MODIVCARE INC. 
By Recommends Stockholders to Vote WHITE Proxy Card to Re-Elect Highly-Qualified and Experienced Incumbent Directors and Reject Dissident Group's Opposition Slate
Dear Fellow Providence Stockholder:
As you decide how to vote at the upcoming 2009 Annual Meeting of the Stockholders of The Providence Service Corporation to be held on
ARE YOU PREPARED TO LET DONALD E. SMITH IMPOSE UPON PROVIDENCE THE SAME APPROACH TO CORPORATE GOVERNANCE THAT HE IMPOSED UPON AVALON CORRECTIONAL SERVICES?
-- On November 16, 1992, Avalon Correctional Services cautioned investors
in its prospectus filed with the SEC that it has engaged in, and would
continue to engage in, transactions with companies owned and/or
controlled by Mr. Smith, most of which could be considered
non-arm's length transactions. Avalon Correctional Services
indicated that such transactions could include cash advances, loan
guarantees, leased equipment, utilization of its properties, and
administrative and accounting services. Avalon Correctional Services
also advised investors that some of the transactions with Mr.
Smith's other businesses may not have occurred on terms as
favorable as Avalon Correctional Services would have received from
unrelated third parties on an arms-length basis. In that same
prospectus, Avalon Correctional Services also disclosed that it has no
policy for the resolution of conflicts of interest that may occur
between it and Mr. Smith.
-- On December 30, 1994, in an amendment to a Registration Statement on
Form SB-2 filed by Avalon Correctional Services with the SEC, Avalon
Correctional Services cautioned investors that both it and its
subsidiaries had engaged in transactions with Mr. Smith that could be
considered as not having occurred at arms-length and that such
transactions may not have occurred on terms as favorable as Avalon
Correctional Services would have received from unrelated third parties
on an arms-length basis. Avalon Correctional Services also cautioned
investors that there were no assurances that it would not engage in any
non-arms length transactions with its officers and directors in the
future. In addition, Avalon Correctional Services cautioned investors
that Mr. Smith was involved in other ventures and activities (for which
he would spend a portion of his time performing services) and that
conflicts of interest might arise in the allocation of his resources and
time between Avalon Correctional Services and his other activities and
ventures. In that same Registration Statement, Avalon Correctional
Services also disclosed that it had acquired two affiliated companies
from Mr. Smith and members of his family. The purchase price was paid
in shares of Avalon Correctional Services' capital stock valued, as
of December 31, 1993, at approximately $1.4 million.
-- On April 10, 1996, Avalon Correctional Services cautioned investors, in
a post-effective amendment to a Form SB-2 that it filed with the SEC,
that both it and its subsidiaries had engaged in transactions with Mr.
Smith that could be considered as not having occurred at arms-length and
that such transactions may not have occurred on terms as favorable as
Avalon Correctional Services would have received from unrelated third
parties on an arms-length basis. Avalon Correctional Services also
cautioned investors that there were no assurances that it would not
engage in any non-arms length transactions with its officers and
directors in the future. In addition, Avalon Correctional Services
cautioned investors that Mr. Smith was involved in other ventures and
activities (for which he would spend a portion of his time performing
services) and that conflicts of interest might arise in the allocation
of his resources and time between Avalon Correctional Services and his
other activities and ventures.
-- On May 8, 1996, in a post-effective amendment to a Registration
Statement on Form SB-2 filed with the SEC, Avalon Correctional Services
cautioned investors that both it and its subsidiaries had engaged in
transactions with Mr. Smith that could be considered as not having
occurred at arm's length and that such transactions may not have
occurred on terms as favorable as Avalon Correctional Services would
have received from unrelated third parties on an arms-length basis.
Avalon Correctional Services also cautioned investors that there were no
assurances that it would not engage in any non-arms length transactions
with its officers and directors in the future.
-- On March 24, 2000, in a post-effective amendment to a Registration
Statement on Form S-2 filed with the SEC, Avalon Correctional Services
again cautioned investors that both it and its subsidiaries had engaged
in transactions with Mr. Smith that might not have been on an
arms-length basis.
-- On December 22, 2004, Avalon Correctional Services announced in a Form
8-K filed with the SEC that, effective December 21, 2004, Mark Cooley
and Jim Wilson had resigned from its Board of Directors.
-- On January 3, 2005, Avalon Correctional Services further announced in a
Form 8-K filed with the SEC that, effective December 30, 2004 (just nine
days after the resignations of Messrs. Cooley and Wilson), Robert O.
McDonald and Dr. Charles Thomas had resigned from its Board of
Directors, leaving Mr. Smith as the sole remaining director of a
Nasdaq-listed public reporting company.
-- On January 12, 2005, Avalon Correctional Services was notified by Nasdaq
that it could face being delisted from Nasdaq if it did not take actions
to bring itself into compliance with various corporate governance
requirements imposed by Nasdaq. In particular, Nasdaq was concerned
that, with Mr. Smith as the sole remaining director, the Board of
Directors of Avalon Correctional Services no longer had any independent
directors.
-- On January 18, 2005, Avalon Correctional Services, after publicly
disclosing that it was facing a possible delisting from Nasdaq, publicly
disclosed in a Form 8-K filed with the SEC that, rather than comply with
Nasdaq's corporate governance requirements (which require that a
majority of its Board of Directors be independent), it was considering
the possibility of delisting and moving to the over-the-counter market
or "pink sheets." Avalon Correctional Services also publicly
disclosed in this Form 8-K that, given the increasing compliance costs
imposed by the Sarbanes-Oxley Act (which includes numerous corporate
governance requirements for the protection of stockholders), ongoing
costs and expenses associated with the preparation and filing by Avalon
Correctional Services of periodic reports with the SEC and the
increasing commitment of its management's time to regulatory
requirements, Avalon Correctional Services was considering terminating
the registration of its shares of common stock under the Exchange Act as
a way to cease being required to comply with these regulatory
requirements.
-- On January 24, 2005, Avalon Correctional Services received a letter from
Ravenswood Investment Company, which then held 7.2% of the outstanding
shares of Avalon Correctional Services, expressing its concern with the
announcement by Avalon Correctional Services that it was evaluating
whether to remain a reporting company and with the absence of any
independent directors on the Board of Directors of Avalon Correctional
Services. In its letter, Ravenswood reminds Avalon Correctional Services
that good corporate governance requires a majority of outside directors.
Ravenswood also indicates that it is writing because Mr. Smith refused
to return its telephone calls.
-- On February 3, 2005, with little advance notice to stockholders, and
notwithstanding the potential adverse effects on the market for, and the
liquidity of, the common stock of Avalon Correctional Services, Avalon
Correctional Services publicly disclosed in a Form 8-K that it was
terminating the registration of its shares under the Exchange Act to
cease being required to comply with the SEC's periodic reporting
requirements and the Sarbanes-Oxley Act (which include numerous
corporate governance provisions for the protection of stockholders).
Avalon Correctional Services also disclosed that its shares would no
longer be listed on Nasdaq. Avalon Correctional Services indicated in
its public filings that the financial impact of complying with the
Sarbanes-Oxley Act could jeopardize its ability to continue as a going
concern. As a result of this decision, Avalon Correctional Services now
continues as a publicly-traded company that trades only on the
"pink sheets," makes no quarterly, annual or periodic filings
with the SEC, avoids any requirement to comply with the Sarbanes-Oxley
Act, including the numerous corporate governance provisions thereof that
are intended to protect stockholders, and has only one director, Mr.
Smith.
-- According to Avalon Correctional Services' 2007 Annual Report,
Avalon Correctional Services loaned certain members of its management a
total of approximately $1.1 million during 2007 to purchase shares of
its capital stock. While Avalon Correctional Services was no longer
subject to the Sarbanes-Oxley Act at this time due to its decision to
terminate the registration of its shares under the Exchange Act (so as
to cease its obligation to comply therewith), these type of loan
arrangements with officers of a public reporting company are expressly
prohibited under Section 402 of the Sarbanes-Oxley Act.
-- In addition to the other related party transactions between Avalon
Correctional Services and Mr. Smith that are discussed above, since
2001, Avalon Correctional Services has leased certain vehicles from an
entity controlled by Mr. Smith and, pursuant to such leases, has made
payments to such entity in the aggregate of more than $800,000
The above are only a few illustrations of how Mr. Smith has shown a flagrant disregard for best practices in corporate governance at Avalon Correctional Services over the past seventeen years. If you don't want to allow
YOUR VOTE IS IMPORTANT--VOTE THE WHITE PROXY CARD TODAY
Your vote is important, no matter how many or how few shares you own. To vote your shares, please vote TODAY by telephone, Internet or by signing, dating and returning the enclosed WHITE proxy card in the enclosed postage-paid envelope provided.
On behalf of your Board of Directors, we thank you for your continued support of
Sincerely,
Fletcher Jay McCusker
Chairman of the Board of Directors
and Chief Executive Officer
Your Vote Is Important, No Matter How Many Or How Few Shares You Own.
If you have questions about how to vote your shares, or need additional assistance, please contact the firm assisting us in the solicitation of proxies:
INNISFREE M&A INCORPORATED
Stockholders call Toll-Free: (888) 750-5834
Banks and Brokers Call Collect: (212) 750-5833
Important Information
On
About
The Providence Service Corporation, through its owned and managed entities, provides home and community based social services and non-emergency transportation services management to government sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections.
Forward-Looking Statements
This press release contains ""forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "demonstrate," "expect," "estimate," "anticipate," "should" and "likely" and similar expressions identify forward-looking statements. In addition, statements that are not historical should also be considered forward-looking statements. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statement was made. Such forward-looking statements are based on current expectations that involve a number of known and unknown risks, uncertainties and other factors which may cause actual events to be materially different from those expressed or implied by such forward-looking statements. These factors include, but are not limited to the global credit crisis, capital market conditions, and other risks detailed in
SOURCE The Providence Service Corporation
