The Providence Service (PRSC)

Base Salary

Base salaries are an important element of compensation and are used to provide a fixed amount of compensation for the executive’s regular work. In addition, base salaries are used to reward superior individual performance of each executive officer on a day-to-day basis during the year, and to encourage them to perform at their highest levels. The base salaries of executive officers are reviewed on an annual basis, as well as at the time of a promotion or other change in responsibilities. Increases to base salary recognize the overall experience, position and responsibilities within our company and expected contributions to us of each executive officer. Further, increases in salary are based on an evaluation of the individual’s performance and level of pay compared to comparable companies pay levels for similar positions. Individual base salaries can vary within a range of +/- 10% of the 50^th percentile of the 2008 peer group data provided by Mercer. The degree to which individual base salaries may vary from the 50^th percentile established by the Compensation Committee for 2008 depends on several factors including, but not limited to, fairness within the executive group based on internal comparisons of pay within the executive group, historical compensation, responsibilities of each executive officer, and individual contributions to further Providence’s and our stockholders’ interests. Base salaries are targeted to the median competitive data for cash compensation.

For 2007, the base salary for Fletcher McCusker, our chief executive officer, Craig Norris, our chief operating officer, Michael Deitch, our chief financial officer, Fred Furman, our executive vice president and general counsel, and Mary Shea, our executive vice president of program services, was determined in accordance with the Compensation Committee’s principles and objectives of executive compensation set forth above and amounted to $400,000, $300,000, $270,000, $270,000 and $195,000, respectively.

To further align executive compensation with executive officer performance and enhance our overall performance and investment value, the Compensation Committee approved effective January 1, 2008, increases in the annual base salaries of Messrs. McCusker, Norris, Deitch, and Furman. Effective January 1, 2008, Messrs. McCusker’s, Norris’, Deitch’s and Furman’s annual base salary are $575,000, $350,000, $300,000 and $300,000, respectively.

The effective date of merit increases typically is April 1st of each year through 2007 but was changed to January 1^st in 2008. Increases in base salaries are based upon individual performance after taking into account the amount we have budgeted for the year for potential merit increases in executive base salaries. Base salary increases can also occur upon promotion.

Base Salary

Base salaries are an important element of compensation and are used to provide a fixed amount of compensation for the executive’s regular work. The base salaries of executive officers are reviewed on an annual basis, as well as at the time of a promotion or other change in responsibilities. Increases in salary are based on an evaluation of the individual’s performance and level of pay compared to comparable companies pay levels for similar positions. Base salaries are targeted to the median competitive data for cash compensation.

The effective date of merit increases typically is April 1^st of each year. Increases in base salaries are based upon individual performance after taking into account the amount Providence has budgeted for the year for potential merit increases in executive base salaries. Base salary increases can also occur upon promotion.

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