PRG-Schultz Reaches Agreement in Principle on Financial Restructuring; Company Closes on $10 million of Bridge Financing

PRG-Schultz International, Inc. (Nasdaq: PRGX), todayannounced that it has reached an agreement in principle with the adhoc committee of noteholders for the company's 4.75% ConvertibleSubordinated Notes due 2006 (Notes) on the terms of a financialrestructuring of the Notes. Investors owning approximately 52% of theNotes have agreed to support the proposed restructuring. In relateddevelopments, the company announced that it closed on its previouslyannounced bridge financing with certain of the holders of the Notesand paid November interest on the Notes within the contractual graceperiod. The bridge financing is in the amount of $10 million, callsfor monthly interest payments at the annual rate of 12%, and has anoutside maturity date of August 15, 2006.

"We are on target with our plans to improve our capitalstructure," said James B. McCurry, PRG-Schultz's President and ChiefExecutive Officer. "This agreement in principle for the restructuringof our public convertible notes, coupled with $10 million of bridgefinancing, demonstrate the support of our major lenders to thefinancial restructuring process."

Under the agreement in principle, the company will offer toexchange the $125 million of outstanding Notes for $50 million of newsenior notes, $60 million of new senior convertible notes, and newseries A convertible preferred stock having a liquidation preferenceof $15 million. In 2011 all the new notes will mature and any sharesof the preferred stock remaining outstanding will be redeemed by thecompany.

-- The new senior notes will bear interest at 11%, payable semiannually in cash, and are callable at 104% of face in year 1, 102% in year 2, and at par in years 3 through 5.

-- The new senior convertible notes will bear interest at 10%, payable semiannually in cash or in kind, at the option of the company. The new senior convertible notes will be convertible at the option of the holders (and in certain circumstances, at the option of the company) into shares of new series B preferred stock having a 10% annual dividend and a liquidation preference equal to the principal amount of notes converted. Dividends on the new series B preferred stock may be paid in cash or in kind, at the option of the company. The new series B preferred stock will be convertible at the option of the holders into shares of common stock at the rate of $0.65 of liquidation preference per share of common stock.

-- The new series A preferred stock will have a 9% dividend, payable in cash or in kind, at the option of the company. The new series A preferred stock will be convertible at the option of the holders into shares of common stock at the rate of $0.28405 of liquidation preference per share of common stock.

-- The series A and series B preferred stock will vote with the company's common stock on essentially all matters requiring shareholder votes. The company has the right to redeem the new senior convertible notes at par at any time after repayment of the new senior notes. The company also has the right to redeem the new series A and series B preferred stock at the stated liquidation preference at any time after repayment of the new senior notes and the new senior convertible notes.

Immediately after completion of the restructuring, existing commonshareholders will own 54.1% of the equity of the company. If all thenew senior convertible notes converted into series B preferred stockimmediately on completion of the restructuring, existing commonshareholders would own approximately 30% of the equity of the company(exclusive of any dilution for management incentive plans).

The company intends to accomplish the restructuring through anexchange offer for the Notes, which is currently scheduled to commencein mid-January, 2006. The company will be seeking a 99% minimumacceptance level of the Notes in the exchange offer. In addition, as acondition to the exchange offer, the company must refinance its seniorsecured bank debt and add a second lien facility to increaseliquidity. The aggregate amount of first and second lien debt cannotexceed $47.5 million.

About PRG-Schultz International, Inc.

Headquartered in Atlanta, PRG-Schultz International, Inc. is theworld's leading profit improvement firm, providing clients throughoutthe world 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.

Forward Looking Statements

Statements made in this news release that look forward in time,including statements regarding the company's ability to achieve anacceptable level of Notes exchanged in its proposed exchange offer,refinance its existing secured bank debt, and add new secured orunsecured financing involve risks and uncertainties and areforward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995. Such risks and uncertaintiesinclude the inherent risks involved in any contract negotiation.Should the company be unable to achieve a sufficiently high acceptancerate in its proposed exchange offer, it will have to seek tore-negotiate the terms of a restructuring of the Notes. There is noguarantee that the company will be able to restructure its Notes, orraise additional financing on acceptable terms. Any such restructuringwould be expected to result in a significant dilution of theoutstanding equity of the company. Failure to accomplish therestructuring could require the company to seek protection from itscreditors and could materially adversely impact the company's businessand operating results. For a discussion of other risk factors that mayimpact the company's business, please see our Securities and ExchangeCommission filings, including the company's Form 10-K as filed withthe Securities and Exchange Commission on March 16, 2005 and Form10-Qs as filed May 10, 2005, August 9, 2005 and November 9, 2005. Thecompany disclaims any obligation or duty to update or modify theseforward-looking statements.