##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 0-28000
 PRGX Global, Inc.
  Georgia
    
    58-2213805(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)600 Galleria ParkwaySuite 100Atlanta, Georgia
    
    30339-5986(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code : (770) 779-3900
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredCommon Stock, No Par Value
    
    The NASDAQ Stock Market LLC (The Nasdaq Global Market)Preferred Stock Purchase Rights
    
    The NASDAQ Stock Market LLC (The Nasdaq Global Market)
 Securities registered pursuant to Section 12(g) of the Act: None
 o þ
 o þ
 Note
 þ o
 þ
 o o
  o Large accelerated filer
þ  Accelerated filer
o Non-accelerated filer (Do not check if a smaller reporting company)o Smaller reporting company o þ
   Documents Incorporated by Reference




---



##### 



PRGX Global, Inc.
 FORM 10-K
December 31, 2010
  
 PagePart IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    10Item 1B.
    
    Unresolved Staff Comments
    
    
    17Item 2.
    
    Properties
    
    
    17Item 3.
    
    Legal Proceedings
    
    
    17Item 4.
    
    [Reserved]
    
    
    17Part IIItem 5.
    

Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    18Item 6.
    
    Selected Financial Data
    
    
    20Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 8.
    
    Financial Statements and Supplementary Data
    
    
    36Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    68Item 9A.
    
    Controls and Procedures
    
    
    68Item 9B.
    
    Other Information
    
    
    69Part IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    70Item 11.
    
    Executive Compensation
    
    
    70Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    71Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    72Item 14.
    
    Principal Accountants Fees and Services
    
    
    72Part IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    73Signatures
    
    
    78EX-10.33EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1




---



##### Table of Contents



Cautionary Statement Regarding Forward-Looking Statements
  Risk Factors
 
    
    our ability to successfully execute our recovery audit growth strategy;
    
    our continued dependence on our largest clients for significant revenues;
    
    changes to Medicare and Medicaid recovery audit contractor (RAC) programs and
the impact of our incurring significant costs as a subcontractor in the national
Medicare RAC program and otherwise in connection with our healthcare claims
recovery audit business;
    
    revenues that do not meet expectations or justify costs incurred;
    
    our ability to develop material sources of new revenue in addition to revenues
from our core accounts payable recovery audit services;
    
    changes to revenues from our Medicare audit recovery work due to a number of
pressures and uncertainties affecting Medicare spending generally and over which we
have little or no control;
    
    changes in the market for our services;
    
    client and vendor bankruptcies and financial difficulties;
    
    our ability to retain and attract qualified personnel;
    
    our inability to protect and maintain the competitive advantage of our
proprietary technology and intellectual property rights;
    
    our reliance on operations outside the U.S. for a significant portion of our
revenues;
    
    the highly competitive environments in which our recovery audit services,
business analytics and advisory services businesses operate and the resulting
pricing pressure on those businesses;
    
    our ability to integrate recent and future acquisitions;
    
    uncertainty in the credit markets;
    
    our ability to maintain compliance with our financial covenants;
    
    effects of changes in accounting policies, standards, guidelines or principles;
or
    
    terrorist acts, acts of war and other factors over which we have little or no
control.
  i




---



##### Table of Contents



PART I
 
 ITEM 1. Business
       1




---



##### Table of Contents



The PRGX Strategy and Client Value Propositions
  1.
    
    grow the accounts payable recovery audit business;2.
    
    trail blaze accountability in healthcare;3.
    
    expand data mining for profitability;4.
    
    broaden our services footprint; and5.
    
    build a strong team with a high-performance culture.
 Profit
Discovery
  Grow the Accounts Payable Recovery Audit Business
   Next Generation Recovery Audit
  2




---



##### Table of Contents



Trail Blaze Accountability in Healthcare
  Healthcare Claims Recovery Audit
   Expand Data Mining for Profitability
 Spend Optimization
 Fraud & Compliance
 3




---



##### Table of Contents



Expand Our Services Footprint
  Profit Performance Optimization
 Build a Strong Team with a High-Performance Culture
  Summary
    The Recovery Audit Industry and PRGX
   4




---



##### Table of Contents




    
    retailers such as discount, department, specialty, grocery and drug stores, and
wholesalers who sell to these retailers;
    
    business enterprises other than retailers/wholesalers such as manufacturers, financial
services firms, and pharmaceutical companies;
    
    healthcare payers, both private sector health insurance companies and state and federal
government payers such as the CMS; and
    
    federal and state government agencies other than government healthcare payers.
      
    
    Data Capture and Availability.Businesses increasingly are using technology to manage
complex procurement and accounts payable systems and realize greater operating
efficiencies. Many businesses worldwide communicate with vendors electronically  whether
by Electronic Data Interchange (EDI) or the Internet  to exchange inventory and sales
data, transmit purchase orders, submit invoices, forward
shipping and receiving information and remit payments. These systems capture more detailed
data and enable the cost effective review of more transactions by recovery auditors.
    
    Increasing Number of Auditable Claim Categories.Traditionally, the recovery audit
industry identified simple, or disbursement, claim types such as the duplicate payment of
invoices. Enhancements to
 5




---



##### Table of Contents



accounts payable software, particularly large enterprise software
solutions used by many large companies, have reduced the extent to which these companies
make simple disbursement errors. However, the introduction of creative vendor discount
programs, complex pricing arrangements and activity-based incentives has led to an increase
in auditable transactions and potential sources of error. These transactions are
complicated to audit as the underlying transaction data is difficult to access and
recognizing mistakes is complex. Recovery audit firms such as PRGX with significant
industry-specific expertise and sophisticated technology are best equipped to audit these
complicated, or contract compliance, claim categories.
    
    Globalization.As the operations of major retailers and other business enterprises
become increasingly global, they often seek service providers with a global reach.
    
    Consolidation in the Retail Industry.Retailer consolidation continues in both the U.S.
and internationally. As retailers grow larger, vendors become more reliant on a smaller
number of retailer customers and, as a result, the balance of power favors retailers rather
than their vendors. This dynamic creates an environment that allows retailers to assert
overpayment claims more easily.
    
    Significant Promotional Activity.Trade promotion spending is substantial within the
retail trade and significant sums are being spent in categories with numerous transactions
and a high potential for errors, such as scan downs, or discounts at the point of sale.
Because of the high volume of trade promotion within retail, there are significant
opportunities for mistakes and, therefore, auditable claims.
    
    Move Toward Standard Auditing Practices. Increasingly, vendors to our clients are
insisting on the satisfaction of certain conditions, such as clearer post-audit procedures,
better documentation and electronic communication of claims, before accepting the validity
of a claim.
  Clients
  Client Contracts
   6




---



##### Table of Contents



Technology
       Auditor Hiring, Training and Compensation
  Proprietary Rights
 ® , ® , ®, ®, ,  , 
 7




---



##### Table of Contents



Competition
 Accounts Payable Recovery Audit
   Client Internal Recovery Audit Departments
 Other Accounts Payable Recovery Audit Firms
 
    
    Full-service accounts payable recovery audit firms. We believe that only one company
other than PRGX offers a full suite of U.S. and international recovery audit services;
    
    A large number of smaller accounts payable recovery firms which have a limited client
base and which use less sophisticated tools to mine disbursement claim categories at low
contingency rates. These firms are most common in the U.S. market. Competition in most
international markets, if any, typically comes from small niche providers;
    
    Firms that offer a hybrid of audit software tools and training for use by internal audit
departments, and/or general accounts payable process improvement enablers; and
    
    Firms with specialized skills focused on recovery audit services for discrete sectors
such as sales and use tax or real estate.
 Other Providers of Recovery Audit Services
 Healthcare Claims Recovery Audit Services
  
    
    Firms that provide recovery audit services across multiple industries including
healthcare;
    
    Firms that provide healthcare IT solutions and services to both the government and
private payers; and
    
    Firms that contract with federal and state governments integrity programs.
 8




---



##### Table of Contents



Business Analytics Services
  Advisory Services
  Regulation
  Employees
  Website
 www.prgx.com
 9




---



##### Table of Contents



ITEM 1A. Risk Factors
 Revenues from our accounts payable recovery audit business have declined over the last several years. We must successfully execute our recovery audit growth strategy in order to increase our
revenues, and must lower our cost of delivery in order to maintain profitability.
  We depend on our largest clients for significant revenues, so losing a major client could adversely affect our revenues and liquidity.
  Client and vendor bankruptcies and financial difficulties could reduce our earnings.
    Our growth strategy may not be successful.
  10




---



##### Table of Contents



The terms of our credit facility place restrictions on us, which create risks of default and reduce our flexibility.
   We have incurred and will continue to incur significant costs in establishing the necessary resources to provide services for Medicare, Medicaid and other healthcare claims audit recovery
work. Furthermore, revenues from our Medicare, Medicaid and other healthcare claims audit recovery
work lag significantly behind these costs and may not justify the costs incurred.
  Recovery auditing of Medicare and Medicaid spending is subject to a number of pressures and uncertainties that could impact our future opportunities and revenues from this business.
  11




---



##### Table of Contents



Our participation in the Medicare recovery audit program is as a subcontractor, and consequently, is subject to being reduced or eliminated should the prime contractors with whom we have contracted
have their prime contracts with CMS terminated or should those contracts expire.
  We may be unable to protect and maintain the competitive advantage of our proprietary technology and intellectual property rights.
   Data security breaches or computer viruses could harm our business by disrupting our delivery of services, damaging our reputation or exposing us to liability.
  Operational failures in our data processing facilities could harm our business and reputation.
 12




---



##### Table of Contents



Our failure to retain the services of key members of management and highly skilled personnel could adversely impact our operations and financial performance.
   We rely on operations outside the U.S. for a significant portion of our revenues and are increasingly dependent on operations outside the U.S. for supporting our operations globally.
  
    
    greater exposure to the possibility of economic instability, the disruption of
operations from labor and political disturbances, expropriation or war in the
international markets we serve;
    
    difficulties in staffing and managing foreign operations and in collecting accounts
receivable;
    
    fluctuations in currency exchange rates, particularly weaknesses in the British
pound, the euro, the Canadian dollar, the Mexican peso, and the Brazilian real and
other currencies of countries in which we transact business, which could result in
currency translations that materially reduce our revenues and earnings;
    
    costs associated with adapting our services to our foreign clients needs;
    
    unexpected changes in regulatory requirements and laws;
    
    expenses and legal restrictions associated with transferring earnings from our
foreign subsidiaries to us;
    
    difficulties complying with a variety of foreign laws and regulations, such as those
relating to data content retention, privacy and employee welfare;
    
    business interruptions due to widespread disease, potential terrorist activities, or
other catastrophes;
    
    reduced or limited protection of our intellectual property rights;
    
    longer accounts receivable cycles; and
    
    competition with large or state-owned enterprises and/or regulations that
effectively limit our operations and favor local competitors.
   13




---



##### Table of Contents



Our recovery audit services, business analytics and advisory services businesses operate in highly competitive environments and are subject to pricing pressure.
   Our client contracts generally contain provisions under which the client may terminate our services prior to the completion of the agreement.
  Our failure to comply with applicable governmental privacy laws and regulations could substantially impact our business, operations and financial condition.
  The ownership change that occurred as a result of our 2006 exchange offer limits our ability to use our net operating losses.
  14




---



##### Table of Contents



Certain of our tax positions may be subject to challenge by the Internal Revenue Service and other tax authorities, and if successful, these challenges could increase our future tax liabilities and
expense.
    Future impairment of goodwill, other intangible assets and long-lived assets would reduce our future earnings.
  Our articles of incorporation, bylaws, shareholder rights plan and Georgia law may inhibit a change of control that shareholders may favor.
  
    
    a classified Board of Directors;
    
    the requirement that our shareholders may only remove directors for cause;
    
    specified requirements for calling special meetings of shareholders;
    
    the ability of the Board of Directors to consider the interests of various
constituencies, including our employees, clients and creditors and the local community,
in making decisions; and
    
    the ability of the Board of Directors to issue shares of preferred stock with such
designations, powers, preferences and rights as it determines, without any further vote
or action by our shareholders.
  Our stock price has been and may continue to be volatile.
 15




---



##### Table of Contents




    
    future announcements concerning us, key clients or competitors;
    
    quarterly variations in operating results and liquidity;
    
    changes in financial estimates and recommendations by securities analysts;
    
    developments with respect to technology or litigation;
    
    changes in applicable laws and regulations;
    
    the operating and stock price performance of other companies that investors may deem
comparable to our company;
    
    acquisitions and financings; and
    
    sales and purchases of our stock by insiders.
  16




---



##### Table of Contents



ITEM 1B. Unresolved Staff Comments
  
 ITEM 2. Properties
  Note 8
 
 ITEM 3. Legal Proceedings
  
 ITEM 4. [Reserved
 17




---



##### Table of Contents



ITEM 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  2010 Calendar Quarter
    
    High
    
    Low1st Quarter
    
    $
    6.27
    
    
    $
    5.012nd Quarter
    
    
    6.93
    
    
    
    3.603rd Quarter
    
    
    5.75
    
    
    
    4.004th Quarter
    
    
    6.53
    
    
    
    5.65
 2009 Calendar Quarter
    
    High
    
    Low1st Quarter
    
    $
    4.91
    
    
    $
    2.742nd Quarter
    
    
    4.04
    
    
    
    2.483rd Quarter
    
    
    6.01
    
    
    
    2.604th Quarter
    
    
    6.98
    
    
    
    4.50
 Issuer Purchases of Equity Securities
  Total Number of
    
    MaximumTotal
    
    
    
    
    
    Shares Purchased
    
    Approximate DollarNumber of
    
    Average
    
    as Part of
    
    Value of Shares thatShares
    
    Price
    
    Publicly
    
    May Yet BePurchased
    
    Paid per
    
    Announced Plans
    
    Purchased Under the2010
    
    (a)
    
    Share
    
    or Programs
    
    Plans or Programs(millions of dollars)October 1 
October 31
    
    
    1,081
    
    
    $
    5.92
    
    
    
    
    
    
    $
    November 1 
November 30
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    December 1 
December 31
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    1,081
    
    
    $
    5.92
    
    
    
    
 
 (a)
    
    All shares reported during the quarter were surrendered by employees to satisfy tax
withholding obligations upon vesting of restricted stock. 18




---



##### Table of Contents



Performance Graph
  
 Cumulative Total Return
 12/05
    
    12/06
    
    12/07
    
    12/08
    
    12/09
    
    12/10PRGX Global, Inc.
    
    
    100.00
    
    
    
    131.15
    
    
    
    140.49
    
    
    
    66.89
    
    
    
    96.89
    
    
    
    103.77NASDAQ Composite
    
    
    100.00
    
    
    
    111.23
    
    
    
    124.24
    
    
    
    73.47
    
    
    
    106.76
    
    
    
    125.43RDG Technology
Composite
    
    
    100.00
    
    
    
    109.07
    
    
    
    125.31
    
    
    
    71.12
    
    
    
    114.36
    
    
    
    129.26
 19




---



##### Table of Contents



ITEM 6. Selected Financial Data
   Managements Discussion and Analysis of Financial
Condition and Results of Operations
 Years Ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(In thousands, except per share data)Statements of Operations Data:Revenues
    
    $
    184,081
    
    
    $
    179,583
    
    
    $
    195,706
    
    
    $
    227,369
    
    
    $
    225,898Cost of revenues
    
    
    127,179
    
    
    
    116,718
    
    
    
    125,901
    
    
    
    140,877
    
    
    
    161,827Gross margin
    
    
    56,902
    
    
    
    62,865
    
    
    
    69,805
    
    
    
    86,492
    
    
    
    64,071Selling, general and
administrative expenses
    
    
    49,081
    
    
    
    43,873
    
    
    
    44,028
    
    
    
    67,063
    
    
    
    56,500Operational restructuring expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,644
    
    
    
    4,130Operating income
    
    
    7,821
    
    
    
    18,992
    
    
    
    25,777
    
    
    
    17,785
    
    
    
    3,441Gain on bargain purchase, net (1)
    
    
    
    
    
    
    2,388
    
    
    
    
    
    
    
    
    
    
    
    Interest expense, net
    
    
    1,305
    
    
    
    3,025
    
    
    
    3,245
    
    
    
    13,815
    
    
    
    16,311Loss on debt extinguishment and
financial restructuring
    
    
    1,381
    
    
    
    
    
    
    
    
    
    
    
    9,397
    
    
    
    10,047Income (loss) from
continuing operations before
income taxes
    
    
    5,135
    
    
    
    18,355
    
    
    
    22,532
    
    
    
    (5,427
    )
    
    
    (22,917
    )Income tax expense (2)
    
    
    1,882
    
    
    
    3,028
    
    
    
    3,502
    
    
    
    1,658
    
    
    
    1,165Income (loss) from
continuing operations
    
    
    3,253
    
    
    
    15,327
    
    
    
    19,030
    
    
    
    (7,085
    )
    
    
    (24,082
    )Discontinued operations:Earnings from discontinued
operations, net of income
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,215
    
    
    
    2,983Net earnings (loss)
    
    $
    3,253
    
    
    $
    15,327
    
    
    $
    19,030
    
    
    $
    13,130
    
    
    $
    (21,099
    )Basic earnings (loss) per
common share:Earnings (loss) from continuing
operations
    
    $
    0.14
    
    
    $
    0.67
    
    
    $
    0.87
    
    
    $
    (0.62
    )
    
    $
    (3.77
    )Earnings from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.66
    
    
    
    0.45Net earnings
(loss)
    
    $
    0.14
    
    
    $
    0.67
    
    
    $
    0.87
    
    
    $
    1.04
    
    
    $
    (3.32
    )Diluted earnings (loss) per
common share:Earnings (loss) from continuing
operations
    
    $
    0.13
    
    
    $
    0.65
    
    
    $
    0.83
    
    
    $
    (0.62
    )
    
    $
    (3.77
    )Earnings from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.66
    
    
    
    0.45Net earnings
(loss)
    
    $
    0.13
    
    
    $
    0.65
    
    
    $
    0.83
    
    
    $
    1.04
    
    
    $
    (3.32
    )
 20




---



##### Table of Contents



December 31,2010
    
    2009
    
    2008
    
    2007
    
    2006(In thousands)Balance Sheet Data:Cash and cash equivalents
    
    $
    18,448
    
    
    $
    33,026
    
    
    $
    26,688
    
    
    $
    42,364
    
    
    $
    30,228Working capital
    
    
    17,678
    
    
    
    18,479
    
    
    
    10,512
    
    
    
    16,998
    
    
    
    5,218Total assets
    
    
    106,321
    
    
    
    110,513
    
    
    
    98,783
    
    
    
    122,438
    
    
    
    178,667Long-term debt, excluding
current installments
    
    
    9,000
    
    
    
    11,070
    
    
    
    14,331
    
    
    
    38,078
    
    
    
    136,922Redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,199Total shareholders equity (deficit)
    
    $
    48,843
    
    
    $
    41,439
    
    
    $
    22,710
    
    
    $
    2,349
    
    
    $
    (104,483
    )
 
 (1)
    
    In July 2009, we acquired the business and certain assets of First Audit Partners LLP. The
excess of the fair value of assets acquired over the purchase price resulted in a gain on
bargain purchase. See Note 14of Notes to Consolidated Financial Statements included in
Item 8 of this Form 10-K.(2)
    
    Low effective tax rates in 2009 and 2008 are primarily attributable to reductions in the
deferred tax asset valuation allowance. Low effective tax rates in 2007 and 2006 are
primarily attributable to the non-recognition of loss carry-forward benefits. See Note 1 (i)
and Note 9of Notes to Consolidated Financial Statements included in Item 8 of this Form
10-K. 21




---



##### Table of Contents



ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction
       22




---



##### Table of Contents



23




---



##### Table of Contents



Results of Operations
  Years Ended December 31,2010
    
    2009
    
    2008Statements of Operations Data:Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    69.1
    
    
    
    65.0
    
    
    
    64.3Gross margin
    
    
    30.9
    
    
    
    35.0
    
    
    
    35.7Selling, general and administrative expenses
    
    
    26.7
    
    
    
    24.4
    
    
    
    22.5Operating income
    
    
    4.2
    
    
    
    10.6
    
    
    
    13.2Gain on bargain purchase, net
    
    
    
    
    
    
    1.3
    
    
    
    Interest expense, net
    
    
    0.7
    
    
    
    1.7
    
    
    
    1.7Loss on debt extinguishment
    
    
    0.7
    
    
    
    
    
    
    
    Earnings before income taxes
    
    
    2.8
    
    
    
    10.2
    
    
    
    11.5Income tax expense
    
    
    1.0
    
    
    
    1.7
    
    
    
    1.8Net earnings
    
    
    1.8
    %
    
    
    8.5
    %
    
    
    9.7
    %
 Revenues.
 Years Ended December 31,2010
    
    
    2009
    
    
    2008Recovery Audit Services  Americas
    
    $
    115,156
    
    
    $
    121,561
    
    
    $
    138,168Recovery Audit Services  Europe/Asia-Pacific
    
    
    57,590
    
    
    
    52,489
    
    
    
    53,600New Services
    
    
    11,335
    
    
    
    5,533
    
    
    
    3,938Total
    
    $
    184,081
    
    
    $
    179,583
    
    
    $
    195,706
     24




---



##### Table of Contents



Cost of Revenues (COR).
  Years Ended December 31,2010
    
    
    2009
    
    
    2008Recovery Audit Services  Americas
    
    $
    68,570
    
    
    $
    68,002
    
    
    $
    76,272Recovery Audit Services  Europe/Asia-Pacific
    
    
    44,420
    
    
    
    40,317
    
    
    
    41,362New Services
    
    
    14,189
    
    
    
    8,399
    
    
    
    8,267Total
    
    $
    127,179
    
    
    $
    116,718
    
    
    $
    125,901
  25




---



##### Table of Contents



Selling, General and Administrative Expenses (SG&A).
  Years Ended December 31,2010
    
    
    2009
    
    
    2008Recovery Audit Services  Americas
    
    $
    21,524
    
    
    $
    17,647
    
    
    $
    16,771Recovery Audit Services  Europe/Asia-Pacific
    
    
    6,693
    
    
    
    5,319
    
    
    
    8,383New Services
    
    
    3,950
    
    
    
    1,151
    
    
    
    1,893Subtotal for segments
    
    
    32,167
    
    
    
    24,117
    
    
    
    27,047Corporate support
    
    
    16,914
    
    
    
    19,756
    
    
    
    16,981Total
    
    $
    49,081
    
    
    $
    43,873
    
    
    $
    44,028
   Note 14
 26




---



##### Table of Contents



See Note 14 )
  Interest Expense, net and Loss on Extinguishment of Debt
  Income Tax Expense
    27




---



##### Table of Contents



Liquidity and Capital Resources
   Operating Activities.
    Investing Activities and Depreciation and Amortization Expense.
  28




---



##### Table of Contents



Business Acquisitions
 Note 14
    Financing Activities and Interest Expense.
   New Credit Facility
  29




---



##### Table of Contents



Stock Repurchase Program
  30




---



##### Table of Contents



Contractual Obligations and Other Commitments
  Payments Due by Period (in thousands)Less
    
    
    
    
    
    
    
    
    
    
    MoreThan
    
    
    
    
    
    
    3-5
    
    
    ThanContractual obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    Years
    
    
    5 YearsLong-term debt obligations (1)
    
    $
    12,000
    
    
    $
    3,000
    
    
    $
    6,000
    
    
    $
    3,000
    
    
    $
    Operating lease obligations
    
    
    27,514
    
    
    
    7,384
    
    
    
    13,606
    
    
    
    6,426
    
    
    
    98Cash portions of stock-based compensation (2)
    
    
    114
    
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    Purchase price payments to former FAP owners
(3)
    
    
    2,925
    
    
    
    770
    
    
    
    2,155
    
    
    
    
    
    
    
    Payments to Messrs. Cook and Toma (4)
    
    
    1,073
    
    
    
    58
    
    
    
    122
    
    
    
    129
    
    
    
    764Purchase price payments to Etesius Limited
shareholders (5)
    
    
    1,200
    
    
    
    100
    
    
    
    400
    
    
    
    700
    
    
    
    Purchase price payments to former TJG
Holdings LLC owners (6)
    
    
    1,900
    
    
    
    584
    
    
    
    1,240
    
    
    
    76
    
    
    
    Severance
    
    
    405
    
    
    
    405
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    47,131
    
    
    $
    12,415
    
    
    $
    23,523
    
    
    $
    10,331
    
    
    $
    862
 
 (1)
    
    Excludes variable rate interest (LIBOR plus 2.25% to 3.50% per annum) payable monthly.(2)
    
    Represents the portions of Performance Units outstanding under the 2006 Management Incentive
Plan payable in cash. Amounts presented are based on the market price of our common stock at
December 31, 2010. The final payment is due to be made on April 30, 2011 and will be based on
the market price of our common stock on that date  see 2006 Management Incentive Plan below.(3)
    
    Represents deferred payments due under the FAP asset purchase agreement  see Business
Acquisitions above. The amounts presented include variable consideration which may be due
based on cash flows generated by the acquired business over the next three years. The
obligations are denominated in British pounds sterling. The U.S. dollar amounts above are
based on December 31, 2010 foreign exchange rates.(4)
    
    Represents estimated reimbursements payable for healthcare costs incurred by these former
executives.(5)
    
    Represents deferred payments due under the Etesius Limited share purchase agreement. The
amounts presented do not include variable consideration which may be due based on the
financial performance of certain service lines over the next four years. We currently estimate
the fair value of variable consideration to be insignificant. For more information, see
Business Acquisitions above.(6)
    
    Represents deferred payments due under the TJG Holdings LLC asset purchase agreement. The
amounts presented include an estimate of variable consideration which may be due based on cash
flows generated by the acquired business over the next two years. For more information, see
Business Acquisitions above. 2006 Management Incentive Plan
   31




---



##### Table of Contents



Off Balance Sheet Arrangements
  Critical Accounting Policies
 Note 1
   
    
    Revenue Recognition.We generally recognize revenues on the accrual basis except with
respect to an insignificant number of our international units where we recognize revenues
on the cash basis. We generally recognize revenues for a contractually specified percentage
of amounts recovered when we have determined that our clients have received economic value
(generally through credits taken against existing accounts payable due to the involved
vendors or refund checks received from those vendors), and when we have met the following
criteria: (a) persuasive evidence of an arrangement exists; (b) services have been
rendered; (c) the fee billed to the client is fixed or determinable; and (d) collectability
is reasonably assured. Additionally, for purposes of determining appropriate timing of
recognition and for internal control purposes, we rely on customary business practices and
processes for documenting that the criteria described in (a) through (d) above have been
met. Such customary business practices and processes may vary significantly by client. On
occasion, it is possible that a transaction has met all of the revenue recognition criteria
described above but we do not recognize revenues, unless we can otherwise determine that
criteria (a) through (d) above have been met, because our customary business practices and
processes specific to that client have not been completed. The determination that we have
met each of the aforementioned criteria, particularly the determination of the timing of
economic benefit received by the client and the determination that collectability is
reasonably assured, requires the application of significant judgment by management and a
misapplication of this judgment could result in inappropriate recognition of revenues.
 32




---



##### Table of Contents




    
    Unbilled Receivables & Refund Liabilities. Unbilled receivables relate to claims for
which our clients have received economic value but for which we contractually have agreed
not to invoice the clients. Unbilled receivables arise when a portion of our fee is
deferred at the time of the initial invoice. At a later date (which can be up to a year
after the original invoice, or a year after completion of the audit period), we invoice the
unbilled receivable amount. Notwithstanding the deferred due date, our clients acknowledge
that we have earned this unbilled receivable at the time of the original invoice, but have
agreed to defer billing the client for the related services.Refund liabilities result from reductions in the economic value previously received by our
clients with respect to vendor claims identified by us and for which we previously have
recognized revenues. We recognize such refund liabilities either by offsets to amounts
otherwise due from clients or by cash refunds to clients. We compute the estimate of our
refund liabilities at any given time based on actual historical refund data.We record periodic changes in unbilled receivables and refund liabilities as
adjustments to revenues.During the fourth quarter of 2010, we revised our estimate of expected refund rates of
unbilled receivables in our Recovery Audit Services  Americas operating segment. We
obtained sufficient historical data on our realization of paybacks from unbilled receivables
that enabled us to make this change to our method of calculating this estimate. The impact
of this change resulted in a $0.2 million increase in fourth quarter 2010 net earnings, or
less than $0.01 per basic and diluted share. We do not expect that this change in estimate
will have a material impact on our net earnings in future periods.During the first quarter of 2008, we revised our estimate of expected refund rates in our
Recovery Audit Services  Americas operating segment. Such change in estimate resulted from
a decline in actual Recovery Audit Services  Americas refund rates observed during 2007.
The impact of this change in estimate resulted in a $0.8 million increase in first quarter
2008 net earnings. During the fourth quarter of 2008, we changed our method of estimating
the refund liability related to our Recovery Audit Services  Europe/Asia-Pacific segment
to be more consistent with the methodology used in the Recovery Audit Services  Americas
segment. This change in estimate resulted in a $0.9 million decrease in fourth quarter 2008
net earnings. The combined impact of the 2008 refund liability estimate changes was to
decrease net earnings by $0.1 million, or less than $0.01 per basic and diluted share.
    
    Goodwill and Other Intangible Assets. We assess the recoverability of our goodwill and
other intangible assets during the fourth quarter of each year, or sooner if events or
changes in circumstances indicate that the carrying amount may exceed its fair value. As a
result of this testing, we concluded that there was no impairment of goodwill and other
intangible assets in the past three years.In connection with the business acquisitions we completed in 2010, we recorded additional
goodwill of $0.6 million and additional intangible assets of $3.9 million consisting
primarily of customer relationships, non-compete agreements and trade names. We determined
these amounts based on estimates we made and on valuation reports we obtained from third
parties. We generally use accelerated amortization methods for customer relationships and
trade names, and straight-line amortization for non-compete agreements.
    
    Income Taxes.Our effective tax rate is based on historical and anticipated future
taxable income, statutory tax rates and tax planning opportunities available to us in the
various jurisdictions in which we operate. Significant judgment is required in determining
the effective tax rate and in evaluating our tax positions. Tax regulations require items
to be included in the tax returns at different times than the items are reflected in the
financial statements. As a result, our effective tax rate reflected in our Consolidated
Financial Statements included in Item 8 of this Form 10-K is different than that reported
in our tax returns. Some of these differences are permanent, such as expenses that are not
deductible on our tax returns, and some are temporary differences, such as depreciation
expense. Temporary differences create deferred tax assets and liabilities. Deferred tax
assets generally represent items that can be used as a tax deduction or credit in our tax
returns in future years for which we have already recorded the tax benefit in the statement
of operations. We establish valuation allowances to reduce net deferred tax assets to the
amounts that we believe are more likely than not to be realized. We adjust these valuation
allowances in light of changing facts and circumstances. Deferred tax liabilities generally
represent tax expense recognized in our consolidated
 33




---



##### Table of Contents



financial statements for which payment has been deferred, or expense for which a deduction
has already been taken on our tax returns but has not yet been recognized as an expense in
our consolidated financial statements.We reduce our deferred tax assets by a valuation allowance if it is more likely than not
that some portion or all of a deferred tax asset will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences are deductible. In determining the
amount of valuation allowance to record, we consider all available positive and negative
evidence affecting specific deferred tax assets, including our past and anticipated future
performance, the reversal of deferred tax liabilities, the length of carry-back and
carry-forward periods, and the implementation of tax planning strategies. Objective positive
evidence is necessary to support a conclusion that a valuation allowance is not needed for
all or a portion of deferred tax assets when significant negative evidence exists.
Cumulative tax losses in recent years are the most compelling form of negative evidence we
considered in this determination.We apply a more-likely-than-not recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. We refer to U.S. generally accepted accounting principles (GAAP)
for guidance on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. Our policy for recording interest and penalties
associated with tax positions is to record such items as a component of earnings before
income taxes.
    
    Stock-Based Compensation.We account for awards of equity instruments issued to employees
under the fair value method of accounting and recognize such amounts in our statements of
operations. We measure compensation cost for all stock-based awards at fair value on the date
of grant and recognize compensation expense in our consolidated statements of operations using
the straight-line method over the service period over which we expect the awards to vest.We estimate the fair value of all time-vested options as of the date of grant using the
Black-Scholes option valuation model, which was developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully transferable. Option
valuation models require the input of highly subjective assumptions, including the expected
stock price volatility.We estimate the fair value of awards of restricted shares and nonvested shares as being
equal to the market value of the common stock on the date of the award. We classify our
share-based payments as either liability-classified awards or as equity-classified awards.
We remeasure liability-classified awards to fair value at each balance sheet date until the
award is settled. We measure equity-classified awards at their grant date fair value and do
not subsequently remeasure them. We have classified our share-based payments which are
settled in our common stock as equity-classified awards and our share-based payments that
are settled in cash as liability-classified awards. Compensation costs related to
equity-classified awards generally are equal to the grant-date fair value of the award
amortized over the vesting period of the award. The liability for liability-classified
awards generally is equal to the fair value of the award as of the balance sheet date
multiplied by the percentage vested at the time. We charge (or credit) the change in the
liability amount from one balance sheet date to another to compensation expense.Stock-based compensation expense was $4.0 million in 2010, $3.3 million in 2009 and $2.2
million in 2008. We discuss stock-based compensation in more detail in Note1(l) and Note 13
of Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.
 New Accounting Standards
  34




---



##### Table of Contents



ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency Market Risk.
 Interest Rate Risk
  35




---



##### Table of Contents



ITEM 8. Financial Statements and Supplementary Data
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageNumberReport of Independent Registered Public Accounting Firm
    
    
    37Consolidated Statements of Operations for the Years ended December 31, 2010, 2009 and 2008
    
    
    38Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    39Consolidated Statements of Shareholders Equity for the Years ended
December 31, 2010, 2009 and 2008
    
    
    40Consolidated Statements of Cash Flows for the Years ended December 31, 2010, 2009 and 2008
    
    
    41Notes to Consolidated Financial Statements
    
    
    42
 36




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
   ,
  Internal Control  Integrated Framework
 Atlanta, Georgia
    
    /s/ BDO USA, LLPMarch 16, 2011
 37




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
 Years Ended December 31,2010
    
    
    2009
    
    
    2008Revenues
    
    $
    184,081
    
    
    $
    179,583
    
    
    $
    195,706Cost of revenues
    
    
    127,179
    
    
    
    116,718
    
    
    
    125,901Gross margin
    
    
    56,902
    
    
    
    62,865
    
    
    
    69,805Selling, general and administrative expenses
    
    
    49,081
    
    
    
    43,873
    
    
    
    44,028Operating income
    
    
    7,821
    
    
    
    18,992
    
    
    
    25,777Gain on bargain purchase, net (Note 14)
    
    
    
    
    
    
    2,388
    
    
    
    Interest expense
    
    
    (1,451
    )
    
    
    (3,229
    )
    
    
    (4,090
    )Interest income
    
    
    146
    
    
    
    204
    
    
    
    845Loss on debt extinguishment (Note 7)
    
    
    (1,381
    )
    
    
    
    
    
    
    Earnings before income taxes
    
    
    5,135
    
    
    
    18,355
    
    
    
    22,532Income tax expense (Note 9)
    
    
    1,882
    
    
    
    3,028
    
    
    
    3,502Net earnings
    
    $
    3,253
    
    
    $
    15,327
    
    
    $
    19,030Basic earnings per common share (Note 5)
    
    $
    0.14
    
    
    $
    0.67
    
    
    $
    0.87Diluted earnings per common share (Note 5)
    
    $
    0.13
    
    
    $
    0.65
    
    
    $
    0.83Weighted-average common shares outstanding (Note 5):Basic
    
    
    23,906
    
    
    
    22,915
    
    
    
    21,829Diluted
    
    
    24,144
    
    
    
    23,560
    
    
    
    23,008
 See accompanying Notes to Consolidated Financial Statements.
 38




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
 December 31,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    18,448
    
    
    $
    33,026Restricted cash
    
    
    64
    
    
    
    256Receivables:Contract receivables, less allowances of $591 in 2010 and $1,032 in 2009:Billed
    
    
    31,144
    
    
    
    28,034Unbilled
    
    
    4,749
    
    
    
    4,48135,893
    
    
    
    32,515Employee advances and miscellaneous receivables, less allowances of $669 in 2010 and $351
in 2009
    
    
    827
    
    
    
    276Total receivables
    
    
    36,720
    
    
    
    32,791Prepaid expenses and other current assets
    
    
    3,586
    
    
    
    2,306Deferred income taxes (Note 9)
    
    
    36
    
    
    
    29Total current assets
    
    
    58,854
    
    
    
    68,408Property and equipment:Computer and other equipment
    
    
    23,068
    
    
    
    23,032Furniture and fixtures
    
    
    2,982
    
    
    
    2,888Leasehold improvements
    
    
    3,073
    
    
    
    2,975Software
    
    
    13,945
    
    
    
    5,55143,068
    
    
    
    34,446Less accumulated depreciation and amortization
    
    
    (27,373
    )
    
    
    (24,443
    )Property and equipment, net
    
    
    15,695
    
    
    
    10,003Goodwill (Note 6)
    
    
    5,196
    
    
    
    4,600Intangible assets, less accumulated amortization of $17,573 in 2010 and $13,573 in 2009 (Note 6)
    
    
    23,855
    
    
    
    24,104Unbilled receivables
    
    
    1,462
    
    
    
    1,410Deferred loan costs, net of accumulated amortization (Note 7)
    
    
    558
    
    
    
    1,431Deferred income taxes (Note 9)
    
    
    403
    
    
    
    253Other assets
    
    
    298
    
    
    
    304$
    106,321
    
    
    $
    110,513LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    14,365
    
    
    $
    15,707Accrued payroll and related expenses
    
    
    13,871
    
    
    
    19,884Refund liabilities
    
    
    7,179
    
    
    
    7,467Deferred revenues
    
    
    1,381
    
    
    
    916Current portions of debt and capital lease obligations (Note 7)
    
    
    3,000
    
    
    
    3,260Business acquisition obligations (Note 14)
    
    
    1,380
    
    
    
    2,695Total current liabilities
    
    
    41,176
    
    
    
    49,929Long-term debt and capital lease obligations (Note 7)
    
    
    9,000
    
    
    
    11,070Noncurrent compensation obligations (Notes 2, 13 and 14)
    
    
    271
    
    
    
    978Refund liabilities
    
    
    982
    
    
    
    733Other long-term liabilities
    
    
    6,049
    
    
    
    6,364Total liabilities
    
    
    57,478
    
    
    
    69,074Commitments and contingencies (Notes 2, 7, 8, 11 and 12)Shareholders equity (Notes 11 and 13):Common stock, no par value; $.01 stated value per share. Authorized 50,000,000 shares;
23,932,774 shares issued and outstanding in 2010 and 23,272,892 shares issued and
outstanding in 2009
    
    
    239
    
    
    
    233Additional paid-in capital
    
    
    566,328
    
    
    
    562,563Accumulated deficit
    
    
    (521,408
    )
    
    
    (524,661
    )Accumulated other comprehensive income
    
    
    3,684
    
    
    
    3,304Total shareholders equity
    
    
    48,843
    
    
    
    41,439$
    106,321
    
    
    $
    110,513
 See accompanying Notes to Consolidated Financial Statements.
 39




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
Years Ended December 31, 2010, 2009 and 2008
(In thousands, except share data)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    
    
    
    
    Comprehensive
    
    
    Treasury
    
    
    Shareholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Accumulated Deficit
    
    
    Income
    
    
    Stock
    
    
    Equity
    
    
    IncomeBalance at December 31, 2007
    
    
    22,100,090
    
    
    $
    221
    
    
    $
    605,592
    
    
    $
    (559,018
    )
    
    $
    4,264
    
    
    $
    (48,710
    )
    
    $
    2,349Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,030
    
    
    
    
    
    
    
    
    
    
    
    19,030
    
    
    $
    19,030Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,143
    )
    
    
    
    
    
    
    (1,143
    )
    
    
    (1,143
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    17,887Issuances of common stock:Restricted share awards
    
    
    399,507
    
    
    
    4
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2006 MIP Performance Unit settlements
    
    
    295,879
    
    
    
    3
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,687
    )
    
    
    (1,687
    )Retirement of treasury stock
    
    
    (1,005,831
    )
    
    
    (10
    )
    
    
    (50,387
    )
    
    
    
    
    
    
    
    
    
    
    50,397
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    4,161
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,161Balance at December 31, 2008
    
    
    21,789,645
    
    
    
    218
    
    
    
    559,359
    
    
    
    (539,988
    )
    
    
    3,121
    
    
    
    
    
    
    
    22,710Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,327
    
    
    
    
    
    
    
    
    
    
    
    15,327
    
    
    $
    15,327Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183
    
    
    
    
    
    
    
    183
    
    
    
    183Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    15,510Issuances of common stock:Restricted share awards
    
    
    817,905
    
    
    
    8
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted shares remitted by employees
for taxes
    
    
    (15,096
    )
    
    
    
    
    
    
    (116
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (116
    )Stock option exercises
    
    
    9,375
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    262006 MIP Performance Unit settlements
    
    
    884,473
    
    
    
    9
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited restricted share awards
    
    
    (134,656
    )
    
    
    (1
    )
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (246
    )
    
    
    (246
    )Retirement of treasury stock
    
    
    (78,754
    )
    
    
    (1
    )
    
    
    (245
    )
    
    
    
    
    
    
    
    
    
    
    246
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    3,555
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,555Balance at December 31, 2009
    
    
    23,272,892
    
    
    
    233
    
    
    
    562,563
    
    
    
    (524,661
    )
    
    
    3,304
    
    
    
    
    
    
    
    41,439Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,253
    
    
    
    
    
    
    
    
    
    
    
    3,253
    
    
    $
    3,253Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    380
    
    
    
    
    
    
    
    380
    
    
    
    380Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,633Issuances of common stock:Restricted share awards
    
    
    560,460
    
    
    
    6
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted shares remitted by employees
for taxes
    
    
    (28,547
    )
    
    
    
    
    
    
    (214
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (214
    )Stock option exercises
    
    
    38,633
    
    
    
    
    
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1092006 MIP Performance Unit settlements
    
    
    134,490
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited restricted share awards
    
    
    (45,154
    )
    
    
    (1
    )
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    3,876
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,876Balance at December 31, 2010
    
    
    23,932,774
    
    
    $
    239
    
    
    $
    566,328
    
    
    $
    (521,408
    )
    
    $
    3,684
    
    
    $
    
    
    
    $
    48,843
 See accompanying Notes to Consolidated Financial Statements.
 40




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Years Ended December 31,2010
    
    
    2009
    
    
    2008Cash flows from operating activities:Net earnings
    
    $
    3,253
    
    
    $
    15,327
    
    
    $
    19,030Adjustments to reconcile earnings from operations to net cash provided by
operating activities:Gain on bargain purchase, net
    
    
    
    
    
    
    (2,388
    )
    
    
    Depreciation and amortization
    
    
    8,908
    
    
    
    6,140
    
    
    
    5,194Amortization of debt discount, premium and deferred loan costs
    
    
    1,539
    
    
    
    789
    
    
    
    786Stock-based compensation expense
    
    
    3,980
    
    
    
    3,345
    
    
    
    2,207Loss on disposals of property, plant and equipment, net
    
    
    15
    
    
    
    109
    
    
    
    101Deferred income taxes
    
    
    (1,354
    )
    
    
    (516
    )
    
    
    577Changes in operating assets and liabilities, net of business acquisitions:Restricted cash
    
    
    193
    
    
    
    (195
    )
    
    
    (61
    )Billed receivables
    
    
    (1,757
    )
    
    
    1,092
    
    
    
    423Unbilled receivables
    
    
    (320
    )
    
    
    1,466
    
    
    
    1,155Prepaid expenses and other current assets
    
    
    (1,274
    )
    
    
    775
    
    
    
    186Other assets
    
    
    56
    
    
    
    55
    
    
    
    3Accounts payable and accrued expenses
    
    
    (2,107
    )
    
    
    (2,531
    )
    
    
    1,634Accrued payroll and related expenses
    
    
    (6,255
    )
    
    
    (3,163
    )
    
    
    (7,561
    )Refund liabilities
    
    
    (39
    )
    
    
    (567
    )
    
    
    (2,806
    )Deferred revenues
    
    
    (139
    )
    
    
    405
    
    
    
    (63
    )Noncurrent compensation obligations
    
    
    (707
    )
    
    
    (1,589
    )
    
    
    (3,508
    )Other long-term liabilities
    
    
    (523
    )
    
    
    (388
    )
    
    
    (607
    )Net cash provided by operating activities
    
    
    3,469
    
    
    
    18,166
    
    
    
    16,690Cash flows from investing activities:Business acquisitions
    
    
    (7,741
    )
    
    
    (2,029
    )
    
    
    Purchases of property and equipment, net of disposal proceeds
    
    
    (6,934
    )
    
    
    (5,511
    )
    
    
    (3,298
    )Net cash used in investing activities
    
    
    (14,675
    )
    
    
    (7,540
    )
    
    
    (3,298
    )Cash flows from financing activities:Repayments of former credit facility (Note 7)
    
    
    (14,070
    )
    
    
    (5,315
    )
    
    
    (26,279
    )Repayments of long-term debt and capital lease obligations
    
    
    (3,260
    )
    
    
    
    
    
    
    Proceeds from term loan (Note 7)
    
    
    15,000
    
    
    
    
    
    
    
    Payments for deferred loan costs
    
    
    (666
    )
    
    
    (50
    )
    
    
    (59
    )Payments of deferred acquisition consideration
    
    
    (409
    )
    
    
    
    
    
    
    Repurchases of common stock
    
    
    
    
    
    
    (246
    )
    
    
    (1,687
    )Restricted stock remitted by employees for taxes
    
    
    (214
    )
    
    
    (116
    )
    
    
    Proceeds from stock option exercises
    
    
    109
    
    
    
    26
    
    
    
    Net cash used in financing activities
    
    
    (3,510
    )
    
    
    (5,701
    )
    
    
    (28,025
    )Effect of exchange rates on cash and cash equivalents
    
    
    138
    
    
    
    1,413
    
    
    
    (1,043
    )Net change in cash and cash equivalents
    
    
    (14,578
    )
    
    
    6,338
    
    
    
    (15,676
    )Cash and cash equivalents at beginning of year
    
    
    33,026
    
    
    
    26,688
    
    
    
    42,364Cash and cash equivalents at end of year
    
    $
    18,448
    
    
    $
    33,026
    
    
    $
    26,688Supplemental cash flow statement information:Cash paid during the year for interest
    
    $
    570
    
    
    $
    1,939
    
    
    $
    3,191Cash paid during the year for income taxes, net of refunds received
    
    $
    2,743
    
    
    $
    4,247
    
    
    $
    2,475Deferred and contingent business acquisition consideration (Note 14)
    
    $
    1,638
    
    
    $
    4,210
    
    
    $
    
 See accompanying Notes to Consolidated Financial Statements.
 41




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (a) Description of Business and Basis of Presentation
 Description of Business
  
    
    retailers such as discount, department, specialty, grocery and drug stores, and
wholesalers who sell to these retailers;
    
    business enterprises other than retailers/wholesalers such as manufacturers, financial
services firms, and pharmaceutical companies;
    
    healthcare payers, both private sector health insurance companies and state and federal
government payers such as the Centers for Medicare and Medicaid Services (CMS); and
    
    federal and state government agencies.
  Basis of Presentation
   (b) Revenue Recognition, Unbilled Receivables and Refund Liabilities
   42




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        (c) Cash and Cash Equivalents
   43




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (d) Fair Value of Financial Instruments
     (e) Property and Equipment
   (f) Software Development Costs
   44




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (g) Goodwill and Intangible Assets
   (h) Direct Expenses and Deferred Costs
  (b) Revenue Recognition, Unbilled Receivables and
Refund Liabilities
 (i) Income Taxes
   45




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (j) Foreign Currency
  (k) Earnings Per Common Share
  (l) Stock-Based Compensation
   Years Ended December 31,2010
    
    
    2009
    
    
    2008Risk-free interest rates
    
    
    0.80%  2.65
    %
    
    
    1.60%  2.71
    %
    
    
    2.37%  3.08
    %Dividend yields
    
    
    
    
    
    
    
    
    
    
    Volatility factor of expected market price
    
    
    .795  1.036
    
    
    
    .950  1.081
    
    
    
    .876  .919Weighted-average expected term of option
    
    
    3.9  4.9 years
    
    
    
    4  5 years
    
    
    
    4  4.5 yearsForfeiture rate
    
    
    
    
    
    
    
    
    
    
    
 46




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (m) Comprehensive Income
  (n) Segment Reporting
  Note 4
 Note 4
 (o) New Accounting Standards
  FASB ASC 860 Accounting for Transfers of Financial Assets, an amendment of SFAS No. 140
 47




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  FASB ASC 985-605. Revenue Arrangements with Multiple
Deliverables Issue 08-1 Software-Revenue Recognition
 FASB ASC Update No. 2010-26. Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts
 (2) RETIREMENT OBLIGATIONS
   (3) MAJOR CLIENTS
  (4) OPERATING SEGMENTS AND RELATED INFORMATION
  48




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   RecoveryAudit
    
    
    Recovery AuditServices 
    
    
    Services 
    
    
    New
    
    
    CorporateAmericas
    
    
    Europe/Asia-Pacific
    
    
    Services
    
    
    Support
    
    
    Total2010Revenues
    
    $
    115,156
    
    
    $
    57,590
    
    
    $
    11,335
    
    
    $
    
    
    
    $
    184,081Net earnings (loss)
    
    $
    25,190
    
    
    $
    6,062
    
    
    $
    (6,842
    )
    
    $
    (21,157
    )
    
    $
    3,253Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,882
    
    
    
    1,882Interest, net
    
    
    (128
    )
    
    
    416
    
    
    
    38
    
    
    
    979
    
    
    
    1,305Loss on debt extinguishment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,381
    
    
    
    1,381Depreciation and amortization expense
    
    
    5,869
    
    
    
    1,631
    
    
    
    1,408
    
    
    
    
    
    
    
    8,908EBITDA
    
    
    30,931
    
    
    
    8,109
    
    
    
    (5,396
    )
    
    
    (16,915
    )
    
    
    16,729Foreign currency gains on intercompany
balances
    
    
    33
    
    
    
    391
    
    
    
    (2
    )
    
    
    
    
    
    
    422Acquisition obligations
classified as compensation
    
    
    
    
    
    
    371
    
    
    
    
    
    
    
    
    
    
    
    371Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,980
    
    
    
    3,980Adjusted EBITDA
    
    $
    30,964
    
    
    $
    8,871
    
    
    $
    (5,398
    )
    
    $
    (12,935
    )
    
    $
    21,502Capital expenditures
    
    $
    5,674
    
    
    $
    329
    
    
    $
    931
    
    
    $
    
    
    
    $
    6,934Allocated assets
    
    $
    57,143
    
    
    $
    17,698
    
    
    $
    9,347
    
    
    $
    
    
    
    $
    84,188Unallocated assets:Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,448
    
    
    
    18,448Restricted cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64
    
    
    
    64Deferred loan costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    558
    
    
    
    558Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    439
    
    
    
    439Prepaid expenses and other assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,624
    
    
    
    2,624Total assets
    
    $
    57,143
    
    
    $
    17,698
    
    
    $
    9,347
    
    
    $
    22,133
    
    
    $
    106,321
 49




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Recovery Audit
    
    
    Recovery AuditServices 
    
    
    Services 
    
    
    New
    
    
    CorporateAmericas
    
    
    Europe/Asia-Pacific
    
    
    Services
    
    
    Support
    
    
    Total2009Revenues
    
    $
    121,561
    
    
    $
    52,489
    
    
    $
    5,533
    
    
    $
    
    
    
    $
    179,583Net earnings (loss)
    
    $
    36,013
    
    
    $
    9,055
    
    
    $
    (4,017
    )
    
    $
    (25,724
    )
    
    $
    15,327Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,028
    
    
    
    3,028Interest, net
    
    
    (99
    )
    
    
    184
    
    
    
    
    
    
    
    2,940
    
    
    
    3,025Depreciation and amortization expense
    
    
    4,798
    
    
    
    911
    
    
    
    431
    
    
    
    
    
    
    
    6,140EBITDA
    
    
    40,712
    
    
    
    10,150
    
    
    
    (3,586
    )
    
    
    (19,756
    )
    
    
    27,520Foreign currency gains on intercompany
balances
    
    
    (360
    )
    
    
    (1,235
    )
    
    
    
    
    
    
    
    
    
    
    (1,595
    )Litigation settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    650
    
    
    
    650Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,345
    
    
    
    3,345Gain on bargain purchase, net
    
    
    
    
    
    
    (2,388
    )
    
    
    
    
    
    
    
    
    
    
    (2,388
    )Adjusted EBITDA
    
    $
    40,352
    
    
    $
    6,527
    
    
    $
    (3,586
    )
    
    $
    (15,761
    )
    
    $
    27,532Capital expenditures
    
    $
    4,281
    
    
    $
    266
    
    
    $
    964
    
    
    $
    
    
    
    $
    5,511Allocated assets
    
    $
    47,263
    
    
    $
    21,421
    
    
    $
    2,814
    
    
    $
    
    
    
    $
    71,498Unallocated assets:Cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,026
    
    
    
    33,026Restricted cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    256
    
    
    
    256Deferred loan costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,431
    
    
    
    1,431Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    282
    
    
    
    282Prepaid expenses and other assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,020
    
    
    
    4,020Total assets
    
    $
    47,263
    
    
    $
    21,421
    
    
    $
    2,814
    
    
    $
    39,015
    
    
    $
    110,5132008Revenues
    
    $
    138,168
    
    
    $
    53,600
    
    
    $
    3,938
    
    
    $
    
    
    
    $
    195,706Net earnings (loss)
    
    $
    45,305
    
    
    $
    3,900
    
    
    $
    (6,222
    )
    
    $
    (23,953
    )
    
    $
    19,030Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,502
    
    
    
    3,502Interest, net
    
    
    (178
    )
    
    
    (45
    )
    
    
    
    
    
    
    3,468
    
    
    
    3,245Depreciation and amortization expense
    
    
    4,657
    
    
    
    308
    
    
    
    229
    
    
    
    
    
    
    
    5,194EBITDA
    
    
    49,784
    
    
    
    4,163
    
    
    
    (5,993
    )
    
    
    (16,983
    )
    
    
    30,971Foreign currency (gains) losses on
intercompany balances
    
    
    (181
    )
    
    
    3,464
    
    
    
    
    
    
    
    
    
    
    
    3,283Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,207
    
    
    
    2,207Adjusted EBITDA
    
    $
    49,603
    
    
    $
    7,627
    
    
    $
    (5,993
    )
    
    $
    (14,776
    )
    
    $
    36,461Capital expenditures
    
    $
    2,441
    
    
    $
    302
    
    
    $
    555
    
    
    $
    
    
    
    $
    3,298
 50




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Years Ended December 31,2010
    
    
    2009
    
    
    2008United States
    
    $
    92,574
    
    
    $
    97,141
    
    
    $
    111,954United Kingdom
    
    
    31,422
    
    
    
    25,169
    
    
    
    26,649Canada
    
    
    22,141
    
    
    
    20,560
    
    
    
    21,099France
    
    
    12,231
    
    
    
    12,055
    
    
    
    11,438Brazil
    
    
    5,128
    
    
    
    4,320
    
    
    
    3,339Mexico
    
    
    3,950
    
    
    
    3,740
    
    
    
    4,697Belgium
    
    
    2,705
    
    
    
    2,186
    
    
    
    885Spain
    
    
    2,065
    
    
    
    2,547
    
    
    
    3,319Australia
    
    
    1,690
    
    
    
    1,424
    
    
    
    1,113Sweden
    
    
    1,460
    
    
    
    2,158
    
    
    
    2,459Ireland
    
    
    1,024
    
    
    
    225
    
    
    
    Germany
    
    
    744
    
    
    
    1,224
    
    
    
    2,373Other
    
    
    6,947
    
    
    
    6,834
    
    
    
    6,381$
    184,081
    
    
    $
    179,583
    
    
    $
    195,706
  December 31,2010
    
    
    2009United States
    
    $
    34,273
    
    
    $
    31,678United Kingdom
    
    
    10,295
    
    
    
    7,701All Other
    
    
    1,034
    
    
    
    1,063$
    45,602
    
    
    $
    40,442
 (5) EARNINGS PER COMMON SHARE
  Years Ended December 31,2010
    
    
    2009
    
    
    2008Basic earnings per common share:Numerator:Net earnings
    
    $
    3,253
    
    
    $
    15,327
    
    
    $
    19,030Denominator:Weighted-average common shares outstanding
    
    
    23,906
    
    
    
    22,915
    
    
    
    21,829Basic earnings per common share
    
    $
    0.14
    
    
    $
    0.67
    
    
    $
    0.87Diluted earnings per common share:Numerator:Net earnings
    
    $
    3,253
    
    
    $
    15,327
    
    
    $
    19,030Denominator:Weighted-average common shares outstanding
    
    
    23,906
    
    
    
    22,915
    
    
    
    21,829Incremental shares from stock-based compensation plans
    
    
    238
    
    
    
    645
    
    
    
    1,179Denominator for diluted earnings per common share
    
    
    24,144
    
    
    
    23,560
    
    
    
    23,008Diluted earnings per common share
    
    $
    0.13
    
    
    $
    0.65
    
    
    $
    0.83
 51




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (6) GOODWILL AND INTANGIBLE ASSETS
 (a) Goodwill
 Note 14 Business Acquisitions
 (b) Intangible Assets
 Note 14 Business Acquisitions
   52




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Customer
    
    
    
    
    
    
    Non-competeRelationships
    
    
    Trademarks
    
    
    agreements
    
    
    Trade Names
    
    
    TotalGross carrying amount:Balance, January 1, 2009
    
    $
    27,700
    
    
    $
    
    
    
    $
    
    
    
    $
    2,200
    
    
    $
    29,900Acquisition of FAP
    
    
    6,525
    
    
    
    527
    
    
    
    778
    
    
    
    
    
    
    
    7,830FX adjustments
    
    
    (44
    )
    
    
    (4
    )
    
    
    (5
    )
    
    
    
    
    
    
    (53
    )Balance, December 31, 2009
    
    
    34,181
    
    
    
    523
    
    
    
    773
    
    
    
    2,200
    
    
    
    37,677Acquisition of Etesius
    
    
    1,565
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,565Acquisition of TJG
    
    
    829
    
    
    
    
    
    
    
    808
    
    
    
    665
    
    
    
    2,302FX adjustments and other
    
    
    (70
    )
    
    
    (18
    )
    
    
    (28
    )
    
    
    
    
    
    
    (116
    )Balance, December 31, 2010
    
    $
    36,505
    
    
    $
    505
    
    
    $
    1,553
    
    
    $
    2,865
    
    
    $
    41,428Accumulated amortization:Balance, January 1, 2009
    
    $
    (10,932
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (10,932
    )Amortization expense
    
    
    (2,517
    )
    
    
    (40
    )
    
    
    (78
    )
    
    
    
    
    
    
    (2,635
    )FX adjustments and other
    
    
    (5
    )
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (6
    )Balance, December 31, 2009
    
    
    (13,454
    )
    
    
    (40
    )
    
    
    (79
    )
    
    
    
    
    
    
    (13,573
    )Amortization expense
    
    
    (3,158
    )
    
    
    (83
    )
    
    
    (197
    )
    
    
    (567
    )
    
    
    (4,005
    )FX adjustments and other
    
    
    3
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    5Balance, December 31, 2010
    
    $
    (16,609
    )
    
    $
    (123
    )
    
    $
    (274
    )
    
    $
    (567
    )
    
    $
    (17,573
    )Net carrying amount:Balance, December 31, 2009
    
    $
    20,727
    
    
    $
    483
    
    
    $
    694
    
    
    $
    2,200
    
    
    $
    24,104Balance, December 31, 2010
    
    $
    19,896
    
    
    $
    382
    
    
    $
    1,279
    
    
    $
    2,298
    
    
    $
    23,855Estimated useful life (years)
    
    6-20 years
    
    6 years
    
    3-4.5 years
    
    4-5 years
 (7) DEBT AND CAPITAL LEASES
  December 31,2010
    
    
    2009SunTrust term loan due quarterly through January 2014
    
    $
    12,000
    
    
    $
    Ableco term loan repaid in January 2010
    
    
    
    
    
    
    14,070Capital lease obligations
    
    
    
    
    
    
    26012,000
    
    
    
    14,330Less current portion
    
    
    3,000
    
    
    
    3,260$
    9,000
    
    
    $
    11,070
   53




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Ableco
Credit Facility
  Ableco Credit Facility
    54




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Future Minimum Payments
  Year Ending December 31,2011
    
    $
    3,0002012
    
    
    3,0002013
    
    
    3,0002014
    
    
    3,0002015
    
    
    Thereafter
    
    
    $
    12,000
 (8) LEASE COMMITMENTS
     Sub-leaseYear Ending December 31,
    

Gross
    
    

Income
    
    

Net2011
    
    $
    7,384
    
    
    $
    (877
    )
    
    $
    6,5072012
    
    
    7,046
    
    
    
    (829
    )
    
    
    6,2172013
    
    
    6,560
    
    
    
    (751
    )
    
    
    5,8092014
    
    
    6,006
    
    
    
    (751
    )
    
    
    5,2552015
    
    
    420
    
    
    
    
    
    
    
    420Thereafter
    
    
    98
    
    
    
    
    
    
    
    98Total payments
    
    $
    27,514
    
    
    $
    (3,208
    )
    
    $
    24,306
 55




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (9) INCOME TAXES
  Years Ended December 31,2010
    
    
    2009
    
    
    2008United States
    
    $
    (3,189
    )
    
    $
    4,369
    
    
    $
    18,300Foreign
    
    
    8,324
    
    
    
    13,986
    
    
    
    4,232$
    5,135
    
    
    $
    18,355
    
    
    $
    22,532
  Years Ended December 31,2010
    
    
    2009
    
    
    2008Current:Federal
    
    $
    
    
    
    $
    40
    
    
    $
    (130
    )State
    
    
    30
    
    
    
    85
    
    
    
    Foreign
    
    
    3,206
    
    
    
    3,419
    
    
    
    3,0553,236
    
    
    
    3,544
    
    
    
    2,925Deferred:Federal
    
    
    (514
    )
    
    
    
    
    
    
    130State
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    (840
    )
    
    
    (516
    )
    
    
    447(1,354
    )
    
    
    (516
    )
    
    
    577Total
    
    $
    1,882
    
    
    $
    3,028
    
    
    $
    3,502
  Years Ended December 31,2010
    
    
    2009
    
    
    2008Statutory federal income tax rate
    
    $
    1,746
    
    
    $
    6,424
    
    
    $
    7,886State income taxes, net of federal benefit
    
    
    577
    
    
    
    90
    
    
    
    362Change in deferred tax asset valuation allowance
    
    
    (3,254
    )
    
    
    (6,093
    )
    
    
    (13,058
    )First Audit Partners acquisition  basis difference
    
    
    
    
    
    
    668
    
    
    
    Foreign loss carry-forward adjustment
    
    
    
    
    
    
    
    
    
    
    5,115Foreign taxes
    
    
    2,407
    
    
    
    586
    
    
    
    1,930Compensation deduction limitation
    
    
    448
    
    
    
    1,104
    
    
    
    Other, net
    
    
    (42
    )
    
    
    249
    
    
    
    1,267$
    1,882
    
    
    $
    3,028
    
    
    $
    3,502
 56




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  December 31,2010
    
    
    2009Deferred income tax assets:Accounts payable and accrued expenses
    
    $
    2,100
    
    
    $
    2,165Accrued payroll and related expenses
    
    
    1,748
    
    
    
    3,052Stock-based compensation expense
    
    
    8,314
    
    
    
    8,060Depreciation
    
    
    4,074
    
    
    
    3,482Noncompete agreements
    
    
    84
    
    
    
    122Unbilled receivables and refund liabilities
    
    
    1,064
    
    
    
    1,426Foreign operating loss carry-forwards of foreign subsidiary
    
    
    1,875
    
    
    
    2,071Federal operating loss carry-forwards
    
    
    20,877
    
    
    
    16,597Intangible assets
    
    
    17,686
    
    
    
    23,832State operating loss carry-forwards
    
    
    2,321
    
    
    
    2,624Other
    
    
    4,032
    
    
    
    4,003Gross deferred tax assets
    
    
    64,175
    
    
    
    67,434Less valuation allowance
    
    
    54,801
    
    
    
    58,304Gross deferred tax assets net of valuation allowance
    
    
    9,374
    
    
    
    9,130Deferred income tax liabilities:Intangible assets
    
    
    7,177
    
    
    
    7,340Capitalized software
    
    
    1,106
    
    
    
    1,206Other
    
    
    652
    
    
    
    302Gross deferred tax liabilities
    
    
    8,935
    
    
    
    8,848Net deferred tax assets
    
    $
    439
    
    
    $
    282
      57




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     (10) EMPLOYEE BENEFIT PLANS
  (11) SHAREHOLDER RIGHTS PLAN
  58




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (12) COMMITMENTS AND CONTINGENCIES
 Legal Proceedings
    59




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (13) STOCK-BASED COMPENSATION
      # of
    
    
    
    
    
    WeightedOptions
    
    Vesting
    
    Average
    
    Grant DateGranted
    
    Period
    
    Exercise Price
    
    Fair Value201051,276
    
    
    
    1 year
    (1)
    
    $
    4.20
    
    
    $
    129,6048,546
    
    
    
    3 years
    (2)
    
    
    5.39
    
    
    
    34,146649,010
    
    
    
    3 years
    (3)
    
    
    4.14
    
    
    
    1,739,6872009296,296
    
    
    
    4 years
    (4)
    
    $
    3.57
    
    
    $
    763,52942,730
    
    
    
    1 year
    (5)
    
    
    2.82
    
    
    
    88,011505,755
    
    
    
    3 years
    (3)

    
    
    2.92
    
    
    
    1,088,334200860,135
    
    
    
    1 year
    (6)

    
    $
    9.87
    
    
    $
    393,722211,460
    
    
    
    3 years
    (3)

    
    
    9.51
    
    
    
    1,338,330
 
 (1)
    
    Non-qualified stock options were granted under the 2008 EIP to the Companys non-employee
directors. The options vest in full upon the earlier of (i) June 23, 2011, and (ii) the date of,
and immediately prior to, the Companys 2011 annual meeting of shareholders, provided the director
has been continuously serving as a member of the Board from the date of grant until the earlier of
such dates. Unvested options are forfeited when a director leaves the Board. 42,730 of these
options expire on June 22, 2017, except that vested options held by a director who
leaves the Board before a change of control will terminate three years after termination of Board
service, if such date occurs before June 22, 2017. The remaining 8,546 options expire on September
7, 2017, 60




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 except that vested options held by a director who leaves the Board before a change of control will
terminate three years after termination of Board service, if such date occurs before September 7,
2017.(2)
    
    Non-qualified stock options were granted under the 2008 EIP to a new non-employee director. The
options vest in full upon the earlier of (i) June 23, 2013, and (ii) the date of, and immediately
prior to, the Companys 2013 annual meeting of shareholders, provided the director has been
continuously serving as a member of the Board from the date of grant until the earlier of such
dates. Unvested options are forfeited when a director leaves the Board. The options expire on
September 7, 2017, except that vested options held by a director who leaves the Board before a
change of control will terminate three years after termination of Board service, if such date
occurs before September 7, 2017.(3)
    
    Non-qualified stock options were granted to certain executive and non-executive employees of
the Company pursuant to the 2008 EIP. The options vest in three equal annual installments beginning
on the first anniversary of the grant date.(4)
    
    During the first quarter of 2009, in connection with his joining the Company as its President
and Chief Executive Officer, the Company made inducement grants outside its existing stock-based
compensation plans to Mr. Romil Bahl. Mr. Bahl received an option to purchase 296,296 shares of
the common stock of the Company. Mr. Bahls options were granted in two tranches, the first of
which consists of 111,111 shares that vest in four equal annual installments beginning in January
2010. The second tranche consists of 185,185 shares and vests 50% on each of the second and fourth
anniversaries of the grant date.(5)
    
    Non-qualified stock options were granted under the 2008 EIP to the Companys non-employee
directors. The options vested in full on May 26, 2010. The options expire on May 25, 2016, except
that vested options held by a director who leaves the Board before a change of control will
terminate three years after termination of Board service, if such date occurs before May 25, 2016.(6)
    
    Non-qualified stock options were granted under the 2008 EIP to the Companys non-employee
directors. The options became fully vested on May 27, 2009, the date of the Companys 2009 annual
meeting of the shareholders.  # ofShares
    
    
    Vesting
    
    
    Grant DateGranted
    
    
    Period
    
    
    Fair Value201051,276
    
    
    
    1 year
    (1)
    
    $
    215,2748,546
    
    
    
    3 years
    (2)
    
    
    46,063600,010
    
    
    
    3 years
    (3)
    
    
    2,410,9652009344,445
    
    
    
    4 years
    (4)
    
    $
    1,229,66942,730
    
    
    
    1 year
    (5)
    
    
    120,49920,000
    
    
    
    3 years
    (6)
    
    
    57,400522,832
    
    
    
    3 years
    (3)
    
    
    1,546,63625,000
    
    
    
    3 years
    (7)
    
    
    168,500200825,325
    
    
    
    1 year
    (8)
    
    $
    249,958171,323
    
    
    
    3 years
    (3)
    
    
    1,629,282317,192
    
    
    
    3 years
    (9)
    
    
    3,016,496
 61




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 (1)
    
    Nonvested stock awards (restricted stock) were granted to the Companys non-employee directors
pursuant to the 2008 EIP. The shares of restricted stock will vest upon the earlier of (i) June 23,
2011, and (ii) the date of, and immediately prior to, the Companys 2011 annual meeting of
shareholders, provided the director has been continuously serving as a member of the Board from the
date of grant until the earlier of such dates. Unvested shares of restricted stock will be
forfeited when a director leaves the Board. The shares are generally nontransferable until vesting.
During the vesting period, the grantees of the restricted stock will be entitled to receive
dividends with respect to the nonvested shares and to vote the shares.(2)
    
    Nonvested stock awards (restricted stock) were granted to a new non-employee director pursuant
to the 2008 EIP. The shares of restricted stock will vest upon the earlier of (i) June 23, 2013,
and (ii) the date of, and immediately prior to, the Companys 2013 annual meeting of shareholders,
provided the director has been continuously serving as a member of the Board from the date of grant
until the earlier of such dates. Unvested shares of restricted stock will be forfeited when the
director leaves the Board. The shares are generally nontransferable until vesting. During the
vesting period, the grantee of the restricted stock will be entitled to receive dividends with
respect to the nonvested shares and to vote the shares.(3)
    
    Nonvested stock awards (restricted stock and restricted stock units) were granted to certain
executive and non-executive employees of the Company pursuant to the Companys 2008 EIP. The shares
of restricted stock and the restricted stock units vest in three equal annual installments
beginning on the first anniversary of the grant date. During the vesting period, the restricted
stock grantees will be entitled to receive dividends, if any, with respect to the nonvested shares
and to vote the shares. During the vesting period, grantees of restricted stock units will be
entitled to receive dividends, if any, with respect to the nonvested shares, but will not be
entitled to vote the shares underlying the units.(4)
    
    During the first quarter of 2009, in connection with his joining the Company as its President
and Chief Executive Officer, the Company made inducement grants outside its existing stock-based
compensation plans to Mr. Romil Bahl. Mr. Bahl received nonvested stock awards (restricted stock)
representing 344,445 shares of the Companys common stock. Mr. Bahls nonvested stock awards were
granted in two tranches, the first of which consists of 233,334 shares that vest in four equal
annual installments beginning in January 2010. The second tranche consists of 111,111 shares and
vests 50% on each of the second and fourth anniversaries of the grant date. During the vesting
period, Mr. Bahl will be entitled to receive dividends with respect to the nonvested shares, if
any, and to vote the shares.(5)
    
    Nonvested stock awards (restricted stock) were granted to the Companys non-employee directors
pursuant to the 2008 EIP. The shares of restricted stock vested in full on May 26, 2010.(6)
    
    Nonvested stock awards (restricted stock) were granted to an employee of the Company pursuant
to the Companys 2008 EIP. The shares of restricted stock vest 50% on each of the first and third
anniversaries of the grant date. During the vesting period, the restricted stock grantee will be
entitled to receive dividends, if any, with respect to the nonvested shares and to vote the shares.(7)
    
    Nonvested stock awards (restricted stock units) granted to 3 employees of the Company pursuant
to the Companys 2008 EIP. The shares of restricted stock units vest on the third anniversary of
the grant date. During the vesting period, grantees of restricted stock units will be entitled to
receive dividends, if any, with respect to the nonvested shares, but will not be entitled to vote
the shares underlying the units.(8)
    
    Nonvested stock awards (restricted stock) were granted to the Companys non-employee directors
pursuant to the 2008 EIP. The shares of restricted stock vested on May 27, 2009.(9)
    
    Nonvested stock awards (restricted stock and restricted stock units) were granted to 68
executive and non-executive employees of the Company pursuant to the Companys 2008 EIP. These
shares of restricted stock and restricted stock units will vest on December 31, 2011 provided that
Company performance goals outlined in the
stock award agreements are met for the three-year period ending December 31, 2011. During the
vesting period, the award recipients of restricted stock will be entitled to receive dividends with
respect to the nonvested shares and to vote the shares. During the vesting period, award recipients
of restricted stock units will be entitled to receive dividends with respect to the nonvested
shares, but will not be entitled to vote the shares underlying the units. 62




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Weighted-
    
    
    Weighted-Average
    
    
    Average
    
    
    AggregateExercise
    
    
    Remaining
    
    
    IntrinsicPrice
    
    
    Contractual
    
    
    ValueOptions
    
    Shares
    
    
    (Per Share)
    
    
    Term
    
    
    ($000s)Outstanding at January 1, 2010
    
    
    1,740,569
    
    
    $
    8.98Granted
    
    
    709,874
    
    
    
    4.16Exercised
    
    
    (38,633
    )
    
    
    2.82
    
    
    
    
    
    
    $
    98Forfeited
    
    
    (43,440
    )
    
    
    6.72Expired
    
    
    (99,591
    )
    
    
    33.47Outstanding at December 31, 2010
    
    
    2,268,779
    
    
    $
    6.54
    
    
    5.01 years
    
    $
    3,956Exercisable at December 31, 2010
    
    
    975,294
    
    
    $
    9.97
    
    
    3.80 years
    
    $
    745
   WeightedAverage GrantDate Fair ValueNonvested Stock
    
    Shares
    
    
    (Per Share)Nonvested at January 1, 2010
    
    
    1,230,718
    
    
    $
    4.86Granted
    
    
    659,832
    
    
    
    4.05Vested
    
    
    (335,173
    )
    
    
    3.86Forfeited
    
    
    (66,346
    )
    
    
    7.41Nonvested at December 31, 2010
    
    
    1,489,031
    
    
    $
    4.61
  2006 MIP Performance Units
  63




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       (14) BUSINESS ACQUISTIONS
   Etesius Limited
  64




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Fair values of net assets acquired:Equipment
    
    $
    18Software
    
    
    3,100Intangible assets, primarily customer relationships
    
    
    1,565Deferred tax liabilities
    
    
    (1,168
    )Working capital
    
    
    (382
    )Fair value of net assets acquired
    
    $
    3,133Fair value of purchase price
    
    $
    3,133
 TJG Holdings LLC
    Fair values of net assets acquired:Equipment
    
    $
    67Intangible assets, primarily customer relationships
    
    
    2,302Working capital
    
    
    762Goodwill
    
    
    596Fair value of net assets acquired
    
    $
    3,727Fair value of purchase price
    
    $
    3,727
 First Audit Partners LLP
  65




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Fair values of assets acquired:Equipment
    
    $
    56Current assets, primarily work in progress
    
    
    741Intangible assets, primarily customer relationships
    
    
    7,8308,627Fair value of purchase price
    
    
    5,839Gain on bargain purchase
    
    
    2,788Transaction costs
    
    
    (400
    )Gain on bargain purchase, net
    
    $
    2,388
 66




---



##### Table of Contents



PRGX GLOBAL, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (15) QUARTERLY RESULTS
  2010 Quarter Ended
    
    
    2009 Quarter EndedMar. 31
    
    
    June 30
    
    
    Sept. 30
    
    
    Dec. 31
    
    
    Mar. 31
    
    
    June 30
    
    
    Sept. 30
    
    
    Dec. 31(In thousands, except per share data)Revenues
    
    $
    41,329
    
    
    $
    45,507
    
    
    $
    46,900
    
    
    $
    50,345
    
    
    $
    39,252
    
    
    $
    45,471
    
    
    $
    45,321
    
    
    $
    49,539Cost of revenues (1)
    
    
    30,175
    
    
    
    31,036
    
    
    
    31,952
    
    
    
    34,016
    
    
    
    26,413
    
    
    
    28,328
    
    
    
    28,974
    
    
    
    33,003Gross margin
    
    
    11,154
    
    
    
    14,471
    
    
    
    14,948
    
    
    
    16,329
    
    
    
    12,839
    
    
    
    17,143
    
    
    
    16,347
    
    
    
    16,536Selling, general and administrative
expenses (1)
    
    
    12,388
    
    
    
    13,537
    
    
    
    10,895
    
    
    
    12,261
    
    
    
    9,723
    
    
    
    10,773
    
    
    
    11,001
    
    
    
    12,376Operating income (loss)
    
    
    (1,234
    )
    
    
    934
    
    
    
    4,053
    
    
    
    4,068
    
    
    
    3,116
    
    
    
    6,370
    
    
    
    5,346
    
    
    
    4,160Gain on bargain purchase, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,388
    
    
    
    Interest expense, net
    
    
    384
    
    
    
    271
    
    
    
    315
    
    
    
    335
    
    
    
    699
    
    
    
    727
    
    
    
    728
    
    
    
    871Loss on debt extinguishment
    
    
    1,381
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Earnings (loss) before income taxes
    
    
    (2,999
    )
    
    
    663
    
    
    
    3,738
    
    
    
    3,733
    
    
    
    2,417
    
    
    
    5,643
    
    
    
    7,006
    
    
    
    3,289Income tax expense (benefit)
    
    
    436
    
    
    
    628
    
    
    
    1,177
    
    
    
    (359
    )
    
    
    544
    
    
    
    618
    
    
    
    605
    
    
    
    1,261Net earnings (loss)
    
    $
    (3,435
    )
    
    $
    35
    
    
    $
    2,561
    
    
    $
    4,092
    
    
    $
    1,873
    
    
    $
    5,025
    
    
    $
    6,401
    
    
    $
    2,028Basic earnings (loss) per common share
    
    $
    (0.15
    )
    
    $
    0.00
    
    
    $
    0.11
    
    
    $
    0.17
    
    
    $
    0.08
    
    
    $
    0.22
    
    
    $
    0.27
    
    
    $
    0.09Diluted earnings (loss) per common share
    
    $
    (0.15
    )
    
    $
    0.00
    
    
    $
    0.11
    
    
    $
    0.17
    
    
    $
    0.08
    
    
    $
    0.21
    
    
    $
    0.27
    
    
    $
    0.08
 
 (1)
    
    We have reclassified certain previously reported amounts for the first three quarters of 2010 to conform with classifications adopted in fourth quarter of 2010.(2)
    
    We calculate each quarter as a discrete period; the sum of the four quarters may not equal the calculated full-year amount.   67




---



##### Table of Contents



ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 ITEM 9A. Controls and Procedures
       
 Internal Control  Integrated
Framework
  68




---



##### Table of Contents



.
  Atlanta, Georgia
March 16, 2011
    
    /s/ BDO USA, LLP
 
 ITEM 9B. Other Information.
  69




---



##### Table of Contents



PART III
 
 ITEM 10. Directors, Executive Officers and Corporate Governance
   
 ITEM 11. Executive Compensation
  70




---



##### Table of Contents



ITEM 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  Securities Authorized for Issuance Under Equity Compensation Plans
      Weighted-average exercise
    
    
    Number of securities remainingNumber of securities to be issued
    
    
    price of outstanding
    
    
    available for future issuance underupon exercise of outstanding
    
    
    options, warrants and
    
    
    equity compensation plans (excludingPlan category

    
    options, warrants and rights
    
    
    rights
    
    
    securities reflected in column (a))(a)
    
    
    (b)
    
    
    (c)Equity compensation plans
approved by security
holders:Stock Incentive Plan
    
    
    588,455
    
    
    $
    12.69
    
    
    
    2008 Equity Incentive Plan
    
    
    2,586,947
    
    
    
    4.57
    
    
    
    2,127,037Share awards (1)
    
    
    26,898
    
    
    
    
    
    
    
    77,794Equity compensation plans
not approved by security
holders (2)
    
    
    582,408
    
    
    
    3.57
    
    
    
    Total
    
    
    3,784,708
    
    
    $
    6.54
    
    
    
    2,204,831
 71




---



##### Table of Contents



(1)
    
    Amounts presented represent 60% of Performance Unit awards under the Companys 2006
Management Incentive Plan. Performance Unit awards are required to be settled 60% in common
stock and 40% in cash.(2)
    
    Inducement Option Grant  during the first quarter of 2009, in connection with his joining
the Company as its President and Chief Executive Officer, the Company made inducement grants
outside its existing stock-based compensation plans to Mr. Romil Bahl. Mr. Bahl received an
option to purchase 296,296 shares of the common stock of the Company and nonvested stock
awards (restricted stock) representing 344,445 shares of the Companys common stock. Of those
grants, 58,333 of restricted stock vested in 2010. 
 ITEM 13. Certain Relationships and Related Transactions, and Director Independence
 -
 
 ITEM 14. Principal Accountants Fees and Services
  72




---



##### Table of Contents



PART IV
 
 ITEM 15.
    
    Exhibits, Financial Statement Schedules
  (1)
    
    Consolidated Financial Statements:
 For the following consolidated financial information included herein, see Index on Page 36.
 PageReport of Independent Registered Public Accounting Firm
    
    
    37Consolidated Statements of Operations for the Years ended December
31, 2010, 2009 and 2008
    
    
    38Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    39Consolidated Statements of Shareholders Equity for the Years ended
December 31, 2010, 2009 and 2008
    
    
    40Consolidated Statements of Cash Flows for the Years ended December
31, 2010, 2009 and 2008
    
    
    41Notes to Consolidated Financial Statements
    
    
    42
 (2)
    
    Financial Statement Schedule:
 Schedule II  Valuation and Qualifying Accounts
    
    S-1
 (3)
    
    Exhibits
 ExhibitNumber
    
    Description2.1
    
    Share Purchase Agreement dated February 25, 2010 by and between PRGX U.K. Limited
and Etesius Limited (incorporated by reference to Exhibit 2.1 to
the Registrants Form 10-K filed on March 29, 2010).3.1
    
    Restated Articles of Incorporation of the Registrant, as amended and corrected
through August 11, 2006 (restated solely for the purpose of filing with the
Commission) (incorporated by reference to Exhibit 3.1 to the Registrants Form 8-K filed on August 17, 2006).3.1.1
    
    Articles of Amendment of the Registrant dated January 20, 2010 (incorporated by
reference to Exhibit 3.1 to the Registrants Form 8-K filed on January 25, 2010).3.2
    
    Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit
3.1 to the Registrants Form 8-K filed on December 11, 2007).4.1
    
    Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the
Registrants Form 10-K for the year ended December 31, 2001).4.2
    
    See Restated Articles of Incorporation and Bylaws of the Registrant, filed as
Exhibits 3.1 and 3.2, respectively.4.3
    
    Shareholder Protection Rights Agreement, dated as of August 9, 2000, between the
Registrant and Rights Agent, effective May 1, 2002 (incorporated by reference to
Exhibit 4.3 to the Registrants Form 10-Q for the quarterly period ended June 30,
2002).4.3.1
    
    First Amendment to Shareholder Protection Rights Agreement, dated as of March 12,
2002, between the Registrant and Rights Agent (incorporated by reference to Exhibit
4.3 to the Registrants Form 10-Q for the quarterly period ended September 30,
2002).4.3.2
    
    Second Amendment to Shareholder Protection Rights Agreement, dated as of August 16,
2002, between the Registrant and Rights Agent (incorporated by reference to Exhibit
4.3 to the Registrants Form 10-Q for the quarterly period ended September 30,
2002).4.3.3
    
    Third Amendment to Shareholder Protection Rights Agreement, dated as of November 7,
2006, between the Registrant and Rights Agent (incorporated by reference to Exhibit
4.1 to the Registrants Form 8-K filed on November 14, 2005).
 73




---



##### Table of Contents



ExhibitNumber
    
    Description4.3.4
    
    Fourth Amendment to Shareholder Protection Rights Agreement, dated as of November
14, 2006, between the Registrant and Rights Agent (incorporated by reference to
Exhibit 4.1 to the Registrants Form 8-K filed on November 30, 2005).4.3.5
    
    Fifth Amendment to Shareholder Protection Rights Agreement, dated as of March 9,
2006, between the Registrant and Rights Agent (incorporated by reference to Exhibit
4.9 to the Registrants Form 10-K for the year ended December 31, 2005).4.3.6
    
    Sixth Amendment to Shareholder Protection Rights Agreement, dated as of September
17, 2007, between the Registrant and Rights Agent (incorporated by reference to
Exhibit 4.1 to the Registrants Form 8-K filed on September 21, 2007).4.3.7
    
    Seventh Amendment to Shareholder Protection Rights Agreement, dated as of August 9,
2010, between the Registrant and Rights Agent (incorporated by reference to Exhibit
4.1 to the Registrants Form 8-K filed on August 9, 2010).+10.1
    
    1996 Stock Option Plan, dated as of January 25, 1996, together with Forms of
Non-qualified Stock Option Agreement (incorporated by reference to Exhibit 10.2 to
the Registrants March 26, 1996 Registration Statement No. 333-1086 on Form S-1).+10.2
    
    Form of Indemnification Agreement between the Registrant and Directors and certain
officers, including named executive officers, of the Registrant (incorporated by
reference to Exhibit 10.4 to the Registrants Form 10-K for the year ended December
31, 2003).+10.3
    
    Form of the Registrants Non-Qualified Stock Option Agreement (incorporated by
reference to Exhibit 10.2 to the Registrants Form 10-Q for the quarterly period
ended June 30, 2001).10.4
    
    Noncompetition, Nonsolicitation and Confidentiality Agreement among The Profit
Recovery Group International, Inc., Howard Schultz & Associates International,
Inc., Howard Schultz, Andrew Schultz and certain trusts, dated January 24, 2002
(incorporated by reference to Exhibit 10.34 to the Registrants Form 10-K for the
year ended December 31, 2001).10.5
    
    Office Lease Agreement between Galleria 600, LLC and PRG-Schultz International,
Inc. (incorporated by reference to Exhibit 10.43 to the Registrants Form 10-K for
the year ended December 31, 2001).10.5.1
    
    First Amendment to Office Lease Agreement between Galleria 600, LLC and PRG-Schultz
International, Inc. (incorporated by reference to Exhibit 10.65 to the Registrants
Form 10-K for the year ended December 31, 2002).+10. 6
    
    Amended Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the
Registrants Form 10-Q for the quarterly period ended June 30, 2002).+10.7
    
    Amended HSA-Texas Stock Option Plan (incorporated by reference to Exhibit 10.4 to
the Registrants Form 10-Q for the quarterly period ended June 30, 2002).10.8
    
    Investor Rights Agreement, dated as of August 27, 2002, among PRG-Schultz
International, Inc., Berkshire Fund V, LP, Berkshire Investors LLC and Blum
Strategic Partners II, L.P. (incorporated by reference to Exhibit 10.7 to the
Registrants Form 10-Q for the quarterly period ended September 30, 2002).10.8.1
    
    Amendment to Investor Rights Agreement dated March 28, 2006 (incorporated by
reference to Exhibit 10.8 to the Registrants Form 10-Q for the quarter ended March
31, 2006).+10.9
    
    Form of Non-employee Director Option Agreement (incorporated by reference to
Exhibit 99.1 to the Registrants Report on Form 8-K filed on February 11, 2005).+10.10
    
    Amended and Restated Employment Agreement between Registrant and Mr. James B.
McCurry, dated as of December 17, 2007 (incorporated by reference to Exhibit 10.1
to the Registrants Form 8-K filed on December 19, 2007).+10.10.1
    
    Release Agreement dated December 1, 2008 between the Registrant and Mr. McCurry
(incorporated by reference to Exhibit 10.1 to the Registrants Form 8-K filed on
December 4, 2008).+10.11
    
    Separation and Release Agreement between Registrant and Mr. John M. Cook, dated as
of August 2, 2005 (incorporated by reference to Exhibit 99.1 to Registrants Form
8-K filed on August 8, 2005).+10.11.1
    
    First Amendment to Separation and Release Agreement with John M. Cook dated March
16, 2006 (incorporated by reference to Exhibit 99.1 to the registrants Form 8-K
filed on March 22, 2006).
 74




---



##### Table of Contents



ExhibitNumber
    
    Description+10.12
    
    Separation and Release Agreement between Registrant and Mr. John M. Toma, dated as
of August 2, 2005 (incorporated by reference to Exhibit 99.2 to Registrants Form
8-K filed on August 8, 2005).+10.12.1
    
    First Amendment to Separation and Release Agreement with John M. Toma dated March
16, 2006 (incorporated by reference to Exhibit 99.2 to the registrants Form 8-K
filed on March 22, 2006).+10.13
    
    Employment Agreement between the Registrant and Peter Limeri entered into on
November 28, 2008 (incorporated by reference to Exhibit 10.2 to the Registrants
Form 8-K filed on December 4, 2008).10.14
    
    Amended and Restated Standstill Agreement, dated as of July 16, 2007, between
Registrant and Blum Capital Partners, L.P. and certain of its affiliates
(incorporated by reference to Exhibit 10.1 to the Registrants Form 8-K filed on
July 16, 2007).10.15
    
    Restructuring Support Agreement dated December 23, 2005 (incorporated by reference
to Exhibit 10.66 to the Registrants Form 10-K for the year ended December 31,
2005).10.15.1
    
    Amended and Restated Restructuring Support Agreement (incorporated by reference to
Exhibit 10.1 to the Registrants Form 10-Q for the quarter ended March 31, 2006).+10.16
    
    Employment Agreement between the Registrant and Larry Robinson dated November 28,
2008 (incorporated by reference to Exhibit 10.3 to the Registrants Form 8-K filed
on December 4, 2008).+10.16.1
    
    Separation Agreement between the Registrant and Larry Robinson dated August 3, 2010
(incorporated by reference to Exhibit 10.1 to the Registrants Form 8-K filed on
August 9, 2010).+10.17
    
    Employment Agreement between the Registrant and Brad Roos dated November 28, 2008
(incorporated by reference to Exhibit 10.4 to the Registrants Form 8-K filed on
December 4, 2008).+10.18
    
    Expatriate Assignment Agreement with Brad Roos (incorporated by reference to
Exhibit 10.1 to the Registrants Form 8-K filed on February 14, 2008).+10.18.1
    
    Separation Agreement between the Registrant and Brad Roos dated May 29, 2009
(incorporated by reference to Exhibit 10.2 to the Registrants Form 8-K filed on
June 1, 2009).10.19
    
    Registration Rights Agreement dated March 17, 2006 (incorporated by reference to
Exhibit 10.2 to the Registrants Form 10-Q for the quarter ended March 31, 2006).10.20
    
    Amended and Restated Financing Agreement dated September 17, 2007 (incorporated by
reference to Exhibit 10.1 to the Registrants Form 8-K filed on September 21,
2007).10.20.1
    
    Amendment Number One to Amended and Restated Financing Agreement (incorporated by
reference to Exhibit 10.1 to the Registrants Form 8-K filed on April 3, 2008).10.20.2
    
    Amendment Number Two to Amended and Restated Financing Agreement (incorporated by
reference to Exhibit 10.1 to the Registrants Form 8-K filed on April 3, 2009)10.21
    
    Security Agreement dated March 17, 2006 (incorporated by reference to Exhibit 10.4
to the Registrants Form 10-Q for the quarter ended March 31, 2006).+10.22
    
    Amended and Restated 2006 Management Incentive Plan (incorporated by reference to
Exhibit 10.1 to the Registrants Form 10-Q for the quarter ended September 30,
2006).+10.22.1
    
    Form of Performance Unit Agreement under 2006 Amended and Restated Management
Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrants Form
10-Q for the quarter ended September 30, 2006).+10.22.2
    
    Form of Amendment to Performance Unit Agreement (incorporated by reference to
Exhibit 10.1 to the Registrants Form 8-K filed on December 11, 2007).+10.23
    
    Employment Agreement with Norman Lee White dated June 19, 2006 (incorporated by
reference to Exhibit 10.1 to the Registrants Report on Form 8-K filed on June 20,
2006).+10.23.1
    
    Separation Agreement dated November 30, 2008 between PRG-Schultz USA and Mr. White
(incorporated by reference to Exhibit 10.5 to the Registrants Form 8-K filed on
December 4, 2008).+10.24
    
    Form of Non-Employee Director Stock Option Agreement (incorporated by reference to
Exhibit 10.1 to the Registrants Form 8-K filed on September 18, 2007).+10.25
    
    2009 PRG-Schultz Performance Bonus
Plan (incorporated by reference to Exhibit 10.25 to
the Registrants Form 10-K filed on March 29, 2010).
 75




---



##### Table of Contents



ExhibitNumber
    
    Description+10.26
    
    PRGX Global, Inc. 2008 Equity Incentive Plan (incorporated by reference to Exhibit
10.1 to the Registrants Form 8-K filed on June 4, 2008).+10.26.1
    
    Form of Restricted Stock Agreement for Non-Employee Directors (incorporated by
reference to Exhibit 10.2 to the Registrants Form 8-K filed on June 4, 2008).+10.26.2
    
    Form of Non-Qualified Stock Option Agreement for Non-Employee Directors
(incorporated by reference to Exhibit 10.3 to the Registrants Form 8-K filed on
June 4, 2008).+10.27
    
    Employment Agreement dated January 8, 2009, by and between Mr. Romil Bahl and the
Registrant (incorporated by reference to Exhibit 10.1 to the Registrants Form 8-K filed on January 14, 2009).+10.27.1
    
    Form of Nonqualified Stock Option Agreement (incorporated by reference to Exhibit
10.2 to the Registrants Form 8-K filed on January 14, 2009).+10.27.2
    
    Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.3 to
the Registrants Form 8-K filed on January 14, 2009).+10.28
    
    Employment Agreement dated May 26, 2009 by and between the Registrant and Robert B.
Lee (incorporated by reference to Exhibit 10.1 to the Registrants Form 8-K filed
on June 1, 2009).10.29
    
    Revolving Credit and Term Loan Agreement dated as of January 19, 2010, by and among
PRGX Global, Inc. (formerly PRG-Schultz International, Inc), and PRGX USA, Inc.
(formerly PRG-Schultz USA, Inc.), as co-borrowers, the lenders from time to time
party thereto, SunTrust Bank, as issuing bank, and SunTrust Bank, as administrative
agent (incorporated by reference to Exhibit 10.1 to the Registrants Form 8-K filed
on January 25, 2010).10.29.1
    
    Subsidiary Guaranty Agreement dated as of January 19, 2010 by and among PRGX
Global, Inc. (formerly PRG-Schultz International, Inc), and PRGX USA, Inc.
(formerly PRG-Schultz USA, Inc.), as borrowers, each of the subsidiaries of PRGX
Global, Inc. listed on schedule I thereto, as guarantors, and SunTrust Bank, as
administrative agent (incorporated by reference to Exhibit 10.2 to the Registrants
Form 8-K filed on January 25, 2010).10.29.2
    
    Security Agreement dated January 19, 2010 among PRGX Global, Inc. (formerly
PRG-Schultz International, Inc), PRGX USA, Inc. (formerly PRG-Schultz USA, Inc.),
and the other direct and indirect subsidiaries of PRGX Global, Inc. signatory
thereto, as grantors, in favor of SunTrust Bank, as administrative agent
(incorporated by reference to Exhibit 10.3 to the Registrants Form 8-K filed on
January 25, 2010).10.29.3
    
    Equity Pledge Agreement dated as of January 19, 2010, made by PRGX Global, Inc.
(formerly PRG-Schultz International, Inc), PRGX USA, Inc. (formerly PRG-Schultz
USA, Inc.), and the other direct and indirect subsidiaries of PRGX Global, Inc.
signatory thereto, as grantors, in favor of SunTrust Bank, as administrative agent
(incorporated by reference to Exhibit 10.4 to the Registrants Form 8-K filed on
January 25, 2010).+10.30
    
    Employment Agreement between the Registrant and Victor A. Allums dated November 28,
2008 (incorporated by reference to Exhibit 10.31 to the Registrants Form 10-K
filed on March 29, 2010).+10.31
    
    Employment Agreement between the Registrant and Jennifer G. Moore dated November 28,
2008 (incorporated by reference to Exhibit 10.32 to the Registrants Form 10-K filed
on March 29, 2010).+10.31.1
    
    Separation Agreement between the Registrant and Jennifer G. Moore dated October 26,
2009 (incorporated by reference to Exhibit 10.32.1 to the Registrants Form 10-K
filed on March 29, 2010).+10.32
    
    Employment Agreement between the Registrant and James Shand dated March 12, 2009
(incorporated by reference to Exhibit 10.33 to the Registrants Form 10-K filed on
March 29, 2010).+10.33
    
    Employment Agreement between the Registrant and Michael Noel dated September 30,
2009.14.1
    
    Code of Ethics for Senior Financial Officers (incorporated by reference to Exhibit
14.1 to the Registrants Form 10-K for the year ended December 31, 2003).21.1
    
    Subsidiaries of the Registrant.23.1
    
    Consent of BDO USA, LLP
 76




---



##### Table of Contents



ExhibitNumber
    
    Description31.1
    
    Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a) or
15d-14(a), for the year ended December 31, 2010.31.2
    
    Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a) or
15d-14(a), for the year ended December 31, 2010.32.1
    
    Certification of the Chief Executive Officer and Chief Financial Officer, pursuant
to 18 U.S.C. Section 1350, for the year ended December 31, 2010.
 
 +
    
    Designates management contract or compensatory plan or arrangement. 77




---



##### Table of Contents



SIGNATURES
  PRGX GLOBAL, INC.By:
    /s/  ROMIL BAHLRomil BahlPresident, Chief Executive Officer,
Director
(Principal Executive Officer)   Signature
    
    Title
    
    Date/s/ ROMIL BAHL
Romil Bahl
    
    President, Chief Executive Officer
and Director
(Principal Executive Officer)
    
    March 16, 2011/s/ ROBERT B. LEE
Robert B. Lee
    
    Chief Financial Officer and Treasurer (Principal 
Financial Officer)
    
    March 16, 2011/s/ BRIAN D. LANE
Brian D. Lane
    
    Controller (Principal 
Accounting Officer)
    
    March 16, 2011/s/ PATRICK M. BYRNE
Patrick M. Byrne
    
    Director
    
    March 16, 2011/s/ DAVID A. COLE
David A. Cole
    
    Director
    
    March 16, 2011/s/ PATRICK G. DILLS
Patrick G. Dills
    
    Chairman of the Board
    
    March 16, 2011/s/ ARCHELLE GEORGIOU FELDSHON
Archelle Georgiou Feldshon
    
    Director
    
    March 16, 2011/s/ N. COLIN LIND
N. Colin Lind
    
    Director
    
    March 16, 2011/s/ PHILIP J. MAZZILLI, JR.
Philip J. Mazzilli, Jr.
    
    Director
    
    March 16, 2011/s/ STEVEN P. ROSENBERG
Steven P. Rosenberg
    
    Director
    
    March 16, 2011
 78




---



##### Table of Contents



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(In thousands)
 Additions
    
    DeductionsChargeBalance at
    
    (Credit) to
    
    Credit to
    
    Balance atBeginning
    
    Costs and
    
    the respective
    
    End ofDescription
    
    of Year
    
    Expenses
    
    receivable (1)
    
    Year2010Allowance for doubtful accounts receivable
    
    $
    1,032
    
    
    
    (360
    )
    
    
    (81
    )
    
    $
    591Allowance for doubtful employee advances
and miscellaneous receivables
    
    $
    351
    
    
    
    559
    
    
    
    (241
    )
    
    $
    669Deferred tax valuation allowance
    
    $
    58,304
    
    
    
    (3,503
    )
    
    
    
    
    
    $
    54,8012009Allowance for doubtful accounts receivable
    
    $
    921
    
    
    
    137
    
    
    
    (26
    )
    
    $
    1,032Allowance for doubtful employee advances
and miscellaneous receivables
    
    $
    311
    
    
    
    235
    
    
    
    (195
    )
    
    $
    351Deferred tax valuation allowance
    
    $
    64,307
    
    
    
    (6,003
    )
    
    
    
    
    
    $
    58,3042008Allowance for doubtful accounts receivable
    
    $
    826
    
    
    
    319
    
    
    
    (224
    )
    
    $
    921Allowance for doubtful employee advances
and miscellaneous receivables
    
    $
    1,831
    
    
    
    
    
    
    
    (1,520
    )
    
    $
    311Deferred tax valuation allowance
    
    $
    79,805
    
    
    
    (15,498
    )
    
    
    
    
    
    $
    64,307
 
 (1)
    
    Write-offs, net of recoveries S-1