##### Table of Contents





UNITED STATES
    SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
  FORM 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE  SECURITIES EXCHANGE ACT OF 1934  Commission File Number
    001-31451
  BEARINGPOINT, INC.
 (Exact name of Registrant as
    specified in its charter)
  DELAWARE

22-3680505(State or other jurisdiction
    of
    incorporation or organization)

(IRS Employer
    Identification No.)1676 International Drive, McLean, VA

22102(Address of principal executive
    offices)

(Zip Code)  (703) 747-3000
 (Registrants telephone
    number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of each class

Name of each exchange on which registeredCommon Stock, $.01 Par Value

New York Stock ExchangeSeries A Junior Participating Preferred Stock Purchase
    Rights

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act: None
   o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  non-accelerated Rule 12b-2
  Large accelerated
    filer þ

Accelerated
    filer o

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ




---



##### 





TABLE OF
    CONTENTS
   
 PageDescription

NumberPART I.Item 1.


Business


1Item 1A.


Risk Factors


6Item 1B.


Unresolved Staff Comments


20Item 2.


Properties


20Item 3.


Legal Proceedings


21Item 4.


Submission of Matters to a Vote of Security
    Holders


23PART II.Item 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


25Item 6.


Selected Financial Data


27Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operation


30Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


64Item 8.


Financial Statements and Supplementary Data


65Item 9.


Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


65Item 9A.


Controls and Procedures


66Item 9B.


Other Information


69PART III.Item 10.


Directors, Executive Officers and Corporate
    Governance


70Item 11.


Executive Compensation


74Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


95Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


98Item 14.


Principal Accounting Fees and Services


99PART IV.Item 15.


Exhibits, Financial Statement Schedules


100Employment LetterManaging Director AgreementSpecial Termination AgreementAmendment to the Restricted Stock Unit AgreementRestricted Stock Unit AgreementStock Option AgreementList of SubsidiariesConsent of Ernst & Young LLPConsent of PricewaterhouseCoopers LLPCertification of CEOCertification of CFOSection 1350 CertificationSection 1350 Certification




---



##### Table of Contents



PART I.  FORWARD-LOOKING
    STATEMENTS
  Form 10-K
  AVAILABLE
    INFORMATION
  (703) 747-3000.
  www.bearingpoint.com. Form 10-K, Form 10-Q Form 8-K,
  1-800-SEC-0330. http://www.sec.gov
    ITEM 1.
    BUSINESS  General
   1




---



##### Table of Contents



Strategy
    
    Leveraging Opportunities Across Our Global Footprint. We
    must strengthen our global delivery model by creating greater
    opportunities and scaling those offerings and solutions that
    offer the greatest opportunities for growth and profitability.
    We believe that operating globally will help us better serve our
    clients needs, provide us with an advantage over regional
    competitors and allow us to maintain a diverse portfolio that
    can help to sustain our business during economic downturns.  We intend to leverage our
    best-in-class
    government solutions and offerings developed in our
    U.S. Federal, state and local markets to offer them to
    governments around the world. Optimizing our global capabilities
    delivered through our Global Development Centers
    (GDCs) in China, India and the United States
    (Hattiesburg, Mississippi) and providing highly skilled
    professionals at a lower cost for application development and
    support also will be an important part of achieving our goals.  
    Attracting, Developing and Retaining a
    World-Class Employee Base.As a professional services
    company, our employees are the cornerstone of our success. We
    must attract, develop and retain world-class talent. Under the
    leadership of our new Executive Vice President, Human Resources,
    our goal is to build a world-class human resources function that
    will help us hire and retain our employees and provide
    outstanding training and career opportunities for our people.      
    Striving For Operational Excellence and Profitability.We
    must strive to drive higher operating margins through
    operational excellence and financial discipline. We will monitor
    the metrics that we believe are critical to driving
    profitability and positive cash flow, and we will hold our
    employees 2




---



##### Table of Contents



accountable for their performance. To further a culture of
    accountability, each of our operating segments will be measured
    according to key performance indicators of our business
    operations. For information on these key performance indicators,
    see Item 7, Managements Discussion and Analysis
    of Financial Condition and Results of Operation 
    Overview  Key Performance Indicators.      North
    American Industry Groups
      
    Public Servicesserves a broad range of both public and
    private clients, including agencies of the U.S. Federal
    government such as the Departments of Defense, Homeland
    Security, and Health and Human Services; provincial, state and
    local governments; public healthcare companies and private
    sector healthcare agencies; aerospace and defense companies; and
    higher education clients. We believe that our Public Services
    business will continue to be our largest revenue producer,
    generating opportunities for both strong growth in North America
    and in our international operations by leveraging our
    differentiated solutions, as well as our experience and
    expertise, to governments around the world.
    Commercial Servicessupports a highly diversified range
    of clients, including those in the life sciences and energy
    markets, as well as technology, consumer markets, manufacturing,
    transportation, communications and private and public utilities.
    In 2008, our Commercial Services business will focus on
    providing differentiated solutions to priority segments and
    accounts, and will transition from lower margin, transactional
    commodity services to higher margin, value-added services in
    order to generate sustainable relationships and revenue.
    Financial Servicesdirects its solutions to many of the
    worlds leading banking, insurance, securities, real
    estate, hospitality and professional services institutions. In
    2008, our Financial Services business will concentrate its focus
    within high growth markets, deepen relationships with our key
    accounts and middle market clients, particularly at the
    C-suite level, and seek to improve profitability by
    targeting niche markets for our differentiated solutions.  International
    Operations
     3




---



##### Table of Contents



best-in-class
    
    EMEA. Our EMEA region will continue to be a key part of
    our strategy. Consequently, in late 2007 we decided to continue
    to own and operate our EMEA segment as part of our consolidated
    business rather than move forward with a sale of that business
    to our EMEA managing directors.
    Asia Pacific. In Asia Pacific, our growth strategy will
    focus on taking advantage of client successes to leverage new
    opportunities within Japan and China, and to improve our
    profitability in Korea and the South Asia Pacific countries by
    focusing our solutions on our key client accounts within these
    countries.
    Latin America. In Latin America, we have streamlined our
    in-country operations in order to strategically focus upon the
    countries in which we believe we will be most successful. We
    will continue to serve clients within Latin America from our
    offices in Brazil and Mexico.  Our
    Joint Marketing Relationships
      Competition
       4




---



##### Table of Contents



Intellectual
    Property
      Customer
    Dependence
    Employees
       5




---



##### Table of Contents



ITEM 1A.
    RISK
    FACTORS  Risks
    that Relate to Our Business
  Our business may be adversely impacted as a result of
    changes in demand, both globally and in individual market
    segments, for our consulting and systems integration
    services.
      Our operating results will suffer if we are not able to
    maintain our billing and utilization rates or control our
    costs.
      
    our clients perception of our ability to add value through
    our services;
    our ability to access and use of lower-cost service delivery
    personnel, as compared to the ability of our competitors to do
    so;
    introduction of new services or products by us or our
    competitors;
    pricing policies of our competitors; and
    general economic conditions in the United States and abroad.    
    seasonal trends, primarily as a result of our hiring cycle and
    holiday and summer vacations;
    our ability to transition employees from completed projects to
    new engagements;
    our ability to forecast demand for our services and thereby
    maintain an appropriately balanced and sized workforce;
    our ability to manage attrition; and
    our ability to mobilize our workforce quickly or economically,
    especially outside the United States. 6




---



##### Table of Contents



If we are unable to timely and properly implement and
    operate our new financial reporting system, we may be unable to
    timely file our SEC periodic reports or conclude that our
    internal control over financial reporting is effective, either
    of which could have a material adverse effect on our business,
    financial condition or results of operation.
      
    our inability to timely file our SEC periodic reports;
    the substantial increase in our SG&A expenses, including
    finance and accounting and audit costs; and
    the material weaknesses identified in our 2004 through 2007
    audits and the conclusion by management that our internal
    control over financial reporting was not effective.    We continue to incur SG&A expenses as a percentage of
    revenue at levels significantly higher than those of our
    competitors. If we are unable to significantly reduce SG&A
    expenses as a percentage of revenue over the near term, our
    ability to achieve our goals in net income and profitability
    will remain in jeopardy.
   7




---



##### Table of Contents




    improving our controls around the financial closing process;
    remediating deficiencies in our internal controls;
    reducing the amount of time and effort spent to substantiate the
    accuracy and completeness of our financial results;
    reducing redundant systems and activities;
    streamlining the input and capture of data;
    hiring and retaining skilled finance and accounting personnel
    while decreasing the number of personnel required to support our
    financial close process, including reliance on contractors;
    achieving further reductions in the number of offices and square
    feet of space occupied by us; and
    achieving further cost savings in our various corporate
    services, including legal, information technology and human
    resources.    The systems integration consulting markets are highly
    competitive, and we may not be able to compete effectively if we
    are not able to maintain our billing rates or control our costs
    related to these engagements.
    Contracting with the U.S. Federal government is inherently
    risky and exposes us to risks that may materially and adversely
    affect our business.
    
    Our government contracts are subject to laws and regulations
    that provide government clients with rights and remedies not
    typically found in commercial contracts, which are unfavorable
    to us. These rights and remedies allow government clients, among
    other things, to:  
    establish temporary holdbacks of funds due and owed to us under
    contracts for various reasons;
    terminate our facility security clearances and thereby prevent
    us from receiving classified contracts;
    cancel multi-year contracts and related orders if funds for
    contract performance for any subsequent year become unavailable;
    claim rights in products, systems and technology produced by us;
    prohibit future procurement awards with a particular agency if
    it is found that our prior relationship with that agency gives
    us an unfair advantage over competing contractors; 8




---



##### Table of Contents




    subject the award of contracts to protest by competitors, which
    may require the suspension of our performance pending the
    outcome of the protest or our resubmission of a bid for the
    contract, or result in the termination, reduction or
    modification of the awarded contract; and
    prospectively reduce our pricing based upon achieving certain
    agreed service volumes or other metrics and reimburse any
    previously charged amounts subsequently found to have been
    improperly charged under the contract.  
    Our failure to obtain and maintain necessary security clearances
    may limit our ability to perform classified work for government
    clients, which could cause us to lose business. In addition,
    security breaches in sensitive government systems that we have
    developed could damage our reputation and eligibility for
    additional work and expose us to significant losses.
    The U.S. Federal government audits and reviews our performance
    on contracts, pricing and cost allocation practices, cost
    structure, systems, and compliance with applicable laws,
    regulations and standards. If the government finds that our
    costs are not reimbursable, have not been properly determined or
    are based on outdated estimates of our costs, we may not be
    allowed to bill for all or part of those costs, or we may have
    to refund cash that we have already collected, which may
    materially affect our operating margin and the expected timing
    of our cash flows.
    Government contracting officers have wide latitude in their
    ability to conclude as to the financial responsibility of
    companies that contract with agencies of the U.S. Federal
    government. Officers who conclude that a company is not
    financially responsible may withhold new engagements and
    terminate recently contracted engagements for which significant
    expenditures and outlays already may have been made.
    If the government uncovers improper or illegal activities in the
    course of audits or investigations, we may be subject to civil
    and criminal penalties and administrative sanctions, including
    termination of contracts, forfeiture of profits, suspension of
    payments, fines and suspension or debarment from doing business
    with U.S. Federal government agencies. These consequences could
    materially and adversely affect our revenue and operating
    results. The inherent limitations of internal controls, even
    when adequate, may not prevent or detect all improper or illegal
    activities.
    Government contracts, and the proceedings surrounding them, are
    often subject to more extensive scrutiny and publicity than
    other commercial contracts. Negative publicity related to our
    government contracts, regardless of its accuracy, may further
    damage our business by affecting our ability to compete for new
    contracts.    Our ability to attract, retain and motivate our managing
    directors and other key employees is critical to the success of
    our business. We continue to experience sustained,
    higher-than-industry average levels of voluntary turnover among
    our workforce, which has impacted our ability to grow our
    business.
      
    In light of our current issues related to our North American
    financial reporting systems and our internal control over
    financial reporting, it is particularly critical that we
    continue to attract and retain experienced finance personnel. 9




---



##### Table of Contents




    Higher than average attrition creates recruiting, training and
    retention costs and benefits that place significant demands on
    our resources.
    Our inability to timely file our periodic reports with the SEC
    from 2005 through 2007 materially and negatively affected our
    ability to deliver freely tradable equity incentives to our
    people.
    Rumors, misperceptions and misrepresentations regarding our
    financial stability or ongoing operations may create career
    uncertainties for our employees.    Our contracts can be terminated by our clients with short
    notice, or our clients may cancel or delay projects.
  engagement-by-engagement
  If we are not able to keep up with rapid changes in
    technology or maintain strong relationships with software
    providers, our business could suffer.
      Loss of our joint marketing relationships could reduce our
    revenue and growth prospects.
   10




---



##### Table of Contents



We are not likely to be able to significantly grow our
    business through mergers and acquisitions in the near
    term.
    There will not be a consistent pattern in our financial
    results from quarter to quarter, which may result in increased
    volatility of our stock price.
    
    the business decisions of our clients regarding the use of our
    services;
    seasonality, including the number of work days and holidays and
    summer vacations;
    the stage of completion of existing projects or their
    termination;
    cost overruns or revenue write-offs resulting from unexpected
    delays or delivery issues on engagements;
    periodic differences between our clients estimated and
    actual levels of business activity associated with ongoing
    engagements;
    our ability to transition employees quickly from completed
    projects to new engagements;
    the introduction of new products or services by us or our
    competitors;
    changes in our pricing policies or those of our competitors;
    our ability to manage costs, including personnel costs and
    support services costs, particularly outside the United States
    where local labor laws may significantly affect our ability to
    mobilize personnel quickly or economically;
    currency exchange fluctuations;
    ongoing costs associated with our efforts to remediate material
    weaknesses in our internal control over financial reporting, and
    to produce timely and accurate financial information despite the
    continuing existence of these material weaknesses;
    changes in, or the application of changes to, accounting
    principles generally accepted in the United States, particularly
    those related to revenue recognition; and
    global, regional and local economic and political conditions and
    related risks, including acts of terrorism.  Our performance may be negatively affected due to
    financial, regulatory and operational risks inherent in
    worldwide operations.
   11




---



##### Table of Contents



We may bear the risk of cost overruns relating to our
    services, thereby adversely affecting our performance.
    We may face legal liabilities and damage to our
    professional reputation from claims made against our
    work.
    Our services may infringe upon the intellectual property
    rights of others.
   12




---



##### Table of Contents



We have only a limited ability to protect our intellectual
    property rights, which are important to our success.
      Risks
    that Relate to Our Liquidity
  Our current cash resources might not be sufficient to meet
    our expected cash needs over time. Beginning in early 2009, we
    will begin to become subject to significant required payments
    under our 2007 Credit Facility and various series of our
    debentures. We continue to believe that our cash balances,
    together with cash generated from operating activities and
    borrowings previously made under our 2007 Credit Facility, will
    be sufficient to provide adequate funds for our anticipated
    internal growth, operating needs and debt service obligations.
    However, if we cannot consistently generate sufficient positive
    cash flows from operating activities to fund these required
    payments and service our indebtedness, our business, financial
    condition and results of operations could be materially and
    adversely effected.
    and/or
 13




---



##### Table of Contents



Our 2007 Credit Facility imposes a number of restrictions
    on the way in which we operate our business and may negatively
    affect our ability to finance future needs, or do so on
    favorable terms. If we violate these restrictions, we will be in
    default under the 2007 Credit Facility, which may cross-default
    to our other indebtedness.
    We may be unable to obtain new surety bonds, letters of
    credit or bank guarantees in support of client engagements on
    acceptable terms.
    Downgrades of our credit ratings may increase our
    borrowing costs and materially and adversely affect our
    business, financial condition or results of operation.
   14




---



##### Table of Contents



Our leverage may adversely affect our business and
    financial performance and may restrict our operating
    flexibility.
    
    limit cash flow available for general corporate purposes, such
    as capital expenditures;
    limit our ability to obtain, or obtain on favorable terms,
    additional debt financing in the future;
    limit our flexibility in reacting to competitive and other
    changes in our industry and economic conditions generally;
    expose us to a risk that a substantial decrease in net operating
    cash flows due to economic developments or adverse developments
    in our business could make it difficult to meet debt service
    requirements; and
    expose us to risks inherent in interest rate fluctuations
    because borrowings may be at variable rates of interest, which
    could result in high interest expense in the event of increases
    in interest rates.  The holders of our debentures have the right, at their
    option, to require us to purchase some or all of our debentures
    upon certain dates or upon the occurrence of certain designated
    events, which could have a material adverse effect on our
    liquidity.
   15




---



##### Table of Contents



Debentures

Maturity Date

Put Date$250.0 Million 2.50% Series AConvertible Subordinated Debentures due 2024
    (the Series A Debentures)

December 15, 2024

December 15, 2011
    December 15, 2014
    December 15, 2019$200.0 Million 2.75% Series BConvertible Subordinated Debentures due 2024
    (the Series B Debentures and together with
    Series A Debentures, the Subordinated
    Debentures)

December 15, 2024

December 15, 2014
    December 15, 2019$200.0 Million 5.00% Convertible
    Senior Subordinated Debentures due 2025
    (the April 2005 Convertible Debentures)

April 15, 2025

April 15, 2009
    April 15, 2013
    April 15, 2015
    April 15, 2020$40.0 Million 0.50% ConvertibleSenior Subordinated Debentures due 2010
    (the July 2005 Convertible Debentures)

July 15, 2010

N/A         Risks
    that Relate to our Failure to Timely File Periodic Reports with
    the SEC and our Internal Control over Financial
    Reporting
   16




---



##### Table of Contents



Our continuing failure to timely file certain periodic
    reports with the SEC poses significant risks to our business,
    each of which could materially and adversely affect our
    financial condition and results of operation.
  Forms 10-K Forms 10-Q
    
    If we are not timely in filing our periodic reports on or after
    October 31, 2008, (i) an event of default could be
    declared by our lenders under our senior secured credit
    facility, which may result in the lenders declaring our
    outstanding loans due and payable in whole or in part, and
    potentially resulting in a cross-default to one or more series
    of our convertible subordinated debentures and other
    indebtedness,
    and/or
    (ii) an event of default could be claimed by holders of one
    or more series of our subordinated debentures, resulting in a
    cross-default under our senior secured credit facility. See
     Risks that Relate to Our Liquidity.
    If the NYSE does not grant us extensions to file our periodic
    reports with the NYSE, it has the right to begin proceedings to
    delist our common stock. A delisting of our common stock would
    have a material adverse effect on us by, among other things:  
    reducing the liquidity and market price of our common stock;
    resulting in a possible event of default under and acceleration
    of our senior secured credit facility and triggering a right to
    the holders of our debentures to request us to repurchase all
    then outstanding debentures; and
    reducing the number of investors willing to hold or acquire our
    common stock, thereby restricting our ability to obtain equity
    financing.  
    We may have difficulty retaining our clients and obtaining new
    clients.
    We would not be eligible to use a registration statement to
    offer and sell freely tradable securities, thereby preventing us
    from accessing the public capital or credit markets or
    delivering shares under our equity plans.    In 2004, we identified material weaknesses in our internal
    control over financial reporting, the remediation of which
    continues to materially and adversely affect our business and
    financial condition, and as of December 31, 2007, certain
    material weaknesses remain.
     17




---



##### Table of Contents



Form 10-Q
      Risks
    that Relate to Our Common Stock
  The price of our common stock may decline due to the
    number of shares that may be available for sale in the
    future.
   18




---



##### Table of Contents



Initial Per Share





TotalConversion


Initial


ApproximatePrice/Exercise


Conversion


Number ofConvertible Debt and Warrants

Price($)


Dates


SharesSeries A Debentures

$
10.50



March 31, 2005
(1)


23.8 millionSeries B Debentures


10.50



March 31, 2005
(1)


19.0 millionApril 2005 Convertible Debentures


6.60



April 27, 2005



30.3 millionJuly 2005 Convertible Debentures


6.75



July 15, 2006



5.9 millionWarrants issued in connection with the July 2005 Senior
    Debentures (the July 2005 Warrants)


8.00



July 15, 2006



3.5 millionTotal










82.5 million     (1)
    
    The holders of the Series A
    Debentures and Series B Debentures have the right to
    convert the debentures into shares of common stock only upon the
    occurrence of certain triggering events. For additional
    information regarding the triggering events, see Note 6,
    Notes Payable  Series A and Series B
    Convertible Subordinated Debentures, of the Notes to
    Consolidated Financial Statements.    Exercise PriceNumber of Shares

Range


Average


Calendar Year428,520


$
4.71  $8.77


$
8.07



2008200,000


$
7.89  $8.70


$
8.30



2009     Number of Shares

Calendar Year4,030,861


20082,066,161


200924,195,155


2010 and thereafter    19




---



##### Table of Contents



There are significant limitations on the ability of any
    person or company to acquire the Company without the approval of
    our Board of Directors (the Board).
      
    our Board is classified into three classes, each of which will
    serve for staggered three-year terms;
    a director may be removed by our stockholders only for cause and
    then only by the affirmative vote of two-thirds of our voting
    stock;
    only our Board or the Chairman of the Board may call special
    meetings of our stockholders;
    our stockholders may not take action by written consent;
    our stockholders must comply with advance notice procedures in
    order to nominate candidates for election to our Board or to
    place stockholders proposals on the agenda for
    consideration at meetings of the stockholders;
    if stockholder approval is required by applicable law, any
    mergers, consolidations and sales of all or substantially all of
    our assets must be approved by the affirmative vote of at least
    two-thirds of our voting stock; and
    our stockholders may amend or repeal any of the foregoing
    provisions of our certificate of incorporation or our bylaws
    only by a vote of two-thirds of our voting stock.  ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES     20




---



##### Table of Contents



ITEM 3.
    LEGAL
    PROCEEDINGS  Overview
    
    Claims and investigations arising from our inability to timely
    file periodic reports under the Exchange Act, and the
    restatement of our financial statements for certain prior
    periods to correct accounting errors and departures from
    generally accepted accounting principles for those years
    (SEC Reporting Matters);
    Claims and investigations being conducted by agencies or
    officers of the U.S. Federal government and arising in
    connection with our provision of services under contracts with
    agencies of the U.S. Federal government (Government
    Contracting Matters); and
    Claims made in the ordinary course of business by clients
    seeking damages for alleged breaches of contract or failure of
    performance, by current or former employees seeking damages for
    alleged acts of wrongful termination or discrimination, and by
    creditors or other vendors alleging defaults in payment or
    performance.    SEC
    Reporting Matters
  2005 Class Action Suits. Rule 10b-5 Makor Issues & Rights, Ltd v. Tellabs Tellabs
 21




---



##### Table of Contents



2005 Shareholders Derivative Demand. Form 8-K,
  SEC Investigation. Form 8-K.
    Government
    Contracting Matters
   22




---



##### Table of Contents



ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    (1)
    Election of Directors. Our stockholders elected
    the following persons as Class I directors to hold office
    until the annual meeting of stockholders to be held in 2010 and
    their respective successors have been duly elected and qualified.  Nominee for Class I Director

For


WithholdDouglas C. Allred


152,960,864



28,469,643Betsy J. Bernard


153,017,163



28,413,344Spencer C. Fleischer


179,134,849



2,295,658   (2)
    Ratification of Appointment of Ernst & Young
    LLP. Our stockholders ratified the appointment of
    Ernst & Young LLP as our independent registered public
    accounting firm for 2007.  For

Against


Abstain178,240,625


567,529



2,622,353  23




---



##### Table of Contents



Executive
    Officers of the Registrant
    Judy A. Ethell
  F. Edwin Harbach
  Laurent C. Lutz,
       24




---



##### Table of Contents



PART II.  ITEM 5.
    MARKET
    FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
    MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Information
      Price
    Range of Common Stock
  Price Range ofCommon StockHigh


Low2007Fourth Quarter


5.19



2.45Third Quarter


7.64



3.83Second Quarter


8.00



6.90First Quarter


8.56



7.332006Fourth Quarter


8.89



7.44Third Quarter


9.00



7.36Second Quarter


9.59



7.55First Quarter


9.16



7.77   Holders
    Dividends
   25




---



##### Table of Contents



Equity
    Compensation Plan Information
  Equity
    Compensation Plan Information
    (as of December 31, 2007)
  Number of securitiesremaining availableNumber of securities


Weighted-average


for future issuanceto be issued upon


exercise price of


under equityexercise of


outstanding


compensation plansoutstanding options,


options, warrants


(excluding securitiesPlan Category

warrants and rights


and rights


reflected in column (a))Equity Compensation Plans Approved by Security Holders


58,494,576


$
11.30



46,246,324
(1)(2)Equity Compensation Plans Not Approved by Security Holders


1,950,825
(3)

$
7.55



Total


60,445,401


$
11.17



46,246,324     (1)
    
    Includes 22,098,610 shares of
    common stock available for grants of stock options, restricted
    stock, stock appreciation rights and other stock-based awards
    under our Amended and Restated 2000 Long-Term Incentive Plan
    (the LTIP) and 24,147,714 shares of common
    stock available for issuance under our Amended and Restated
    Employee Stock Purchase Plan (the ESPP).(2)
    
    Under the LTIP, the number of
    shares of common stock authorized for grants or awards is
    92,179,333. Under the ESPP, the number of shares of our common
    stock available for purchase is 3,766,096 shares, plus an
    annual increase on the first day of each of our fiscal years
    beginning on July 1, 2001 and ending on June 30, 2026
    equal to the lesser of (i) 30 million shares,
    (ii) three percent of the shares outstanding on the last
    day of the immediately preceding fiscal year or (iii) a
    lesser number of shares as determined by our Board or the
    Compensation Committee of the Board.(3)
    
    Consists of 888,325 outstanding
    RSUs held by Mr. Harbach; and 1,000,000 outstanding options
    and 62,500 outstanding RSUs held by Mr. You, all of which
    were non-LTIP grants.  Issuer
    Purchases of Equity Securities
    ApproximateDollar Value ofTotal Number of


Shares that MayShares Purchased


Yet Be Purchasedas Part of


Under PubliclyPublicly


Announced PlansTotal Number of


Average Price


Announced Plans


or ProgramsPeriod

Shares Purchased


per Share


or Programs(1)


($ in millions)(1)December 1, 2007 December 31, 2007


624,482
(2)

$
2.59






$
64.3     (1)
    
    In July 2001, our Board authorized
    us to repurchase up to $100.0 million of our common stock.
    Any shares so repurchased are held as treasury shares. During
    2007, there were no open market purchases by the Company of our
    common stock.(2)
    
    In December 2007, as permitted
    under the LTIP, we acquired an aggregate of 624,482 shares
    of our common stock for an aggregate price of $1.6 million
    in connection with share withholding for payroll tax obligations
    due from employees and former employees for the issuance of
    shares of common stock upon settlement of RSUs. 26




---



##### Table of Contents



COMPARATIVE
    STOCK PERFORMANCE
      
  ITEM 6.
    SELECTED
    FINANCIAL DATA   27




---



##### Table of Contents



Statements
    of Operations
  Six MonthsYear Ended


Ended


Year EndedDecember 31,


December 31,


December 31,


December 31,


December 31,


June 30,2007


2006


2005


2004


2003


2003(in thousands, except per share amounts)Revenue

$
3,455,562


$
3,444,003


$
3,388,900


$
3,375,782


$
1,522,503


$
3,157,898Costs of service:Costs of service(1)


2,966,168



2,863,856



3,001,327



2,816,559



1,221,249



2,436,864Lease and facilities restructuring charge


20,869



29,621



29,581



11,699



61,436



17,283Total costs of service


2,987,037



2,893,477



3,030,908



2,828,258



1,282,685



2,454,147Gross profit


468,525



550,526



357,992



547,524



239,818



703,751Amortization of purchased intangible assets






1,545



2,266



3,457



10,212



45,127Goodwill impairment charge(2)










166,415



397,065



127,326



Selling, general and administrative expenses(1)


701,317



748,250



750,867



641,176



272,250



550,098Operating (loss) income


(232,792
)


(199,269
)


(561,556
)


(494,174
)


(169,970
)


108,526Insurance settlement






38,000















Interest / other expense, net(3)


(57,698
)


(19,774
)


(37,966
)


(17,644
)


(1,773
)


(10,493
)Loss on early extinguishment of debt














(22,617
)






(Loss) income before taxes


(290,490
)


(181,043
)


(599,522
)


(534,435
)


(171,743
)


98,033Income tax expense(4)


72,233



32,397



122,121



11,791



4,872



65,342Net (loss) income applicable to common stockholders(5)


(362,723
)


(213,440
)


(721,643
)


(546,226
)


(176,615
)


32,691(Loss) earnings per share  basic and diluted:Net (loss) income applicable to common stockholders

$
(1.68
)

$
(1.01
)

$
(3.59
)

$
(2.77
)

$
(0.91
)

$
0.18   Balance
    Sheet Data
  December 31,


December 31,


December 31,


December 31,


December 31,


June 30,2007


2006


2005


2004


2003


2003(in thousands)Cash, cash equivalents, and restricted cash(6)

$
468,518


$
392,668


$
376,587


$
265,863


$
122,475


$
121,790Total assets


1,981,404



1,939,240



1,972,426



2,182,707



2,211,613



2,150,210Long-term liabilities(7)


1,538,801



1,078,930



976,501



648,565



408,324



375,991Total debt


974,643



671,850



674,760



423,226



248,228



277,176Total liabilities(7)


2,450,693



2,116,541



2,017,998



1,558,009



1,141,618



1,006,990Total stockholders (deficit) equity(7)


(469,289
)


(177,301
)


(45,572
)


624,698



1,069,995



1,143,220     (1)
    
    During the year ended
    December 31, 2007, an adjustment of $7.6 million was
    recorded, comprised of $2.5 million within costs of service
    and $5.1 million within selling, general and administrative
    expenses, to true up the stock-based compensation expense
    calculated with an estimated forfeiture rate and capture the
    impact of unanticipated forfeitures that occurred in the fourth
    quarter of 2007.(2)
    
    During the years ended
    December 31, 2005 and 2004 and the six months ended
    December 31, 2003, we recorded goodwill impairment charges
    of $166.4 million, $397.1 million and
    $127.3 million, respectively. For additional 28




---



##### Table of Contents



information regarding these
    goodwill impairment charges and international acquisitions, see
    Note 5, Business Acquisitions, Goodwill and Other
    Intangible Assets, of the Notes to Consolidated Financial
    Statements.(3)
    
    During the year ended
    December 31, 2004, we recorded a change in accounting
    principle resulting in a charge of $0.5 million related to
    the elimination of a one-month lag in reporting for certain Asia
    Pacific subsidiaries, as well as a subsidiary within the EMEA
    region. While the elimination of the one-month lag is considered
    a change in accounting principle, the effect of the change is
    included in other income (expense) due to the immateriality of
    the change in relation to consolidated net loss.(4)
    
    During the year ended
    December 31, 2005, we recorded a valuation allowance of
    $55.3 million, primarily against our U.S. deferred tax
    assets to reflect our conclusion that it is more likely than not
    that these tax benefits would not be realized. For additional
    information, see Note 14, Income Taxes, of the
    Notes to Consolidated Financial Statements.(5)
    
    During the fourth quarter of 2006,
    the one-month reporting lag in the remaining EMEA entities was
    eliminated. The elimination of one month of activity increased
    our 2006 consolidated net loss for the year ended
    December 31, 2006 by $1.2 million.(6)
    
    Restricted cash amounts at
    December 31, 2007, 2006, 2005 and 2004 were
    $1.7 million, $3.1 million, $121.2 million and
    $21.1 million, respectively. As of December 31, 2003
    and June 30, 2003, there was no restricted cash.(7)
    
    During the year ended
    December 31, 2007, we recognized an increase of
    approximately $119.8 million in liability for unrecognized
    tax benefits, which was reflected as an increase to the
    January 1, 2007 balance of accumulated deficit as a result
    of adopting the provisions of Financial Accounting Standards
    Board (FASB) Interpretation No. 48,
    Accounting for Uncertainty in Income Taxes, as of
    January 1, 2007. 29




---



##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATION  The following Managements Discussion and Analysis of
    Financial Condition and Results of Operation
    (MD&A) should be read in conjunction with the
    Consolidated Financial Statements and the Notes to Consolidated
    Financial Statements included elsewhere in this Annual Report.
    This Annual Report contains forward-looking statements that
    involve risks and uncertainties. See Forward-Looking
    Statements.
  Overview
    Economic and Industry Factors
       30




---



##### Table of Contents



Revenue and Income Drivers
          Key Performance Indicators
    
    Bookings. We believe that information regarding our new
    contract bookings provides useful trend information regarding
    how the volume of our new business changes over time. Comparing
    the amount of new contract bookings and revenue provides us with
    an additional measure of the short-term sustainability of
    revenue growth. Information regarding our new bookings should
    not be compared to, or substituted for, an analysis of our
    revenue over time. There are no third-party standards or
    requirements governing the calculation of bookings. New contract
    bookings are recorded using then existing currency exchange
    rates and are not subsequently adjusted for currency
    fluctuations. These amounts represent our estimate at contract
    signing of the net revenue expected over the term of that
    contract and involve estimates and judgments regarding new
    contracts as well as renewals, extensions and additions to
    existing contracts. Subsequent cancellations, extensions and
    other matters may affect the amount of bookings previously
    reported; however, we do not revise previously reported
    bookings. Bookings do not include potential revenue that could
    be earned from a client relationship as a result of future
    expansion of service offerings to that client, nor does it
    reflect option years under contracts that are subject to client
    discretion. We do not record unfunded U.S. Federal contracts as
    new contract bookings while appropriation approvals remain
    pending, as there can be no assurances that these approvals will
    be forthcoming in the near future, if at all. Consequently,
    there can be significant differences between the time of
    contract signing and new contract booking recognition. Our level
    of bookings provides an indication of how our business is 31




---



##### Table of Contents



performing: a positive variance between bookings and revenue is
    indicative of business momentum, a negative variance is
    indicative of a business downturn. Nonetheless, we do not
    characterize our bookings, or our engagement contracts
    associated with new bookings, as backlog because our engagements
    generally can be cancelled or terminated on short notice or
    without notice.  
    Revenue Growth. Unlike bookings, which provide only a
    general sense of future expectations, period-over-period
    comparisons of revenue provide a meaningful depiction of how
    successful we have been in growing our business over time.    
    Gross Margin (gross profit as a percentage of revenue).Gross margin is a meaningful tool for monitoring our ability
    to control our costs of service. Analysis of the various cost
    elements, including professional compensation expense, effects
    of foreign exchange rate changes and the use of subcontractors,
    as a percentage of revenue over time can provide additional
    information as to the key challenges we are facing in our
    business. The cost of subcontractors is generally more expensive
    than the cost of our own workforce and can negatively impact our
    gross profit. While the use of subcontractors can help us to win
    larger, more complex deals, and also may be mandated by our
    clients, we focus on limiting the use of subcontractors whenever
    possible in order to minimize our costs. We also utilize certain
    adjusted gross margin metrics in connection with the vesting and
    settlement of certain employee incentive awards. For a
    discussion of these metrics, see Item 11, Executive
    Compensation  Compensation Discussion and
    Analysis.    
    Utilization. Utilization represents the percentage of
    time our consultants are performing work, and is defined as
    total hours charged to client engagements or to non-chargeable
    client-relationship projects divided by total available hours
    for any specific time period, net of holiday and paid vacation
    hours.
    Days Sales Outstanding (DSO). DSO is an
    operational metric that approximates the amount of earned
    revenue that remains unpaid by clients at a given time. DSOs are
    derived by dividing the sum of our outstanding accounts
    receivable and unbilled revenue, less deferred revenue, by our
    average net revenue per day. Average net revenue per
    day is determined by dividing total net revenue for the
    most recently ended trailing twelve-month period by 365.
    Free Cash Flow. Free cash flow is calculated by
    subtracting purchases of property and equipment from cash
    provided by operating activities. We believe free cash flow is a
    useful measure because it allows better understanding and
    assessment of our ability to meet debt service requirements and
    the amount of recurring cash generated from operation after
    expenditures for fixed assets. Free cash flow does not represent
    our residual cash flow available for discretionary expenditures
    as it excludes certain mandatory expenditures such as repayment
    of maturing debt. We use free cash flow as a measure of
    recurring operating cash flow. Free cash flow is a non-GAAP
    financial measure. The most directly comparable financial
    measure calculated in accordance with GAAP is net cash provided
    by operating activities. 32




---



##### Table of Contents




    Attrition. Attrition, or voluntary total employee
    turnover, is calculated by dividing the number of our employees
    who have chosen to leave the Company within a certain period by
    the total average number of all employees during that same
    period. Our attrition statistic covers all of our employees,
    which we believe provides metrics that are more compatible with,
    and comparable to, those of our competitors.    2007
    Highlights
        
    New contract bookings for 2007 were $2,864.9 million, a
    decrease from new contract bookings of $3,130.0 million for
    2006. Increases in new contract bookings in our EMEA and Asia
    Pacific regions were more than offset by significant declines in
    new contract bookings in our other operating segments.
    Year-over-year decreases in Public Services bookings for 2007 of
    slightly more than ten percent were substantially attributable
    to the signing of several exceptionally large, multi-year
    bookings in our SLED sector in early 2006.
    Our revenue for 2007 was $3,455.6 million, representing an
    increase of $11.6 million, or 0.3%, over 2006 revenue of
    $3,444.0 million. Revenue increases in Public Services,
    EMEA, Latin America and Asia Pacific exceeded revenue declines
    in Financial Services and Commercial Services. In analyzing
    year-over-year revenue growth for 2007, consideration should
    also be given to the effect in fiscal 2006 of two previously
    disclosed settlements within the telecommunications industry and
    the recognition of certain previously deferred revenue, the net
    combined effect of which negatively impacted our revenue in 2006.
    Our gross profit for 2007 was $468.5 million, compared to
    $550.5 million for 2006. Gross profit as a percentage of
    revenue decreased to 13.6% during 2007 from 16.0% during 2006.
    Revenue improvements and significant decreases in other direct
    contract expenses were more than offset by increases in
    professional compensation expense, with the most significant
    portion of these increases attributable to expenses associated
    with salaries and benefits and stock-based compensation.
    During 2006 and 2007, we worked with Hawaiian Telcom
    Communications, Inc., a telecommunications industry client
    (HT), to resolve issues relating to our delivery of
    services for the design, build and operation of various
    information technology systems. In 2006 and 2005, we 33




---



##### Table of Contents



accrued losses of $28.2 million and $111.7 million,
    respectively, under our Contract with HT (the HT
    Contract). On February 8, 2007, we entered into a
    Settlement Agreement and Transition Agreement with HT. Pursuant
    to the Settlement Agreement, we paid $52 million,
    $38 million of which was paid by certain of our insurers,
    and we waived approximately $29.6 million of invoices and
    other amounts otherwise payable by HT to us. Due to the timing
    of the Settlement Agreement being reached prior to the filing of
    our 2006 financial statements, the amounts paid by the insurers
    and the invoices that were waived were reflected in our
    financial statements as of December 31, 2006, although the
    $38 million payment was made subsequent to
    December 31, 2006. In addition, the Transition Agreement
    governed our transitioning of the remaining work under the HT
    Contract to a successor provider, which has been completed. In
    2006 and 2005, we incurred losses of $28.2 million and
    $111.7 million, respectively, under the HT Contract.  
    On June 18, 2007, we entered into a settlement with a
    telecommunications industry client resolving the clients
    claims under a client-initiated audit of certain of
    our time and expense charges relating to an engagement that
    closed in 2003. In connection with the settlement, we will make
    six equal annual payments to the client for an aggregate amount
    of $24 million, the first payment of which was made on the
    signing date in return for a full release of the clients
    claim and the opportunity to perform services for this client in
    the future.
    On May 22, 2007, we settled certain disputes with KPMG that
    had arisen between our companies related to a transition
    services agreement executed in 2001. KPMG had asserted that we
    were liable to it for approximately $31 million under the
    agreement for certain technology service termination costs.
    While neither company admitted any liability under these claims,
    these claims were mutually released. In addition, we agreed to
    amend a number of real estate subleases between KPMG and
    BearingPoint, and to consent to the further subletting of
    others. The settlement also included cash payments by us to KPMG
    of an aggregate of $5 million over a three-year time frame.
    We incurred SG&A expenses of $701.3 million in 2007,
    representing a decrease of $46.9 million, or 6.3%, from
    SG&A expenses of $748.3 million in 2006. The decrease
    was primarily due to reduced costs, including subcontracted
    labor, directly related to the closing of our financial
    statements, as well as savings from the reduction in the size of
    our sales force. Partially offsetting these savings was
    increased compensation expense for additional SG&A
    personnel, additional recruiting costs incurred, and stock-based
    compensation expense related to RSUs and PSUs. During 2007, we
    incurred external costs of approximately $83.5 million
    related to the preparation of our financial statements, our
    auditors review and audit of our financial statements and
    the testing of internal controls, compared with approximately
    $128.2 million for 2006.
    During 2007, we implemented numerous new controls in our efforts
    toward remediating our material weaknesses in internal control
    over financial reporting. While some material weaknesses remain
    (see Item 9A of this Annual Report), senior management
    continues its focus on the full remediation of material
    weaknesses and continues our goal of building a strong internal
    control environment. We currently expect our remaining material
    weaknesses to be fully remediated in 2008.
    In 2007, we realized a net loss of $362.7 million, or a
    loss of $1.68 per share, representing an increase of
    $149.3 million over a net loss of $213.4 million, or a
    loss of $1.01 per share, in 2006. This change in net loss was
    primarily attributable to:  
    A decrease in gross profit of $82.0 million;
    An increase in interest expense of $24.0 million due to
    interest attributable to our 2007 Credit Facility and the
    acceleration of debt issuance costs resulting from the
    termination of the 2005 Credit Facility; and
    An increase in income tax expense of $39.8 million.   34




---



##### Table of Contents




    Effective January 1, 2007, we adopted the provisions of
    FASB Interpretation No. (FIN) 48,
    Accounting for Uncertainty in Income Taxes
    (FIN 48). FIN 48 supersedes Statement of
    Financial Accounting Standards (SFAS) No. 5,
    Accounting for Contingencies, as it relates to
    income tax liabilities and changes the standard of recognition
    that a tax contingency is required to meet before being
    recognized in the financial statements. Upon adoption of
    FIN 48 and after examining our existing tax contingencies
    under the standards of FIN 48, we recognized an increase of
    approximately $119.8 million in our long-term liability for
    unrecognized tax benefits, which was reflected as an increase to
    the January 1, 2007 balance of accumulated deficit.    
    Utilization for 2007 was 77.2%, compared with 76.2% in 2006.
    As of December 31, 2007, our DSOs stood at 77 days,
    representing a decrease of 5 days, or 6.1%, from our DSOs
    at December 31, 2006.
    Free cash flow for 2007 and 2006 was ($231.5) million and
    $8.1 million, respectively. Net cash (used in) provided by
    operating activities in 2007 and 2006 was ($194.2) million
    and $58.7 million, respectively. Purchases of property and
    equipment in 2007 and 2006 were $37.3 million and
    $50.6 million, respectively. The decrease in free cash flow
    for 2007 was primarily attributable to an increase in net loss,
    net of non-cash items, the timing of payment of significant
    amounts of our accounts payable and, to a lesser degree,
    increases to our combined accounts receivable and unbilled
    revenue, despite a decrease in DSOs in 2007.
    In 2007 we adopted a new Standards of Business Conduct based on
    best industry practices (to replace our prior Code of Business
    Conduct and Ethics) and created a Compliance Committee comprised
    of members of our senior management whose focus is to properly
    organize and allocate the necessary resources to address
    broader, Company-wide compliance efforts.
    In 2007, we hired Rick Martino as our Executive Vice President,
    Human Resources. In December 2007, F. Edwin Harbach was
    promoted to Chief Executive Officer from President and Chief
    Operating Officer.
    During 2007, we spent approximately $25.3 million in
    connection with the implementation of our new North American
    financial reporting system. We finalized decisions regarding the
    design of, and obtained licenses for the components needed to
    substantially replace, our existing North American financial
    reporting systems. This implementation is ongoing, with a number
    of milestones, such as system integration review, system build
    review and user test acceptance left to complete. For additional
    information regarding the implementation of our North American
    financial reporting systems, see  Principal
    Business Priorities for 2008 and Beyond  Drive
    Operational Excellence.
    As of December 31, 2007, we had approximately
    17,100 full-time employees, including approximately 14,400
    consulting professionals, which represented a decrease in
    billable headcount of approximately 5.9% from full-time
    employees and consulting professionals at December 31, 2006
    of 17,500 and 15,300, respectively. 35




---



##### Table of Contents




    Our voluntary, annualized attrition rate for 2007 was 24.7%,
    compared to 25.6% for 2006. The highly competitive industry in
    which we operate and our financial condition continue to make it
    particularly critical and challenging for us to attract and
    retain experienced personnel.
    In early 2007, we granted approximately 22.4 million PSUs
    to our highest-performing managing directors and senior
    managers. The PSUs were issued as single, three-year cliff
    vesting awards rather than several, smaller, periodic awards,
    primarily to promote the longer retention of our employees. As
    of December 31, 2007, approximately 18.2 million PSUs
    were outstanding. For additional information about the PSUs,
    see  Principal Business Priorities for 2008 and
    Beyond  Attract, Develop and Retain a
    World-Class Employee Base.
    In early 2007, we granted performance cash awards providing for
    the payment of up to $50 million to a group of our managing
    directors and other high-performing senior-level employees,
    including our executive officers (the Performance Cash
    Awards). Generally, 50% of these awards may be earned on
    December 31 in each of 2007 and 2008, subject to the achievement
    of the same consolidated business unit contribution target
    required under the PSUs. If the Performance Cash Awards are not
    earned in 2007 and 2008, the awards may still be fully earned if
    compounded average annual growth for the three-year period ended
    December 31, 2009 is achieved. Amounts earned will be paid
    by March 31, 2010 or, if the determination of whether
    amounts have been earned cannot be made by March 31, within
    30 days of the determination date. We did not meet the
    consolidated business unit contribution target for 2007. For
    additional information regarding consolidated business unit
    contribution, see Item 11, Executive
    Compensation  Compensation Discussion and
    Analysis.
    For 2006 and 2007, our Managing Director Compensation Plan (the
    MD Compensation Plan) was not fully activated
    because we were not current in the filing of our SEC periodic
    reports. Even though the target levels of profitability under
    the MD Compensation Plan were not achieved in either year, we
    decided to pay performance-based cash bonuses for retention
    purposes and because we were able to sustain our underlying
    operations and our core business continued to perform, despite
    the issues we continue to face with respect to our financial
    accounting systems and efforts to become timely in our SEC
    periodic reports. In 2007, we paid performance-based cash
    bonuses totaling approximately $50 million
    ($33 million to staff, $17 million to managing
    directors), based on 2006 performance. In addition, we have
    accrued performance-based cash bonuses totaling approximately
    $30 million ($15 million to staff, $15 million to
    managing directors), to be paid in 2008.
    In 2007, upon the recommendation of our Chief Executive Officer,
    the Compensation Committee of our Board agreed, for 2008, not to
    activate the provision of our MD Compensation Plan that provides
    for 20% of a managing directors salary to be paid two
    fiscal quarters after the compensation has been earned, as
    determined by the Companys performance. We expect to
    review the plan this year, in order to revisit whether it is
    still properly aligned with our current business and employee
    retention objectives.
    During 2007, we continued our partnership with Yale University
    to create the BearingPoint Leadership Program at Yale School of
    Management, an innovative education and training program
    focusing on career and leadership development for our employees.
    In 2007, approximately 1,500 employees participated in the
    Yale program, and we currently estimate approximately 2,000 will
    participate in 2008. Participants are taught a curriculum
    jointly developed by a faculty composed of both Yale professors
    and BearingPoint specialists, including a consulting skills
    workshop for experienced professionals and management skills
    training for newly hired or promoted managers and managing
    directors.
    In April 2007, the U.S. Defense Contract Audit Agency
    (DCAA) issued a report on its audit of our financial
    capability, which concluded that our financial condition is
    acceptable for performing government contracts. The DCAA
    examined our financial condition and capability to determine if
    we have adequate financial resources to perform government
    contracts in the current and near-term (up to one year). 36




---



##### Table of Contents




    On February 6, 2007, Standard & Poors
    withdrew our senior unsecured rating of B- and our subordinated
    debt rating of CCC+ and removed them from CreditWatch.
    Separately, on December 7, 2007, Moodys confirmed our
    B2 corporate family rating, assigned us a negative rating
    outlook and downgraded the ratings of our Series A
    Debentures and Series B Debentures to Caa1 from B3.
    In early 2007, we launched a new brand strategy and messaging
    platform to more aggressively increase awareness of BearingPoint
    as a leading global management and technology company. This
    included an internal launch of our branding campaign to our
    employees to help improve communication, increase employee
    morale and retention, and equip employees with enhanced sales
    and marketing materials to be more successful in the
    marketplace. In connection with our new brand strategy, we
    initiated a fully integrated marketing program featuring our
    re-designed Internet site, print and online advertising, events,
    sponsorships, thought leadership, public relations and client
    references.
    In 2007, we received a number of high-profile awards and
    industry recognition, providing independent, third-party
    acknowledgement of our significant company achievements and
    capabilities. These accolades included:  
    Named Worldwide Systems Integrator of the Year by
    FileNet.
    Designated 2007 Global Systems Integrator of the
    Year by Cognos.
    Won SAP Pinnacle Award for Thought Leadership in Enterprise
    Service-Oriented
    Architecture.
    Called a leader in Risk Consulting Services by Forrester.
    Listed among leading companies in the InformationWeek500.
    Named as one of the Top 10 Most Trusted Management
    Consulting Firms in China by the China Enterprise
    Confederation.  
    Effective as of October 22, 2007, our Board approved an
    amendment to our existing shareholder rights agreement. As
    amended, a shareholders right under the agreement to
    acquire additional shares of stock will not trigger unless
    (a) a shareholder who is a passive investor
    acquires 20% or more of our common stock or (b) a
    shareholder who is not a passive investor acquires
    15% or more of our common stock. Prior to the amendment, these
    rights were triggered upon a shareholder acquiring 15% or more
    of our common stock in all instances.  Principal
    Business Priorities for 2008 and Beyond
    Leverage Opportunities Across our Global Footprint.
  
    Leverage our Global Delivery Model. We remain committed
    to our global delivery model, and we will continue to deliver
    consistent, sustainable solutions to our clients worldwide,
    while maintaining world class on-shore and off-shore
    capabilities to meet the ever changing needs of our clients.
    This includes: optimizing our global operating model and
    delivery capabilities; leveraging our strong Public Services
    franchise globally; and building market awareness under one
    global brand.
    Maintain Focus on Key Clients, Marketing and Offerings.
    We will continue to selectively target and focus on clients,
    markets and offerings that we believe will offer the greatest
    growth, profitability and opportunity. We will strategically
    leverage our industry and solution expertise along with our 37




---



##### Table of Contents



business partners and other core channels to market to
    effectively deliver our capabilities in these areas.  
    Differentiate through our Solutions. We will continue to
    target and invest in higher-margin, higher-growth solutions that
    are relevant to our clients needs and that we can provide
    in a compelling, differentiated manner. In 2008, we will invest
    in a profitable portfolio of solutions, continue to target
    segments, geographies and accounts where we can grow, lead and
    be profitable, and focus upon translating our intellectual
    property and industry experience into innovative solutions to
    key client needs.  Attract, Develop and Retain a World-Class Employee
    Base.
  
    Reduce Employee Attrition. We continue in our efforts to
    reduce attrition by raising our levels of employee ownership to
    align the interests of our employees with those of our
    shareholders, providing improved training opportunities, and
    seeking to better understand and manage employee career
    expectations. We experienced additional improvement in our
    voluntary employee attrition rate during the fourth quarter of
    2007, in comparison to the third quarter of 2007. We are
    optimistic that becoming timely in our financial and SEC
    periodic reporting and again being able to focus singularly on
    our business strategy will continue to improve our attrition
    rates.
    Promote a Pay for Performance Culture. We
    believe that providing a pay for performance culture
    that is communicated both clearly and consistently to our
    employees will enhance their understanding of how to succeed
    within our company. In 2008, we will strive to bring more
    clarity and consistency to our bonus and equity programs to
    effectively provide proper incentives to motivate and reward our
    employees for their contributions to the success of our business.
    Increase Employee Share Ownership. During the fourth
    quarter of 2007, we became current in the filing of our SEC
    periodic reports, and were able to sell shares to our employees
    under our ESPP. We expect to continue to provide our employees
    with regular opportunities to acquire greater ownership in our
    company through the ESPP.
    Enhance Employee Training. We plan to enhance career
    development and training at all levels, including the expansion
    of our Yale program, which has been highly successful in
    training our employees, increasing employee satisfaction and
    reducing attrition for those who attend the program.
    Monitor Employee Satisfaction. As part of our efforts to
    maintain a culture consistent with our values, we will monitor
    employee satisfaction through regular surveys and hold our
    leaders accountable for improving the results of these surveys
    and for taking appropriate actions to address concerns and
    issues raised.
    Enhance our Equity Award Structure. In early 2007, we
    granted approximately 22.4 million PSUs to our
    highest-performing managing directors and senior managers. The
    PSUs were issued as single, three-year cliff vesting awards
    rather than several, smaller, periodic awards, primarily to
    promote the longer retention of our employees. As of
    December 31, 2007, approximately 18.2 million PSUs
    were outstanding.   38




---



##### Table of Contents



Drive Operational Excellence.
  
    Drive Higher Operating Margins. We will strive to achieve
    higher operating margins by targeting revenue growth in
    strategic markets and through differentiated solutions, managing
    our costs of service by monitoring our utilization rates,
    broadening our people pyramid and enhancing our mix
    of off-shore and on-shore service delivery, and continuing to
    achieve infrastructure cost reductions through 2008.
    Generate a Culture of Accountability. We must strive to
    drive higher operating margins through operational excellence
    and financial discipline. We will monitor the metrics that we
    believe are critical to driving profitability and positive cash
    flow, and we will hold our employees accountable for their
    performance. To further a culture of accountability, each of our
    operating segments will be measured according to key performance
    indicators of their respective business operations. For
    information on these key performance indicators, see
     Overview  Key Performance
    Indicators.
    Replace Our North American Financial Reporting Systems.We are currently in the process of replacing our North
    American financial reporting systems. To date, we are on
    schedule and have completed various assessments of our new North
    American financial system. In early 2008, we anticipate
    completing the steps necessary to start systems integration
    testing, such as mock data conversion, increasing involvement by
    our operating segments, and the development of various reports,
    interfaces and enhancements. Other major milestones to be
    completed include: systems integration review, system build
    review and user test acceptance.
    Strengthen our Balance Sheet. In 2008, we will continue
    to seek improvements in our quarterly DSO balances and to
    increase our operational focus on improving operating margins.
    We are currently undertaking an extensive review of our current
    capital structure and considering our alternatives for
    optimizing the debt and equity components of that structure. In
    April 2009, holders of our April 2005 Convertible Debentures
    will have the right to demand payment of the principal of their
    debentures. We believe that achieving our 2008 operational and
    financial plans will permit us to honor these obligations by
    making payments out of our cash balances. Being able to repay
    these debentures with cash generated from our operations would
    represent not only a significant de-leveraging of our balance
    sheet but also a positive affirmation that our core business
    remains solid and capable of operating profitably.
    Remain Timely in our Financial and SEC Periodic Reporting.With the filing of this Annual Report, we have become timely
    in the filing of our SEC periodic reports for the first time
    since 2005. We have not yet, however, demonstrated our ability
    to consistently file our SEC periodic reports on a timely basis.
    While we believe we have made significant improvements in our
    periodic financial closing process, we will not be able to fully
    minimize the amount of time required to conduct our periodic
    financial closing process until we have remediated the material
    weaknesses in our internal control over financial reporting and
    fully transitioned to our new North American financial reporting
    system. Based on our management teams most recent review,
    we currently expect that all steps necessary to remediate our
    remaining material weaknesses related to revenue recognition,
    accounts payable disclosures and our Asia Pacific financial
    statement close and reporting process will be completed during
    2008. Full remediation can only be achieved, however, after
    appropriate internal 39




---



##### Table of Contents



assessment, including testing and auditing procedures have been
    completed. As a result, the exact date of full remediation of
    each material weakness remains subject to change. Until that
    time, we will continue to maintain our focus on shortening our
    financial closing process and enhancing our controls in order to
    remain timely in the filing of our SEC periodic reports.    Segments
      Year
    Ended December 31, 2007 Compared to Year Ended
    December 31, 2006
  Revenue.
  Year Ended December 31,2007


2006


$ Change


% ChangeRevenuePublic Services

$
1,432,645


$
1,339,358


$
93,287



7.0
%Commercial Services


509,789



554,806



(45,017
)


(8.1
)%Financial Services


264,198



399,331



(135,133
)


(33.8
)%EMEA


791,298



703,083



88,215



12.5
%Asia Pacific


362,715



360,001



2,714



0.8
%Latin America


90,091



82,319



7,772



9.4
%Corporate/Other


4,826



5,105



(279
)


n/mTotal

$
3,455,562


$
3,444,003


$
11,559



0.3
%   40




---



##### Table of Contents



Impact of


Revenue growthcurrency


(decline), net offluctuations


currency impact


TotalRevenuePublic Services


0.0
%


7.0
%


7.0
%Commercial Services


0.0
%


(8.1
)%


(8.1
)%Financial Services


0.0
%


(33.8
)%


(33.8
)%EMEA


9.4
%


3.1
%


12.5
%Asia Pacific


1.7
%


(0.9
)%


0.8
%Latin America


9.5
%


(0.1
)%


9.4
%Corporate/Other


n/m



n/m



n/mTotal


2.3
%


(2.0
)%


0.3
%    n/m = not meaningful
  
    Public Servicesrevenue increased in 2007 due to
    significant revenue growth in our Emerging Markets, SLED and
    Civilian sectors. Revenue growth within these sectors was
    partially derived from expected increases in work on several
    large existing multi-year contracts signed in prior years.
    Revenue in our Defense sector declined somewhat, due to
    congressional decisions regarding ongoing funding by the
    U.S. government of the continuing war on terrorism and
    combat operations in Iraq and Afghanistan, as well as increased
    budgetary pressures on U.S. defense spending. The
    non-governmental portion of our Healthcare sector also
    experienced revenue declines.
    Commercial Servicesrevenue decreased in 2007. While we
    experienced significant revenue growth in our Energy sector as
    client demand for the Companys industry-specific solutions
    increased, overall, revenue decreased due to declines in the
    Communications and Media, High Technology and Manufacturing
    sectors. These declines were due, in part, to decreased business
    levels caused by consolidation within the telecommunications
    industry and disputes with two significant telecommunications
    clients in that sector.
    Financial Servicesrevenue decreased in 2007 due to
    significant revenue declines across all of its industry sectors.
    Revenue decreases were attributable to several factors,
    including the winding down of the segments largest client
    engagement during 2007. The continuing effects of losses of
    senior staff in certain of our higher rate business sectors also
    attributed to revenue declines in 2007. In addition,
    difficulties in securing long-term client commitments and delays
    by clients in implementing new initiatives given the recently
    reported industry-wide losses related to asset write-downs all
    had a negative effect on revenue on a year-over-year basis.
    EMEArevenue increased in 2007, primarily as a result of
    the favorable impact of the strengthening of foreign currencies,
    primarily the Euro, against the U.S. dollar, but also due
    to significant revenue increases in France, Russia and
    Switzerland. Revenue growth in France was due to an expanding
    systems implementation practice while revenue growth in Russia
    and Switzerland was generally attributable to increased demand
    for our consulting services in those markets. These increases
    were partially offset by revenue declines in Spain and the
    United Kingdom. Revenue in the United Kingdom declined due to
    the reduction in the volume of work provided to multi-national
    clients in 2007, and the decline in revenue in Spain was
    attributable to our strategic decision to reduce our activities
    in this country.
    Asia Pacificrevenue increased in 2007, primarily as a
    result of the favorable impact of the strengthening of foreign
    currencies against the U.S. dollar. Significant revenue
    growth was achieved in Japan and to a lesser extent in China.
    These increases continue to be offset by lower revenue in
    Australia, Korea and New Zealand. Japanese revenue increased due
    to continued revenue growth from systems implementation
    contracts and projects involving compliance with Japans
    Financial Instruments and Exchange Law. This growth began in
    2006 and has continued throughout 2007. 41




---



##### Table of Contents



China revenue increased as a result of significant new contracts
    signed with several large multi-national clients in 2007. Lower
    revenue in Australia and New Zealand resulted from the winding
    down or completion of several significant client engagements and
    partially due to deteriorating market conditions.  
    Latin Americarevenue increased in 2007, with Brazil and
    Mexico contributing equally to the growth in U.S. dollars.
    The favorable impact of the strengthening of the Brazilian Real
    against the U.S. dollar served to offset local currency
    revenue declines in Brazil.
    Corporate/Other: Our Corporate/Other segment does not
    contribute significantly to our revenue.  Gross Profit.
  
    Professional compensation expense increased as a percentage of
    revenue to 53.4% for 2007, compared to 49.8% for 2006. We
    experienced a net increase in professional compensation expense
    of $129.9 million, or 7.6%, to $1,846.6 million for
    2007 over $1,716.6 million for 2006. The increase in
    professional compensation was primarily due to merit-based
    annual salary increases, increases in stock-based compensation
    expense for PSUs, RSUs and, to a lesser extent, cash bonuses.
    Other direct contract expenses decreased as a percentage of
    revenue to 23.7% for 2007 compared to 26.0% for 2006. We
    experienced a net decrease in other direct contract expenses of
    $77.4 million, or 8.6%, to $819.6 million for 2007
    from $897.0 million for 2006. The decrease was driven
    primarily by reduced subcontractor expenses as a result of
    increased use of our internal resources. In addition, the
    decline was driven by higher other direct contract expenses
    recorded in the first quarter of 2006 related to the HT Contract.
    Other costs of service as a percentage of revenue increased to
    8.7% for 2007 from 7.3% for 2006. We experienced a net increase
    in other costs of service of $49.8 million, or 19.9%, to
    $300.0 million for 2007 from $250.2 million for 2006.
    The increase was primarily due to an increase in non-billable
    employees over the prior year, due in part to the redeployment
    of existing employees from client-facing roles to practice
    support roles, which resulted in related salaries and expenses
    now being reflected in other costs of service rather than
    professional compensation expense.
    In 2007 we recorded, within the Corporate/Other operating
    segment, a charge of $20.9 million for lease and facilities
    restructuring costs, compared to a $29.6 million charge for
    lease and facilities restructuring costs in 2006. These costs
    for 2007 related primarily to the fair value of future lease
    obligations associated with office space, primarily within the
    EMEA and North America regions, which we will no longer be using. 42




---



##### Table of Contents



Gross Profit by Segment.
  Year Ended December 31,2007


2006


$ Change


% ChangeGross ProfitPublic Services

$
263,431


$
263,841


$
(410
)


(0.2
)%Commercial Services


81,656



81,419



237



0.3
%Financial Services


41,627



135,187



(93,560
)


(69.2
)%EMEA


153,959



129,523



24,436



18.9
%Asia Pacific


81,946



80,448



1,498



1.9
%Latin America


(11,240
)


9,058



(20,298
)


n/mCorporate/Other


(142,854
)


(148,950
)


6,096



n/mTotal

$
468,525


$
550,526


$
(82,001
)


(14.9
)%   Year Ended December 31,2007


2006Gross Profit as a Percentage of RevenuePublic Services


18.4
%


19.7
%Commercial Services


16.0
%


14.7
%Financial Services


15.8
%


33.9
%EMEA


19.5
%


18.4
%Asia Pacific


22.6
%


22.3
%Latin America


(12.5
)%


11.0
%Corporate/Other


n/m



n/mTotal


13.6
%


16.0
%    n/m = not meaningful
    
    Public Servicesgross profit remained relatively
    unchanged in 2007. Significant year-over-year revenue increases
    were offset by a significant increase in professional
    compensation expense of $78.1 million, or 13.2%, over 2006,
    and additional costs and revenue write-downs of approximately
    $15 million were taken on two of our SLED sector contracts.
    The increase in professional compensation expense was associated
    with the hiring of additional personnel needed to meet the
    demand for our services, as well as bonus payments and accruals,
    and increases in stock-based compensation expense.
    Commercial Servicesgross profit remained relatively
    unchanged in 2007, with declines in subcontractor expenses,
    professional compensation and reimbursable client expenses being
    partially offset by reductions in revenue and contract losses.
    In 2006, Commercial Services gross profit was negatively
    impacted by losses of approximately $86.2 million
    attributable to settlements reached with two telecommunications
    clients, as compared to losses of approximately
    $16.7 million in 2007, primarily in connection with a
    single Communications and Media sector project.
    Financial Servicesgross profit significantly decreased
    in 2007, primarily due to significantly lower revenue combined
    with a decline in higher margin engagements in the total mix of
    engagements. 43




---



##### Table of Contents



Declines in revenue were partially offset by declines in
    compensation expense, reimbursable client expenses and
    subcontractor expenses. These declines in costs of services were
    at a slower pace than the declines in revenue, resulting in
    lower gross profits in 2007 as compared to 2006.  
    EMEAgross profit increased in 2007, primarily due to
    overall higher revenue in the EMEA region as well as improved
    profitability in Germany, France and Switzerland as a result of
    higher utilization and lower costs. This increase was partially
    offset by an increase in professional compensation due to a
    larger number of additional personnel to meet the demand for our
    services and, to a lesser extent, an increase in other costs of
    services. The increases in professional compensation and other
    costs of services were partially offset by decreases in costs
    associated with subcontractors due largely to our effort to
    increase the use of internal resources.
    Asia Pacificgross profit increased in 2007, due to
    increased revenue and improvements in profitability and staff
    utilization in our Japanese business. In addition, positive
    growth in gross profit in the region was realized from decreases
    in other direct contract expenses as a result of decreased
    subcontractor usage in Japan, which were substantially offset by
    higher professional compensation costs as well as increased
    contract loss reserves of $12.1 million recorded during
    2007 as compared to 2006.
    Latin America gross profit decreased in 2007, due to
    significant increases in compensation expense, other direct
    contract expenses and contract
    write-offs.
    These increases were driven by an increase in employee
    compensation recognized as a result of statutory overtime
    regulations and other employee benefits in Brazil, and to a
    lesser extent by increased subcontractor expenses in Mexico.
    Corporate/Otherconsists primarily of rent expense and
    other facilities related charges.  Amortization of Purchased Intangible Assets.
  Selling, General and Administrative Expenses.
  Interest Income.
  Interest Expense.
  Insurance Settlement.
  Other (Expense) Income, net.
 44




---



##### Table of Contents



Income Tax Expense.
  Net Loss.
  Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
  Revenue.
  Year Ended December 31,2006


2005


$ Change


% ChangeRevenuePublic Services

$
1,339,358


$
1,293,390


$
45,968



3.6
%Commercial Services


554,806



663,797



(108,991
)


(16.4
)%Financial Services


399,331



379,592



19,739



5.2
%EMEA


703,083



662,020



41,063



6.2
%Asia Pacific


360,001



312,190



47,811



15.3
%Latin America


82,319



75,664



6,655



8.8
%Corporate/Other


5,105



2,247



2,858



n/mTotal

$
3,444,003


$
3,388,900


$
55,103



1.6
%   45




---



##### Table of Contents



Impact of


Revenue growthcurrency


(decline), net offluctuations


currency impact


TotalRevenuePublic Services


0.0
%


3.6
%


3.6
%Commercial Services


0.0
%


(16.4
)%


(16.4
)%Financial Services


0.0
%


5.2
%


5.2
%EMEA


0.9
%


5.3
%


6.2
%Asia Pacific


(3.2
)%


18.5
%


15.3
%Latin America


9.3
%


(0.5
)%


8.8
%Corporate/Other


n/m



n/m



n/mTotal


0.1
%


1.5
%


1.6
%    n/m = not meaningful
  
    Public Servicesrevenue increased in 2006, with strong
    revenue growth in certain sectors, particularly in the SLED and
    Emerging Markets sectors. SLED revenue increased due to
    significant increases in revenue from a number of our key
    clients. Emerging Markets revenue increased primarily from
    revenue increases on several large existing multi-year contracts
    and also from revenue associated with several new contracts
    signed in 2006. Revenue declined in our Civilian business sector
    due to reduced information technology spending and an
    increasingly competitive environment.
    Commercial Servicesrevenue decreased in 2006, primarily
    due to a $57.5 million year-over-year decrease in revenue
    associated with the HT Contract and a reduction of
    $20.0 million in revenue related to the resolution of a
    billings dispute with another large telecommunications client
    regarding an engagement completed in 2003. Reduced customer
    demand for our services, particularly in the telecommunications
    industry, also affected our revenue. These decreases were
    partially offset by the recognition in 2006 of approximately
    $22.3 million in previously deferred revenue.
    Financial Servicesrevenue increased in 2006, primarily
    due to revenue growth in our Insurance and Banking sectors,
    offset by declines in our Global Markets sector. Insurance
    sector revenue increased in response to industry-wide demand for
    major technology updates and upgrades to operational systems.
    Banking sector revenue increases were attributable to existing
    client engagements and the introduction of some new clients into
    our traditional client base. Global Markets sector revenue
    declined as we increased the proportion of work derived from
    lower rate per hour offshore resources in response to client
    demand, which affected our revenue.
    EMEArevenue increased in 2006, primarily due to strong
    revenue growth in the United Kingdom, France, Ireland and
    Switzerland. Revenue growth in the United Kingdom was driven by
    our continued expansion in that region, while France continued
    to benefit from an expanding systems integration practice and
    additional penetration into the French public sector market in
    2006. Ireland and Switzerland revenue growth were generally
    attributable to increased demand for consulting services in
    local markets. Revenue in Germany declined due to a combination
    of the impact of adjustments in billable headcount precipitated
    by the restructuring of our German practice, increased pressure
    on pricing, and a reduction in the spending levels of German
    public sector clients.
    Asia Pacificrevenue increased in 2006, primarily due to
    significant revenue growth in Australia and Japan. Australian
    revenue increased primarily due to a significant new client
    engagement in the telecommunications industry. Japanese revenue
    increased due to revenue growth from system implementation
    contracts and projects involving compliance with Japans
    Financial Instruments and Exchange Law, though a substantial
    portion of this revenue growth was derived from the use of
    subcontractors. Asia Pacific revenue was negatively affected in
    2006 by the weakening of foreign currencies against the
    U.S. dollar, primarily the Japanese Yen. 46




---



##### Table of Contents




    Latin Americarevenue increased in 2006, primarily as a
    function of the weakening of the U.S. dollar against local
    currencies in Latin America (particularly the Brazilian Real),
    along with local currency revenue growth and increasing
    engagement hours in Brazil, offset by deteriorating revenue in
    Mexico. Revenue in Brazil increased due to the addition of
    significant client engagements, while revenue in Mexico declined
    as they continue to restructure the business to position itself
    for future growth.
    Corporate/Other: Our Corporate/Other segment does not
    contribute significantly to our revenue.  Gross Profit.
  
    Professional compensation expense decreased as a percentage of
    revenue to 49.8% for 2006, compared to 52.2% for 2005. We
    experienced a net decrease in professional compensation expense
    of $53.8 million, or 3.0%, to $1,716.6 million for
    2006 from $1,770.4 million for 2005. The decrease in 2006
    from 2005 was primarily due to higher professional compensation
    expense recorded in 2005 (as compared to 2006) related to
    the loss accrual for the HT Contract. Stock compensation expense
    for 2006 was $41.0 million, as compared to
    $76.3 million for 2005. Cash bonuses earned in 2006 by our
    highest-performing employees were $49.0 million, as
    compared to $17.8 million earned in 2005.
    Other direct contract expenses decreased as a percentage of
    revenue to 26.0% for 2006 compared to 28.7% for 2005. We
    experienced a net decrease in other direct contract expenses of
    $75.8 million, or 7.8%, to $897.0 million for 2006
    from $972.8 million for 2005. The decrease in 2006 from
    2005 was primarily due to other direct contract expenses
    recorded in 2005 related to the loss accrual for the HT
    Contract. In addition, the decline was driven by reduced
    subcontractor expenses as a result of the increased use of
    internal resources and a decrease of resales of procured
    materials.
    Other costs of service as a percentage of revenue decreased to
    7.3% for 2006 from 7.6% for 2005. We experienced a net decrease
    in other costs of service of $7.9 million, or 3.1%, to
    $250.2 million for 2006 from $258.1 million for 2005.
    The decrease in 2006 from 2005 was primarily attributable to a
    reduction in administrative support and related costs for our
    operating segments.
    In 2006 we recorded, within the Corporate/Other operating
    segment, a charge of $29.6 million for lease and facilities
    restructuring costs, compared to a $29.6 million charge for
    lease, facilities and other exit activities in 2005. These costs
    for 2006 related primarily to the fair value of future lease
    obligations associated with office space, primarily within the
    EMEA and North America regions, which we will no longer be using. 47




---



##### Table of Contents



Gross Profit by Segment.
  Year Ended December 31,2006


2005


$ Change


% ChangeGross ProfitPublic Services

$
263,841


$
238,904


$
24,937



10.4
%Commercial Services


81,419



(11,142
)


92,561



830.7
%Financial Services


135,187



110,602



24,585



22.2
%EMEA


129,523



87,702



41,821



47.7
%Asia Pacific


80,448



53,636



26,812



50.0
%Latin America


9,058



4,321



4,737



109.6
%Corporate/Other


(148,950
)


(126,031
)


(22,919
)


n/mTotal

$
550,526


$
357,992


$
192,534



53.8
%   Year Ended December 31,2006


2005Gross Profit as a Percentage of RevenuePublic Services


19.7
%


18.5
%Commercial Services


14.7
%


(1.7
)%Financial Services


33.9
%


29.1
%EMEA


18.4
%


13.2
%Asia Pacific


22.3
%


17.2
%Latin America


11.0
%


5.7
%Corporate/Other


n/m



n/mTotal


16.0
%


10.6
%    n/m = not meaningful
    
    Public Servicesgross profit increased in 2006 despite a
    substantial reduction in gross profits in our SLED practice and
    increases in professional compensation expense related to hiring
    needs related to demand for our services.
    Commercial Servicesgross profit increased in 2006,
    despite significantly lower revenue, primarily due to a
    $45.5 million year-over-year reduction in losses from the
    HT Contract. Other factors contributing to the increase in gross
    profit were the cost savings realized from 2005 workforce
    realignments and reduced subcontractor expenses as a result of
    the increased use of internal resources.
    Financial Servicesgross profit increased in 2006, due to
    higher revenue combined with a decline in compensation expenses.
    The decrease in compensation expenses is primarily due to more
    efficient utilization of Company shared staff in this segment
    and efficient use of offshore resources.
    EMEAgross profit increased in 2006, due primarily to
    higher revenue and improved profitability in France and Ireland
    along with significantly improved profitability in Spain as a
    result of higher utilization and lower costs. Slight declines in
    compensation expense and other direct contract expenses also
    contributed to the increase in gross profit, though compensation
    expense for 2006 48




---



##### Table of Contents



continued to be affected by severance and other costs related to
    the internal restructuring of the Companys German practice.  
    Asia Pacificgross profit increased in 2006, primarily
    due to significant improvements in profitability and staff
    utilization in the Companys Australian and Chinese
    businesses. Due to the high demand for resources in the Japanese
    market and limited availability of qualified personnel,
    increases in subcontractor expenses served to depress the growth
    of gross profit in the Companys Japanese operation.
    Significant regional improvements in compensation expense
    derived from the 2005 workforce reductions in Japan and China
    were substantially offset by additional compensation expenses
    associated with the use of the Companys personnel from
    outside the region in connection with a significant new
    telecommunications industry engagement in Australia.
    Latin Americagross profit increased in 2006, due to
    higher revenue offset by an increase in compensation expenses,
    driven by higher billable headcount to meet the growth of our
    business in the region, predominantly Brazil.
    Corporate/Otherconsists primarily of rent expense and
    other facilities related charges.  Amortization of Purchased Intangible Assets.
  Goodwill Impairment Charges.
  Selling, General and Administrative Expenses.
  Interest Income.
  Interest Expense.
  Insurance Settlement.
  Other Income/Expense, net.
  Income Tax Expense.
 49




---



##### Table of Contents



Net Loss. non-cash
  Obligations
    and Commitments
    Payments due by PeriodLess than








More thanContractual Obligations

Total


1 year


1-3 years


3-5 years


5 yearsLong-term debt(1)

$
1,493,597


$
56,276


$
136,406


$
374,515


$
926,400Operating leases


312,489



83,984



123,822



65,469



39,214Purchase obligations(2)


100,114



44,300



38,452



10,822



6,540Obligations under the pension and postretirement medical plans


55,228



3,805



8,462



9,734



33,227Total(3)

$
1,961,428


$
188,365


$
307,142


$
460,540


$
1,005,381     (1)
    
    Long-term debt includes both
    principal and interest scheduled payment obligations. Certain of
    our long-term debt allow the holders the right to convert the
    debentures into shares of our common stock or cash (at the
    Companys option) in earlier periods than presented above.
    For additional information, see Note 6, Notes
    Payable, of the Notes to Consolidated Financial Statements.(2)
    
    Purchase obligations include
    material agreements to purchase goods or services, principally
    software and telecommunications services, that are enforceable
    and legally binding and that specify all significant terms,
    including: fixed or minimum quantities to be purchased; fixed,
    minimum or variable price provisions; and the approximate timing
    of the transaction. Purchase obligations exclude agreements that
    are cancelable without penalty. From time to time, our operating
    segments, particularly our Public Services segment, enter into
    agreements with vendors in the normal course of business that
    support existing contracts with our clients (client vendor
    agreements). The vast majority of these client vendor
    agreements involve subcontracts for services to be provided by
    third-party vendors. These agreements may be in the form of
    teaming agreements or may be a client requirement, and can span
    multiple years, depending on the duration of the underlying
    arrangement with our clients. We are liable for payments to
    vendors under these client vendor agreements. We are unable to
    cancel some of these client vendor agreements unless the related
    agreement with our client is terminated
    and/or upon
    payment of a penalty. However, our clients are generally
    obligated by contract to reimburse us, directly or indirectly,
    for payments we make to vendors under these agreements. We are
    not aware of any payments we have been required to make to
    vendors after a related client contract has been terminated. We
    currently estimate that the total payments we could be obligated
    to make under all client vendor agreements known to us would 50




---



##### Table of Contents



be approximately $99,000, however,
    we are unable to identify which of these agreements might
    constitute purchase obligations.(3)
    
    The above table does not reflect
    unrecognized tax benefits of $314,961. Due to uncertainty
    regarding the completion of tax audits and possible outcomes,
    the estimate of obligations related to unrecognized tax benefits
    cannot be made. For additional information, see Note 14,
    Income Taxes, to the Consolidated Financial
    Statements.  Liquidity
    and Capital Resources
    Year Ended December 31,2006 to 20072007


2006


2005


ChangeNet cash provided by (used in):Operating activities

$
(194,187
)

$
58,680


$
(113,071
)

$
(252,867
)Investing activities


(35,942
)


67,570



(141,043
)


(103,512
)Financing activities


290,566



(7,316
)


274,152



297,882Effect of exchange rate changes on cash and cash equivalents


16,807



15,297



(9,508
)


1,510Net increase in cash and cash equivalents

$
77,244


$
134,231


$
10,530


$
(56,987
)   Operating Activities.
    Investing Activities.
    Financing Activities.
   51




---



##### Table of Contents



Additional
    Cash Flow Information
  2007
    Outlook.
    and/or
 52




---



##### Table of Contents



Debt
    Obligations
    Balance











BalanceDecember 31,











December 31,2006


Borrowings


Repayments


Other(1)


2007Convertible debentures

$
671,490


$



$



$
4,121


$
675,611Term Loans under the 2007 Credit Facility






300,000



(2,250
)






297,750Other


360



2,853



(1,931
)






1,282Total notes payable

$
671,850


$
302,853


$
(4,181
)

$
4,121


$
974,643   Balance











BalanceDecember 31,











December 31,2005


Borrowings


Repayments


Other(1)


2006Convertible debentures

$
668,054


$



$



$
3,436


$
671,490Yen-denominated term loan (January 31, 2003)


2,803







(2,802
)


(1
)


Yen-denominated term loan (June 30, 2003)


1,402







(1,442
)


40



Other


2,501







(2,262
)


121



360Total notes payable

$
674,760


$



$
(6,506
)

$
3,596


$
671,850     (1)
    
    Other changes in notes payable
    consist of amortization of notes payable discount and foreign
    currency translation adjustments.    Debt
    Ratings
    2007
    Credit Facility
   53




---



##### Table of Contents




    The affirmative covenantsinclude, among other things:
    the delivery of unaudited quarterly and audited annual financial
    statements, all in accordance with generally accepted accounting
    principles; certain monthly operating metrics and budgets;
    compliance with applicable laws and regulations (excluding,
    prior to October 31, 2008, compliance with certain filing
    requirements under the securities laws); maintenance of
    existence and insurance; after October 31, 2008, as
    requested by the Administrative Agent, reasonable efforts to
    maintain credit ratings; and maintenance of books and records
    (subject to the material weaknesses previously disclosed in our
    Annual Report on
    Form 10-K
    for the year ended December 31, 2005).
    The negative covenants, which (subject to exceptions)
    restrict certain of our corporate activities, include, among
    other things, limitations on: disposition of assets; mergers and
    acquisitions; payment of dividends; stock repurchases and
    redemptions; incurrence of additional indebtedness; making of
    loans and investments; creation of liens; prepayment of other
    indebtedness; and engaging in certain transactions with
    affiliates.   54




---



##### Table of Contents



Repurchase
    of Debentures at the Option of the Holders
    voluntary or optional
    Discontinued
    2005 Credit Facility
     55




---



##### Table of Contents



Guarantees
    and Indemnification Obligations
      and/or
  Critical
    Accounting Policies and Estimates
    
    revenue recognition,
    valuation of accounts receivable,
    valuation of goodwill, 56




---



##### Table of Contents




    accounting for income taxes,
    valuation of long-lived assets,
    accounting for leases,
    restructuring charges,
    legal contingencies,
    retirement benefits,
    accounting for stock-based compensation,
    accounting for intercompany loans, and
    accounting for employee global mobility and tax equalization.    Revenue
    Recognition
  time-and-material,
  81-1, (SOP 81-1). and/or SOP 97-2, SOP 98-9 SOP 81-1, SOP 81-1
 57




---



##### Table of Contents



time-and-materials
  00-21, SOP 81-1 and/or
       58




---



##### Table of Contents



Valuation
    of Accounts Receivable
    Valuation
    of Goodwill
        Accounting
    for Income Taxes
   59




---



##### Table of Contents



Valuation
    of Long-Lived Assets
   60




---



##### Table of Contents



Accounting
    for Leases
    Restructuring
    Charges
  and/or
  Legal
    Contingencies
    Retirement
    Benefits
   61




---



##### Table of Contents



Accounting
    for Stock-Based Compensation
       62




---



##### Table of Contents



Accounting
    for Intercompany Loans
    Accounting
    for Employee Global Mobility and Tax Equalization
    Recently
    Issued Accounting Pronouncements
     63




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Interest
    Rate Risk
      Expected Maturity DateYear ended December 31,(In thousands U.S. Dollars, except interest rates)2008


2009


2010


2011


2012


Thereafter


Total


Fair ValueU.S. Dollar Functional CurrencySeries A Convertible Subordinated Debentures





















$
250,000


$
250,000


$
146,875Average fixed interest rate






















2.50
%


2.50
%U.S. Dollar Functional CurrencySeries B Convertible Subordinated Debentures





















$
200,000


$
200,000


$
106,000Average fixed interest rate






















4.10
%


4.10
%U.S. Dollar Functional CurrencySeries C Convertible Subordinated Debentures





















$
200,000


$
200,000


$
167,760Average fixed interest rate






















5.00
%


5.00
%U.S. Dollar Functional CurrencyConvertible Senior Subordinated Debentures(1)









$
40,000














$
40,000


$
24,346Average fixed interest rate










0.50
%














0.50
%U.S. Dollar Functional CurrencyTerm Loans under the 2007 Credit Facility

$
3,000


$
3,000


$
3,000


$
3,000


$
285,750






$
297,750


$
297,750Average fixed interest rate


8.88
%


8.88
%


8.88
%


8.88
%


8.88
%






8.88
%U.S. Dollar Functional CurrencyOther

$
700


$
582


















$
1,282


$
1,282Average fixed interest rate


8.49
%


8.49
%


















8.49
%     (1)
    
    The fair value was estimated using
    the Black-Scholes model with an expected volatility of 37.29%,
    risk-free interest rate of 3.06%, an expected life of
    2.5 years, and an expected dividend yield of zero. 64




---



##### Table of Contents



Foreign
    Currency Exchange Risk
    non-U.S. dollars
  ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Page F-1,
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE  client-auditor
  Regulation S-K, Form 10-K
   65




---



##### Table of Contents



Regulation S-K Regulation S-K.
  ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
    Managements
    Report on Internal Control over Financial
    Reporting
  Rules 13a-15(f) 15d-15(f)
  Internal Control  Integrated Framework
   66




---



##### Table of Contents




    We did not maintain effective controls over the completeness,
    accuracy, existence, valuation and disclosure of revenue, costs
    of service, accounts receivable, unbilled revenue, deferred
    contract costs, and deferred revenue. Specifically, we did not
    maintain effective controls, including monitoring by management,
    outside of our North American region to provide reasonable
    assurance that we had adequately evaluated customer contracts
    regarding the proper application of GAAP. Although numerous new
    controls over the accounts noted above have been implemented in
    our North American region, certain of these controls are not
    fully remediated or have not been operating for a sufficient
    amount of time to be deemed effective.
    We did not maintain effective controls over the completeness,
    accuracy and timeliness of the recording of accounts payable,
    accrued liabilities, other current and non-current liabilities.
    Specifically, we did not design effective controls over our
    period-end reporting to capture and accrue costs incurred but
    not yet invoiced by third party suppliers and contractors. In
    addition, we did not maintain adequate controls over the
    approval and processing of purchase orders.
    We did not maintain effective controls over our financial
    statement close and reporting process in our Asia Pacific
    region. Specifically, we did not maintain effective controls
    over the recording of recurring and non-recurring journal
    entries, nor did we provide reasonable assurance that accounts
    were complete and accurate and agreed to detailed support and
    that reconciliations of accounts were properly performed,
    reviewed and approved.  Internal
    Control  Integrated Framework
    Remediation
    of Material Weaknesses in Internal Control over Financial
    Reporting
      Changes
    in Internal Control over Financial Reporting
   67




---



##### Table of Contents




    Ongoing training efforts with regard to the application of GAAP
    and mandatory training with respect to the Foreign Corrupt
    Practices Act and Standards of Business Conduct;
    Implementation of numerous formal management financial review
    monitoring controls;
    Implementation of certain controls designed to identify
    non-routine and significant transactions; and
    Strengthening of policies and procedures across the organization.  Report
    of Ernst & Young LLP, Independent Registered Public
    Accounting Firm, on Internal Control over Financial
    Reporting
           68




---



##### Table of Contents




    the Company did not maintain effective controls over the
    completeness, accuracy, existence, valuation and disclosure of
    revenue, costs of service, accounts receivable, unbilled
    revenue, deferred contract costs, and deferred revenue,
    the Company did not maintain effective controls over the
    completeness, accuracy and timeliness of the recording of
    accounts payable, accrued liabilities, other current and
    non-current liabilities, and;
    the Company did not maintain effective controls over the
    financial statement close and reporting process in its Asia
    Pacific region.          ITEM 9B.
    OTHER
    INFORMATION   69




---



##### Table of Contents



PART III.  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    Class I
    Directors Whose Terms Expire in 2010
  Douglas C. Allred
  Betsy J. Bernard
  Spencer C. Fleischer
  Class II
    Directors Whose Terms Expire in 2008
  Wolfgang H. Kemna
  Albert L. Lord
  Eddie R. Munson
 70




---



##### Table of Contents



J. Terry Strange
  Class III
    Directors Whose Terms Expire in 2009
  F. Edwin Harbach
  Roderick C. McGeary
  Jill S. Kanin-Lovers
    Presiding
    Director of Executive Sessions of Non-Management
    Directors
    Audit
    Committee
   71




---



##### Table of Contents



Compensation
    Committee Interlocks and Insider Participation
    Standards
    of Business Conduct
  and/or www.bearingpoint.com
  Committee
    Charters
  www.bearingpoint.com. 908-607-2100.
  Annual
    Certifications
   72




---



##### Table of Contents



Annual
    Meeting
  Form 10-Q, Form 8-K
  Communications
    with Board of Directors
    c/o General
  1-800-206-4081 240-864-0229
  Section 16(a)
    Beneficial Ownership Reporting Compliance
   73




---



##### Table of Contents



ITEM 11.
    EXECUTIVE
    COMPENSATION  Compensation
    Discussion and Analysis
      Overall
    Compensation Philosophy and Objectives
    
    attract and retain the best possible talent;
    recognize and reward outstanding individual performance;
    motivate our people to deliver quality service to our clients,
    in order to drive client satisfaction and the profitability of
    our company, resulting in positive returns for our stockholders;
    provide for cash and long-term incentive compensation at levels
    that are competitive with companies within our industry and of
    similar size (targeting total compensation to remain at
    approximately the 50th percentile); and
    communicate metrics openly and transparently, to influence
    employee performance and accountability.  How
    Compensation is Determined
     74




---



##### Table of Contents



Accenture Ltd

Cisco Systems, Inc.

Gartner, Inc.ADVO, Inc.

Convergys Corporation

The GEO Group, Inc.APAC Customer Services, Inc.

eFunds Corporation

IKON Office Solutions, Inc.ARAMARK Corporation

Electronic Data Systems Corporation

IMS Health IncorporatedAutomatic Data Processing, Inc.

EMC Corporation

Jackson Hewitt Tax Service Inc.H&R Block, Inc.

Emdeon Corporation

Pitney Bowes Inc.Booz Allen Hamilton Inc.

Equifax Inc.

R.R. Donnelly & Sons CompanyCB Richard Ellis Group, Inc.

Equity Office Properties Trust

The Reynolds and Reynolds CompanyCDI Corp.

First Data Corporation

Robert Half International Inc.Ceridian Corporation

Fiserv, Inc.

Unisys CorporationCheckFree Corporation

G&K Services, Inc.

WPP Group plc     Accenture Ltd

Hewlett-Packard CompanyAffiliated Computer Services, Inc.

International Business Machines CorporationComputer Sciences Corporation

Marsh & McLennan Companies, Inc.Electronic Data Systems Corporation

Oracle CorporationEMC Corporation

Sun Microsystems, Inc.First Data Corporation

Unisys Corporation       Appointment of Ed Harbach as Chief Executive
    Officer.
 75




---



##### Table of Contents



Accenture Ltd

Dendrite International, Inc.

IKON Office Solutions, Inc.ADVO, Inc.

eBay Inc.

IMS Health IncorporatedAPAC Customer Services, Inc.

eFunds Corporation

Iron Mountain IncorporatedARAMARK Corporation

Electronic Data Systems Corporation

Kelly Services, Inc.Automatic Data Processing, Inc.

EMC Corporation

MacDonald, Dettwiler and AssociatesBooz Allen & Hamilton, Inc.

Equifax Inc.

Oracle CorporationThe Brinks Company

First Data Corporation

Pitney Bowes Inc.CA, Inc.

Fiserv, Inc.

Robert Half International Inc.Ceridian Corporation

G&K Services, Inc.

Symantec CorporationCheckFree Corporation

Gartner, Inc.

TeleTech Holdings, Inc.CitiStreet

The GEO Group, Inc.

Unisys CorporationConvergys Corporation

GTECH Holdings Corp

Viad CorpDeluxe Corporation

H&R Block, Inc.     Accenture Ltd

Gartner, Inc.Booz Allen Hamilton, Inc.

International Business Machines CorporationCapgemini U.S. LLC

Science Applications International CorporationDeloitte Consulting LLP

Unisys CorporationDiamond Management & Technology Consultants, Inc.     Principal
    Components of Executive Officer Compensation
     76




---



##### Table of Contents



Fixed
    Compensation
  Base Salaries.
        Variable
    Compensation
  Cash Awards.
 77




---



##### Table of Contents



F. Edwin Harbach:

    excellent communication to the
    Board regarding Company issues and challenges, and operational
    vision and goals;    development of metrics and
    scorecard to monitor Company performance;    operational improvements related
    to the participation of our engagement teams in providing
    financial information and updates into the financial closing
    process;    successful transition to new
    responsibilities and duties as Chief Executive Officer; and    evaluations by Board members.    78




---



##### Table of Contents



Judy Ethell:

    instrumental in Companys
    ability to become current in its SEC periodic reports;    progress achieved with respect to
    the remediation of internal control issues and Sarbanes-Oxley
    efforts;    achievement of cost reductions
    within finance; and    feedback provided by peers and
    direct reports, gathered through the Companys 360
    degree review process.Laurent Lutz:

    instrumental in Companys
    ability to become current in its SEC periodic reports;    successful resolution of contract
    disputes and litigation;    negotiation and structuring of the
    2007 Credit Facility;    development and leadership of
    legal and compliance functions; and    quality of analysis and guidance
    provided to the Board and its committees.   Long-Term
    Incentive Compensation
    Performance Share Units.
     79




---



##### Table of Contents



Restricted Stock Units.
  
    Mr. Lutz received a grant of RSUs in accordance with his
    employment arrangements with the Company, which provided that
    once the Company became current in its SEC periodic reports,
    Mr. Lutzs long-term incentive award would be paid in
    RSUs rather than in cash. At the time of Mr. Lutzs
    hire in 2006, we could not issue RSUs due to the existence of a
    blackout period under our 401(k) plan pursuant to
    Regulation BTR. After we took steps to amend the 401(k)
    plan, the blackout period ended as of September 14, 2006.
    Mr. Harbach received a grant of RSUs as part of his
    employment arrangement with the Company.
    Mr. You and Mr. McGeary received grants of RSUs as
    part of their bonus compensation for our 2006 fiscal year.  Stock Options.
    Other
    Compensation
  Deferred Compensation Plans.
  Other Benefits.
  Perquisites and Other Compensation. gross-up
 80




---



##### Table of Contents



Regulatory
    Considerations
    change-in-control
  REPORT OF
    THE COMPENSATION COMMITTEE
    OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
  Form 10-K Form 10-K.
    Jill S. Kanin-Lovers (Chair)*
    Douglas C. Allred**
    Betsy J. Bernard
    Eddie R. Munson***
  *Member of the Compensation Committee since May 10, 2007
    and Chair beginning November 5, 2007
    **Chair of the Compensation Committee until November 5,
    2007
    ***Member of the Compensation Committee since November 5,
    2007
 81




---



##### Table of Contents



Summary
    of Cash and Certain Other Compensation
    Summary
    Compensation Table
  Non-EquityIncentiveStock


Option


Plan


All OtherName and




Salary


Bonus


Awards


Awards


Compensation


Compensation


TotalPrincipal Position

Year


($)


($)(1)


($)(2)


($)(2)


($)


($)(1)


($)F. Edwin Harbach(3)


2007


$
686,830


$
1,350,046


$
1,710,473


$



$



$
152,364


$
3,899,713Chief Executive Officer


2006



























Judy A. Ethell(4)


2007



520,094



260,047



1,500,626



379,396







78,579



2,738,742Chief Financial Officer


2006



500,000



500,000



690,700



1,131,000







3,797



2,825,497Laurent C. Lutz(5)


2007



520,094



635,047



1,418,690







525,000
(6)


10,777



3,109,608General Counsel and Secretary


2006



411,059



1,311,059











525,000



78,431



2,325,549Roderick C. McGeary


2007



676,166







240,000















916,166Chairman of the Board


2006



662,640



50,712



250,000



263,732











1,227,084Richard J. Roberts(7)


2007



635,525







405,283



82,450







1,586



1,124,844Chairman, Global Public Services and


2006



650,000



50,700



855,400



332,160







3,977



1,892,237Former Chief Operating OfficerHarry L. You(8)


2007



791,229







122,346



3,056,537







107,237



4,077,349Former Chief Executive Officer


2006



750,000



58,500



938,900



2,519,300







331,828



4,598,528     (1)
    
    Unless otherwise noted,
    Bonus amounts consist of performance-based cash
    bonuses accrued in the fiscal year for which the bonus has been
    earned. We have entered into employment agreements with
    Mr. Harbach, Ms. Ethell and Mr. Lutz that set
    forth the terms of their compensation. Mr. You also had an
    employment agreement that set forth the terms of his
    compensation. All Other Compensation does not
    include matching contributions to be made by the Company under
    the 401(k) Plan for 2007, since these amounts are not finalized
    for payment until the following year.(2)
    
    Amounts reflected in the table as
    2007 equity compensation reflect the amount recognized for
    financial statement reporting purposes in 2007 in accordance
    with SFAS 123(R) for equity award expense. These amounts reflect
    the Companys accounting expense for these awards, and do
    not correspond to the actual value that may be recognized by the
    named executive officers. Whether and to what extent a named
    executive officer realizes value will depend on various factors,
    including actual operating performance, stock price fluctuations
    and the named executive officers continued employment. For
    a discussion of the assumptions used by the Company in
    calculating these amounts, see Item 7,
    Managements Discussion and Analysis of Financial
    Condition and Results of Operation  Accounting for
    Stock-Based Compensation, and Note 13,
    Stock-Based Compensation, of the Notes to
    Consolidated Financial Statements. For information regarding
    2007 Stock Awards and Option Awards, see
     Grants of Plan-Based Awards.(3)
    
    Mr. Harbachs annual base
    salary for 2007 was $700,000. The amount reported as
    Mr. Harbachs salary is the amount actually paid in
    2007. Mr. Harbachs Bonus amount for 2007
    consists of a signing bonus of $1,000,000 and a $350,046 cash
    incentive award for his 2007 performance.
    Mr. Harbachs All Other Compensation
    consists of $98,704 in reimbursements for costs associated with
    a furnished apartment in New York City for
    Mr. Harbachs use (including a monthly rental payment
    of $10,000 beginning on September 15, 2007, certain
    expenses incidental to the maintenance, furnishing and upkeep of
    the apartment and costs related to Mr. Harbachs
    moving expenses) and $53,660 in tax equalization payments with
    respect to the reimbursement of certain state taxes paid by
    Mr. Harbach resulting from work performed outside his state
    of residence. Mr. Harbach served as our President and Chief
    Operating Officer until December 3, 2007, when he became
    our Chief Executive Officer. In connection with
    Mr. Harbachs promotion, Mr. Harbachs
    annual salary was increased to $900,214, effective
    December 31, 2007, with a target bonus of $900,214. In
    February 2008, we agreed to make Mr. Harbachs
    new base salary effective as of December 1, 2007, to align
    more closely with the date of his promotion. The incremental
    salary to be paid to Mr. Harbach will be made in 2008. For
    additional information regarding Mr. Harbachs 2008
    employment arrangements, see  Employment
    Agreements  Employment for F. Edwin Harbach.(4)
    
    Ms. Ethells All
    Other Compensation consists of $76,669 in legal fees
    reimbursed by the Company and tax equalization payments with
    respect to the reimbursement of these legal fees, which amounts
    were paid in 2007, 82




---



##### Table of Contents



incurred in connection with the
    previously disclosed replacement of certain equity grants in
    2006, and $1,910 in tax equalization payments with respect to
    the reimbursement of certain state taxes paid by Ms. Ethell
    resulting from work performed outside her state of residence.(5)
    
    Mr. Lutzs
    Bonus amount for 2007 consists of a $375,000 cash
    retention bonus paid on the first anniversary of the effective
    date of his employment agreement and a $260,047 cash incentive
    award for his 2007 performance. Mr. Lutzs All
    Other Compensation consists of $10,777 in tax equalization
    payments with respect to the reimbursement of certain state
    taxes paid by Mr. Lutz resulting from work performed
    outside his state of residence.(6)
    
    Upon his appointment as General
    Counsel of the Company in March 2006, Mr. Lutz was granted
    a multi-year award under our LTIP with an aggregate value of
    $1.75 million. Grants under the award were to be made in
    cash until the earlier of (i) the date an effective
    registration statement on
    Form S-8
    is filed or is on file, and (ii) the date, if any, we cease
    to be a reporting company under the Exchange Act. Subsequent to
    that event, the award would consist of grants of RSUs having an
    aggregate value of $1.75 million, less amounts previously
    paid in cash. Mr. Lutz received cash payments (which
    reduced the value of the RSUs to be granted) of $525,000 on
    July 1, 2006 and June 30, 2007. On October 22,
    2007, the Company filed a registration statement on
    Form S-8,
    which became effective on the same day. As a result, we were
    obligated, pursuant to the terms of his employment agreement, to
    provide Mr. Lutz with an equity grant having an aggregate value
    of $700,000, which was the amount remaining from his initial
    award, after taking into account cash payments previously made.
    Therefore, we granted Mr. Lutz 146,444 RSUs, which number
    was based on the closing price of our common stock on the first
    business day after the filing of the registration statement. Of
    the 146,444 RSUs, 36,611 RSUs vested and settled on
    December 31, 2007 and an additional 36,611 RSUs will vest
    on December 31 in each of 2008, 2009 and 2010.   (7)
    
    Effective as of January 8,
    2007, Mr. Roberts no longer served as our Chief Operating
    Officer.(8)
    
    Mr. You served as our Chief
    Executive Officer until he left the Company on December 3,
    2007. Mr. Yous All Other Compensation
    consists of $17,848 in commuting expenses, $8,730 in tax
    equalization payments with respect to the reimbursement of
    certain state taxes paid by Mr. You resulting from work
    performed outside his state of residence, $7,810 for temporary
    living accommodations and $72,849 in accrued and unused personal
    days paid in connection with his leaving the Company.  Grants of
    Plan-Based Awards
    All Other


All OtherStock


Option





Grant DateAwards:


Awards:


Exercise


Fair ValueEstimated Future Payouts


Number of


Number of


or Base


of StockEstimated Future Payouts


Under Equity Incentive


Shares of


Securities


Price of


andCompensation


Under Non-Equity Incentive Plan Awards


Plan Awards


Stock


Underlying


Option


OptionGrant


Committee


Threshold


Target


Maximum


Threshold


Target


Maximum


or Units


Options


Awards


AwardsName

Date


Approval Date


($)


($)


($)


(#)


(#)


(#)


(#)


(#)


($/Sh)


($)(1)F. Edwin Harbach(2)


1/8/2007



1/8/2007



























888,325










$
7,000,001Judy A. Ethell(3)


3/13/2007



3/13/2007















0



306,905



767,263















3,477,238Laurent C. Lutz(4)


3/13/2007



3/13/2007















0



383,632



959,080















4,346,54710/23/2007



2/24/2006



















146,444



















700,002Roderick C. McGeary(5)


2/12/2007



2/12/2007



















29,197



















239,9993/13/2007



3/13/2007















0



255,754



639,385















2,897,693Richard J. Roberts(6)


3/13/2007



3/13/2007















0



63,939



159,848















724,425Harry L. You(7)


2/12/2007



2/12/2007



















72,992



















599,9943/13/2007



3/13/2007















0



959,079



2,397,698















10,866,365     (1)
    
    Amounts reflected in the
    Grant Date Fair Value of Stock and Option Awards
    column reflect the amount recognized for financial statement
    purposes in 2007 in accordance with SFAS 123(R) for equity award
    expense. These amounts reflect the Companys accounting
    expense for these awards, and do not correspond to the actual
    value that may be recognized by the named executive officers.
    Whether and to what extent a named executive officer realizes
    value will depend on various factors, including actual operating
    performance, stock price fluctuations and the named executive
    officers continued employment. For a discussion of the
    assumptions used by the Company in calculating these amounts,
    see Item 7, Managements Discussion and Analysis
    of Financial Condition and Results of Operation 
    Accounting for Stock-Based Compensation, and Note 13,
    Stock-Based Compensation, of the Notes to
    Consolidated Financial Statements.(2)
    
    Mr. Harbach was granted
    888,235 RSUs on January 8, 2007, of which 222,081 RSUs
    vested on January 8, 2008, 222,081 RSUs will vest on
    January 8 in each of 2009 and 2010, and 222,082 RSUs will vest
    on January 8, 2011, in connection with his appointment as
    Chief Operating Officer of the Company. In addition, on
    January 2, 2008, Mr. Harbach was granted the following
    awards in connection with his promotion to Chief Executive
    Officer of the 83




---



##### Table of Contents



Company: (i) stock options to
    purchase up to 1,232,600 shares of our common stock (at an
    exercise price of $2.76 per share), 25% of which will vest on
    January 2 in each of 2009 through 2012, and (iii) 199,275
    RSUs of which 49,818 will vest on January 2, 2009 and
    49,819 will vest on January 2 in each of 2010 through 2012.(3)
    
    Ms. Ethell was granted 306,905
    PSUs on March 13, 2007. The PSUs will vest on
    December 31, 2009 if two performance-based metrics are
    achieved. For more information, see  Equity
    Compensation Programs  PSU Program.(4)
    
    Mr. Lutz was granted the
    following awards: (i) 383,632 PSUs were granted on
    March 13, 2007; and (ii) 146,444 RSUs were granted as
    of October 23, 2007 in connection with his employment
    agreement, of which 36,611 RSUs vested on December 31,
    2007, and 36,611 RSUs will vest on December 31 in each of 2008
    through 2010. The PSUs will vest on December 31, 2009 if
    two performance-based metrics are achieved. For more information
    on the RSU grant, see Footnote 6 to the Summary
    Compensation Table,  and for more information on the PSU
    grant, see  Equity Compensation
    Programs  PSU Program.(5)
    
    Mr. McGeary was granted the
    following awards: (i) 29,197 RSUs were granted on
    February 12, 2007, of which 7,299 RSUs vested on
    February 12, 2008, 7,299 RSUs will vest on February 12 in
    each of 2009 and 2010, and 7,300 RSUs will vest on
    February 12, 2011; and (ii) 255,754 PSUs were granted
    on March 13, 2007. Effective as of December 31, 2007,
    the vesting of the RSUs was accelerated and the PSUs were
    forfeited in connection with Mr. McGearys retirement
    from the Company.(6)
    
    Mr. Roberts was granted 63,939
    PSUs on March 13, 2007. The PSUs will vest on
    December 31, 2009 if two performance-based metrics are
    achieved. For more information, see  Equity
    Compensation Programs  PSU Program.(7)
    
    Mr. You was granted the
    following awards: (i) 72,992 RSUs were granted on
    February 12, 2007, of which 18,248 RSUs were scheduled to
    vest on February 12 in each of 2008, 2009, 2010 and 2011; and
    (ii) 959,079 PSUs were granted on March 13, 2007. The
    PSUs were scheduled to vest on December 31, 2009 if two
    performance-based metrics were achieved. When Mr. You left
    the Company, both of these awards were forfeited. 84




---



##### Table of Contents



Outstanding
    Equity Awards at Fiscal Year-End (December 31,
    2007)
    Option Awards

Stock Awards(1)Equity









Equity

EquityIncentive









Incentive Plan

Incentive PlanPlan







Market

Awards:

Awards:Awards:







Value of

Number of

Market orNumber of

Number of

Number of





Number of

Shares or

Unearned

Payout Value ofSecurities

Securities

Securities





Shares or

Units of

Shares, Units

UnearnedUnderlying

Underlying

Underlying





Units of

Stock

or Other

Shares, Units orUnexercised

Unexercised

Unexercised

Option

Option

Stock That

That Have

Rights That

Other RightsOptions(#)

Options(#)

Unearned

Exercise

Expiration

Have Not

Not

Have Not

That Have NotName

Exercisable

Unexercisable

Options(#)

Price($)

Date

Vested(#)

Vested($)

Vested(#)

Vested($)F. Edwin Harbach(2)













$








888,325
(2)

$
2,513,960






$
Judy A. Ethell


300,000
(3)






300,000
(3)


8.70



9/19/2016











105,400
(3)


298,282Laurent C. Lutz






















109,833
(4)


310,827







Roderick C. McGeary


7,928











55.50



6/30/2010




(5)










15,000











16.38



4/24/2011















450,000











9.00



11/19/2014















Richard J. Roberts


11,982











18.00



7/31/2010



69,883
(6)


197,769







53,205











18.00



2/8/2011















50,000











13.30



7/24/2011















11,611











11.01



9/3/2012















70,000











10.01



9/3/2012















125,000











8.19



8/28/2013















60,000











9.15



10/4/2014















Harry L. You


1,000,000
(7)










7.55



3/18/2015




(8)










     (1)
    
    Due to the terms of the PSUs and
    the fact that no determinations regarding the vesting of PSUs
    can be made until December 31, 2009, PSU awards are not
    included in this table.(2)
    
    Mr. Harbach received a grant
    of 888,325 RSUs on January 8, 2007, of which 222,081 RSUs
    vested on January 8, 2008, 222,081 RSUs will vest on
    January 8 in 2009 and 2010, and 222,082 RSUs will vest on
    January 8, 2011. Mr. Harbach did not receive a grant
    of RSUs in 2007, since he received the RSU grant earlier in
    the year. In addition, the amounts reflected above do not
    include grants made on January 2, 2008 in connection with
    Mr. Harbachs promotion to Chief Executive Officer.
    For information regarding these grants, see Footnote 1 to
     Grants of Plan-Based Awards.(3)
    
    On September 19, 2006,
    Ms. Ethell was granted stock options to purchase up to
    600,000 shares of our common stock, of which 25% vested
    upon grant, 25% vested on July 1, 2007 and, subject to
    achievement of certain performance criteria, 25% will vest on
    July 1 in each of 2008 and 2009. On September 19, 2006,
    Ms. Ethell was also granted: (i) 292,000 RSUs, of
    which 204,400 RSUs vested upon grant, 29,200 RSUs vested on
    July 1, 2007, and, subject to achievement of certain
    performance criteria, 29,200 RSUs will vest on July 1 in each of
    2008 and 2009; and (ii) 94,000 RSUs, of which 23,500 RSUs
    vested upon grant, 23,500 RSUs vested on July 1, 2007, and,
    subject to achievement of certain performance criteria, and
    23,500 RSUs will vest on July 1 in each of 2008 and 2009. In
    addition, on March 13, 2007, Ms. Ethell was granted
    306,905 PSUs, which will vest on December 31, 2009 if two
    performance-based metrics are achieved. For more information,
    please see  Equity Compensation
    Programs  PSU Program.(4)
    
    On October 23, 2007,
    Mr. Lutz was granted 146,444 RSUs, of which 36,611 RSUs
    vested on December 31, 2007 and 36,611 will vest on
    December 31 in each of 2008 through 2010. In addition, on
    March 13, 2007, Mr. Lutz was granted 383,632 PSUs,
    which will vest on December 31, 2009 if two
    performance-based metrics are achieved. For more information,
    see  Equity Compensation Programs 
    PSU Program.(5)
    
    Mr. McGeary was granted the
    following awards: (i) Effective as of September 25,
    2006, Mr. McGeary was granted 29,411 RSUs, of which 7,352
    RSUs vested on January 1, 2007 and 7,353 RSUs will vest on
    January 1 in each of 2008 through 2010; and (ii) on
    February 12, 2007, Mr. McGeary was granted 29,197
    RSUs, of which 7,299 RSUs vested on February 12, 2008,
    7,299 RSUs will vest on February 12 in each of 2009 and 2010 and
    7,300 RSUs will vest on February 12, 2011. In addition, on
    March 13, 2007, Mr. McGeary was granted 255,754 PSUs.
    Effective as of December 31, 2007, the vesting of the RSUs
    was accelerated, and the PSUs were forfeited, in connection with
    Mr. McGearys retirement from the Company. 85




---



##### Table of Contents



(6)
    
    As of December 31, 2007, all
    of Mr. Roberts stock options grants were fully
    vested. Effective as of September 25, 2006,
    Mr. Roberts was granted 93,177 RSUs, of which
    23,294 RSUs vested on January 1 in each of 2007 and 2008,
    23,294 RSUs will vest on January 1, 2009 and 23,295 RSUs
    will vest on January 1, 2010. On March 13, 2007,
    Mr. Roberts was also granted 63,939 PSUs, which will vest
    on December 31, 2009 if two performance-based metrics are
    achieved. For more information, see  Equity
    Compensation Programs  PSU Program.(7)
    
    Mr. You was granted stock
    options to purchase up to 2,000,000 shares of our common
    stock, which options vest 25% on March 18 in each of 2006
    through 2009. In connection with Mr. You leaving the
    Company on December 3, 2007, Mr. Yous vested
    stock options will expire on March 3, 2008.(8)
    
    As of December 3, 2007, all
    unvested RSUs and PSUs were forfeited in connection with
    Mr. You leaving the Company.  Option
    Exercises and Stock Vested
    Option Awards


Stock AwardsNumber of Shares





Number of SharesAcquired on


Value Realized


Acquired on


Value RealizedName

Exercise(#)


on Exercise($)


Vesting(#)


on Vesting($)(1)F. Edwin Harbach





$







$
Judy A. Ethell










52,700



385,237Laurent C. Lutz










36,611



103,609Roderick C. McGeary(2)










58,608



202,915Richard J. Roberts










23,294



183,324Harry L. You










62,500



471,875     (1)
    
    Amounts reflect the value of awards
    realized by the named executive officer and are computed by
    multiplying the number of vested shares by the closing price of
    the Companys stock on the date of vesting.(2)
    
    Effective December 31, 2007,
    pursuant to the terms of his award agreement, the vesting of all
    RSUs granted to Mr. McGeary was accelerated in connection
    with his retirement from the Company.  Pension
    Benefits
  U.S.-based
  Nonqualified
    Deferred Compensation Plans
   86




---



##### Table of Contents



Employment
    Agreements
  Managing Director Agreements.
    Employment Agreement for F. Edwin Harbach.
  
    Termination of Prior Agreements. Effective as of
    December 31, 2007, Mr. Harbachs previous
    employment agreement, Managing Director Agreement and Special
    Termination Agreement were terminated. Mr. Harbachs
    annual base salary and bonus compensation for 2007 can be found
    in the Summary Compensation Table above, and
    information regarding his equity awards are included under
     Outstanding Equity Awards at Fiscal Year-End
    (December 31, 2007), in each instance pursuant to his
    previous employment agreement.
    Compensation. Mr. Harbachs compensation
    for 2008 will be:  
    Mr. Harbachs annual base salary for 2008 is $900,214.
    In addition, starting in 2008, Mr. Harbach will be eligible
    for an annual performance bonus with a target amount of 100% of
    his annual base salary for the year for which the performance
    bonus is being awarded, based on his ability to achieve all
    performance objectives as established for the applicable year by
    the Compensation Committee.
    On January 2, 2008, Mr. Harbach received a grant of
    199,275 RSUs and a grant of stock options pursuant to the LTIP,
    with an exercise price of $2.76 per share, to purchase
    1,232,600 shares of common stock of the Company. The RSUs
    and the stock options vest in equal 25% increments on each of
    the next four anniversary dates of such grant date, provided
    that Mr. Harbachs employment has not terminated prior
    to such date. Furthermore, all of the RSUs will vest upon the
    termination of Mr. Harbachs employment due to his
    death, disability or retirement.
    Effective as of December 31, 2007, the terms of
    Mr. Harbachs prior RSU grant of 888,325 restricted
    stock units awarded to him in January 2007 was amended to
    provide that in the event of a Change in Control (as defined in
    the LTIP), the RSUs will become 100% vested and nonforfeitable
    effective as of the date of such Change in Control, provided
    that Mr. Harbachs employment has not terminated prior
    to such date. This amendment conforms the vesting of the RSUs
    upon a change in control to that contained in all other RSU
    awards granted by the Company. Previously, the RSUs would have
    vested only upon (i) a Change in Control and
    (ii) Mr. Harbachs termination by the Company for
    any reason other than for cause within three years following a
    Change in Control. 87




---



##### Table of Contents




    Living Expenses. Mr. Harbach will be reimbursed
    for monthly rental payments for his current apartment lease in
    New York City. The Compensation Committee of the Board will
    review its decision to provide this reimbursement at each lease
    renewal date.
    Indemnification. We agreed to indemnify
    Mr. Harbach with respect to his activities on behalf of the
    Company to the fullest extent permitted by law and the
    Companys Articles of Incorporation.
    Termination Payments. Mr. Harbach is entitled to
    certain termination payments under his employment agreement,
    which are described below under  Potential
    Payments upon Termination of Employment or Change in
    Control.    
    Managing Director Agreement. Mr. Harbachs
    Managing Director Agreement is the standard form currently
    utilized for all new managing directors of the Company. The
    Managing Director Agreement contains noncompetition and
    non-solicitation provisions for a period of two years after his
    termination or resignation.
    Special Termination Agreement. The term of
    Mr. Harbachs Special Termination Agreement is three
    years (subject to potential one-year extensions) or, if longer,
    two years after a Change in Control. If, after a Change in
    Control and during the term of the Special Termination
    Agreement, the Company terminates Mr. Harbachs
    employment other than for Cause or Disability (as defined in the
    Special Termination Agreement) or if he terminates his
    employment within 60 days after any decrease of his base
    salary by 20% or more after such Change in Control,
    Mr. Harbach is entitled to certain benefits, including the
    payment of approximately one years compensation (based on
    salary plus potential bonus).  Employment Agreement for Judy A. Ethell.
  
    Compensation. Information regarding
    Ms. Ethells annual base salary and bonus compensation
    can be found in the Summary Compensation Table
    above. Information regarding equity awards issued to
    Ms. Ethell pursuant to her employment arrangements are
    included under Outstanding Equity Awards at Fiscal
    Year-End (December 31, 2007), above.
    Indemnification. We agreed to indemnify
    Ms. Ethell with respect to her activities on behalf of the
    Company, for any failure of the Company to comply with
    Section 409A of the Internal Revenue Code of 1986, as
    amended, and for certain other matters.
    Termination Payments. Ms. Ethell is entitled to
    certain termination payments under her employment agreement,
    which are described below under  Potential
    Payments upon Termination of Employment or Change in
    Control.  Employment Agreement for Laurent C. Lutz.
  
    Compensation. Information regarding
    Mr. Lutzs annual base salary and bonus compensation
    can be found in the Summary Compensation Table
    above. Information regarding equity awards issued to
    Mr. Lutz and non-equity incentive plan compensation awarded
    to Mr. Lutz are included under Outstanding Equity
    Awards at Fiscal Year-End (December 31, 2007) and
    Grants of Plan-Based Awards, above.
    Indemnification. We agreed to indemnify
    Mr. Lutz in the event that any activity he undertakes on
    behalf of the Company is challenged as being in violation of any
    agreement he may have with a prior employer and for certain
    other matters. In addition, Mr. Lutz is entitled to receive
    a gross-up
    for any 88




---



##### Table of Contents



payment to him under any of his agreements that would be subject
    to a surtax imposed by Section 409A of the Internal Revenue
    Code or for any interest or penalties thereon.  
    Termination Payments. Mr. Lutz is entitled to
    certain termination payments under his employment agreement,
    which are described below under  Potential
    Payments upon Termination of Employment or Change in
    Control.  Employment Agreement for Harry L. You.
  Potential
    Payments upon Termination or Change in Control
  Severance Payments under Managing Director
    Agreements.
  Severance Payments under Employment
    Agreements.
  Termination Payments under Special Termination
    Agreements.
     89




---



##### Table of Contents



Potential
    Payments
    Upon Termination of Employment or
    Change-in-Control
    as of December 31, 2007
    
    the named executive officers employment were terminated by
    us without Cause (as defined in such named executive
    officers employment agreement) or by the named executive
    officer for Good Reason (as defined in such named
    executive officers employment agreement); and
    the named executive officers employment (a) were
    terminated by us within two years after a Change in Control (as
    defined in such named executive officers Special
    Termination Agreement) for any reason other than
    Cause (as defined in such named executive
    officers Special Termination Agreement) or if the
    executive became permanently disabled or was unable to work for
    a period of 180 consecutive days, (b) (i) were
    involuntarily terminated by us (other than for Cause) or
    (ii) were terminated by the named executive officer
    following a reduction or adverse change in the named executive
    officers duties or compensation, in each case within six
    months prior to a Change in Control and in anticipation of a
    Change in Control or (c) were terminated by the named
    executive officer during the term of the Special Termination
    Agreement but after a Change in Control if one of the events
    specified in such named executive officers Special
    Termination Agreement has occurred.  Termination of


Change inName

Employment(1)(2)


Control(2)(3)F. Edwin Harbach

$
2,815,886
(4)


5,642,648
(5)Judy A. Ethell


1,298,693
(6)


7,457,748
(7)Laurent C. Lutz


2,031,039
(8)


8,095,839
(9)Richard J. Roberts


317,763
(10)


2,006,024
(11)     *
    
    Mr. McGeary retired from the
    Company, effective December 31, 2007, and
    Mr. Yous departure from the Company was effective on
    December 3, 2007.(1)
    
    Amounts set forth in the table for
    Mr. Harbach, Ms. Ethell and Mr. Lutz reflect the
    severance payments payable under their respective employment
    agreements. If Mr. Harbach, Ms. Ethell or
    Mr. Lutzs employment is not terminated (i) by us
    without Cause (as defined in such named executive
    officers employment agreement) or (ii) by the named
    executive officer for Good Reason (as defined in
    such named executive officers employment agreement), then
    such named executive officer may still be eligible to receive
    payments representing earned but unpaid salary and bonus
    amounts, any unpaid accrued personal days or unreimbursed
    business expenses and any other amounts due under the
    Companys benefit plans. If Mr. Harbach,
    Ms. Ethell or Mr. Lutz does not qualify for payment
    under any of the provisions of their respective employment
    agreements, they may be eligible to receive severance payments
    under their respective Managing Director Agreements if their
    employment is terminated other than for Cause (as defined in the
    respective Managing Director Agreement) or for no reason. Such
    payments would generally consist of all earned and unpaid base
    salary plus a payment equal to three months pay at such
    named executive officers current base salary. Amounts
    payable under the Managing Director Agreements for
    Mr. Harbach, Ms. Ethell and Mr. Lutz as of
    December 31, 2007 would have been $175,000, $130,000 and
    $130,000, respectively. Amounts set forth in the table for
    Mr. Roberts reflect the severance payments payable under
    his Managing Director Agreement.(2)
    
    The dollar amounts in the table
    with respect to RSUs and PSUs that accelerate upon a
    termination, Change in Control or other triggering event assume
    a $2.83 per share price for our common stock (the closing price
    on December 31, 2007).(3)
    
    Amounts set forth in the table for
    Mr. Harbach, Ms. Ethell, Mr. Lutz and
    Mr. Roberts reflect the termination payments payable
    governed under their respective Special Termination Agreements
    upon a Change of Control (as defined in such agreements). Even
    if Mr. Harbach, Ms. Ethell or Mr. Lutz is not
    eligible to receive the payments set forth in the table above
    upon a change in control (as defined in the Special Termination
    Agreements), all unvested options, RSUs and PSUs held will
    immediately vest upon the occurrence of a Change of Control (as
    defined under the LTIP) pursuant to such named executive
    officers employment agreement. In addition, the Change of
    Control provisions under the LTIP generally provide that any
    unvested portion of stock option grants, RSUs and PSUs will vest
    upon the occurrence of a Change of Control (as defined in the
    LTIP). See Change of Control Provisions Under the
    LTIP 90




---



##### Table of Contents



below. Furthermore, if such named
    executive officer is not eligible to receive the payments and
    other benefits specified in his or her Special Termination
    Agreement upon a change in control, such named executive officer
    may be eligible to receive the payments payable upon termination
    of employment under such individuals employment agreement,
    as specified in this table and the related footnotes.(4)
    
    Under Mr. Harbachs
    employment agreement in effect as of December 31, 2007,
    Mr. Harbach would have been entitled to the following:
    (i) payment equal to two times the sum of his
    (A) annual base salary ($700,000) and (B) bonus
    compensation of $350,046, (ii) payment of accrued and
    unused personal days ($65,310), (iii) payment of premiums
    under the Consolidated Omnibus Budget Reconciliation Act of
    1985, as amended for a period of 18 months after
    termination ($21,995), and (iv) the vesting of an
    additional 222,081 RSUs that would have vested within the first
    anniversary of the termination date ($628,489).(5)
    
    Under Mr. Harbachs
    Special Termination Agreement in effect as of December 31,
    2007, Mr. Harbach would have been entitled to the
    following: (i) payment equal to the sum of his
    (A) annual base salary in 2007 ($700,000) and
    (B) bonus compensation of $350,046, (ii) for a period
    of 2 years after his termination, continuation of medical,
    dental, life insurance, disability, accidental death and
    dismemberment benefits and other welfare benefits, subject to
    certain exceptions ($21,897), (iii) pursuant to the terms
    of Mr. Harbachs RSU grant, in the event of a Change
    in Control, the vesting of all unvested RSUs (an additional
    888,325 RSUs valued at $2,513,960), (iv) reimbursement for
    outplacement services, (v) payment of any earned but unpaid
    salary, bonus or incentive compensation and (vi) an
    additional tax
    gross-up
    payment of $2,056,745, which excludes tax gross-up payments that
    may be payable under his Special Termination Agreement to offset
    the impact of excise taxes that may be imposed under provisions
    of the Internal Revenue Code.(6)
    
    Under Ms. Ethells
    employment agreement, Ms. Ethell would have been entitled
    to (i) payment equal to the sum of her (A) annual base
    salary ($520,000) and (B) target bonus ($520,000),
    (ii) payment of accrued and unused personal days ($94,412),
    (iii) payment of premiums under the Consolidated Omnibus
    Budget Reconciliation Act of 1985, as amended, for a period of
    18 months after termination ($15,140), and the vesting of
    an additional 150,000 options and 52,700 RSUs that would have
    vested within the first anniversary of the termination date
    ($149,141).(7)
    
    Under Ms. Ethells
    Special Termination Agreement, Ms. Ethell would have been
    entitled to the following: (i) payment equal to 299% of the
    sum of her (A) annual base salary in 2007 ($520,000) and
    (B) target bonus for 2007 ($520,000), (ii) for a
    period of 2 years after her termination, continuation of
    medical, dental, life insurance, disability, accidental death
    and dismemberment benefits and other welfare benefits, subject
    to certain exceptions ($15,546), (iii) if
    Ms. Ethells employment is terminated by us (other
    than for Cause) or there is a reduction or adverse change in
    Ms. Ethells duties or compensation and
    Ms. Ethell terminates her employment within six months
    prior to a Change of Control and in anticipation of a Change of
    Control, the vesting of all unvested options, RSUs and PSUs (an
    additional 300,000 options, 105,400 RSUs and 306,905 PSUs
    (assuming the PSUs vest at 100%) valued at $1,166,823),
    (iv) reimbursement for outplacement services,
    (v) payment of any earned but unpaid salary, bonus or
    incentive compensation and (vi) an additional tax
    gross-up
    payment of $3,165,779, which excludes tax gross-up payments that
    may be payable under her Special Termination Agreement to offset
    the impact of excise taxes that may be imposed under provisions
    of the Internal Revenue Code.(8)
    
    Under Mr. Lutzs
    employment agreement, Mr. Lutz would have been entitled to
    (i) payment equal to the sum of his (A) annual base
    salary ($520,000) (or, in the event of termination by Good
    Reason (as defined in his employment agreement), 1 and 1/2 times
    annual base salary) and (B) target bonus ($520,000),
    (ii) payment of accrued and unused personal days ($64,197),
    (iii) payment of premiums under the Consolidated Omnibus
    Budget Reconciliation Act of 1985, as amended for a period of
    18 months after termination ($21,995), (iv) vesting of
    an additional 36,611 RSUs scheduled to vest on the next vesting
    date following the termination date ($103,609) and (v) an
    additional tax
    gross-up
    payment of $801,238.(9)
    
    Under Mr. Lutzs Special
    Termination Agreement, Mr. Lutz would have been entitled to
    the following: (i) payment equal to 299% of the sum of his
    (A) annual base salary in 2007 ($520,000) and
    (B) target bonus for 2007 ($520,000), (ii) for a
    period of 2 years after his termination, continuation of
    medical, dental, life insurance, disability, accidental death
    and dismemberment benefits and other welfare benefits, subject
    to certain exceptions ($20,932), (iii) if
    Mr. Lutzs employment is terminated by us (other than
    for Cause) or there is a reduction or adverse change in
    Mr. Lutzs duties or compensation and Mr. Lutz
    terminates his employment within six months prior to a Change of
    Control and in anticipation of a Change of Control, the vesting
    of all unvested RSUs and PSUs (an additional 109,833 RSUs and
    383,632 PSUs (assuming the PSUs vest at 100%) valued at
    $1,396,506), (iv) reimbursement for outplacement services,
    (v) payment of any earned but unpaid salary, bonus or
    incentive compensation and (vi) an additional tax
    gross-up
    payment of $3,193,801, which excludes tax gross-up payments that
    may be payable under his Special Termination Agreement to offset
    the impact of excise taxes that may be imposed under provisions
    of the Internal Revenue Code. In addition, pursuant to his
    employment agreement, Mr. Lutz would have been entitled, as
    of December 31, 2007, to the acceleration of the remaining
    portion of his unpaid retention bonus ($375,000) upon a Change
    in Control (as defined in his Special Termination Agreement). 91




---



##### Table of Contents



(10)
    
    Under Mr. Roberts
    Managing Director Agreement, Mr. Roberts would have been
    entitled to payment equal to six months of his base salary
    ($635,525).(11)
    
    Under Mr. Roberts
    Special Termination Agreement, Mr. Roberts would have been
    entitled to the following: (i) payment equal to the sum of
    his (A) annual base salary in 2007 ($635,525) and
    (B) potential bonus or incentive compensation (20% of base
    salary or $127,105), (ii) for a period of 2 years
    after his termination, continuation of medical, dental, life
    insurance, disability, accidental death and dismemberment
    benefits and other welfare benefits, subject to certain
    exceptions ($18,154), (iii) if Mr. Roberts
    employment is terminated by us (other than for Cause) or
    (ii) there is a reduction or adverse change in
    Mr. Roberts duties or compensation and
    Mr. Roberts terminates his employment within six months
    prior to a Change of Control and in anticipation of a Change of
    Control, the vesting of all unvested RSUs and PSUs (an
    additional 69,883 RSUs and 63,939 PSUs (assuming the PSUs vest
    at 100%) valued at $378,716), (iv) reimbursement for
    outplacement services, (v) payment of any earned but unpaid
    salary, bonus or incentive compensation and (vi) an
    additional
    gross-up
    payment of $846,524, which excludes tax gross-up payments that
    may be payable under his Special Termination Agreement to offset
    the impact of excise taxes that may be imposed under provisions
    of the Internal Revenue Code.  Change of Control Provisions Under the LTIP.
  Managing
    Director Compensation Plan
       92




---



##### Table of Contents



Director
    Compensation
      
    an annual fee of $40,000;
    a meeting fee of $2,000 for attendance in person at any meeting
    of the Board or a committee of the Board and $1,000 for
    attendance by telephone (members of the Audit Committee are paid
    $2,000 for attendance at any Audit Committee meeting, whether
    they attended in person or by telephone);
    a grant of stock options to purchase up to 15,000 shares of
    common stock upon initial election to the Board; and
    a grant of stock options to purchase up to 5,000 shares of
    common stock upon initial election as the Chair of the Audit
    Committee.        2007 Director
    Compensation Table
  Fees Earnedor Paidin Cash


Stock Awards


Option Awards


TotalName

($)(1)


($)(4)


($)(5)(6)


($)Douglas C. Allred

$
85,000


$
15,520


$



$
100,520Betsy J. Bernard


84,000



15,520







99,520Spencer C. Fleischer


84,000



15,520







99,520Jill S. Kanin-Lovers(2)


71,000



15,520



30,946



117,466Wolfgang H. Kemna


85,000



15,520







100,520Albert L. Lord


94,000



15,520







109,520Eddie R. Munson(3)


51,000



15,520



6,662



73,182J. Terry Strange


124,000



15,520







139,520  93




---



##### Table of Contents



(1)
    
    Unless otherwise noted, Fees
    Earned or Paid in Cash amounts consist of amounts paid for
    Board service rendered in 2007.(2)
    
    Ms. Kanin-Lovers was elected
    to the Board on May 10, 2007.(3)
    
    Mr. Munson was elected to the
    Board on October 19, 2007.(4)
    
    Reflects the dollar amount
    recognized for financial statement reporting purposes in
    accordance with SFAS 123(R) with respect to grants of
    restricted stock awarded for 2007 service. On January 18,
    2008, each director was granted 8,000 shares of restricted
    common stock for services rendered in 2007, each with a fair
    value of $15,520. In accordance with SFAS 123(R), fair
    value is calculated using the closing price of our common stock
    on the date of grant.(5)
    
    Reflects the dollar amount
    recognized for financial statement reporting purposes, in
    accordance with SFAS 123(R) with respect to stock option
    awards granted during 2007. In accordance with SFAS 123(R),
    fair value was estimated using the Black-Scholes option-pricing
    model.(6)
    
    Outstanding equity awards for each
    non-employee director is as follows (for a complete description
    of the beneficial ownership by our directors, see 
    Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholder Matters):  Outstanding


OutstandingStock Awards at


Option Awards atDecember 31,


December 31,Name

2007(1)


2007Douglas C. Allred


36,000



15,000Betsy J. Bernard


24,000



15,000Spencer C. Fleischer


16,000



15,000Jill S. Kanin-Lovers






15,000Wolfgang H. Kemna


36,000



15,000Albert L. Lord


32,000



15,000Eddie R. Munson






15,000J. Terry Strange


32,000



20,000     (1)
    
    Does not include 8,000 shares
    of restricted stock granted on January 18, 2008 to each
    non-employee director as part of that directors equity
    compensation for services rendered in 2007.   94




---



##### Table of Contents



ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS  Beneficial
    Ownership of More Than Five Percent
    Common StockPercentage ofName and Address of 5% Holders of Common Stock

Number of Shares

Shares OutstandingAriel Capital Management, LLC(1)


41,516,556



19.3
%200 E. Randolph Drive, Suite 2900Chicago, IL 60601Glenview Capital Management, LLC(2)


20,599,344



9.4767 Fifth Avenue, 44th FloorNew York, NY 10153Whitebox Advisors, LLC(3)


16,990,113



7.33033 Excelsior BoulevardMinneapolis, MN 55416North Run Capital, LP(4)


16,709,700



7.8One International Place, Suite 2401Boston, MA 02110Franklin Resources, Inc.(5)


13,496,210



6.3One Franklin ParkwaySan Mateo, CA
    94403-1906Noonday Asset Management, LP(6)


11,825,600



5.5227 West Trade Street, Suite 2140Charlotte, NC 28202Tracer Capital Management L.P.(7)


11,685,813



5.4540 Madison Avenue, 33rd FloorNew York, NY 10022     (1)
    
    Represents shares beneficially held
    by Ariel Capital Management, LLC (Ariel), as
    reported on a Schedule 13G/A filed on January 10, 2008.
    Ariel has sole voting power with respect to
    33,042,381 shares and sole dispositive power with respect
    to 41,516,556 shares. These shares are beneficially owned
    by investment advisory clients of Ariel.(2)
    
    Represents shares beneficially held
    by Glenview Capital Management, LLC (Glenview) and
    Lawrence M. Robbins, as reported on a Schedule 13G/A filed
    on February 14, 2008. Glenview serves as investment manager
    to various entities and as such may be deemed to have voting and
    dispositive power with respect to 20,599,344 shares, of
    which 4,924,244 shares are issuable upon conversion of
    certain convertible debentures of the Company. Mr. Robbins
    is the Chief Executive Officer of Glenview.(3)
    
    Represents shares beneficially held
    by Whitebox Advisors, LLC and its various related entities
    (collectively, Whitebox), as reported on a Schedule
    13G filed on February 14, 2008. Whitebox serves as
    investment manager to various entities and as such may be deemed
    to have voting and dispositive power with respect to
    16,990,113 shares, of which all shares are issuable upon
    the conversion of certain convertible debentures of the Company.(4)
    
    Represents shares beneficially held
    by North Run Capital, LP, North Run GP, LP, North Run Advisors,
    LLC, Todd B. Hammer and Thomas B. Ellis (North Run),
    as reported on a Schedule 13G/A filed on February 14,
    2008. North Run has sole voting and dispositive powers with
    respect to 16,709,700 shares.(5)
    
    Represents shares beneficially held
    by Franklin Resources, Inc., Charles B. Johnson, Rupert H.
    Johnson, Jr. and Franklin Templeton Investments Corp.
    (collectively Franklin Resources), as reported on a
    Schedule 13G filed on February 6, 2008. Franklin
    Resources has sole voting and dispositive power for up to
    13,496,210 shares. These shares are beneficially owned by
    one or more open or closed end investment companies or other
    managed accounts that are investment management clients of
    investment mangers that are direct and indirect subsidiaries of
    Franklin Resources, Inc.(6)
    
    Represents shares beneficially held
    by the Noonday Funds, the Farallon Funds, and its various
    advisors, managing members, management company and general
    partner (collectively, Noonday), as reported on a
    Schedule 13G/A filed on January 4, 2008. Noonday has voting
    and dispositive powers for up to 11,825,600 shares.(7)
    
    Represents shares beneficially held
    by Tracer Capital Management L.P. (Tracer), Riley
    McCormack and Matt Hastings, as reported on a Schedule 13G
    filed on February 14, 2008. Tracer serves as investment
    manager to various entities and as such may be deemed to have
    voting and dispositive power with respect to
    11,685,813 shares. Mr. McCormack and Mr. Hastings
    are the sole limited partners of Tracer. 95




---



##### Table of Contents



Security
    Ownership of Directors and Executive Officers
  Rule 13d-3
  Common StockPercentage ofName and Address(1)

Number of Shares


Shares OutstandingF. Edwin Harbach(2)


222,081



*Judy A. Ethell(3)


682,181



*Laurent C. Lutz


22,167



*Douglas C. Allred(4)


59,000



*Betsy J. Bernard(5)


47,000



*Spencer C. Fleischer(6)


39,000



*Jill S. Kanin-Lovers


8,000



*Wolfgang H. Kemna(7)


59,000



*Albert L. Lord(8)


66,600



*Roderick C. McGeary(9)


700,760



*Eddie R. Munson


8,000



*J. Terry Strange(10)


65,000



*Richard J. Roberts(11)


670,542



*Harry L. You(12)


1,072,500



*All executive officers and directors as a group
    (12 persons)(13)


1,978,789



*    *
    
    Less than 1% of our common stock
    outstanding.(1)
    
    The address for all persons listed
    is
    c/o BearingPoint,
    Inc., 1676 International Drive, McLean, Virginia 22102 USA.(2)
    
    Represents 222,081 vested RSUs.(3)
    
    Includes 58,400 vested RSUs, and
    300,000 shares of common stock that may be acquired through
    the exercise of stock options. Also includes 141,600 shares
    of common stock and 30,000 vested RSUs held by Robert R. Glatz,
    Ms. Ethells spouse.(4)
    
    Includes 15,000 shares of
    common stock that may be acquired through the exercise of stock
    options.(5)
    
    Includes 15,000 shares of
    common stock that may be acquired through the exercise of stock
    options.(6)
    
    Includes 15,000 shares of
    common stock that may be acquired through the exercise of stock
    options within 60 days of December 31, 2007.
    Mr. Fleischer is a senior managing member of Friedman
    Fleischer & Lowe GP II, LLC, a Delaware limited
    liability company (FFL GP). FFL GP is the general
    partner of Friedman Fleischer & Lowe GP II, L.P.,
    which is the general partner of each of Friedman
    Fleischer & Lowe Capital Partners II, L.P. (FFL
    Capital Partners), FFL Parallel Fund II, L.P.
    (FFL Parallel Fund) and FFL Executive Partners II,
    L.P. (FFL Executive Partners, and together with FFL
    Capital Partners and FFL Parallel Fund, the FFL
    Funds). The FFL Funds are the owners of record of
    $40 million of initial principal amount of
    0.50% Convertible Senior Subordinated Debentures due July
    2010 and warrants to purchase up to 3.5 million shares of
    common stock. Mr. Fleischer disclaims any beneficial
    ownership of the securities owned by the FFL Funds, except to
    the extent of his pecuniary interest therein, if any.(7)
    
    Includes 15,000 shares of
    common stock that may be acquired through the exercise of stock
    options.(8)
    
    Includes 15,000 shares of
    common stock that may be acquired through the exercise of stock
    options. 96




---



##### Table of Contents



(9)
    
    On December 31, 2007,
    Mr. McGeary retired as an employee of the Company.
    Mr. McGeary will continue to serve as the Chairman of our
    Board. Effective as of his retirement as an employee of the
    Company, all unvested RSUs become vested. Includes 51,256 vested
    RSUs and 472,928 shares of common stock that may be
    acquired through the exercise of stock options.(10)
    
    Includes 20,000 shares of
    common stock that may be acquired through the exercise of stock
    options.(11)
    
    Effective as of January 8,
    2007, Mr. Roberts no longer served as our Chief Operating
    Officer, as a result of the appointment of F. Edwin Harbach as
    our President and Chief Operating Officer. Includes
    4,301 shares held through a family trust, 196,370 vested
    RSUs and 381,708 shares of common stock that may be
    acquired through the exercise of stock options.   (12)
    
    Includes 62,500 vested RSUs and
    1,000,000 shares of common stock that may be acquired
    through the exercise of stock options.(13)
    
    Does not include Mr. Roberts
    or Mr. You as they were not executive officers nor, in the
    case of Mr. You, a director, on December 31, 2007. 97




---



##### Table of Contents



ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE  Related
    Party Transaction Policies
    Related
    Transactions
  Friedman
    Fleischer & Lowe, LLC /Spencer C. Fleischer    Judy
    Ethell/Robert Glatz    Director
    Independence
   98




---



##### Table of Contents



ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES  Audit
    Committee Pre-Approval Policies
  Rule 2-01 Regulation S-X.
  Independent
    Registered Public Accountants Fees
    Fiscal Year Ended December 31,Type of Fee

2007


2006Audit Fees(1)

$
31,595,000


$
30,211,000Audit-Related Fees(2)


805,000



275,000Tax Fees(3)


449,000



960,000All Other Fees(4)


2,187,000



15,000Total

$
35,036,000


$
31,461,000     (1)
    
    Audit fees include audits of
    consolidated financial statements, reviews of unaudited
    quarterly financial statements and services that are normally
    provided by independent auditors in connection with statutory
    and regulatory filings.(2)
    
    Audit-related fees include
    assurance and related services provided by our independent
    auditors that are reasonably related to the performance of the
    audit or review of our consolidated financial statements and are
    not included above under Audit Fees. These services
    principally include audits of employee benefit plans, accounting
    consultations, and other services in connection with regulatory
    reporting requirements.(3)
    
    Tax services principally include
    consultation in connection with tax compliance, tax
    consultations and tax planning.(4)
    
    All other fees include licenses to
    technical accounting research software and, for 2007, an EMEA
    due diligence review. 99




---



##### Table of Contents



PART IV  Item 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES        Exhibit No.

Description3
.1

Amended and Restated Certificate of Incorporation, dated as of
    February 7, 2001, which is incorporated herein by reference
    to Exhibit 3.1 from the Companys
    Form 10-Q
    for the quarter ended March 31, 2001.3
.2

Amended and Restated Bylaws, amended and restated as of
    August 2, 2007, which is incorporated herein by reference
    to Exhibit 3.1 from the Companys
    Form 8-K
    filed with the SEC on August 8, 2007.3
.3

Certificate of Ownership and Merger merging Bones Holding into
    the Company, dated October 2, 2002, which is incorporated
    herein by reference to Exhibit 3.3 from the Companys
    Form 10-Q
    for the quarter ended September 30, 2002.4
.1

Rights Agreement, dated as of October 2, 2001, between the
    Company and EquiServe Trust Company, N.A., which is
    incorporated herein by reference to Exhibit 1.1 from the
    Companys Registration Statement on
    Form 8-A
    dated October 3, 2001.4
.2

Certificate of Designation of Series A Junior Participating
    Preferred Stock, which is incorporated herein by reference to
    Exhibit A to Exhibit 1.1 from the Companys
    Registration Statement on
    Form 8-A
    dated October 3, 2001.4
.3

Amendment No. 1 to the Rights Agreement between the Company
    and EquiServe Trust Company, N.A., which is incorporated
    herein by reference to Exhibit 99.1 from the Companys
    Form 8-K
    filed on September 6, 2002.4
.4

Second Amendment to the Rights Agreement, dated as of
    October 27, 2007, between the Company and Computershare
    Trust Company, N.A. (formerly EquiServe Trust Company,
    N.A.), which is incorporated herein by reference to
    Exhibit 4.4 from the Companys
    Form 10-Q
    for the quarter ended June 30, 2007.10
.1

Amended and Restated Separation Agreement, dated as of
    February 13, 2001, among KPMG LLP, KPMG Consulting, LLC and
    the Company, which is incorporated herein by reference to
    Exhibit 10.1 from the Companys
    Form 10-Q
    for the quarter ended March 31, 2001.10
.2

Transition Services Agreement, dated as of February 13,
    2001, among KPMG LLP, KPMG Consulting, LLC and the Company,
    which is incorporated herein by reference to Exhibit 10.3
    from the Companys
    Form 10-Q
    for the quarter ended March 31, 2001.10
.3

Stock Purchase Agreement dated as of December 29, 1999,
    among Cisco Systems, Inc., KPMG LLP and the Company, which is
    incorporated herein by reference to Exhibit 10.11 from the
    Companys
    Form S-1.
    (Registration
    No. 333-36328)
    (referred to below as the Companys
    Form S-1).10
.4

Investor Rights Agreement dated as of January 31, 2000,
    among KPMG LLP, Cisco Systems, Inc. and the Company, which is
    incorporated herein by reference to Exhibit 10.12 from the
    Companys
    Form S-1. 100




---



##### Table of Contents



Exhibit No.

Description10
.5

Irrevocable Waiver, dated May 17, 2004, by Cisco Systems,
    Inc. with respect to the Investor Rights Agreement, dated
    January 31, 2000 and the Stock Purchase Agreement, dated
    December 29, 1999, which is incorporated herein by
    reference to Exhibit 10.49 of the Companys
    Form S-1/A
    (Registration
    No. 333-100199).10
.6

Credit Agreement dated as of May 18, 2007, as amended and
    restated on June 1, 2007, among the Company, BearingPoint,
    LLC, the guarantors party thereto, the lenders party thereto,
    UBS Securities LLC, Morgan Stanley Senior Funding, Inc., UBS AG,
    Stamford Branch and Wells Fargo Foothill, LLC, which is
    incorporated herein by reference to Exhibit 10.6 from the
    Companys
    Form 10-K
    for the year ended December 31, 2006.10
.7

Security Agreement dated as of May 18, 2007, among the
    Company, BearingPoint, LLC, the guarantors party thereto and UBS
    AG, Stamford Branch, as Collateral Agent, which is incorporated
    herein by reference to Exhibit 10.7 from the Companys
    Form 10-K
    for the year ended December 31, 2006.10
.8

Form of Term Note under the Credit Agreement dated as of
    May 18, 2007, which is incorporated herein by reference to
    Exhibit 10.8 from the Companys
    Form 10-K
    for the year ended December 31, 2006.10
.9

Form of 2.50% Series A Convertible Subordinated Debentures
    due 2024, which is incorporated by reference to
    Exhibit 10.66 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.10

Form of 2.75% Series B Convertible Subordinated Debentures
    due 2024, which is incorporated by reference to
    Exhibit 10.67 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.11

Purchase Agreement, dated as of December 16, 2004, among
    the Company and the Initial Purchasers named therein, which is
    incorporated by reference to Exhibit 10.68 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.12

Indenture, dated as of December 22, 2004, by and between
    the Company and The Bank of New York, as trustee, which is
    incorporated by reference to Exhibit 99.1 from the
    Companys
    Form 8-K
    filed on March 10, 2006.10
.13

First Supplemental Indenture, dated as of November 7, 2006,
    between BearingPoint, Inc. and The Bank of New York, as trustee
    under the Indenture, dated as of December 22, 2004, which
    is incorporated by reference to Exhibit 99.1 from the
    Companys
    Form 8-K
    filed on November 8, 2006.10
.14

Resale Registration Rights Agreement, dated December 22,
    2004, between the Company and the Initial Purchasers, which is
    incorporated by reference to Exhibit 10.70 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.15

Form of 5.00% Convertible Senior Subordinated Debentures
    due 2025, which is incorporated by reference to
    Exhibit 10.71 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.16

Form of Securities Purchase Agreement, dated April 21,
    2005, among the Company and the purchasers named therein, which
    is incorporated by reference to Exhibit 10.72 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.17

Indenture, dated as of April 27, 2005, by and between the
    Company and the Bank of New York, as trustee, which is
    incorporated by reference to Exhibit 99.2 from the
    Companys
    Form 8-K
    filed on March 10, 2006. 101




---



##### Table of Contents



Exhibit No.

Description10
.18

First Supplemental Indenture, dated as of November 2, 2006,
    between BearingPoint, Inc. and The Bank of New York, as trustee
    under the Indenture, dated as of April 27, 2005, which is
    incorporated by reference to Exhibit 99.2 from the
    Companys
    Form 8-K
    filed on November 3, 2006.10
.19

Registration Rights Agreement, dated April 27, 2005,
    between the Company and the placement agents named therein,
    which is incorporated by reference to Exhibit 10.74 from
    the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.20

Securities Purchase Agreement, dated July 15, 2005, among
    the Company and certain affiliates of Friedman
    Fleischer & Lowe, LLC, which is incorporated by
    reference to Exhibit 10.75 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.21

Form of 0.50% Convertible Senior Subordinated Debentures
    due July 2010, which is incorporated by reference to
    Exhibit 10.76 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.22

Form of Warrant Certificate, dated July 15, 2005, which is
    incorporated by reference to Exhibit 10.77 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.23

Registration Rights Agreement, dated July 15, 2005, between
    the Company and certain affiliates of Friedman
    Fleischer & Lowe, LLC, which is incorporated by
    reference to Exhibit 10.78 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.24

Amended and Restated 2000 Long-Term Incentive Plan, effective as
    of February 2, 2007, which is incorporated herein by
    reference to Exhibit 10.24 from the Companys
    Form 10-K
    for the year ended December 31, 2006.10
.25

Employee Stock Purchase Plan, as amended and restated as of
    February 1, 2007, which is incorporated herein by reference
    to Exhibit 10.25 from the Companys
    Form 10-K
    for the year ended December 31, 2006.10
.26

Amended and Restated 401(k) Plan dated August 21, 2003,
    which is incorporated herein by reference to Exhibit 10.19
    from the Companys
    Form 10-K
    for the year ended June 30, 2003.10
.27

Amendment No. 1 to Amended and Restated 401(k) Plan dated
    April 29, 2004, which is incorporated herein by reference
    to Exhibit 10.20 from the Companys
    Form S-1/A
    (Registration
    No. 333-100199).10
.28

Amendment No. 2 to Amended and Restated 401(k) Plan dated
    June 24, 2005, which is incorporated by reference to
    Exhibit 10.24 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.29

Amendment No. 3 to Amended and Restated 401(k) Plan dated
    August 22, 2005, which is incorporated by reference to
    Exhibit 10.25 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.30

Amendment No. 4 to Amended and Restated 401(k) Plan dated
    November 1, 2005, which is incorporated by reference to
    Exhibit 10.26 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.31

Amendment No. 5 to Amended and Restated 401(k) Plan,
    effective as of September 14, 2006, which is incorporated
    herein by reference to Exhibit 10.31 from the
    Companys
    Form 10-K
    for the year ended December 31, 2006.10
.32

Amendment No. 6 to Amended and Restated 401(k) Plan,
    effective as of January 1, 2006, which is incorporated
    herein by reference to Exhibit 10.32 from the
    Companys
    Form 10-K
    for the year ended December 31, 2006. 102




---



##### Table of Contents



Exhibit No.

Description10
.33

Amendment No. 7 to Amended and Restated 401(k) Plan,
    effective as of May 1, 2007, which is incorporated herein
    by reference to Exhibit 10.33 from the Companys
    Form 10-K
    for the year ended December 31, 2006.10
.34

Deferred Compensation Plan, as amended and restated as of
    August 1, 2003, which is incorporated herein by reference
    to Exhibit 10.20 from the Companys
    Form 10-K
    for the year ended June 30, 2003.10
.35

Amendment to Deferred Compensation Plan effective as of
    December 31, 2004, which is incorporated by reference to
    Exhibit 10.28 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.36

Amended and Restated BearingPoint, Inc. Managing Directors
    Deferred Compensation Plan dated January 1, 2006, which is
    incorporated by reference to Exhibit 10.30 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.37

Form of Member Distribution Agreement for KPMG Consulting
    Qualified Employees, which is incorporated herein by reference
    to Exhibit 10.6 from the Companys
    Form S-1
    (including for Richard Roberts).10
.38

Form of Amendment to the Managing Director Agreement, dated as
    of January 31, 2005, between the Company and certain
    executive officers (including for Richard Roberts), which is
    incorporated by reference to Exhibit 10.8 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.39

Form of Managing Director Agreement (including for Roderick C.
    McGeary), which is incorporated herein by reference to
    Exhibit 10.39 from the Companys
    Form 10-K
    for the year ended December 31, 2006.10
.40

Form of Managing Director Agreement, which is incorporated
    herein by reference to Exhibit 10.40 from the
    Companys
    Form 10-K
    for the year ended December 31, 2006.10
.41

Form of Special Termination Agreement (including for Richard
    Roberts), which is incorporated by reference to
    Exhibit 10.93 from the Companys
    Form 10-K
    for the year ended December 31, 2005.10
.42

Form of Restricted Stock Agreement with certain officers of the
    Company pursuant to the 2000 Long-Term Incentive Plan, which is
    incorporated herein by reference to Exhibit 10.5 from the
    Companys
    Form 10-Q
    for the quarter ended September 30, 2002.10
.43

Form of Restricted Stock Agreement with non-employee directors
    of the Company pursuant to the Amended and Restated Long-Term
    Incentive Plan, which is incorporated herein by reference to
    Exhibit 10.5 from the Companys
    Form 10-Q
    for the quarter ended December 31, 2002.10
.44

Form of Restricted Stock Unit agreement under the Companys
    2000 Long-Term Incentive Plan for managing directors and
    employees, which is incorporated by reference to
    Exhibit 10.81 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.45

Form of Performance Share Award Unit Agreement, which is
    incorporated by reference to Exhibit 99.1 from the
    Companys
    Form 8-K
    filed with the SEC on February 8, 2007.10
.46

Form of Performance Cash Award Agreement, which is incorporated
    by reference to Exhibit 99.2 from the Companys
    Form 8-K
    filed with the SEC on February 8, 2007.10
.47

Employment Letter, effective as of March 21, 2005, between
    the Company and Harry L. You, which is incorporated by reference
    to Exhibit 10.86 from the Companys
    Form 10-K
    for the year ended December 31, 2004. 103




---



##### Table of Contents



Exhibit No.

Description10
.48

Managing Director Agreement, dated as of March 21, 2005,
    between the Company and Harry L. You, which is incorporated by
    reference to Exhibit 10.87 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.49

Restricted Stock Unit Agreement, dated March 21, 2005,
    between the Company and Harry L. You, which is incorporated by
    reference to Exhibit 10.88 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.50

Special Termination Agreement, dated as of March 21, 2005,
    between the Company and Harry L. You, which is incorporated by
    reference to Exhibit 10.89 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.51

Stock Option Agreement, between the Company and Harry L. You,
    which is incorporated by reference to Exhibit 10.90 from
    the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.52

Form of Restricted Stock Unit Agreement awarded to Harry You and
    Roderick C. McGeary, which is incorporated by reference to
    Exhibit 99.2 from the Companys
    Form 8-K
    filed with the SEC on February 13, 2007.10
.53

Employment Letter, effective as of July 1, 2005, between
    the Company and Judy A. Ethell, which is incorporated by
    reference to Exhibit 10.91 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.54

Managing Director Agreement, dated as of July 1, 2005,
    between the Company and Judy A. Ethell, which is incorporated
    herein by reference to Exhibit 10.54 from the
    Companys
    Form 10-K
    for the year ended December 31, 2006.10
.55

Special Termination Agreement, dated as of July 1, 2005,
    between the Company and Judy A. Ethell, which is incorporated by
    reference to Exhibit 10.93 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.56

Letter Agreement dated October 3, 2006, between the Company
    and Judy A. Ethell, which is incorporated by reference to
    Exhibit 10.95 from the Companys
    Form 10-K
    for the year ended December 31, 2005.10
.57

Restricted Stock Unit Agreement, dated September 19, 2006,
    between the Company and Judy A. Ethell, which is incorporated by
    reference to Exhibit 10.96 from the Companys
    Form 10-K
    for the year ended December 31, 2005.10
.58

Restricted Stock Unit Agreement, dated September 19, 2006,
    between the Company and Judy A. Ethell, which is incorporated by
    reference to Exhibit 10.97 from the Companys
    Form 10-K
    for the year ended December 31, 2005.10
.59

Employment Letter, effective as of February 24, 2006,
    between the Company and Laurent C. Lutz, which is incorporated
    by reference to Exhibit 10.91 from the Companys
    Form 10-K
    for the year ended December 31, 2005.10
.60

Managing Director Agreement, dated as of February 24, 2006,
    between the Company and Laurent C. Lutz, which is incorporated
    by reference to Exhibit 10.92 from the Companys
    Form 10-K
    for the year ended December 31, 2005.10
.61

Special Termination Agreement, dated as of February 24,
    2006, between the Company and Laurent C. Lutz, which is
    incorporated by reference to Exhibit 10.94 from the
    Companys
    Form 10-K
    for the year ended December 31, 2005.10
.62*

Employment Letter, effective as of December 31, 2007,
    between the Company and F. Edwin Harbach. 104




---



##### Table of Contents



Exhibit No.

Description10
.63*

Managing Director Agreement, effective as of December 31,
    2007, between the Company and F. Edwin Harbach.10
.64*

Special Termination Agreement, dated as of December 31,
    2007, between the Company and F. Edwin Harbach.10
.65

Restricted Stock Unit Agreement, dated January 8, 2007,
    between the Company and F. Edwin Harbach, which is incorporated
    by reference to Exhibit 99.5 from the Companys
    Form 8-K
    filed with the SEC on January 12, 2007.10
.66*

Amendment No. 1 to the Restricted Stock Unit Agreement with
    F. Edwin Harbach dated January 8, 2007, dated as of
    December 31, 2007.10
.67*

Restricted Stock Unit Agreement, dated January 7, 2008,
    between the Company and F. Edwin Harbach.10
.68*

Stock Option Agreement, dated January 7, 2008, between the
    Company and F. Edwin Harbach.14
.1

Standards of Business Conduct, which is incorporated by
    reference to Exhibit 14.1 from the Companys
    Form 10-K
    for the year ended December 31, 2006.16
.1

Letter dated June 28, 2007, from PricewaterhouseCoopers LLP
    to the Securities and Exchange Commission, which is incorporated
    by reference to Exhibit 16.1 from the Companys
    Form 10-K
    for the year ended December 31, 2006.21
.1*

List of subsidiaries of the Registrant.23
.1*

Consent of Ernst & Young LLP.23
.2*

Consent of PricewaterhouseCoopers LLP.31
.1*

Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a).31
.2*

Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a).32
.1*

Certification of Chief Executive Officer pursuant to
    Section 1350.32
.2*

Certification of Chief Financial Officer pursuant to
    Section 1350.     *
    
    filed herewith 105




---



##### Table of Contents



SIGNATURES      By:
    /s/  F.
    Edwin Harbach  Name: F. Edwin
    Harbach
 Title: Chief Executive
    Officer
    Signature

Title/s/  F.
    Edwin HarbachF.
    Edwin Harbach

Director, President and Chief Executive Officer (principal
    executive officer)/s/  Judy
    A. EthellJudy
    A. Ethell

Chief Financial Officer (principal financial and accounting
    officer)/s/  Roderick
    C. McGearyRoderick
    C. McGeary

Chairman of the Board of Directors/s/  Douglas
    C. AllredDouglas
    C. Allred

Director/s/  Betsy
    J. BernardBetsy
    J. Bernard

Director/s/  Spencer
    C. FleischerSpencer
    C. Fleischer

Director/s/  Jill
    S. Kanin-LoversJill
    S. Kanin-Lovers

Director/s/  Wolfgang
    H. KemnaWolfgang
    H. Kemna

Director/s/  Albert
    L. LordAlbert
    L. Lord

Director/s/  Eddie
    R. MunsonEddie
    R. Munson

Director/s/  J.
    Terry StrangeJ.
    Terry Strange

Director  106




---



##### 



ITEM 8:
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  BEARINGPOINT,
    INC.
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
   
  PageReport of Ernst & Young LLP,
    Independent Registered Public Accounting Firm


F-2Report of PricewaterhouseCoopers LLP, Independent
    Registered Public Accounting Firm


F-3Consolidated Balance Sheets at December 31,
    2007 and 2006


F-4Consolidated Statements of Operations for the
    years ended December 31, 2007, 2006 and 2005


F-5Consolidated Statements of Changes in
    Stockholders Equity (Deficit) for the years ended
    December 31, 2007, 2006 and 2005


F-6Consolidated Statements of Cash Flows for the
    years ended December 31, 2007, 2006 and 2005


F-8Notes to Consolidated Financial Statements


F-9   F-1




---



##### Table of Contents



REPORT OF
    ERNST & YOUNG LLP,
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM          Accounting for Uncertainty
    in Income Taxes
    /s/
    Ernst & Young LLP
    F-2




---



##### Table of Contents



REPORT OF
    PRICEWATERHOUSECOOPERS LLP,
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           F-3




---



##### Table of Contents



BEARINGPOINT,
    INC.
  CONSOLIDATED
    BALANCE SHEETS
 (in
    thousands, except share amounts)
  December 31,2007


2006ASSETSCurrent assets:Cash and cash equivalents

$
466,815


$
389,571Restricted cash (note 2)


1,703



3,097Accounts receivable, net of allowance for doubtful accounts of
    $5,980 at December 31, 2007 and $5,927 at December 31,
    2006


356,178



361,638Unbilled revenue


319,132



341,357Income tax receivable


8,869



1,414Deferred income taxes


11,521



7,621Prepaid expenses


36,500



33,677Other current assets


38,122



65,611Total current assets


1,238,840



1,203,986Property and equipment, net


113,771



146,392Goodwill


494,656



463,446Deferred income taxes, less current portion


25,179



41,663Other assets


108,958



83,753Total assets

$
1,981,404


$
1,939,240LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Current portion of notes payable

$
3,700


$
360Accounts payable


215,999



270,321Accrued payroll and employee benefits


368,208



369,503Deferred revenue


115,961



131,313Income tax payable


58,304



33,324Current portion of accrued lease and facilities charges


17,618



17,126Deferred income taxes


15,022



20,109Accrued legal settlements


8,716



59,718Other current liabilities


108,364



135,837Total current liabilities


911,892



1,037,611Notes payable, less current portion


970,943



671,490Accrued employee benefits


118,235



116,087Accrued lease and facilities charges, less current portion


48,066



49,792Deferred income taxes, less current portion


9,581



7,984Income tax reserve


243,308



108,499Other liabilities


148,668



125,078Total liabilities


2,450,693



2,116,541Commitments and contingencies (notes 9, 10, 11)Stockholders deficit:Preferred stock, $.01 par value 10,000,000 shares
    authorized






Common stock, $.01 par value 1,000,000,000 shares
    authorized, 219,890,126 shares issued and
    215,156,077 shares outstanding on December 31, 2007
    and 205,406,249 shares issued and 201,593,999 shares
    outstanding on December 31, 2006


2,186



2,044Additional paid-in capital


1,438,369



1,315,190Accumulated deficit


(2,180,578
)


(1,697,639
)Notes receivable from stockholders






(7,466
)Accumulated other comprehensive income


308,857



246,297Treasury stock, at cost (4,734,049 shares on
    December 31, 2007 and 3,812,250 shares on
    December 31, 2006)


(38,123
)


(35,727
)Total stockholders deficit


(469,289
)


(177,301
)Total liabilities and stockholders deficit

$
1,981,404


$
1,939,240    F-4




---



##### Table of Contents



BEARINGPOINT,
    INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 (in
    thousands, except share and per share amounts)
  Year Ended December 31,2007


2006


2005Revenue

$
3,455,562


$
3,444,003


$
3,388,900Costs of service:Professional compensation


1,846,571



1,716,632



1,770,405Other direct contract expenses


819,618



896,999



972,787Lease and facilities restructuring charges


20,869



29,621



29,581Other costs of service


299,979



250,225



258,135Total costs of service


2,987,037



2,893,477



3,030,908Gross profit


468,525



550,526



357,992Amortization of purchased intangible assets






1,545



2,266Goodwill impairment charge










166,415Selling, general and administrative expenses


701,317



748,250



750,867Operating loss


(232,792
)


(199,269
)


(561,556
)Interest income


12,084



8,749



9,049Interest expense


(61,216
)


(37,182
)


(33,385
)Insurance settlement






38,000



Other (expense) income, net


(8,566
)


8,659



(13,630
)Loss before taxes


(290,490
)


(181,043
)


(599,522
)Income tax expense


72,233



32,397



122,121Net loss

$
(362,723
)

$
(213,440
)

$
(721,643
)Loss per share  basic and diluted:Net loss

$
(1.68
)

$
(1.01
)

$
(3.59
)Weighted average shares  basic and diluted


216,167,179



212,154,618



201,020,274    F-5




---



##### Table of Contents





BEARINGPOINT,
    INC.
  CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIT)
 (in
    thousands)
  Notes


AccumulatedCommon Stock


Additional





receivable


otherShares





paid-in


Accumulated


from


comprehensive


Treasury Stock


Comprehensiveissued


Amount


capital


deficit


stockholders


income (loss)


Shares


Amount


Income (loss)


TotalBalance at December 31, 2004


203,133



2,022



1,143,059



(762,556
)


(8,055
)


285,955



(3,812
)


(35,727
)






624,698Exercise of stock options under Long-Term Incentive Plan,
    including tax benefit of $75


164



1



1,200



























1,201Sale of common stock under Employee Stock Purchase Plan,
    including tax benefit of $520


2,053



21



14,269



























14,290Notes receivable from stockholders, including $6 in interest and
    forgiveness of loan


















477



















477Compensation recognized for stock options, restricted stock
    awards and restricted stock units










82,346



























82,346Cash paid in lieu of stock issuance related to transactions
    involving Andersen Business Consulting










(4,929
)


























(4,929
)Compensation recognized for stock awards related to transactions
    involving Andersen Business Consulting










3,491



























3,491Beneficial conversion feature relating to the July 2005 Senior
    Debentures










14,288



























14,288Fair value of the July 2005 Warrants










8,073



























8,073Comprehensive loss:Net loss














(721,643
)

















$
(721,643
)


(721,643
)Minimum pension liability






















(13,321
)










(13,321
)


(13,321
)Foreign currency translation adjustment






















(54,543
)










(54,543
)


(54,543
)Total comprehensive loss

































$
(789,507
)Balance at December 31, 2005


205,350


$
2,044


$
1,261,797


$
(1,484,199
)

$
(7,578
)

$
218,091



(3,812
)

$
(35,727
)





$
(45,572
)Notes receivable from stockholders, including $3 in interest and
    forgiveness of loan


















112



















112Restricted stock awards to Board of Directors


56







460



























460Compensation recognized for stock options and restricted stock
    units










52,933



























52,933SFAS 158 adjustment, net of tax benefit of $3,756






















(11,417
)














(11,417
)Comprehensive income (loss):Net loss














(213,440
)

















$
(213,440
)


(213,440
)Minimum pension liability, net of tax of $2,961






















8,880











8,880



8,880Foreign currency translation adjustment






















30,743











30,743



30,743Total comprehensive loss

































$
(173,817
)Balance at December 31, 2006


205,406


$
2,044


$
1,315,190


$
(1,697,639
)

$
(7,466
)

$
246,297



(3,812
)

$
(35,727
)





$
(177,301
)    F-6




---



##### Table of Contents



BEARINGPOINT,
    INC.
  CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
    (DEFICIT)  (Continued)
 (in
    thousands)
  Notes


AccumulatedCommon Stock


Additional





receivable


otherShares





paid-in


Accumulated


from


comprehensive


Treasury Stock


Comprehensiveissued


Amount


capital


deficit


stockholders


income (loss)


Shares


Amount


Income (loss)


TotalBalance at December 31, 2006


205,406


$
2,044


$
1,315,190


$
(1,697,639
)

$
(7,466
)

$
246,297



(3,812
)

$
(35,727
)





$
(177,301
)Compensation recognized for stock options, restricted stock
    units, performance share units, Employee Stock Purchase Plan, BE
    an Owner and restricted stock awards










97,062



























97,062Sale of common stock under Employee Stock Purchase
    Plan  BE an Owner


2,546



26



10,122



























10,148Sale of common stock under Employee Stock Purchase Plan


3,104



31



12,343



























12,374Restricted stock awards to Board of Directors


48



































Settlement of notes receivable from stockholders






(3
)


(6,649
)






7,466







(297
)


(782
)






32Settlement of softline acquisition obligation


563



6



10,383



























10,389Settlement of restricted stock units


8,223



82



(82
)














(625
)


(1,614
)






(1,614
)FSP 00-19-2
    adoption














(371
)






















(371
)FIN 48 adoption














(119,845
)






















(119,845
)Comprehensive income (loss):Net loss














(362,723
)

















$
(362,723
)


(362,723
)Prior service cost, net of tax benefit of $1,270






















1,800











1,800



1,800Net actuarial gain, net of tax of $6,229






















13,056











13,056



13,056Foreign currency translation adjustment






















47,704











47,704



47,704Total comprehensive loss

































$
(300,163
)Balance at December 31, 2007


219,890


$
2,186


$
1,438,369


$
(2,180,578
)

$



$
308,857



(4,734
)

$
(38,123
)





$
(469,289
)    F-7




---



##### Table of Contents





BEARINGPOINT,
    INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
  Year Ended December 31,2007


2006


2005Cash flows from operating activities:Net loss

$
(362,723
)

$
(213,440
)

$
(721,643
)Adjustments to reconcile net loss to net cash (used in) provided
    by operating activities:Deferred income taxes


4,060



(13,406
)


49,211Provision (benefit) for doubtful accounts


2,465



(464
)


5,334Stock-based compensation


97,062



53,393



85,837Impairment of goodwill










166,415Depreciation and amortization of property and equipment


63,472



74,023



70,544Amortization of purchased intangible assets






1,545



2,266Lease and facilities restructuring charges


20,869



29,621



29,581Loss on disposal and impairment of assets


9,575



3,769



Amortization of debt issuance costs and debt accretion


13,955



8,936



12,396Other


11,326



(8,549
)


11,597Changes in assets and liabilities:Accounts receivable


17,353



84,124



(52,196
)Unbilled revenue


28,510



19,814



20,492Income tax receivable, prepaid expenses and other current assets


19,742



(23,702
)


26,318Other assets


(14,363
)


(5,710
)


(10,025
)Accounts payable


(58,711
)


(26,322
)


(3,113
)Accrued legal settlements and other current liabilities


(51,421
)


(12,715
)


61,240Accrued payroll and employee benefits


(5,501
)


48,099



47,018Deferred revenue


(18,941
)


(38,605
)


62,788Income tax reserve and other liabilities


29,084



78,269



22,869Net cash (used in) provided by operating activities


(194,187
)


58,680



(113,071
)Cash flows from investing activities:Purchases of property and equipment


(37,335
)


(50,581
)


(40,849
)Decrease (increase) in restricted cash


1,393



118,151



(100,194
)Net cash (used in) provided by investing activities


(35,942
)


67,570



(141,043
)Cash flows from financing activities:Proceeds from issuance of common stock


12,374







14,896Treasury stock through net share delivery


(1,614
)






Net proceeds from issuance of notes payable


284,015







282,156Repayments of notes payable


(4,209
)


(6,506
)


(16,985
)Decrease in book overdrafts






(810
)


(980
)Payments made in lieu of stock issuance










(4,929
)Increase in notes receivable from stockholders










(6
)Net cash provided by (used in) financing activities


290,566



(7,316
)


274,152Effect of exchange rate changes on cash and cash equivalents


16,807



15,297



(9,508
)Net increase in cash and cash equivalents


77,244



134,231



10,530Cash and cash equivalents  beginning of period


389,571



255,340



244,810Cash and cash equivalents  end of period

$
466,815


$
389,571


$
255,340Supplementary cash flow information:Interest paid

$
43,733


$
27,582


$
17,547Taxes paid, net of refunds

$
18,427


$
21,333


$
(41,741
)Supplemental non-cash investing and financing activities:Settlement of notes receivable from stockholders

$
7,466


$



$
Settlement of Softline acquisition obligation

$
10,389


$



$
Sale of common stock  BE an Owner

$
10,148


$



$
Beneficial conversion feature related to the July 2005 Debentures

$



$



$
14,288Fair value of July 2005 Warrants

$



$



$
8,073    F-8




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (in
    thousands, except share and per share amounts)
  1. Description
    of the Business
      2.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation    Use of
    Estimates    Reclassifications
    Revenue
    Recognition
   F-9




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  time-and-material,
  81-1, (SOP 81-1). and/or SOP 97-2, SOP 98-9 SOP 81-1, SOP 81-1
  time-and-materials
  00-21,
 F-10




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  SOP 81-1; and/or
        Costs of
    Service   F-11




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  Selling,
    General and Administrative Expenses    Cash,
    Cash Equivalents and Restricted Cash    Concentrations
    of Credit Risk and Fair Value of Financial Instruments     F-12




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  Valuation
    of Accounts Receivable    Property
    and Equipment  SOP 98-1,
  Accounting
    for Leases
    Asset
    Retirement Obligations
    Goodwill
    and Other Intangible Assets
   F-13




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
       Valuation
    of Long-Lived Assets    Foreign
    Currency   F-14




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
      Accounting
    for Income Taxes      Pension
    and Postretirement Benefits   F-15




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  Accounting
    for Employee Global Mobility and Tax Equalization    Stock-Based
    Compensation      Derivative
    Financial Instruments  EITF 00-19, EITF 98-5, (EITF 98-5), EITF 00-27, No. 98-5 (EITF 00-27),
   F-16




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  Accumulated
    Other Comprehensive Income   Foreign currency


Pension andtranslation


post-retirementadjustment


benefit


TotalBalance December 31, 2005

$
231,412


$
(13,321
)

$
218,091Change in foreign currency translation


30,743







30,743Change in minimum pension liabilities, net of tax of $2,961






8,880



8,880Adoption of SFAS 158, net of tax benefit of $3,756






(11,417
)


(11,417
)Balance December 31, 2006


262,155



(15,858
)


246,297Prior service cost, net of tax benefit of $1,270






1,800



1,800Net actuarial gain, net of tax of $6,229






13,056



13,056Change in foreign currency translation


47,704







47,704Balance December 31, 2007

$
309,859


$
(1,002
)

$
308,857   Recently
    Issued Accounting Pronouncements       F-17




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  3.
    Loss per
    Share    Year Ended December 31,2007


2006


2005Common shares outstanding


202,819,718



201,243,428



201,020,274Vested RSUs


13,347,461



10,911,190



216,167,179



212,154,618



201,020,274        Year Ended December 31,2007


2006


2005Employee stock options


33,682,831



39,869,914



44,920,037Employee stock purchase plan






4,831,754



4,605,505Restricted stock units


8,253,253



4,333,270



4,275,980Performance share units(1)


45,039,343







Series A Convertible Subordinated Debentures


23,810,200



23,810,200



23,810,200Series B Convertible Subordinated Debentures


19,048,160



19,048,160



19,048,160April 2005 Convertible Senior Subordinated Debentures


30,303,020



30,303,020



18,939,388July 2005 Convertible Senior Subordinated Debentures


5,925,926



5,925,926



2,716,049Warrants issued in connection with the July 2005 Debentures


3,500,000



3,500,000



1,604,167Softline acquisition obligation (Note 9)






735,759



713,163169,562,733



132,358,003



120,632,649      (1)
    
    As of the end of the reporting
    period, the performance conditions described further in
    Note 13, Stock-Based Compensation, have not
    been met; however, the above shares represent the maximum
    settlement of shares under this program. F-18




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
   4.
    Property
    and Equipment    December 31,2007


2006Property and equipment:Internal-use software

$
162,727


$
161,005Equipment


83,491



101,026Leasehold improvements


65,089



72,517Furniture


30,111



38,063Total property and equipment


341,418



372,611Accumulated depreciation and amortization:Internal-use software


(110,570
)


(96,798
)Equipment


(61,695
)


(72,809
)Leasehold improvements


(39,099
)


(37,859
)Furniture


(16,283
)


(18,753
)Total accumulated depreciation and amortization


(227,647
)


(226,219
)Property and equipment, net

$
113,771


$
146,392     Year Ended December 31,2007


2006


2005Amounts included in:Other costs of service

$
40,502


$
40,502


$
39,205Selling, general and administrative expenses


22,970



33,521



31,339$
63,472


$
74,023


$
70,544   5.
    Business
    Acquisitions, Goodwill and Other Intangible Assets   F-19




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    ForeignBalance





Currency


BalanceDecember 31,





Translation


December 31,2006


Reductions


Adjustment


2007Public Services

$
23,581


$



$



$
23,581Financial Services


9,210











9,210EMEA


359,133



(7,495
)(1)


34,012



385,650Asia Pacific


70,402







4,601



75,003Latin America


918







92



1,010Corporate/Other


202











202Total

$
463,446


$
(7,495
)

$
38,705


$
494,656     (1)
    
    Amount represents the reversal of
    uncertain income tax liabilities recorded as part of the
    acquisition of a consulting practice in EMEA against goodwill,
    as the statute of limitations for the potential tax liability
    expired during the first quarter of 2007.  ForeignBalance





Currency


BalanceDecember 31,





Translation


December 31,2005


Reductions


Adjustment


2006Public Services

$
23,581


$



$



$
23,581Financial Services


9,210











9,210EMEA


325,262







33,871



359,133Asia Pacific


68,562







1,840



70,402Latin America


871







47



918Corporate/Other


202











202Total

$
427,688


$



$
35,758


$
463,446      F-20




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
       F-21




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  6.
    Notes
    Payable    December 31,2007


2006Current portion(1):Term Loans under the 2007 Credit Facility

$
3,000


$
Other


700



360Total current portion


3,700



360Long-term portion:Series A and Series B Convertible Debentures


450,000



450,000April 2005 Convertible Debentures


200,000



200,000July 2005 Convertible Debentures (net of discount of $14,389 and
    $18,510, respectively)


25,611



21,490Term Loans under the 2007 Credit Facility


294,750



Other


582



Total long-term portion


970,943



671,490Total notes payable

$
974,643


$
671,850     Year

Amount(2)2008

$
3,7002009


3,5822010


28,6112011


3,0002012


285,750Thereafter


650,000Total

$
974,643     (1)
    
    The weighted average interest rate
    on the current portion of notes payable as of December 31,
    2007 and 2006 was 8.8% and 5.6%, respectively.(2)
    
    As described below, the holders of
    the Subordinated Debentures (as defined below) have the right to
    convert the debentures into shares of Company common stock only
    upon occurrence of certain triggering events. The April 2005
    Convertible Debentures (as defined below) were convertible upon
    issuance on April 27, 2005, and the July 2005 Convertible
    Debentures (as defined below) were convertible starting on
    July 15, 2006. Upon conversion of these debentures, the
    Company will have the right to deliver, in lieu of shares of
    common stock, cash or a combination of cash and shares of common
    stock. In addition, the holders of the April 2005 Convertible
    Debentures and Subordinated Debentures have the right, at their
    option, to require the Company to repurchase all or some of
    their debentures on various dates prior to maturity (see below). F-22




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
   No. EITF 00-19-2, (FSP 00-19-2). FSP 00-19-2 FSP 00-19-2,
  2007
    Credit Facility       F-23




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
      
    The affirmative covenantsinclude, among other things:
    the delivery of unaudited quarterly and audited annual financial
    statements, all in accordance with generally accepted accounting
    principles, certain monthly operating metrics and budgets;
    compliance with applicable laws and regulations (excluding,
    prior to October 31, 2008, compliance with certain filing
    requirements under the securities laws); maintenance of
    existence and insurance; after October 31, 2008, as
    requested by the Administrative Agent, reasonable efforts to
    maintain credit ratings; and maintenance of books and records
    (subject to the material weaknesses previously disclosed in the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2005).
    The negative covenants, which (subject to exceptions)
    restrict certain of the Companys corporate activities,
    include, among other things, limitations on: disposition of
    assets; mergers and acquisitions; payment of dividends; stock
    repurchases and redemptions; incurrence of additional
    indebtedness; making of loans and investments; creation of
    liens; prepayment of other indebtedness; and engaging in certain
    transactions with affiliates.        Series A
    and Series B Convertible Subordinated Debentures
   F-24




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
      EITF 96-19, (EITF 96-19),
   F-25




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
           April
    2005 Convertible Senior Subordinated Debentures   F-26




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  EITF 96-19,
         F-27




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
        July 2005
    Convertible Senior Subordinated Debentures  EITF 96-19,
  Form 10-Q
 F-28




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
               EITF 98-5 EITF 00-27,
 F-29




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
      Discontinued
    Credit Facilities  2005
    Credit Facility      F-30




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  7.
    Accrued
    Payroll and Employee Benefits    December 31,2007


2006Accrued compensated absences

$
100,210


$
97,123Payroll related taxes


45,671



55,270Employee mobility and tax equalization


108,056



87,621Accrued bonus


37,393



52,501Other


76,878



76,988Total

$
368,208


$
369,503  8.
    Other
    Current Liabilities    December 31,2007


2006Softline acquisition obligation (see Note 9)

$



$
16,564Accrual for loss contracts


23,006



24,828Sales, use and value added taxes payable


37,694



31,632Other


47,664



62,813Total

$
108,364


$
135,837   9.
    Softline
    Acquisition Obligation   F-31




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     10.
    Collaboration
    Agreement    11.
    Commitments
    and Contingencies    
    Claims and investigations arising from its inability to timely
    file periodic reports under the Exchange Act (the Exchange
    Act) and the restatement of its financial statements for
    certain prior periods to correct accounting errors and
    departures from generally accepted accounting principles for
    those years (SEC Reporting Matters);
    Claims and investigations being conducted by agencies or
    officers of the U.S. Federal government and arising in
    connection with its provision of services under contracts with
    agencies of the U.S. Federal government (Government
    Contracting Matters); and
    Claims made in the ordinary course of business by clients
    seeking damages for alleged breaches of contract or failure of
    performance, by current or former employees seeking damages for
    alleged acts of wrongful termination or discrimination, and by
    creditors or other vendors alleging defaults in payment or
    performance (Other Matters).   F-32




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  SEC
    Reporting Matters
  2005
    Class Action Suits  Rule 10b-5 Makor Issues & Rights, Ltd v.
    Tellabs, Tellabs Tellabs
  2005 Shareholders
    Derivative Demand  Form 8-K,
 F-33




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    SEC
    Investigation  Form 8-K.
    Government
    Contracting Matters
  Government
    Contracts    F-34




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  Other
    Matters
  Hawaiian
    Telcom Communications, Inc.    Telecommunications
    Company    Transition
    Services Provided By KPMG LLP     F-35




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  Operating
    Leases
      Year ending December 31:2008

$
83,9842009


72,1382010


51,6842011


36,9992012


28,470Thereafter


39,214Total minimum payments required

$
312,489     Other
    Commitments
      and/or
 F-36




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    12.
    Stockholders
    Equity  Notes
    Receivable from Stockholders    Treasury
    Stock   Preferred
    Stock  F-37




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  Shareholder
    Rights Plan            F-38




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  13.
    Stock-Based
    Compensation  Long-Term
    Incentive Plan        10-year
   F-39




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    Year Ended December 31,2007


2006


2005Stock options

$
7,473


$
21,097


$
546RSUs


18,920



26,280



81,800PSUs


66,590







ESPP and BE an Owner


3,736



5,556



Restricted stock awards


343



460



3,491Total

$
97,062


$
53,393


$
85,837  F-40




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
           Year EndedDecember 31, 2005Net loss

$
(721,643
)Add back:Total stock-based compensation expense recorded under intrinsic
    value method for all stock awards, net of tax effects


85,837Deduct:Total stock-based compensation expense recorded under fair value
    method for all stock awards, net of tax effects


(173,134
)Pro forma net loss

$
(808,940
)Loss per share:Basic and diluted  as reported

$
(3.59
)Basic and diluted  pro forma

$
(4.02
)    F-41




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
      Stock Price


Risk-Free





ExpectedExpected


Interest


Expected


DividendVolatility


Rate


Life


YieldYear ended December 31, 2007


41.85
%


4.41
%


5.5



Year ended December 31, 2006


50.80
%


4.69
%


6



Year ended December 31, 2005


51.08
%


4.10
%


6



     Blackout
    Period    Form S-8 Form S-8
 F-42




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  Stock
    Option Plans    WeightedWeighted


AverageAverage


Remaining


AggregateNumber


Exercise


Contractual


Intrinsicof Options


Price


Life (Years)


ValueOutstanding at December 31, 2006


36,037,278


$
11.10Granted


30,000


$
5.93Forfeited


(5,397,609
)

$
10.96Outstanding at December 31, 2007


30,669,669


$
11.11Vested or expected to vest at December 31, 2007


30,624,891


$
11.12



5.0


$
Exercisable at December 31, 2007


30,041,149


$
11.17



4.9


$
          F-43




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  Restricted
    Stock Units    WeightedAverageNumber


Grant Dateof RSUs


Fair ValueNonvested at December 31, 2006(1)


8,864,065


$
8.42Granted


1,942,893



7.36Vested


(2,431,254
)


8.34Forfeited


(1,944,372
)


8.39Nonvested at December 31, 2007(1)


6,431,332


$
8.14Vested at December 31, 2007(1)


5,733,620Outstanding at December 31, 2007(1)


12,164,952     (1)
    
    Approximately 73,581 RSUs (net of
    forfeitures) and 39,315 RSUs (net of forfeitures) have been
    excluded from the December 31, 2006 and 2007 nonvested
    balances, respectively, because they were awarded to recipients
    in countries where local laws require a cash settlement.
    Similarly, approximately 37,271 RSUs (net of forfeitures) and
    76,586 RSUs (net of forfeitures) have been excluded from the
    December 31, 2007 vested and outstanding balances,
    respectively. Cash in the amount of $123 was used to settle
    these RSUs in 2007.        Performance
    Share Units   F-44




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    WeightedAverageNumber


Grant Dateof PSUs


Fair ValueNonvested and outstanding at December 31, 2006





$
Granted


22,381,132



12.46Forfeited


(4,253,907
)


12.16Nonvested and outstanding at December 31, 2007(1)


18,127,225


$
12.53     (1)
    
    Excludes approximately 31,969 PSUs
    awarded to recipients in China where local laws require a cash
    settlement.            
    a performance period of February 2, 2007 to
    December 31, 2009;
    a grant date closing stock price equal to the closing price of a
    share of the Companys common stock as reported on the New
    York Stock Exchange;
    a risk free rate using a term structure over the performance
    period; and
    a volatility assumption using a term structure over the
    performance period incorporating an average blended rate of the
    Companys historical volatility and implied volatility from
    the Companys peer group within the S&P 500. F-45




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     Restricted
    Stock Awards      Employee
    Stock Purchase Plan  24-month 24-month 6-months 6-month
 F-46




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
      14.
    Income
    Taxes      Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2007


2006


2005Current:Federal

$
10,972


$
4,855


$
7,437State and local


1,100



1,199



1,400Foreign


49,304



27,648



58,335Total current


61,376



33,702



67,172Deferred:Federal










40,242State and local










15,045Foreign


10,857



(1,305
)


(338
)Total deferred


10,857



(1,305
)


54,949Total

$
72,233


$
32,397


$
122,121  F-47




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     Year Ended December 31,2007


2006


2005U.S. federal statutory income tax rate


35.0
%


35.0
%


35.0
%Nondeductible goodwill impairment


0.0
%


0.0
%


(6.9
)%Change in valuation allowance


(42.4
)%


(40.2
)%


(37.2
)%Foreign taxes


(6.0
)%


2.1
%


(2.3
)%Nondeductible meals and entertainment expense


(2.3
)%


(4.3
)%


(1.1
)%State taxes, net of federal benefit


4.3
%


3.7
%


2.1
%Foreign recapitalization and restructuring


(5.9
)%


(3.0
)%


(5.5
)%Income tax reserve


(4.3
)%


(4.6
)%


(3.1
)%Non-deductible interest


(0.9
)%


(2.1
)%


(0.5
)%Foreign dividends


(0.1
)%


(2.6
)%


(0.5
)%Other, net


(2.3
)%


(1.9
)%


(0.4
)%Effective income tax rate


(24.9
)%


(17.9
)%


(20.4
)%     December 31,


December 31,2007


2006Deferred income tax assets:Net operating loss carryforwards

$
287,646


$
263,531Accrued compensation


39,624



33,329Reserve for claims


3,344



23,323Equity-based compensation


58,805



39,126Accrued liabilities


32,299



23,931Other


73,472



69,945Total gross deferred income taxes


495,190



453,185Less valuation allowance


(468,563
)


(408,149
)Total net deferred income tax assets


26,627



45,036Deferred income tax liabilities:Property and equipment


5,937



13,416Other






245Revenue recognition


5,334



Foreign currency translation


3,259



10,184Total deferred income tax liabilities


14,530



23,845Net deferred income tax asset

$
12,097


$
21,191  F-48




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     December 31,


December 31,2007


2006Current deferred tax assets

$
11,521


$
7,621Non-current deferred tax assets


25,179



41,663Current deferred tax liabilities


(15,022
)


(20,109
)Non-current deferred tax liabilities


(9,581
)


(7,984
)$
12,097


$
21,191              F-49




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    Balance at January 1, 2007

$
282,822Increase as a result of tax positions taken during the current
    period


30,446Increase as a result of tax positions taken during a prior period


26,296Decrease as a result of tax positions taken during a prior period


(14,475
)Lapse of applicable statute of limitations


(9,160
)Settlements


(968
)Balance at December 31, 2007

$
314,961              F-50




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
          15.
    Transactions
    with KPMG LLP     F-51




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
        Year EndedDecember 31,2005Occupancy costs

$
2,760Other infrastructure service costs


3,236Total

$
5,996Amounts included in:Other costs of service

$
2,760Selling, general and administrative expenses


3,236$
5,996     16.
    Employee
    Benefit Plans  401(k)
    Plan   F-52




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    Pension
    and Postretirement Benefits       F-53




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     Pension PlansYear Ended December 31,2007


2006


2005Components of net periodic pension costService cost


6,613



7,166


$
6,362Interest cost


4,863



4,429



4,167Expected return on plan assets


(998
)


(1,075
)


(1,172
)Amortization of loss


675



1,026



16Amortization of prior service cost


396



635



774Curtailment






120



(833
)Settlement






(365
)


(232
)Net periodic pension cost

$
11,549


$
11,936


$
9,082Postretirement Medical PlanYear Ended December 31,2007


2006


2005Components of postretirement medical costService cost

$
2,471


$
1,922


$
1,257Interest cost


866



735



572Amortization of losses


51



156



73Amortization of prior service cost


478



478



478Net periodic postretirement medical cost

$
3,866


$
3,291


$
2,380  F-54




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  PostretirementMedicalPension Plans


PlanYear Ended


Year EndedDecember 31,


December 31,2007


2006


2007


2006Change in projected benefit obligationBenefit obligation at beginning of year

$
119,159


$
112,542


$
15,073


$
13,204Service cost


6,612



7,166



2,471



1,922Interest cost


4,863



4,428



866



736Plan participants contributions


678



637



196



188Curtailment(1)






(69
)






Benefits paid


(2,412
)


(1,609
)


(270
)


(151
)Administrative expense


(138
)


(128
)






Actuarial (gain) loss


(16,854
)


(8,372
)


(2,907
)


(826
)Settlement(1)






(6,986
)






Effect of exchange rate changes


12,113



11,550







Projected benefit obligation at end of year

$
124,021


$
119,159


$
15,429


$
15,073Change in plan assetsFair value of plan assets at beginning of year

$
22,235


$
24,332


$



$
Actual return on plan assets


260



664







Employer contributions


3,874



3,440



74



(37
)Employee contributions


678



637



196



188Benefits paid


(2,412
)


(1,609
)


(270
)


(151
)Administrative expense


(138
)


(128
)






Settlement(1)






(6,986
)






Effect of exchange rate changes


1,848



1,885







Fair value of plan assets at end of year

$
26,345


$
22,235


$



$
Reconciliation of funded statusFunded status

$
(97,676
)

$
(96,924
)

$
(15,429
)

$
(15,073
)Unrecognized loss














Unamortized prior service cost














Net amount recognized

$
(97,676
)

$
(96,924
)

$
(15,429
)

$
(15,073
)Amounts recognized in Accumulated Other Comprehensive LossPrior service cost

$
3,574


$
4,896


$
1,548


$
2,026Net (gain) loss


(3,589
)


6,510



(531
)


2,426Total accumulated other comprehensive (income) loss

$
(15
)

$
11,406


$
1,017


$
4,452Amounts recognized in the Consolidated Balance SheetsNoncurrent assets

$
2,460


$
231


$



$
Current liabilities


(2,172
)


(1,821
)


(189
)


(229
)Noncurrent liabilities


(97,964
)


(95,334
)


(15,240
)


(14,844
)Net amount recognized

$
(97,676
)

$
(96,924
)

$
(15,429
)

$
(15,073
)Accumulated benefit obligation

$
110,065


$
105,894


$
15,429


$
15,073     (1)
    
    The settlement and curtailment
    related to a decrease in participants in the Switzerland Plan
    due to a reduction in workforce. F-55




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
       PensionPlans


Postretirement Medical PlanYear Ended


Year EndedDecember 31,


December 31,2007


2006


2007


2006Weighted-average assumptions used to determine benefit
    obligationsDiscount rate


5.1
%


4.2
%


6.1
%


5.8
%Rate of compensation increase


3.0
%


3.0
%






Weighted-average assumptions used to determine net periodic
    benefit costDiscount rate


4.2
%


4.0
%


5.8
%


5.8
%Expected long-term return on plan assets


4.5
%


4.5
%






Rate of compensation increase


3.0
%


3.0
%






      Pension PlanDecember 31,


December 31,2007


2006Asset categoryBonds


51.0
%


49.0
%Equities


31.0



30.0Real estate


13.0



14.0Other


5.0



7.0Total


100.0
%


100.0
%  F-56




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     PostretirementPension Plans


Medical Plan2008

$
3,616


$
1892009


3,805



2662010


4,022



3692011


4,237



4622012


4,462



573Years
    2013-2017


26,913



6,314$
47,055


$
8,173     December 31,


December 31,2007


2006Health care cost trend rate assumed for next year


9.0
%


9.0
%Rate to which the cost trend rate is assumed to decline (the
    ultimate trend rate)


5.0
%


5.0
%Year that the rate reaches the ultimate trend rate


2016



2015     1%-Point


1%-PointIncrease


DecreaseEffect on total service and interest cost

$
652


$
(535
)Effect on Postretirement Benefit Obligation

$
2,529


$
(2,108
)      F-57




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     December 31, 2006Prior to SFAS 158


SFAS 158


Post SFAS 158Adjustments


Adjustments


AdjustmentsOther assets

$
89,049


$
(5,296
)

$
83,753Deferred income taxes


37,907



3,756



41,663Total assets


1,940,780



(1,540
)


1,939,240Accrued payroll and employee benefits


342,665



2,050



344,715Total current liabilities


1,035,561



2,050



1,037,611Accrued employee benefits


108,260



7,827



116,087Total liabilities


2,106,664



9,877



2,116,541Accumulated other comprehensive income


257,714



(11,417
)


246,297Total liabilities and stockholders deficit

$
1,940,780


$
(1,540
)

$
1,939,240     Deferred
    Compensation Plan  EITF 97-14,
   F-58




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     17.
    Lease and
    Facilities Restructuring and Severance Activities  Severance
    Activities    Lease and
    Facilities Restructuring Activities         F-59




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
      TotalBalance at December 31, 2004

$
50,342Charges to operations


29,581Payments


(28,315
)Other (1)


(1,011
)Balance at December 31, 2005


50,597Charges to operations


29,621Payments


(14,142
)Other (1)


842Balance at December 31, 2006


66,918Charges to operations


20,869Payments


(23,774
)Other (1)


1,671Balance at December 31, 2007


65,684     (1)
    
    Other changes in restructuring
    accrual consist primarily of foreign currency translation
    adjustments.    Year Ending December 31:2008

$
17,6182009


13,5252010


9,9422011


9,8502012


8,237Thereafter


6,512Total

$
65,684   18.
    Segment
    Information   F-60




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
      Year Ended December 31, 2007Public


Commercial


Financial








Latin


Corporate/Services


Services


Services


EMEA


Asia Pacific


America


Other(1)


TotalRevenue

$
1,432,645


$
509,789


$
264,198


$
791,298


$
362,715


$
90,091


$
4,826


$
3,455,562Operating income (loss)


230,007



58,705



22,896



124,675



69,243



(17,059
)


(721,259
)


(232,792
)Depreciation and amortization


8,648



696



557



11,855



875



450



40,391



63,472Interest expense(2)


25,025



5,638



3,412



7,586



5,476



2,074



12,005



61,216Total assets(3)


396,542



95,003



48,026



594,675



130,109



25,159



691,890



1,981,404   Year Ended December 31, 2006Public


Commercial


Financial








Latin


Corporate/Services


Services


Services


EMEA


Asia Pacific


America


Other(1)


TotalRevenue

$
1,339,358


$
554,806


$
399,331


$
703,083


$
360,001


$
82,319


$
5,105


$
3,444,003Operating income (loss)


234,309



57,229



111,192



96,180



68,205



4,465



(770,849
)


(199,269
)Depreciation and amortization


10,080



1,089



852



10,573



2,795



712



49,467



75,568Interest expense(2)


25,915



6,382



4,715



3,637



9,717



2,836



(16,020
)


37,182Total assets(3)


418,999



113,948



63,342



573,489



124,068



24,714



620,680



1,939,240   Year Ended December 31, 2005Public


Commercial


Financial








Latin


Corporate/Services


Services(4)


Services


EMEA (5)


Asia Pacific


America


Other (1)


TotalRevenue

$
1,293,390


$
663,797


$
379,592


$
662,020


$
312,190


$
75,664


$
2,247


$
3,388,900Operating income (loss)


195,204



(117,376
)


84,926



(47,917
)


39,098



(213
)


(715,278
)


(561,556
)Depreciation and amortization


11,042



879



1,027



6,856



4,328



732



47,946



72,810Interest expense(2)


27,443



9,430



5,610



1,208



8,107



2,807



(21,220
)


33,385Total assets(3)


469,205



166,331



94,781



515,606



127,757



16,674



582,072



1,972,426   (1)
    
    Corporate/Other operating loss is
    principally due to infrastructure and shared services costs,
    such as facilities, information systems, finance and accounting,
    human resources, legal and marketing.(2)
    
    Interest expense is allocated to
    the industry segments based on accounts receivable and unbilled
    revenue.(3)
    
    Industry segment assets include
    accounts receivable, unbilled revenue, certain software and
    property and equipment directly attributed to the industry
    segment, purchased intangible assets and goodwill. All other
    assets are not allocated to industry segments and are classified
    as corporate assets.(4)
    
    Commercial Services includes a
    $64,188 goodwill impairment charge for the year ended
    December 31, 2005.(5)
    
    EMEA includes a $102,227 goodwill
    impairment change for the year ended December 31, 2005. F-61




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
   Geographic
    Information    Year Ended December 31,2007


2006


2005Property and





Property and





Property andEquipment,





Equipment,





Equipment,Revenue (2)


Net (3)


Revenue (2)


Net (3)


Revenue (2)


Net (3)North America(1)

$
2,206,632


$
88,176


$
2,293,495


$
112,262


$
2,336,779


$
129,545EMEA


791,298



17,660



703,083



26,930



662,020



31,228Asia Pacific


362,715



4,738



360,001



4,886



312,190



6,832Latin America(4)


90,091



3,197



82,319



2,314



75,664



2,528Total Outside of North America


1,244,104



25,595



1,145,403



34,130



1,049,874



40,588Corporate/Other


4,826







5,105







2,247



Total

$
3,455,562


$
113,771


$
3,444,003


$
146,392


$
3,388,900


$
170,133   (1)
    
    The North America region includes
    the Public Services, Commercial Services and Financial Services
    segments. The North America region is comprised of operations in
    the United States and Canada. The Company reports financial
    information for these two countries as one region. The
    Companys operations in Canada do not contribute materially
    to the North America region.(2)
    
    Revenue by geographic region is
    reported based on where client services are supervised.(3)
    
    Property and equipment, net of
    depreciation, related to the geographic region in which the
    assets reside.(4)
    
    The Latin America region includes
    Mexico. F-62




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  19.
    Results
    by Quarter (unaudited)  Quarterly Periods during the Year EndedDecember 31, 2007December 31,


September 30,


June 30,


March 31,2007


2007


2007


2007Revenue

$
852,067


$
861,897


$
875,346


$
866,252Costs of service:Costs of service


770,192



725,411



731,486



739,079Lease and facilities restructuring charge


20,561



3,866



1,329



(4,887
)Total costs of service


790,753



729,277



732,815



734,192Gross profit


61,314
(1)


132,620



142,531



132,060Selling, general and administrative expenses


189,042



160,324



174,707



177,244Operating loss


(127,728
)


(27,704
)


(32,176
)


(45,184
)Interest/other expense, net


(15,228
)


(19,822
)


(13,626
)


(9,022
)Loss before taxes


(142,956
)


(47,526
)


(45,802
)


(54,206
)Income tax expense


26,028
(2)


20,480



18,225



7,500Net loss

$
(168,984
)

$
(68,006
)

$
(64,027
)

$
(61,706
)Loss per share  basic and diluted

$
(0.77
)

$
(0.32
)

$
(0.30
)

$
(0.29
)   Quarterly Periods during the Year EndedDecember 31, 2006December 31,


September 30,


June 30,


March 31,2006


2006


2006


2006Revenue

$
874,331


$
843,248


$
892,680


$
833,744Costs of service:Costs of service


749,437



683,318



698,631



732,470Lease and facilities restructuring charge


23,372



961



2,488



2,800Total costs of service


772,809



684,279



701,119



735,270Gross profit


101,522



158,969



191,561



98,474Amortization of purchased intangible assets






515



515



515Selling, general and administrative expenses


209,630



173,323



176,384



188,913Operating (loss) income


(108,108
)


(14,869
)


14,662



(90,954
)Insurance settlement, net of legal fees














38,000Interest/other expense, net


(2,180
)


(5,906
)


(5,351
)


(6,337
)(Loss) income before taxes


(110,288
)


(20,775
)


9,311



(59,291
)Income tax (benefit) expense


(2,047
)


8,858



12,164



13,422Net loss

$
(108,241
)

$
(29,633
)

$
(2,853
)

$
(72,713
)Loss per share  basic and diluted

$
(0.51
)

$
(0.14
)

$
(0.01
)

$
(0.34
)    (1)
    
    During the fourth quarter of 2007,
    the Company recorded $58,800 in loss reserves and revenue write
    downs in addition to $20,561 in lease and facilities
    restructuring charges which significantly impacted gross profit.(2)
    
    During the fourth quarter of 2007,
    the Company recorded a valuation allowance against previously
    recognized deferred tax assets of $11,867. F-63




---



##### Table of Contents



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  20.
    Supplemental
    Financial Information    Balance at


Charge to





Balance atBeginning


Costs and


Deductions-


EndAllowance for Doubtful Accounts

of Period


Expenses (1)


Write Offs


of PeriodYear Ended December 31, 2007

$
5,927


$
2,465


$
(2,412
)

$
5,980Year Ended December 31, 2006


9,326



(464
)


(2,935
)


5,927Year Ended December 31, 2005


11,296



5,334



(7,304
)


9,326   (1)
    
    Expense reflected in other costs of
    service in the Consolidated Financial Statements  Balance at


Charged to


Charged


Credited to


Balance atBeginning


Income Tax


to Other


Income Tax


End ofIncome Tax Valuation Allowance

of Period


Provision


Accounts (2)


Provision


PeriodYear Ended December 31, 2007

$
408,149


$
125,590


$
(65,176
)

$



$
468,563Year Ended December 31, 2006


338,792



76,775



(7,418
)






408,149Year Ended December 31, 2005


114,775



223,031



986







338,792   (2)
    
    Other accounts include deferred tax
    accounts, currency translation adjustments and amounts related
    to the adoption of FIN 48. F-64