The Avalon Group falsely suggests, by use of the term “The Providence Committee for Accountability” that their “Committee” includes other stockholders of Providence that are not affiliated with Avalon Correctional Services, Inc. or Donald E. Smith. That is simply not true. There is no “Committee” other than Avalon Correctional Services and its affiliates and associates. The Avalon Group conveniently avoids to mention this key fact until page three of the Avalon Proxy Statement so that they can falsely suggest that their “Committee” includes other non-affiliated stockholders.

The Avalon Group falsely suggests that the transaction proposal that Mr. Smith sent to Providence on November 21, 2008 was intended to help Providence reduce its debt, improve its debt coverage ratio compliance and increase Providence’s ability to meet its debt covenants. It is Providence’s belief that the only objective of the Avalon Group in submitting such a transaction proposal (the “Avalon Transaction Proposal”) was to increase its equity interest and voting rights in Providence disproportionate to the size of its investment and to the detriment of other stockholders of Providence. Absent from the Avalon Proxy Statement is a discussion of the Avalon Transaction Proposal and why the

Avalon Group believes such a transaction proposal would have helped Providence improve its debt coverage ratio compliance and delever. Providence believes that any suggestion that such a one-sided transaction proposal would have helped Providence improve its debt coverage ratio compliance and delever is completely false and misleading.

We question the Avalon Group’s statement that its nominees would be “independent voices” in Providence’s Boardroom.

The Avalon Group falsely suggests that the Providence Board has increased compensation for executive officers and directors in 2009. The Avalon Group has woven together various different data points completely out of context and conveniently leaves out other facts that would completely negate their argument. Accordingly, we believe that the Avalon Group’s discussion of executive and director compensation is false and misleading, particularly since it fails to mention that the recommendations for executive pay parity that it seeks to criticize were developed in a vastly different economic and business climate before the onset of the worst recession in decades. The Avalon Group neglects to mention that the Providence Board, faced with continued uncertainty regarding 2009’s economic prospects and being committed to returning Providence to its long-time profitable status, froze salaries, reduced employee benefits and suspended 2009’s executive salary parity plan. A more complete discussion in the Avalon Proxy Statement with respect to Providence’s executive compensation would have included the following facts:

In addition, the Providence Board’s Compensation Committee eliminated the portion of the potential incentive cash bonus under Providence’s Annual Incentive Plan tied to Providence’s earnings per share, thus reducing the aggregate total targeted compensation potential of our named

executive officers for 2009, below even their 2008 total targeted compensation, by an additional $1.0 million.

The Avalon Group falsely suggests that Providence does not fit within the peer group of companies with which Providence compares the compensation of its named executive officers. In an attempt to argue that Providence does not fit within the peer group of fourteen companies with which Providence compares the compensation of its named executive officers, the Avalon Group completely ignores Providence’s managed entity revenue in ranking Providence’s revenue compared to its peer group. In the fiscal year ended December 31, 2008, Providence had approximately $243 million in managed entity revenue. Although these revenues are not consolidated for accounting purposes, we provide substantially all administrative functions for these entities and believe that managed entity revenue provides our investors with an additional measure of the size and scale of the operations under our management.

The Avalon Group falsely suggests that their nominees would provide better oversight of corporate acquisitions and dispositions. None of the nominees proposed by the Avalon Group have any significant expertise in coordinating or directing corporate acquisitions and dispositions for a Nasdaq-listed public reporting company. In fact, at least one of the Avalon Nominees, Brian T. Costello, appears to have no experience in corporate acquisitions and dispositions at all. In addition, it would appear that most of Michael C. Bradley’s limited experience with acquisitions and dispositions has been in connection with the comparatively small transactions engaged in by his employer, Avalon Correctional Services, a “pink sheet” company that does not file periodic reports with the SEC, is not subject to the rules and regulations of any national securities exchange and had less than $30 million in revenues in 2007 (according to its most

recent annual report that has been made public). The suggestion that either of these nominees would have improved oversight over a $200 million acquisition by a Nasdaq-listed public reporting company is incomprehensible. Even if one was to agree with the proposition that the Providence Board needs to enhance its composition with one or more individuals with extensive experience directing and coordinating corporate acquisitions and dispositions, neither of the Avalon Group’s nominees would fit that position description. However, one individual who does fit that position description is Terence J. Cryan who, following a referral from one of Providence’s largest stockholders, was appointed to the Providence Board. In contrast to the Avalon Group’s nominees, Mr. Cryan has over 20 years of experience in international business as an investment banker in the United States and Europe as well as CEO level experience, and public company board experience.

The Avalon Group falsely suggests that the impairment charges that we took in 2008 relate solely to the price paid for our LogistiCare acquisition when, in fact, the impairment charges reflect the magnitude of both the decline in our market capitalization and the deterioration of the mergers and acquisitions market.

The Avalon Group wrongly questions the independence of the Providence Board.

The Avalon Group falsely suggests that one of Providence’s directors is not independent when such director is in full compliance with the definition of independence promulgated by the Nasdaq Stock Market, the only standard of independence legally applicable to Providence.

Providence uses CBIZ Benefits and Insurance Services, Inc. (“CBIZ”), a subsidiary of CBIZ, Inc., to administer and consult on its self-insured employee health benefits, 401(k) and deferred compensation plans. For 2008, CBIZ and its subsidiaries received approximately $345,500, consisting of fees of approximately $238,000 paid by Providence and

commissions of approximately $107,500 paid by third parties related to business with Providence.

We question the commitment of the Avalon Nominees to act in the best interests of ALL Providence stockholders. In the Avalon Proxy Statement, the Avalon Group has stated that the Avalon Nominees will focus on the best interests of stockholders. There is historical precedent that has not been disclosed by the Avalon Group in its proxy statement that could cause a stockholder of Providence to question the commitment of at least one of the Avalon Nominees to acting in the best interests of ALL Providence stockholders. One of the Avalon Nominees, Michael C. Bradley, is a senior executive officer of Avalon Correctional Services, a publicly-traded “pink sheet” company and a close confidante of Donald E. Smith, the largest stockholder in Providence. As discussed above, on November 21, 2008, the Avalon Group, including Mr. Bradley, presented Providence with the Avalon Transaction Proposal which Providence believes would have been very detrimental to the interests of all stockholders of Providence other than Donald E. Smith and the other members of the Avalon Group. The Avalon Group has failed to disclose how the Avalon Transaction Proposal would not have been in the best interests of all Providence stockholders.

We question the commitment of the Avalon Nominees to support the implementation of best practices in corporate governance. In the Avalon Proxy Statement, the Avalon Group has stated that the Avalon Nominees will urge implementation of best practices in corporate governance. However, the

historical record of the leader of the Avalon Group, Donald E. Smith, shows a flagrant disregard for best practices in corporate governance at Avalon Correctional Services over the past seventeen years, both during its time as a public reporting company and following Mr. Smith’s decision to voluntarily terminate its registration under the Securities Exchange Act of 1934 and terminate its listing on Nasdaq. The deregistration and delisting actions followed a notice from Nasdaq that Avalon Correctional Services 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 director of Avalon Correctional Services, the Board of Directors of Avalon Correctional Services had no independent directors. In addition, over the past seventeen years, Mr. Smith has shown a strong proclivity for engaging in related-party transactions with Avalon Correctional Services, either directly or through entities owned and/or controlled by Mr. Smith.

73114 Investments, L.L.C. (“73114”) would arrange for the acquisition by 73114 or a related party (collectively the “Avalon Party”) of $5.0 million principal amount of Providence’s convertible notes in the open market;

the Avalon Party would then exchange with Providence this $5.0 million principal amount of convertible notes for $5.0 million worth of newly issued shares of voting cumulative preferred stock of Providence (the “preferred shares”). The preferred shares were to be issued by Providence at an ascribed rate of $5.00 per share for a total of 1,000,000 preferred shares;

Providence would pay the Avalon Party an 8.5% cumulative annual dividend on the $5.0 million aggregate ascribed value of the preferred shares, or $425,000 per year;

the preferred shares would be convertible by the Avalon Party, at its option, into shares of Providence common stock using a conversion rate equal to (a) the $5.00 per share ascribed value of the preferred shares, divided by (b) the 10-day trailing average per share closing price of Providence common stock on the date of the proposed note-for-preferred stock exchange;

the preferred shares would be re-exchangeable by the Avalon Party for the original convertible notes upon a declared default with respect to any Providence indebtedness;

if requested, Providence would be required to buy the preferred shares back from the Avalon Party for $5.0 million in cash upon any amendment, replacement, maturity or extension of Providence’s Senior Credit Facility and/or its convertible notes;

the Avalon Party would have the right to name two directors to the Providence Board; and

the shares of common stock issuable upon conversion of the preferred shares would be registered for trading at Providence’s expense.

In addition to decreasing Providence’s earnings per share, the issuance to the Avalon Party of such 2,555,317 additional shares of common stock would have dramatically increased the dilution to Providence’s non-Avalon Group stockholders. Providence’s non-Avalon Group stockholders owned an aggregate of 10,013,166 shares of Providence common stock at the time of the proposal (based on the 12,313,261 shares of common stock that were outstanding as of September 30, 2008), representing an 81.32% ownership interest. If, at the time of

the proposal, $5.0 million principal amount of Providence’s convertible notes was converted into common stock in accordance with the conversion terms of such notes (increasing Providence’s total outstanding shares by 119,910), the percentage ownership of Providence’s non-Avalon Group stockholders would have only decreased from 81.32% to 80.54%, or less than one percentage point. In contrast, if the preferred shares that Providence was expected to issue in exchange for $5.0 million principal amount of Providence’s convertible notes were converted into common stock in accordance with the terms of the Avalon Transaction Proposal (increasing Providence’s total outstanding shares by 2,675,227), the percentage ownership interest of Providence’s non-Avalon Group stockholders would have decreased from 81.32% to 66.81%. The preferred share conversion would thus have resulted in an approximately 17% greater decrease in ownership interest to Providence’s non-Avalon Group stockholders than would a conversion of the original notes they proposed to give Providence in exchange for such preferred shares, or a 17% increase in dilution to Providence’s non-Avalon Group stockholders;