
|
$
|
0.77
|
|
|
|
|
|
Buy
|
|
|
9,000
|
|
|
$
|
0.78
|
|
|
|
|
|
Buy
|
|
|
12,000
|
|
|
$
|
0.79
|
|
|
|
|
|
Buy
|
|
|
15,000
|
|
|
$
|
0.80
|
|
|
|
|
|
Buy
|
|
|
10,000
|
|
|
$
|
0.81
|
|
|
|
|
|
Buy
|
|
|
10,000
|
|
|
$
|
0.82
|
|
|
|
10/30/2008
|
|
Buy
|
|
|
15,000
|
|
|
$
|
0.80
|
|
|
|
|
|
Buy
|
|
|
19,777
|
|
|
$
|
0.81
|
|
|
|
|
|
Buy
|
|
|
20,000
|
|
|
$
|
0.82
|
|
|
|
|
|
Buy
|
|
|
15,623
|
|
|
$
|
0.83
|
|
|
|
|
|
Buy
|
|
|
95,590
|
|
|
$
|
0.84
|
|
|
|
|
|
Buy
|
|
|
47,357
|
|
|
$
|
0.85
|
|
|
|
|
|
Buy
|
|
|
46,653
|
|
|
$
|
0.86
|
|
|
|
|
|
Buy
|
|
|
2,000
|
|
|
$
|
0.88
|
|
|
|
|
|
Buy
|
|
|
3,440
|
|
|
$
|
0.90
|
|
|
|
|
|
Buy
|
|
|
101,284
|
|
|
$
|
0.91
|
|
|
|
|
|
Buy
|
|
|
13,386
|
|
|
$
|
0.92
|
|
|
|
|
|
Buy
|
|
|
7,014
|
|
|
$
|
0.93
|
|
|
|
|
|
Buy
|
|
|
11,330
|
|
|
$
|
0.94
|
|
|
|
10/31/2008
|
|
Buy
|
|
|
9,000
|
|
|
$
|
0.96
|
|
|
|
|
|
Buy
|
|
|
1,409
|
|
|
$
|
1.00
|
|
|
|
|
|
Buy
|
|
|
9,355
|
|
|
$
|
1.12
|
|
|
|
|
|
Buy
|
|
|
3,900
|
|
|
$
|
1.15
|
|
|
|
|
|
Buy
|
|
|
1,500
|
|
|
$
|
1.16
|
|
|
|
|
|
Buy
|
|
|
31,261
|
|
|
$
|
1.17
|
|
|
|
|
|
Buy
|
|
|
6,652
|
|
|
$
|
1.18
|
|
|
|
|
|
Buy
|
|
|
69,291
|
|
|
$
|
1.19
|
|
|
|
|
|
Buy
|
|
|
67,526
|
|
|
$
|
1.20
|
|
|
|
|
|
Buy
|
|
|
57,718
|
|
|
$
|
1.21
|
|
|
|
|
|
Buy
|
|
|
37,427
|
|
|
$
|
1.22
|
|
|
|
|
|
Buy
|
|
|
20,290
|
|
|
$
|
1.23
|
|
|
|
|
|
Buy
|
|
|
17,274
|
|
|
$
|
1.24
|
|
|
|
|
|
Buy
|
|
|
32,677
|
|
|
$
|
1.25
|
|
|
|
|
|
Buy
|
|
|
110,100
|
|
|
$
|
1.26
|
|
|
|
11/03/2008
|
|
Buy
|
|
|
5,000
|
|
|
$
|
1.28
|
|
|
|
|
|
Buy
|
|
|
26,464
|
|
|
$
|
1.32
|
|
|
|
|
|
Buy
|
|
|
33,390
|
|
|
$
|
1.33
|
|
|
|
|
|
Buy
|
|
|
44,431
|
|
|
$
|
1.34
|
|
|
|
|
|
Buy
|
|
|
47,177
|
|
|
$
|
1.35
|
|
|
|
|
|
Buy
|
|
|
42,955
|
|
|
$
|
1.36
|
|
|
|
|
|
Buy
|
|
|
20,068
|
|
|
$
|
1.37
|
|
|
|
|
|
Buy
|
|
|
14,175
|
|
|
$
|
1.38
|
|
|
|
|
|
Buy
|
|
|
19,920
|
|
|
$
|
1.39
|
|
|
|
|
|
Buy
|
|
|
22,362
|
|
|
$
|
1.40
|
|
|
|
|
|
Buy
|
|
|
4,343
|
|
|
$
|
1.41
|
|
|
|
11/04/2008
|
|
Buy
|
|
|
5,200
|
|
|
$
|
1.44
|
|
|
|
|
|
Buy
|
|
|
12,288
|
|
|
$
|
1.45
|
|
|
|
|
|
Buy
|
|
|
11,430
|
|
|
$
|
1.46
|
|
|
|
|
|
Buy
|
|
|
27,500
|
|
|
$
|
1.47
|
|
|
|
|
|
Buy
|
|
|
20,100
|
|
|
$
|
1.56
|
|
|
|
|
|
Buy
|
|
|
100
|
|
|
$
|
1.59
|
|
|
|
|
|
Buy
|
|
|
7,300
|
|
|
$
|
2.05
|
|
|
|
|
|
Buy
|
|
|
12,518
|
|
|
$
|
2.12
|
|
|
|
|
|
Buy
|
|
|
9,550
|
|
|
$
|
2.48
|
|
|
|
|
|
Buy
|
|
|
100
|
|
|
$
|
2.49
|
|
|
|
|
|
Buy
|
|
|
25,742
|
|
|
$
|
2.50
|
|
|
|
|
|
Buy
|
|
|
600
|
|
|
$
|
2.53
|
|
|
|
|
|
Buy
|
|
|
22,700
|
|
|
$
|
2.54
|
|
|
|
11/05/2008
|
|
Buy
|
|
|
2,150
|
|
|
$
|
2.25
|
|
|
|
|
|
Buy
|
|
|
225
|
|
|
$
|
2.30
|
|
|
|
|
|
Buy
|
|
|
2,655
|
|
|
$
|
2.33
|
|
|
|
|
|
Buy
|
|
|
12,500
|
|
|
$
|
2.34
|
|
|
|
|
|
Buy
|
|
|
2,500
|
|
|
$
|
2.35
|
|
|
|
|
|
Buy
|
|
|
3,100
|
|
|
$
|
2.39
|
|
|
|
|
|
Buy
|
|
|
8,900
|
|
|
$
|
2.40
|
|
|
|
|
|
Buy
|
|
|
5,200
|
|
|
$
|
2.41
|
|
|
|
|
|
Buy
|
|
|
4,500
|
|
|
$
|
2.43
|
|
|
|
|
|
Buy
|
|
|
17,580
|
|
|
$
|
2.45
|
|
|
|
|
|
Buy
|
|
|
5,000
|
|
|
$
|
2.47
|
|
|
|
|
|
Buy
|
|
|
5,000
|
|
|
$
|
2.48
|
|
|
|
|
|
Buy
|
|
|
5,300
|
|
|
$
|
2.49
|
|
|
|
|
|
Buy
|
|
|
10,775
|
|
|
$
|
2.50
|
|
|
|
|
|
Buy
|
|
|
45,528
|
|
|
$
|
2.51
|
|
|
|
|
|
Buy
|
|
|
5,000
|
|
|
$
|
2.54
|
|
|
|
|
|
Buy
|
|
|
5,000
|
|
|
$
|
2.55
|
|
|
|
|
|
Buy
|
|
|
10,000
|
|
|
$
|
2.65
|
|
|
|
|
|
Buy
|
|
|
7,500
|
|
|
$
|
2.68
|
|
|
|
11/06/2008
|
|
Buy
|
|
|
3,606
|
|
|
$
|
2.00
|
|
|
|
|
|
Buy
|
|
|
1,000
|
|
|
$
|
2.01
|
|
|
|
|
|
Buy
|
|
|
2,500
|
|
|
$
|
2.03
|
|
|
|
|
|
Buy
|
|
|
2,500
|
|
|
$
|
2.04
|
|
|
|
|
|
Buy
|
|
|
5,639
|
|
|
$
|
2.05
|
|
|
|
|
|
Buy
|
|
|
300
|
|
|
$
|
2.07
|
|
|
|
|
|
Buy
|
|
|
12,500
|
|
|
$
|
2.08
|
|
|
|
|
|
Buy
|
|
|
3,200
|
|
|
$
|
2.09
|
|
|
|
|
|
Buy
|
|
|
12,057
|
|
|
$
|
2.10
|
|
|
|
|
|
Buy
|
|
|
200
|
|
|
$
|
2.11
|
|
|
|
|
|
Buy
|
|
|
3,400
|
|
|
$
|
2.12
|
|
|
|
|
|
Buy
|
|
|
5,682
|
|
|
$
|
2.13
|
|
|
|
|
|
Buy
|
|
|
13,150
|
|
|
$
|
2.14
|
|
|
|
|
|
Buy
|
|
|
22,761
|
|
|
$
|
2.15
|
|
|
|
|
|
Buy
|
|
|
20,524
|
|
|
$
|
2.16
|
|
|
|
|
|
Buy
|
|
|
2,500
|
|
|
$
|
2.30
|
|
|
|
|
|
Buy
|
|
|
5,000
|
|
|
$
|
2.32
|
|
|
|
|
|
Buy
|
|
|
2,500
|
|
|
$
|
2.33
|
|
|
|
|
|
Buy
|
|
|
2,500
|
|
|
$
|
2.35
|
|
|
|
|
|
Buy
|
|
|
2,500
|
|
|
$
|
2.39
|
|
|
|
|
|
Buy
|
|
|
2,500
|
|
|
$
|
2.40
|
|
|
|
|
|
Buy
|
|
|
2,500
|
|
|
$
|
2.49
|
|
|
|
|
|
Buy
|
|
|
2,500
|
|
|
$
|
2.50
|
|
|
|
|
|
Buy
|
|
|
2,500
|
|
|
$
|
2.60
|
|
|
|
11/07/2008
|
|
Buy
|
|
|
100
|
|
|
$
|
2.09
|
|
|
|
|
|
Buy
|
|
|
10,000
|
|
|
$
|
2.10
|
|
|
|
|
|
Buy
|
|
|
5,100
|
|
|
$
|
2.11
|
|
|
|
|
|
Buy
|
|
|
900
|
|
|
$
|
2.12
|
|
|
|
|
|
Buy
|
|
|
2,500
|
|
|
$
|
2.15
|
|
|
|
|
|
Buy
|
|
|
1,200
|
|
|
$
|
2.17
|
|
|
|
|
|
Buy
|
|
|
3,400
|
|
|
$
|
2.18
|
|
|
|
|
|
Buy
|
|
|
14,100
|
|
|
$
|
2.19
|
|
|
|
|
|
Buy
|
|
|
62
|
|
|
$
|
2.27
|
|
|
|
|
|
Buy
|
|
|
8,000
|
|
|
$
|
2.28
|
|
|
|
|
|
Buy
|
|
|
675
|
|
|
$
|
2.53
|
|
|
|
|
|
Buy
|
|
|
14,238
|
|
|
$
|
2.55
|
|
|
|
|
|
Buy
|
|
|
6,500
|
|
|
$
|
2.58
|
|
|
|
|
|
Buy
|
|
|
3,500
|
|
|
$
|
2.65
|
|
|
|
|
|
Buy
|
|
|
1,280
|
|
|
$
|
2.67
|
|
|
|
|
|
Buy
|
|
|
2,500
|
|
|
$
|
2.68
|
|
|
|
|
|
Buy
|
|
|
8,020
|
|
|
$
|
2.69
|
|
|
|
11/10/2008
|
|
Buy
|
|
|
2,500
|
|
|
$
|
2.35
|
|
|
|
|
|
Buy
|
|
|
800
|
|
|
$
|
2.55
|
|
|
|
11/20/2008
|
|
Buy
|
|
|
487
|
|
|
$
|
1.34
|
|
SCHEDULE
II
The
following tables are reprinted from Providence’s Preliminary Proxy Statement on
Schedule 14A filed with the Securities and Exchange Commission on April 28,
2009.
Principal
Stockholders
The
following table sets forth certain information, as of the Record Date, with
respect to the beneficial ownership of Providence’s Common Stock by each
stockholder known by Providence to own beneficially more than five percent of
our outstanding Common Stock. Except as otherwise specified, the named
beneficial owner has sole voting and investment power with respect to the shares
beneficially owned by such stockholder.
Name
and Address
|
|
No.
of Shares of
Common
Stock
Beneficially
Owned
(1)
|
|
|
Percent
of
Voting
Power
of
Common
Stock
(1)
|
|
Donald
E. and Tiffany Smith (2)
c/o
Avalon Correctional Services, Inc.
13401
Railway Drive, Oklahoma City, Oklahoma 73114
|
|
|
2,300,095
|
|
|
|
18.7
|
%
|
Michael
Bradley (3)
c/o
Avalon Correctional Services, Inc.
13401
Railway Drive, Oklahoma City, Oklahoma 73114
|
|
|
2,293,895
|
|
|
|
18.6
|
%
|
Eric
S. Gray (4)
c/o
Avalon Correctional Services, Inc.
13401
Railway Drive, Oklahoma City, Oklahoma 73114
|
|
|
2,293,895
|
|
|
|
18.6
|
%
|
73114
Investments, L.L.C. (5)
c/o
Avalon Correctional Services, Inc.
13401
Railway Drive, Oklahoma City, Oklahoma 73114
|
|
|
2,292,895
|
|
|
|
18.6
|
%
|
Avalon
Correctional Services, Inc. (5)
13401
Railway Drive, Oklahoma City, Oklahoma 73114
|
|
|
2,292,895
|
|
|
|
18.6
|
%
|
Cardinal
Capital Management, LLC (6)
One Greenwich Office
Park, Greenwich, CT 06831
|
|
|
1,346,640
|
|
|
|
10.9
|
%
|
Bank
of America Corporation (7)
NB
Holdings Corporation
BAC
North America Holding Company
BANA
Holding Corporation
Bank
of America, NA
100
N. Tryon St., Floor 25, Bank of America Corporate Center, Charlotte, NC
28255
|
|
|
1,188,513
|
|
|
|
9.65
|
%
|
Columbia
Management Group, LLC (7)
Columbia
Management Advisors, LLC
100
N. Tryon Street, Floor 25, Bank of America Corporate Center, Charlotte,
NC 28255
|
|
|
1,180,497
|
|
|
|
9.58
|
%
|
Zesiger
Capital Group LLC (8)
320
Park Avenue, New York, NY 10022
|
|
|
1,096,535
|
|
|
|
8.9
|
%
|
Palladium
Equity Partners III, L.P. (9)
Palladium
Equity Partners III, L.L.C.
Marcos
A. Rodriguez
Rockefeller
Center, 1270 Avenue of the Americas, New York, NY 10020
|
|
|
717,254
|
|
|
|
5.5
|
%
|
Barclays
Global Investors, NA (10)
Barclays
Global Fund Advisors
400
Howard Street, San Francisco, CA 94105
|
|
|
716,421
|
|
|
|
5.8
|
%
|
William
Blair & Company, L.L.C. (11)
222
W. Adams, Chicago, IL 60606
|
|
|
680,240
|
|
|
|
5.5
|
%
|
Kennedy
Capital Management, Inc. (12)
10829
Olive Boulevard, St. Louis, MO 63141
|
|
|
634,823
|
|
|
|
5.2
|
%
|
_________________________
(1)
|
The
securities “beneficially owned” by each stockholder are determined as of
the Record Date in accordance with the definition of “beneficial
ownership” set forth in the regulations of the SEC. Accordingly, they may
include securities owned by or for others, including, in the case of an
individual, the spouse and/or minor children of the individual and any
other relative who has the same home as such individual, and may include
securities as to which the stockholder has or shares voting or investment
power or has the right to acquire within 60 days after the Record Date.
Beneficial ownership may be disclaimed as to certain of the
securities.
|
(2)
|
Includes
2,292,895 shares of Common Stock owned by 73114 and 7,200 shares of Common
Stock owned by Donald E. and Tiffany Smith. See note 5
below.
|
(3)
|
Includes
2,292,895 shares of Common Stock owned by 73114 and 1,000 shares of Common
Stock owned by Michael Bradley. See note 5
below.
|
(4)
|
Includes
2,292,895 shares of Common Stock owned by 73114 and 1,000 shares of Common
Stock owned by Eric S. Gray. See note 5
below.
|
(5)
|
Represents
shares of Common Stock owned by 73114. 73114 is a wholly-owned subsidiary
of Avalon Correctional Services. Donald E. Smith is CEO/President Manager
of 73114 and CEO/President of Avalon Correctional Services as well as sole
director of Avalon Correctional Services. Tiffany Smith is Secretary
Manager of 73114 and Vice President and Secretary of Avalon Correctional
Services. The Smiths are husband and wife. Mr. Bradley is Vice
President Manager of 73114 and Chief Financial Officer of Avalon
Correctional Services. Mr. Gray is Vice President Manager of 73114
and Vice President and Corporate Counsel of Avalon Correctional Services.
Messrs. Bradley and Gray disclaim beneficial ownership of the Common Stock
held by 73114. This is based on the Schedule 13D filed with the SEC on
November 10, 2008 and Schedules 13D/A filed with the SEC on
February 13, 2009 and March 2,
2009.
|
(6)
|
Represents
shares of Common Stock indirectly beneficially owned by Cardinal Capital
Management, LLC. This is based on the Schedule 13G/A filed with the SEC on
February 17, 2009.
|
(7)
|
This
is based on the Schedule 13G/A filed with the SEC on February 12,
2009.
|
(8)
|
Represents
shares of Common Stock indirectly beneficially owned by Zesiger Capital
Group LLC. Zesiger Capital Group LLC disclaims beneficial ownership of all
of the shares of Common Stock which are held in discretionary accounts
managed by Zesiger Capital Group LLC. This is based on the Schedule 13G/A
filed with the SEC on February 10,
2009.
|
(9)
|
Represents
shares of Common Stock that may be issued upon the conversion of
Providence’s 6.5% Convertible Senior Subordinated Notes due 2014
beneficially owned by Palladium Equity Partners III, L.P. (“Palladium”).
Palladium Equity Partners III, L.L.C. (“Palladium General”) is the general
partner of Palladium. Mr. Rodriguez is the managing member of
Palladium General. This is based on the Schedule 13G filed with the SEC on
February 14, 2009.
|
(10)
|
The
shares of Common Stock are held in trust accounts for the economic benefit
of the beneficiaries of those accounts. This is based on the Schedule 13G
filed with the SEC on February 5,
2009.
|
(11)
|
This
is based on the Schedule 13G/A filed with the SEC on January 12,
2009.
|
(12)
|
This
is based on the Schedule 13G filed with the SEC on February 13,
2009.
|
Management
and Directors Only
The
following table sets forth certain information, as of the Record Date, with
respect to the beneficial ownership of Providence’s Common Stock by (a) all
of Providence’s directors and each of Providence’s nominees for director,
(b) all of Providence’s executive officers named in the “Summary
Compensation Table” which follows and (c) all of Providence’s directors and
executive officers as a group. Except as otherwise specified, the named
beneficial owner has sole voting and investment power with respect to his/her
shares:
|
|
|
|
|
|
|
Name
|
|
No.
of shares of
Common
Stock
Beneficially
Owned
(1)
|
|
|
Percent
of
Voting
Power
of
Common
Stock
(1)
|
|
Michael
N. Deitch (2)
|
|
|
150,017
|
|
|
|
1.2
|
%
|
Fred
Furman (3)
|
|
|
173,464
|
|
|
|
1.4
|
%
|
Fletcher
Jay McCusker (4)
|
|
|
216,312
|
|
|
|
1.7
|
%
|
Craig
A. Norris (5)
|
|
|
133,631
|
|
|
|
1.1
|
%
|
John
Shermyen (6)
|
|
|
124,261
|
|
|
|
1.0
|
%
|
Hunter
Hurst, III (7)
|
|
|
64,000
|
|
|
|
*
|
|
Kristi
L. Meints (8)
|
|
|
105,429
|
|
|
|
*
|
|
Warren
S. Rustand (9)
|
|
|
74,000
|
|
|
|
*
|
|
Richard
Singleton (10)
|
|
|
74,000
|
|
|
|
*
|
|
All
directors and executive officers as a group (10
persons)(11)
|
|
|
1,134,779
|
|
|
|
8.8
|
%
|
_________________________
* Less
than 1%.
(1)
|
The
securities “beneficially owned” by an individual are determined as of the
Record Date in accordance with the definition of “beneficial ownership”
set forth in the regulations of the SEC. Accordingly, they may include
securities owned by or for, among others, the spouse and/or minor children
of the individual and any other relative who has the same home as such
individual, as well as other securities as to which the individual has or
shares voting or investment power or has the right to acquire under
outstanding stock options within 60 days after the Record Date. Beneficial
ownership may be disclaimed as to certain of the
securities.
|
(2)
|
Includes
87,160 shares of Common Stock held by Mr. Deitch and 62,857 shares of
Common Stock issuable upon the exercise of options that are exercisable
within 60 days of the Record Date.
|
(3)
|
Includes
87,161 shares of Common Stock held by Mr. Furman and 86,303 shares of
Common Stock issuable upon the exercise of options that are exercisable
within 60 days of the Record
Date.
|
(4)
|
Includes
94,973 shares of Common Stock held by Mr. McCusker and 121,339 shares of
Common Stock issuable upon the exercise of options that are exercisable
within 60 days of the Record Date. Does not include 37,000 shares of
Common Stock held by The Fletcher J. McCusker GRAT for the benefit of Mr.
McCusker’s son, as to which Mr. McCusker disclaims beneficial
ownership.
|
(5)
|
Includes
87,798 shares of Common Stock held by Mr. Norris and 45,833 shares of
Common Stock issuable upon the exercise of options that are exercisable
within 60 days of the Record Date.
|
(6)
|
Includes
106,404 shares of Common Stock held by Mr. Shermyen and 17,857 shares
of Common Stock issuable upon the exercise of options that are exercisable
within 60 days of the Record Date.
|
(7)
|
Includes
34,000 shares of Common Stock held by Mr. Hurst and 30,000 shares of
Common Stock issuable upon the exercise of options that are exercisable
within 60 days of the Record Date.
|
(8)
|
Includes
34,000 shares of Common Stock held by Ms. Meints and 71,429 shares of
Common Stock issuable upon the exercise of options that are exercisable
within 60 days of the Record Date.
|
(9)
|
Includes
34,000 shares of Common Stock held by Mr. Rustand and 40,000 shares
of Common Stock issuable upon the exercise of options that are exercisable
within 60 days of the Record Date.
|
(10)
|
Includes
34,000 shares of Common Stock held by Mr. Singleton and 40,000 shares
of Common Stock issuable upon the exercise of options that are exercisable
within 60 days of the Record
Date.
|
(11)
|
Includes
530,618 shares of Common Stock issuable upon the exercise of options that
are exercisable within 60 days of the Record Date, 4,665 shares of Common
Stock held by the Mary J. Shea Revocable Trust, and 599,496 shares of
Common Stock in the aggregate held by Messrs. Deitch, Furman, McCusker,
Norris, Hurst, Rustand, Shermyen and Singleton, and
Ms. Meints.
|
IMPORTANT
Please
review this document and the enclosed materials carefully. YOUR VOTE
IS VERY IMPORTANT, no matter how many or how few shares you own.
|
1.
|
If
your shares are registered in your own name, please sign, date and mail
the enclosed
[BLUE]
proxy card to
D.F. King & Co., Inc. (“D.F. King”), in the postage-paid envelope
provided today.
|
|
2.
|
If
you have previously signed and returned a proxy card to Providence, you
have every right to change your vote. Only your latest dated
card will count. You may revoke any proxy card already sent to
Providence by signing, dating and mailing the enclosed
[BLUE]
proxy card in the
postage-paid envelope provided. Any proxy may be revoked at any
time prior to the 2009 Annual Meeting by delivering a written notice of
revocation or a later dated proxy for the 2009 Annual Meeting to D.F.
King, or by voting in person at the 2009 Annual
Meeting.
|
|
3.
|
If
your shares are held in the name of a brokerage firm, bank nominee or
other institution, only it can sign a
[BLUE]
proxy card with
respect to your shares and only after receiving your specific
instructions. Accordingly, please sign, date and mail the
enclosed
[BLUE]
proxy card in the postage-paid envelope provided, and to ensure that your
shares are voted, you should also contact the person responsible for your
account and give instructions for a
[BLUE]
proxy card to be
issued representing your shares.
|
|
4.
|
After
signing the enclosed
[BLUE]
proxy card, do
not sign or return any other proxy card, even as a sign of protest,
because only your latest dated proxy card will be
counted.
|
If
you have any questions, require assistance in submitting your
[BLUE]
proxy
card,
or
need additional copies of the Committee’s proxy statement materials,
please call
D.F.
King & Co., Inc. at the phone numbers listed below.
D.F.
King & Co., Inc.
48
Wall Street, 22nd Floor
New
York, NY 10005
Stockholders
Call Toll-Free at: (800) 848-3416
Banks
and Brokers Call Collect at: (212)
269-5550
|
PRELIMINARY
PROXY CARD, SUBJECT TO COMPLETION
DATED
APRIL 30, 2009
[BLUE]
PROXY
THE
PROVIDENCE SERVICE CORPORATION
2009
ANNUAL MEETING OF STOCKHOLDERS
THIS
PROXY IS SOLICITED ON BEHALF OF
THE
PROVIDENCE COMMITTEE FOR ACCOUNTABILITY (THE “COMMITTEE”)
THE
BOARD OF DIRECTORS OF THE PROVIDENCE SERVICE CORPORATION
IS
NOT SOLICITING THIS PROXY
P R O X Y
The
undersigned appoints Donald E. Smith and Eric S. Gray, and each of them, agents
with full power of substitution to vote all shares of common stock of The
Providence Service Corporation (“Providence” or the “Company”) which the
undersigned would be entitled to vote if personally present at the 2009 Annual
Meeting of Stockholders of the Company scheduled to be held at
,
,
, on
,
2009, at
:
.M. (local time), and including at any adjournments or postponements thereof and
at any meeting called in lieu thereof (the “Annual Meeting”).
The
solicitation is being made on behalf of The Committee and the participants:
Donald E. and Tiffany Smith, Michael Bradley, Eric S. Gray, Avalon Correctional
Services, Inc., and 73114 Investments, L.L.C..
The
undersigned hereby revokes any other proxy or proxies heretofore given to vote
or act with respect to the shares of common stock of the Company held by the
undersigned, and hereby ratifies and confirms all action the herein named
proxies, their substitutes, or any of them may lawfully take by virtue hereof.
If properly executed, this Proxy will be voted as directed on the reverse
and in the discretion of the herein named proxies or their substitutes with
respect to any other matters as may properly come before the Annual Meeting that
are unknown to the Committee a reasonable time before this
solicitation.
IF
NO DIRECTION IS INDICATED WITH RESPECT TO THE PROPOSALS ON THE REVERSE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 and 2.
This
Proxy will be valid until the sooner of one year from the date indicated on the
reverse side and the completion of the Annual Meeting.
IMPORTANT:
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD
PROMPTLY!
CONTINUED
AND TO BE SIGNED ON REVERSE SIDE
THE
COMMITTEE RECOMMENDS YOU VOTE IN FAVOR OF PROPOSAL 1
Proposal 1
– To elect Michael
C. Bradley and Captain Brian T. Costello (ret.) to serve as Class 3 directors of
the Company for a three-year term that expires at the 2012 annual meeting of the
Company’s stockholders.
|
|
|
|
Nominees:
-
Michael C. Bradley
-
Captain Brian T. Costello (ret.)
|
FOR
ALL
NOMINEES
|
WITHHOLD
AUTHORITY
TO
VOTE
FOR ALL
NOMINEE(S)
|
FOR
ALL
EXCEPT
NOMINEES
WRITTEN
BELOW
|
Proposal 2
–To ratify the
appointment of KPMG LLP as Providence’s independent registered public accounting
firm for the 2009 fiscal year.
Date:
_________________, 2009
|
|
Signature:
|
___________________________________________
|
Signature
(if held jointly):
|
___________________________________________
|
Title(s):
|
___________________________________________
|
Please
sign exactly as your name appears on stock certificates or on the label affixed
hereto. When shares are held by joint tenants, both should
sign. In case of joint owners, EACH joint owner should
sign. When signing as attorney, executor, administrator, trustee,
guardian, corporate officer, etc., give full title as such.
PLEASE
SIGN, DATE AND MAIL YOUR PROXY PROMPTLY IN THE POSTAGE-PAID ENVELOPE
ENCLOSED.
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