PRG-Schultz Announces Receipt of Nasdaq Waiver of Shareholder Approval and Other Requirements in Connection with Proposed Restructuring

Certain aspects of the exchange offer, if consummated, couldresult in the issuance of equity securities that would ordinarilyrequire shareholder approval under the Nasdaq listing requirements.The exchange offer also affords exchange participants with certainvoting and board representation rights prohibited by the Nasdaq rules.The company obtained exceptions from Nasdaq's usual shareholderapproval requirements and from these voting rights prohibitions. Thecompany's Audit Committee has expressly authorized the company toproceed with the restructuring without shareholder approval inreliance on these exceptions. As required by Nasdaq, this pressrelease is made to provide further information regarding the relevantNasdaq rules, the terms of the restructuring, the voting rights of thesecurities to be issued, and PRG-S's reliance on the exceptions fromthe Nasdaq rules. A letter to the same effect has been sent to thecompany's shareholders.

The Restructuring

As previously announced, on February 1, 2006, PRG-S commencedrestructuring of its outstanding $125 million 4.75% ConvertibleSubordinated Notes due 2006 through an exchange offer. The company isoffering to exchange three new securities: (i) new senior notes in theprincipal amount of $50 million plus an additional amount for accruedunpaid interest; (ii) $60 million of new senior convertible notes; and(iii) Series A convertible preferred stock with a liquidationpreference of $15 million, for its outstanding convertible notes.

If the exchange offer is successful, from August 15, 2006 to the"new conversion rights date" (defined below), each $1,000 of seniorconvertible notes is convertible into approximately 2.083 shares ofSeries B convertible preferred stock. On and after the new conversionrights date, each $1,000 of senior convertible notes will instead beconvertible into shares of common stock at an initial conversion priceof $0.65 per share, subject to specified anti-dilution provisions.Each share of the new Series B convertible preferred stock will havean initial liquidation preference of $480 and be convertible intoshares of common stock at a conversion price of $0.65 per share,subject to specified anti-dilution provisions. The "new conversionrights date" is the date on which (A) a registration statementcovering the resale of the new securities by certain PRG-S affiliatesis effective and (B) the authorized shares of common stock areincreased to at least 140 million (subject to anti-dilutionadjustment). One share of new Series A convertible preferred stockwill have an initial liquidation preference of $120 per share, andwill be convertible into shares of common stock at a conversion priceof $0.28405 per share, subject to specified anti-dilution provisions.

The Series A preferred shares will be convertible at closing intoapproximately 52,808,000 shares of common stock in the aggregate. Ifall convertible notes are converted into Series B preferred stockafter August 15, 2006, exchange participants would possessapproximately 70% of PRG-S's voting securities, on a fully dilutedbasis. The Series B preferred stock represents approximately92,308,000 shares of common stock on an as-converted basis.

Except as otherwise required by law, all outstanding shares ofpreferred stock will vote on an as-converted basis with the commonstock, as a single class, on all matters, including the election ofdirectors. In addition, following the completion of the transaction,the Board of Directors of PRG-S will consist of seven members, fourdesignated by the ad hoc committee representing the noteholders, andthree designated by the existing Board.

Nasdaq Requirements

Absent an exception, Nasdaq Marketplace Rules 4350(i)(1)(B) and4350(i)(1)(D)(ii) would require shareholder approval for therestructuring. In addition, the proposed transaction would violate thevoting rights requirements of Nasdaq Marketplace Rule 4351 and IM-4351 as a result of the Board designation rights and the fact that thepreferred stock, which could convert into common stock at less thanthe current market price, votes with the common on an as-convertedbasis. However, PRG-S requested from Nasdaq exceptions to thestockholder approval requirement, and to the voting rightsrequirements, pursuant to Nasdaq Marketplace Rule 4350(i)(2). Rule4350(i)(2) allows Nasdaq to grant exceptions upon application if delayrequired to secure shareholder approval would seriously jeopardize thefinancial viability of the enterprise, and the company's AuditCommittee expressly approves reliance by the company on theexceptions.

PRG-S requested exceptions from the foregoing rules on the basisthat it would not be possible for PRG-S to prepare and file a proxystatement with the U.S. Securities and Exchange Commission and hold astockholders' meeting to approve the transactions in the time that ithas available to consummate the refinancing. If the refinancing is notconsummated quickly, PRG-S expects that it will not be able to fundits operations or repay its existing indebtedness as it becomes due.Nasdaq has granted PRG-S the requested exceptions and PRG-S's AuditCommittee has expressly authorized the company to proceed with therestructuring transactions without shareholder approval in reliance onthose exceptions.

About PRG-Schultz International, Inc.

Headquartered in Atlanta, PRG-Schultz International, Inc. is theworld's leading recovery audit firm, providing clients throughout theworld with insightful value to optimize and expertly manage theirbusiness transactions. Using proprietary software and expert auditmethodologies, PRG-Schultz industry specialists review clientpurchases and payment information to identify and recoveroverpayments.