Providence Service amends bylaws; shareholder group drops consent solicitation

By Lisa Kerner

Charlotte, N.C., Feb. 27 - The Providence Committee for Accountability said it will withdraw its stockholder consent solicitation after Providence Service Corp.'s board of directors unanimously approved changes to the company's bylaws.

The board approved specific corporate governance enhancements including bylaw amendments that adopt and implement a majority standard for the election of directors in uncontested elections, make it easier for stockholders to call a special meeting of stockholders and make it easier for stockholders to nominate candidates for election at the company's annual meetings, a company news release said.

"We welcome these changes, and recognize they are only the first steps. More change is needed at Providence and we believe the board needs shareholder representation. The company currently has no shareholder representation on the board," Providence Committee member Don Smith said in a committee news release.

According to Smith, the shareholder committee will seek the election of Michael Bradley and Brian Costello to Providence's board of directors.

The shareholder group, with a collective 18.7% stake in Providence, comprises 73114 Investments, LLC, Don Smith, Tiffany Smith, Michael Bradley, Eric Gray and Avalon Correctional Services, Inc.

In addition to the enhancements made by Providence to its corporate governance practices, the Providence Committee recommends that the company's board, among other things, also:

• Eliminate the poison pill;

• Eliminate the staggered board;

• Separate the chief executive officer position from the chairman of the board position;

• Eliminate golden parachutes;

• Require two-thirds of the board members to be independent; and

• Adopt a stock holding period for executives.

As previously reported, Providence denied Avalon's request to inspect and copy some of the company's books and records, calling Avalon's demands "extraordinarily overbroad, patently inappropriate, unduly burdensome and devoid of a proper purpose" and accusing Avalon of conducting a "fishing expedition."

In December, Providence announced it had adopted a shareholder rights plan that gives its shareholders rights to purchase shares of newly created series A junior participating preferred stock. The rights will be triggered if a person becomes the beneficial owner of 20% or more of Providence's outstanding common stock, other than by a qualified offer.

Oklahoma City-based Avalon owns and operates private community correctional facilities and correctional programming.

Providence is a Tucson-based provider of home- and community-based social services to government-sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections.

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