10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 2006

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 333-113658

Sensus Metering Systems (Bermuda 2) Ltd.	Sensus Metering Systems Inc.
(Exact name of registrant as specified in its charter)	(Exact name of registrant as specified in its charter)

Bermuda	98-0413362	Delaware	51-0338883
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

8601 Six Forks Road, Suite 300, Raleigh, North Carolina 27615

(Address of principal executive offices) (Zip Code)

(919) 845-4017

(Registrants’ telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  x    No  ¨

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨ Accelerated filer  ¨ Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of June 9, 2006, Sensus Metering Systems (Bermuda 2) Ltd. had 12,000 common shares outstanding, all of which were owned by Sensus Metering Systems (Bermuda 1) Ltd. and Sensus Metering Systems Inc. had 283.603994 shares of common stock outstanding, all of which were owned by Sensus Metering Systems (Bermuda 2) Ltd.

FORM 10-K

FOR THE FISCAL YEAR ENDED MARCH 31, 2006

TABLE OF CONTENTS

		Page
Part I
Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	16
Item 3.	Legal Proceedings	17
Item 4.	Submission of Matters to a Vote of Security Holders	18
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 8.	Financial Statements and Supplementary Data	34
	Consolidated Balance Sheets	35
	Consolidated Statements of Operations	36
	Consolidated Statements of Stockholder’s Equity	37
	Consolidated Statements of Cash Flows	38
	Notes to Consolidated Financial Statements	39
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	78
Item 9A.	Controls and Procedures	78
Item 9B.	Other Information	79
Part III
Item 10.	Directors and Executive Officers of the Registrant	80
Item 11.	Executive Compensation	82
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	86
Item 13.	Certain Relationships and Related Transactions	87
Item 14.	Principal Accountant Fees and Services	88
Part IV
Item 15.	Exhibits and Financial Statement Schedules	89

PART I

ITEM 1.    BUSINESS

Unless the context otherwise indicates or requires, the use in this Annual Report on Form 10-K of the terms “we,” “us” or “our” refers to Sensus Metering Systems (Bermuda 2) Ltd. and its consolidated subsidiaries, including Sensus Metering Systems Inc. and its predecessor business, Invensys Metering Systems. Our fiscal year ends on March 31 and references herein to a fiscal year refer to the twelve-month period ended as of that date.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are available free of charge on our internet web site at http://www.sensus.com as soon as reasonably practicable after such reports are electronically filed with or furnished to the Securities and Exchange Commission.

General

We are a leading provider of advanced metering and related communications systems to the worldwide utility industry and have over a century of experience in designing and manufacturing metering products. We believe we are the largest global manufacturer of water meters and have a substantial share of the sales of automatic meter reading (“AMR”) devices to the North American water utilities market. Additionally, we believe that we are a leading global developer and manufacturer of gas and heat metering systems and are an emerging participant in the North American electric metering market. We are recognized throughout the metering industry for developing and manufacturing metering products with long-term accuracy and unique product features, as well as for providing comprehensive customer service for all of our products. In addition to our metering business, we believe we are the leading North American producer of pipe joining and repair products for water and natural gas utilities and a premier supplier of precision-manufactured, thin-wall, low-porosity aluminum die-castings.

The Acquisition

On December 17, 2003, pursuant to a stock purchase agreement between Sensus Metering Systems Inc. (“Sensus”) and Invensys plc (“Invensys”), and certain of its subsidiaries, the Company acquired (the “Acquisition”) the metering systems and certain other businesses from Invensys. Prior to the date of the Acquisition, the Company had no active business operations. As a result of the Acquisition, we changed the basis of accounting and acquired substantial debt, such that the financial results for periods prior to the Acquisition are not necessarily comparable to results after the Acquisition.

Industry, Markets and Products

We have three principal product lines: metering systems products, pipe joining and repair products, and precision die casting products, accounting for approximately 81%, 10% and 9% of net sales, respectively, for fiscal 2006. Metering systems, the largest product line, includes advanced metering and related AMR communications systems and consists of four principal metering product categories: water, gas, heat and electricity. Under the Smith-Blair brand name, we manufacture pipe joining and repair products used primarily by water and gas utilities. Our precision die casting product line includes precision die-castings that are used internally for our gas meter housings and sold externally, primarily to the top five suppliers to the U.S. automotive industry (“Tier I”). For fiscal 2004, 2005 and 2006, we had net sales from continuing operations of $529.0 million, $569.8 million and $613.9 million, respectively.

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Metering Systems Products

We distribute metering systems products to utilities throughout the world and have a large installed base of meters worldwide. The North American and European utility markets are the largest markets in which we compete.

Demand for meters and metering systems has historically been driven by replacement and repair activities, upgrades to new features or technologies, new construction activity, efforts to reduce utility operating costs, conservation considerations and regulatory requirements. In addition, utilities have been migrating their manually read meters to technology-based, communicating AMR systems, which enable them to lower their operating costs and increase their revenue streams through the reduction of manual meter readings and the improvement of measurement accuracy. As a result of these benefits, the AMR market has experienced significant growth. We offer complete multi-utility AMR solutions to the water, gas and electric utility markets in North America. In addition to our own AMR systems, our meters are compatible with all of the leading AMR systems on the market today.

Water and Heat Metering. Our water metering products and systems are sold worldwide with our largest markets being North America and Europe. We have water metering systems that cover residential and commercial applications. Our water meters utilize two basic metrology designs. First is a piston or positive displacement design, which measures water based on the displacement of a known volume of water. Second is a velocity design, whose measurement uses the speed of water through a specific pipe diameter. In addition, meters can have two basic types of registers, known as manual and encoder registers. A standard or manual register delivers a reading that is determined by gears turning numbered dials and is read visually. An absolute encoder register is an electronic register whereby the reading is converted into electronic signals. Once the reading has been encoded, it can be transmitted and read in a variety of ways, including remotely. The Sensus Intelligent Communicating Encoder (“ICE”) family of products is available on all positive displacement water meters and is the basis for one of the most technologically advanced AMR systems in the industry. Our AMR systems offer utilities several ways to collect meter reading data, including TouchRead^®, walk-by and drive-by radio frequency (“RF”) RadioRead^® , PhoneRead^® and fixed-based FixNet^® RF systems.

The North American water utility market is our largest market and where we believe we hold the highest market share position among four main competitors. Our end-customers in this market are the approximately 53,000 water utilities located throughout the continent. To serve our fragmented and geographically diverse customer base, we focus our efforts on the small- to mid-size utilities that have an installed base of less than 50,000 meters. Such utilities represent approximately 90% of the water utilities in North America. Our high accuracy meters and AMR systems are attractive to these smaller utilities, which generally have limited resources, because they reduce labor-intensive manual meter readings, improve reading accuracy and minimize the cost of repairs.

The European water metering market is another significant market. We are one of the leading participants in this market along with a few other significant competitors. Much of the European residential water meter market is subject to national regulations that effectively limit a meter’s service life to approximately six years. These regulations minimize the need for long-term accuracy. In addition, these utilities do not read the meters frequently, which makes advanced metering systems more difficult to justify. As a result of these factors, product differentiation and features are less of a basis for competition than in North America. However, for industrial and commercial meters, durability, accuracy and design specifications are more critical in the customer’s selection process and are a greater basis for competition.

Our heat metering activity is focused on heat utilities and sub-metering companies in Europe with our main activity in countries that utilize hot water for heating purposes. We produce several types of heat meters that measure the energy consumed. Sensors measure the temperature of the water in a closed system as it enters and exits the building or apartment. The difference in temperature is used to calculate the amount of energy consumed. Heat metering products include PolluCom E^® compact heat meter, PolluStat E^® ultrasonic heat meter and PolluFlow bulk hot water meter.

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Gas Metering. Our gas metering and regulator products are sold primarily to the North American gas utility market and selected international gas utility markets where our gas products meet the regional product specifications. Our largest market is in North America where the market consists of approximately 1,300 gas utilities with approximately 70 million meters. The majority of the market consists of large investor-owned utilities (“IOUs”), with the remaining being small- to mid-size municipal utilities. The IOUs make up approximately 20% of the gas utility companies; however, they manage over 85% of the metering services in the North American market.

We have provided gas metering and regulatory products to the gas utility market for over 100 years and are considered a market leader. Over this period, we have continued to provide product improvements and new product developments to the market. We produce diaphragm gas metering devices for residential, commercial and industrial market segments. For transport gas customers, we supply the market with large volume turbine meters and, within the past couple of years, have introduced an ultrasonic gas meter line with the brand name Sonix^®. In addition to meters, we provide regulator products that manage the gas pressure in the gas line. We also supply AMR products that can read a meter remotely using radio frequency interfaces that connect to the meters. Our AMR products include the Sensus mobile RadioRead^® system and the AMR fixed network FixNet^® system.

Electricity Metering. Sensus entered the North American electric utility market in 2002 with the introduction of the iCon^® solid-state electricity meter for residential metering applications. The electric meter products are only sold in North America and global regions that accept American National Standards Institute (“ANSI”) standard meters. The North American electric utility market is made up of approximately 3,000 electric utilities having approximately 135 million electric meters for residential, commercial and industrial applications. The two main segments of the electric utility market are IOUs and public or municipal utilities. IOUs make up less than 1% of the electric utilities, but manage approximately 70% of the metering services, similar to the gas metering market.

We continue to expand the iCon electric meter product offering to include commercial and industrial electric meter lines as well as growing the meter’s AMR capabilities. We offer our own electric meter AMR products, which include the RadioRead^® mobile walk-by/drive-by system and the FlexNet^® with AMDS Connect^® two-way and one-way fixed network AMR system. The key design features of the iCon enable the product to be one of the most highly accurate electricity measurement devices, and the well engineered mechanical design allows for AMR product integration for both Sensus and compatible third-party AMR vendor products. These features have permitted the iCon meter to quickly gain market acceptance in North America in a short period of time. The market growth for solid-state electricity meters is expected to be higher than the historical 3% market growth due to utilities upgrading to new technologies incorporating their new meters with AMR systems.

Pipe Joining and Repair Products

Our Smith-Blair brand competes in the North American pipe joining, tapping and repair products market. Pipe joining, tapping and repair products consist principally of pipe couplings, tapping sleeves and saddles, and repair clamps that are used primarily by water and natural gas utilities to construct, extend and repair utility piping systems. Demand for pipe joining, tapping and repair products is driven by new construction, replacements and repairs. Replacement and repair demand is driven by aging infrastructure as well as extreme weather conditions, including freezes, droughts, hurricanes and earthquakes. Due to the often time-sensitive nature of customer demand for pipe joining, tapping and repair products, a company’s ability to promptly respond to customer needs with effective engineering solutions plays a significant role in its success within this market. Smith-Blair successfully differentiates itself by providing the widest range of both standard products and engineered-to-order products while maintaining the highest levels of customer service and, we believe, the shortest lead times in the industry.

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Precision Die Casting Products

In North America, approximately 250 die casters produce thousands of castings for numerous products ranging from components for automobiles to medical devices. Our die casting products consist of high quality thin-wall, low porosity aluminum die-castings, generally targeting the automotive industry and gas utility markets in North America. We believe that only four other precision die casters in the United States have the ability to produce products that are similar to those we produce. Sales within the precision die casting market are largely dependent on the success of the automotive platform for which the products are manufactured. In fiscal 2006, approximately 23% of our die casting products were used internally by our gas metering business, approximately 74% were sold to Tier I automotive component suppliers and the remaining 3% were sold to manufacturers of lawn equipment and power tools.

During fiscal 2006, we entered the Chinese precision die casting market by creating a joint venture with a Chinese aluminum die casting company. Our Chinese precision die casting operation manufactures high quality aluminum die castings for use in automobiles, motorcycles and other products.

Competition

The Company competes with a number of companies in the delivery of products and services into each of the markets we serve. Our major competitors include Actaris Metering Systems, Badger Meter Inc., Elster Metering, Itron, Inc., Landis+Gyr AG and Neptune Technologies.

Sales, Marketing and Distribution

In North America, we sell our water and gas meters primarily through a network of distributors, some of which we have had relationships with for over 30 years. Distributors can most effectively reach our broad base of existing and potential customers, which includes over 53,000 water, 3,000 electric and 1,300 gas utilities. Since entering the electric meter market in 2002, we have established our electric utility sales channels in North America through a combination of direct sales personnel, manufacturers’ representatives and distributors. Our distributors and manufacturers’ representatives have extensive relationships with many of the water, electric and gas utilities in North America. Through strong, sole-source distribution arrangements in regional and local markets, we are able to leverage those relationships to generate sales. We complement our distribution network with a North American sales force consisting of 51 members, the majority of whom are dedicated to the water metering market.

Our sales and marketing strategy in Europe differs from that in North America because of the varying competitive and regulatory landscape. Most utilities in Europe procure their meters through a tender process required by European Union or in-house regulations. Price, therefore, remains the main competitive factor in most sections of the residential European metering market. To address the specific characteristics of the European market, we maintain a direct field sales force of 70 persons who are highly trained on product specifications and performances and are able to assist customers in analyzing the technical and financial implications of major metering projects. In addition, we selectively use distributors in the European market primarily in the water and heat sub metering markets. European distributors act more as wholesalers than distributors and do not maintain significant sales and support groups.

We also have sales personnel in South America, Asia and Africa. Market coverage is mainly achieved through commissioned sales agents and several distributors. Our sales personnel play an important role in specifying products and services and are responsible for getting products qualified by utilities’ technical departments.

In addition to the sales and distribution channels, each product line is supported by a product marketing group. The marketing groups furnish product and sales materials by providing literature, promotional programs

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and web-site management. The corporate marketing group also coordinates product pricing and distributor support programs, as well as support for industry advertising, trade shows and publications.

Customers

Our top ten customers accounted for approximately 33% of net sales for the fiscal year ended 2006. Sales to distributors affiliated with National Waterworks, Inc., our largest customer and a wholly owned subsidiary of The Home Depot, Inc., constituted approximately 12% of net sales in fiscal 2006. No other individual customer accounted for more than 5% of net sales.

Products and Systems Development

We are committed to developing the most technologically advanced products within the metering industry. Currently, we maintain an active engineering and technology program that performs four key functions: development of new products, support of existing products, technical assistance for customers and new technology investigations. Our research and development expenditures for fiscal 2006 were $26.1 million. We currently have approximately 153 technical personnel operating in eight key facilities in six countries, with several smaller support groups located regionally.

A primary focus of our research and development is new product development. New product ideas are collected from many sources, including customers and sales and marketing people. We have established engineering teams with specific technical expertise to support global business activities, which eliminate duplication of effort and allow us to focus on enhancing each specific area of expertise. Utilities are very conservative in adopting new technologies and prefer to use products with a proven track record of successful deployment in the field. As a result, new products must undergo extensive field-testing prior to release to target markets. Another major activity of our engineering group is the continual refinement and improvement of existing product design and cost.

In addition to developing our own internal technologies, we have many existing strategic relationships, including licensing agreements and development partnerships with third parties. These relationships are typically negotiated on an exclusive basis and provide us with full licensing rights.

Backlog

The Company’s total backlog at March 31, 2006 and 2005 was $52.7 million and $50.5 million, respectively. The Company’s total backlog consists of unshipped orders relating to undelivered contractual commitments and purchase orders.

Suppliers and Raw Materials

In fiscal 2006, we purchased approximately $256 million of materials from direct suppliers and approximately $84 million of materials from indirect suppliers. In fiscal 2006, our largest supplier accounted for approximately 18% of total direct material expenditures, while the top ten suppliers accounted for approximately 49% of total direct material expenditures.

The principal materials used in the manufacturing processes are commodities that are available from a variety of sources. The key metal materials used in the manufacturing processes include brass castings, aluminum ingots and machined parts. The key non-metal materials used include high performance engineered plastic parts, energy, plastic resins and rubber. We do not maintain long-term supply contracts with our suppliers. Management believes that there is a readily available supply of materials in sufficient quantity from a variety of sources. We have not experienced a significant shortage of key materials and have not recently engaged in hedging transactions for commodity supplies.

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We have developed strategic partnerships with Contract Electronic Manufacturers (“CEMs”), our outsource manufacturing providers. We are able to leverage the CEMs’ ability and capacity to manufacture high volume electronic components. In addition, CEMs function as an extension of our manufacturing capabilities by assembling some of our products and shipping them directly to customers.

Intellectual Property

Our success and ability to compete depends substantially upon our intellectual property. We pursue patent and trademark protection in the United States and abroad. Currently we have almost 200 U.S. and foreign patents, 28 of which we believe are significant to the business. The protection for the first of these patents expires in November 2006 and the protection for the last of these patents expires in 2023. We also have numerous trademark registrations, 30 of which we believe are significant to the business. With respect to these trademarks, so long as we continue to use and renew the registration for them, we can continue to have exclusive rights to use the trademarks indefinitely in those jurisdictions in which registrations are in effect. We sell many of our products under a number of registered trademarks, which we believe are widely recognized in the metering industry.

While we rely on patent, copyright, trademark and trade secret law to protect our technology, we also believe that factors such as our existing licensing agreements, contracts with component manufacturers, the technological and creative skills of our personnel, new product developments and ongoing product enhancements are essential to establishing and maintaining a technology leadership position.

Environmental Matters

We are subject to a variety of federal, state, local and foreign environmental laws and regulations, including those governing the discharge of pollutants into the air or water, the management and disposal of hazardous substances or wastes and the cleanup of contaminated sites. Some of our operations require environmental permits and controls to prevent and reduce air and water pollution, and these permits are subject to modification, renewal and revocation by issuing authorities. We are also subject to the federal Occupational Health and Safety Act and similar state and foreign laws related to employee safety. We cannot give any assurances that we have been, and will at all times be, in compliance with all of these requirements, including reporting obligations and permit restrictions, or that we will not incur material fines, penalties, costs or liabilities in connection with such requirements or a failure to comply with them. While we currently incur capital and other expenditures to comply with these environmental laws, these laws may become more stringent and our processes may change. Therefore, the amount and timing of such expenditures in the future may vary substantially from those currently anticipated.

We are aware of known contamination at the following United States facilities: Russellville, Kentucky; DuBois, Pennsylvania; Texarkana, Arkansas; and Uniontown, Pennsylvania, as a result of historic releases of hazardous materials. The former owner of these sites is investigating, remediating and monitoring these properties. We are obligated to reimburse the former owner for a minority of monies expended on the remediation plus interest on monies paid at all sites other than Russellville (“Reimbursement Sites”), where the former owner pays all remediation costs. In connection with the Acquisition, certain subsidiaries of Invensys agreed to retain liability for the reimbursement obligations related to the Reimbursement Sites. As a result, we do not expect to have any future liabilities for the costs of remediation or other reimbursement costs associated with the Reimbursement Sites.

In addition, there is contamination in the soil and groundwater at our facility in Ludwigshafen, Germany. We are indemnified by the former owner against costs that may result from the contamination. This indemnification obligation is subject to the condition that the plots of land continue in industrial use, unless the former owner has agreed to the change from industrial use. We also have an indemnity, subject to certain limitations, from certain subsidiaries of Invensys regarding this facility pursuant to the terms of the purchase agreement governing the acquisition of Invensys Metering Systems.

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Based on information currently available, we believe that future environmental compliance expenditures will not have a material effect on our financial position. However, as to any of the above-described indemnities, we cannot give any assurances that the indemnifying parties will be able to satisfy their obligations. Environmental compliance costs and liabilities could reduce our net income and cash available for operations.

Other Regulatory Matters

Our products are subject to the rules and regulations of various federal, state and local agencies and foreign regulatory bodies. For example, our AMR products use radio spectrum and are subject to regulation by the Federal Communications Commission (the “FCC”), and much of the European water and heat metering markets, including Germany, The Netherlands, Austria, Switzerland, the Czech Republic and Slovakia, are subject to national regulation. We are also subject to regulation by other governmental bodies. Further, we are subject to governmental regulations related to occupational safety and health, labor, wage practices and the performance of certain engineering services. We believe that we are currently in material compliance with such regulations; however, failure to comply with current or future regulations could result in the imposition of substantial fines, suspension of production, alteration of production processes, cessation of operations, or other actions that could materially and adversely affect our business, financial condition or results of operations.

Employees

We are headquartered in Raleigh, North Carolina and operate globally with 35 facilities in the United States and other countries, including Germany, France, the United Kingdom, Slovakia, Brazil, Chile, South Africa and China. As of March 31, 2006, we had 3,859 full-time employees, of which 1,388 were located in the United States.

We maintain both union and non-union workforces. As of March 31, 2006, 1,769 employees were covered by collective bargaining agreements. The Uniontown, Pennsylvania facility has a five-year agreement with the United Steel Workers of America that expires on February 24, 2008. Sensus Precision Die Casting, Inc., our subsidiary through which we operate our precision die casting product line, has a three-year agreement with the United Automobile Workers that expires on October 8, 2006. The current three-year agreement between Smith-Blair and the United Steel Workers of America expires on March 28, 2007. Additionally, our Ludwigshafen, Germany and Hannover, Germany employees are represented by IG Metall and negotiate with local Employers Associations that represent the German subsidiaries as well as other employers from the industry. The outcome of these negotiations also indirectly affects non-unionized employees to the extent that individual employment agreements contain references to the relevant metal union contracts. The current agreement covering our German unionized workforce expires on March 31, 2007.

ITEM 1A.    RISK FACTORS

In the normal course of our business, in an effort to help keep our security holders and the public informed about our operations, we may from time to time issue or make certain statements, either in writing or orally, that are or contain “forward-looking statements,” as that term is defined in the U.S. federal securities laws. Generally, these statements relate to business plans or strategies, projections involving anticipated revenues, earnings, profitability or other aspects of operating results or other future developments in our affairs or the industry in which we conduct business. The words “expect,” “believe,” “anticipate,” “project,” “estimate” and similar expressions are intended to identify forward-looking statements. We caution readers that such statements are not guarantees of future performance or events and are subject to a number of factors that may tend to influence the accuracy of the statements and the projections upon which the statements are based, including but not limited to those discussed below. All phases of our operations are subject to a number of uncertainties, risks, and other influences, many of which are outside our control, and any one of which, or a combination of which, could materially affect our financial condition or results of operations, the trading price of our publicly-traded securities, and whether the forward-looking statements we make ultimately prove to be accurate.

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Set forth below are risks that we believe are material to our business operations. Additional risks and uncertainties not known to us or that we currently deem immaterial may also impair our business operations.

We are controlled by our principal investors, whose interests in our business may be different, and who control the appointment of our board of directors. As a result, conflicts may exist with respect to fundamental business decisions.

Our principal investors, The Resolute Fund and GS Capital Partners, beneficially own 65.9% and 32.9% of the Company, respectively, through their equity interests in our parent, Sensus Metering Systems (Bermuda 1) Ltd. Our entire board was designated by persons affiliated with The Resolute Fund and GS Capital Partners, and persons affiliated with The Resolute Fund have the ability to designate a majority of the board. In addition, persons affiliated with our principal investors control the appointment of management and the entering into of mergers, sales of substantially all of our assets and other extraordinary transactions. Affiliates of our principal investors may also have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks. In addition, our principal investors or their affiliates may in the future own businesses that directly compete with ours.

We have recorded a significant amount of intangible assets that may never generate the returns we expect, which may require us to write off a significant portion of our intangible assets and would have an adverse effect on our financial condition and results of operations.

The Acquisition resulted in significant increases in identifiable intangible assets and goodwill. Identifiable intangible assets, which include customer relationships, trademarks and tradenames, patents and non-competition agreements, were $215.9 million at March 31, 2006, representing 23% of total assets. Amortization expense associated with our identifiable intangible assets amounted to $22.5 million in fiscal 2006 and is expected to be $68.7 million over the next five fiscal years (without giving effect to acquisitions completed subsequent to March 31, 2006). The large amount of amortization expense will adversely affect our net income during this period. Goodwill, which relates to the excess of cost over the fair value of the net assets of the businesses we acquired, was $330.5 million at March 31, 2006, representing 35% of our total assets.

Goodwill and identifiable intangible assets, which are deemed to have indefinite lives, are recorded at fair value on the date of acquisition and, in accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“FAS 142”), are reviewed at least annually for impairment. Impairment may result from, among other things, deterioration in the performance of the acquired business, adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of the acquired business, and a variety of other circumstances. The full value of our intangible assets may never be realized. Any future determination requiring the write-off of a significant portion of intangible assets would have an adverse effect on our financial condition and results of operations.

We are dependent on the utility industry, which may experience volatility. This volatility could cause our results of operations to vary significantly from period to period.

In fiscal 2006, approximately 90% of our net sales were derived from sales of products and services to the utility industry. Purchases of our products are, to a substantial extent, deferrable in the event that utilities reduce capital expenditures as a result of, among other factors, mergers and acquisitions, pending or unfavorable regulatory decisions, decreased sales due to weather conditions, rising interest rates or general economic downturns.

The utility industry, both domestic and foreign, is generally characterized by long budgeting, purchasing and regulatory process cycles that can take up to several years to complete. Our utility customers typically issue requests for quotes and proposals, establish evaluation committees, review different technical options with vendors, analyze performance and cost/benefit justifications and perform a regulatory review, in addition to applying the normal budget approval process within a utility.

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Such purchase decisions are often put on hold indefinitely when merger negotiations begin. If our customers engage in a high amount of merger and acquisition activity, our sales could be materially and adversely affected. If future state or other regulatory decisions are issued that cause a delay in purchasing decisions, or if we experience changes in our customer base or requirements to modify our products and services (or develop new products or services) to meet the needs of market participants, our results could be materially and adversely affected.

Many of our products are distributed to utility contractors in connection with residential, commercial and industrial construction projects. Historically, new housing construction has decreased during economic slowdowns, and the level of activity in the commercial and industrial construction markets depends on the general economic outlook, corporate profitability, interest rates and existing plant capacity utilization. In general, factors such as trends in the construction industry, billing practices, changes in municipal spending or other factors that influence metering products sales are not within our control and, as a result, may have a material adverse effect on our operating results and financial condition.

We are facing increasing competition. If we are unable to successfully implement our business strategy we risk losing market share to these competitors.

We face competitive pressures from a variety of companies in each of the markets we serve. Some of our present and potential future competitors have or may have substantially greater financial, marketing, technical or manufacturing resources, and in some cases, greater name recognition, market penetration and experience than us. Our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements. They may also be able to devote greater resources to the development, promotion and sale of their products and services than we can. In addition, current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties that increase their ability to address the needs of our prospective customers. It is possible that new competitors or alliances among current and new competitors may emerge and rapidly gain significant market share. If we cannot compete successfully against current or future competitors, it could have a material adverse effect on our business, financial condition, results of operations and cash flow.

Additionally, some of our larger, more sophisticated customers are attempting to reduce the number of vendors from which they purchase to increase their efficiency. If we are not selected as one of these preferred providers, we may lose access to certain sections of the markets in which we compete. Our customers increasingly demand a broad product range, and we must continue to develop our expertise to manufacture and market these products successfully. To remain competitive, we will need to invest continuously in research and development, manufacturing, customer service and support, marketing and our distribution networks. We may also have to adjust the prices of some of our products to stay competitive. We cannot assure you that we will have sufficient resources to continue to make such investments or that we will maintain our competitive position within each of the markets we serve.

We face potential product liability claims relating to products we manufacture or distribute. The successful assertion of a large product liability claim could subject us to substantial damages.

We face risk of exposure to existing and future product liability claims in the event that the use of our products is alleged to have resulted in injury or other adverse effects. We currently maintain product liability insurance coverage providing for primary coverage of $2 million and excess coverage of $75 million, but we cannot give assurances that we will be able to obtain such insurance on acceptable terms in the future, if at all, or that any such insurance will provide adequate coverage against potential claims. In addition, although we are entitled to indemnification from certain subsidiaries of Invensys under the terms of the stock purchase agreement for certain product liability claims existing prior to the Acquisition, we cannot give assurance that we will be able to recover from the indemnifying parties in the event we are found liable. Product liability claims can be expensive to defend and can divert the attention of management and other personnel for long periods of time,

9

regardless of the ultimate outcome of the litigation with respect to those claims. An unsuccessful product liability defense could have a material adverse effect on our business, financial condition or results of operations. In addition, our business depends on the strong product reputation we believe we have developed. In the event that this reputation is damaged, we may face difficulty in maintaining the pricing of some of our products, which could result in reduced sales and profitability.

We are subject to the effects of fluctuations in foreign exchange rates.

The financial condition and results of operations of each of our operating foreign subsidiaries are reported in the relevant local currency and are then translated into U.S. dollars at the applicable currency exchange rate for inclusion in our financial statements. Exchange rates between these currencies and U.S. dollars in recent years have fluctuated significantly and may do so in the future. In addition to currency translation risk, we incur currency transaction risk whenever one of our operating subsidiaries enters into either a purchase or a sales transaction using a different currency than the relevant local currency. Given the volatility of exchange rates, there can be no assurance that we will be able to effectively manage our currency transaction risks. The majority of our businesses source raw materials and sell their products within their local markets in their functional currencies and therefore have limited transaction exposure. Fluctuations in the value of the U.S. dollar may impact our ability to compete in international markets. We can give no assurance that currency fluctuations will not have a material adverse effect on our future international sales and, consequently, on our financial condition and results of operations. During fiscal 2006, we utilized foreign currency forward contracts to minimize the effect of exchange rate fluctuations and expect to continue to utilize these contracts to manage foreign currency exchange risk in the future.

Our substantial indebtedness could adversely affect our financial health, harm our ability to react to changes to our business and could prevent us from fulfilling our obligations under our indebtedness.

We are highly leveraged and have significant debt service obligations. As of March 31, 2006, we had total debt of $485.6 million outstanding. Our cash interest paid for fiscal 2005 and fiscal 2006 was $34.3 million and $37.7 million, respectively.

Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect to our indebtedness. Our substantial debt could also have other material consequences. For example, it could a) increase our vulnerability to general economic downturns and adverse competitive industry conditions, b) require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts and other general corporate purposes, c) limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, d) place us at a competitive disadvantage compared to competitors that have less debt and e) limit our ability to raise additional financing on satisfactory terms or at all.

Furthermore, our interest expense could increase if interest rates increase because a major portion of our debt under the credit agreement governing our senior secured credit facilities is variable-rate debt. Our senior secured credit facilities include term loan facilities in an aggregate amount of $206.2 million, each of which bear interest at the adjusted LIBOR plus 2.0% or the Alternate Base Rate plus 1.0%, and revolving credit facilities in an aggregate amount of $70.0 million, each of which bear interest at the adjusted LIBOR plus 2.5% or the Alternate Base Rate plus 1.5% (exclusive in each case of a 0.5% facility fee). In addition, during fiscal 2006, we utilized interest rate swap agreements, with an aggregate notional amount of $100.0 million, to mitigate our exposure to fluctuations in interest rates on variable-rate debt and expect to continue to utilize these agreements to manage interest rate risk in the future.

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Restrictive covenants in our senior credit facilities and the indenture governing our senior subordinated notes may restrict our ability to pursue our business strategies.

Our senior secured credit facilities contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be beneficial to the Company in the future. Our senior secured credit facilities include covenants restricting, among other things, our ability to a) guarantee or incur additional debt, b) incur liens and engage in sale leaseback transactions, c) make loans and investments, d) declare dividends or redeem or repurchase capital stock, e) engage in mergers, amalgamations, acquisitions and other business combinations, f) prepay, redeem or purchase subordinated debt (including the new notes), g) amend or alter terms of debt (including the new notes), h) sell assets, i) transact with affiliates and j) alter the business that we conduct.

Our senior credit facilities also include financial covenants, including requirements that we maintain a minimum interest coverage ratio, a minimum fixed charge coverage ratio and a maximum leverage ratio. These financial covenants become more restrictive over time.

The indenture governing our senior subordinated notes also contains numerous covenants including, among other things, restrictions on our ability to a) incur or guarantee additional indebtedness or issue certain preferred stock, b) pay dividends on our capital stock or redeem, repurchase or retire our capital stock or subordinated indebtedness, c) make certain investments, d) enter into arrangements that restrict dividends from our subsidiaries, e) engage in transactions with affiliates, f) sell assets, including capital stock of our subsidiaries, and g) merge, amalgamate or consolidate with other companies or transfer all or substantially all of its assets.

We depend on our ability to develop new products for our success. There is no guarantee we will continue to be successful in developing new products.

We have made, and expect to continue to make, substantial investments in technology development. Our future success will depend, in part, on our ability to continue to design and manufacture new competitive products and to enhance our existing products. This product development will require continued investment to maintain our market position. There can be no assurance that unforeseen problems will not occur with respect to the development and performance of our technologies and products or that we will meet our product development schedules. In addition, there can be no assurance that we will have market acceptance of our new products and systems. For example, market acceptance for AMR systems varies by country based on such factors as the regulatory and business environment, labor costs and other economic conditions. We believe that our customers rigorously evaluate their suppliers on the basis of a number of factors, including a) product quality, b) reliability and timeliness of delivery, c) new product innovation, d) price competitiveness, e) technical expertise and development capability, f) product design capability, g) manufacturing expertise, h) operational flexibility, i) customer service and j) overall management.

Our success depends on our ability to continue to meet our customers’ changing requirements. We cannot assure you that we will be able to address technological advances or introduce new products that may be necessary to allow us to remain competitive within our businesses. Furthermore, we cannot assure you that we can adequately protect any of our own technological developments to sustain a competitive advantage.

We rely on our information technology systems to conduct our business. If these systems fail to adequately perform these functions, or if we experience an interruption in their operation, our business and financial results could be adversely affected.

The efficient operation of our business is dependent on our information technology systems. We rely on our information technology systems to effectively manage our business data, communications, production and supply chain, order entry, order fulfillment, inventory replenishment, e-commerce and other business processes. The failure of our information technology systems to perform as we anticipate could disrupt our business and could

11

result in decreased sales, increased overhead costs, excess inventory and product shortages, causing our business and results of operations to suffer. In addition, our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control, including fire, natural disasters, power loss and computer systems failure and viruses. Any such interruption could have a material adverse effect on our business.

If we are unable to make necessary capital investments our business may be adversely affected.

We periodically make capital investments to, among other things, maintain and upgrade our facilities and enhance our production processes. As we maintain and grow our business, we may have to incur significant capital expenditures. We believe that we will be able to fund these expenditures through cash flow from operations and cash on hand. We cannot assure that we will have, or be able to obtain, adequate funds to make all necessary capital expenditures when required, or that the amount of future capital expenditures will not be materially in excess of our anticipated or current expenditures. If we are unable to make necessary capital expenditures, our product line may become dated, our productivity may decrease and the quality of our products may be adversely affected, which, in turn, could result in reduced sales and profitability.

International operations expose us to numerous risks and business uncertainties.

In fiscal 2005 and fiscal 2006, our foreign operations represented 31% of consolidated net sales. We are subject to the risks inherent in conducting business across national boundaries, any one of which could adversely impact our business. These risks include a) regional economic downturns, b) changes in governmental policy or regulation, c) restrictions on the transfer of funds into or out of the country, d) import and export duties and quotas, e) domestic and foreign customs and tariffs, f) different regimes controlling the protection of our intellectual property, g) international incidents, h) military outbreaks, i) government instability, j) difficulty in staffing and managing widespread operations, k) nationalization of foreign assets, l) government protectionism, m) compliance with U.S. Department of Commerce export controls, n) potentially negative consequences from changes in tax laws, o) higher interest rates, p) requirements relating to withholding taxes on remittances and other payments by subsidiaries, q) restrictions on our ability to own or operate subsidiaries, make investments or acquire new businesses in these jurisdictions and r) exposure to liabilities under the Foreign Corrupt Practices Act. We cannot give assurance that one or more of these factors will not impair our current or future international operations and, consequently, our overall business.

We may face volatility in the availability of energy and raw materials used in our manufacturing process.

In the manufacturing of our products, we use large amounts of energy, including electricity and gas, and raw materials and processed inputs, including brass castings, aluminum ingot, plastics and rubber. We obtain energy, raw materials and certain manufactured components from third-party suppliers. We do not maintain long-term supply contracts with our suppliers. The loss, or a substantial decrease in the availability, of such products from some of our suppliers, or the loss of key supplier relationships could have a material adverse effect on our business, results of operations and financial condition. The availability and prices of electricity, gas and raw materials may be subject to curtailment or change due to, among other things, new laws or regulations, suppliers’ allocations to other purchasers, interruptions in production by suppliers, changes in exchange rates and worldwide price levels. In addition, supply interruptions could arise from shortages of electricity, gas and raw materials, labor disputes, transportation disruptions, impaired financial condition of suppliers, adverse weather conditions or other natural disasters. Any change in the supply of, or price for, these energy sources and raw materials may adversely affect our ability to satisfy our customers on a timely basis and thereby negatively affect our financial performance. In addition, we may not be able to pass any price increases in raw materials or other product inputs along to our customers in the form of higher prices, which may have an adverse affect on our operating results.

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We have transitioned a substantial portion of our manufacturing capabilities to contract manufacturers. If we are unable to manage our outsourcing arrangements effectively, or if we are unable to accurately project demand, our revenue and profitability could be harmed.

Our future operating results will depend on our ability to develop and manufacture products cost-effectively. To minimize manufacturing costs, as well as focus on our core competencies and streamline our operations, we have outsourced production of products representing approximately 16% of fiscal 2006 net sales. The primary products that we have outsourced are the MXU radio transducers, fixed-based AMR equipment and iCon electric meters. The outsourcing of production capabilities somewhat diminishes the day-to-day control that we are able to exercise over the production process that could result in quality problems, and correspondingly increased product warranty costs. In addition, as we outsource more production capacity, we will retain limited internal production capacity, and will, therefore, rely on our contract manufacturers to fill orders on a timely basis. We will be required to provide accurate forecasts to our contract manufacturers to satisfy demand for our products. If we overestimate our requirements, we may be required to purchase quantities of products that exceed customer demand. If we underestimate our requirements, we may have inadequate inventory from which to meet customer demand.

Our intellectual property may be inadequately protected, which could result in the loss of our exclusive right to use the intellectual property. Additionally, some of our intellectual property may be misappropriated, which could subject us to claims of infringement.

We rely on a combination of patents, trademarks, copyrights, licenses and trade secret rights to protect our intellectual property throughout the world. We cannot give any assurance that our patent or trademark applications will be approved, that any patents or trademark registrations that may be issued will adequately protect our intellectual property or that any issued patents or registered trademarks will not be challenged by third parties. Other parties may independently develop similar or superior technologies or designs around any patents that may be issued to us. We cannot be certain that the steps we have taken will prevent the misappropriation of our intellectual property, particularly in foreign countries where the laws may not protect our proprietary rights as fully as the laws of the United States.

In the ordinary course of our operations, we, and other companies, from time to time pursue and are pursued in administrative proceedings and litigation concerning the protection of intellectual property rights. If successful, third-party intellectual property lawsuits could subject us to substantial damages, and require us to cease the manufacture, use and sale of infringing products, expend significant resources to develop non-infringing technology or discontinue the use of certain technology. They could also force us to seek licenses to the infringing technology, which licenses may not be available on reasonable terms, or at all. Our ability to sustain current margins on some or all of our products may be affected, which could reduce our sales and profitability. Third-party lawsuits could also invalidate our intellectual property rights. Regardless of the success of any third party-initiated or company-initiated claims, they would likely be time-consuming and expensive to resolve, and would divert the time and attention of our management.

We have licensed technology from third parties to develop new products or product enhancements, including licenses relating to many of our current leading products. We also expect to seek technology from third parties in the future as needed or desirable for future products and product enhancements. We cannot assure that third-party licenses will be available to us on commercially reasonable terms, if at all. The inability to obtain any third-party license required to develop new products or product enhancements could require us to obtain substitute technology of lower quality or performance standards or at greater cost, or could require that we change our product and design plans, and we may still become involved in third-party lawsuits, any of which could seriously harm or delay our ability to manufacture and sell our products.

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We rely on independent distributors for a significant portion of our sales. There is no guarantee that we will be able to retain the services of these distributors.

In addition to our own direct sales force, we depend on the services of independent distributors to sell our products and provide service and aftermarket support to our end-customers. In fiscal 2006, approximately 33% of our net sales were generated from sales to our top ten customers, which include our distribution channels, with approximately 12% of our net sales derived from sales to distributors affiliated with National Waterworks, Inc., our largest customer and a wholly owned subsidiary of The Home Depot, Inc. The majority of the distribution contracts we have with these independent distributors are cancelable by the distributor after a short notice period. We cannot assure these distributors will not terminate their agreements with us.

The loss of one or more key distributors, such as distributors affiliated with National Waterworks, Inc. or a substantial number of our other distributors, could materially reduce our sales and profits. While our relationships with our ten largest distributors have been long-standing, distributors in our industry have experienced significant consolidation in recent years, and we cannot give any assurance that our distributors will not be acquired by other distributors that buy products from our competitors. We also cannot give any assurance that, as consolidation among distributors continues, distributors will not be able to force us to lower our prices, which would have an adverse impact on our results of operations.

Our business is subject to the regulation of, and dependent on licenses granted by, the Federal Communications Commission and other governmental bodies. Changes in existing regulations or the losses of our licenses could adversely affect our business.

A significant portion of our AMR products use radio spectrum and are subject to regulation by the Federal Communications Commission in the United States (the “FCC”). Licenses for radio frequencies must be obtained and periodically renewed. There can be no assurance that any license granted to us or our customers will be renewed on acceptable terms, if at all, or that the FCC will keep in place rules for our frequency bands that are compatible with our business. In the past, the FCC has adopted changes to the requirements for equipment using radio spectrum, and it is possible that the FCC or the United States Congress will adopt additional changes in the future.

We have committed, and expect to continue to commit, significant resources to the development of products that use particular radio frequencies. Action by the FCC could require modifications to our products. If we are unable to modify our products to meet such requirements, we could experience delays in completing such modifications, or the cost of such modifications could have a material adverse effect on our future financial condition and results of operations.

Our radio-based products currently employ both licensed and unlicensed radio frequencies. There must be sufficient radio spectrum allocated by the FCC for our intended uses. As to the licensed frequencies, there is some risk that there may be insufficient available frequencies in some markets to sustain our planned operations. The unlicensed frequencies are available for a wide variety of uses and are not entitled to protection from interference by other users. In the event that the unlicensed frequencies become unacceptably crowded or restrictive, and no additional frequencies are allocated, our business could be materially adversely affected. We are also subject to regulatory requirements on our radio-based products in international markets that vary by country. In some countries, limitations on frequency availability or the cost of making necessary modifications may preclude us from selling our products.

The water and heat meter product lines of our business are subject to national regulation in many European countries. For instance in Germany, there are national regulations that require cold water meters to be recalibrated and repaired every six years. Hot water and heat meters need to be recalibrated and repaired every five years. Other European countries, including The Netherlands, Austria, Switzerland, the Czech Republic and Slovakia, have similar regulations. Because of the relative expense involved in repairing water and heat meters,

14

many customers install new meters at the time these national regulations call for recalibration and repair. If these national regulations were changed to extend the time for recalibration and repair, that could decrease sales of water and heat meters in Europe. If European or other countries were to impose new or change existing regulations regarding products, that could also materially and adversely affect our business, financial condition and results of operations.

We are also subject to governmental regulations related to occupational safety and health, labor, and wage practices. In addition, we are subject to various government regulations regarding the performance of certain engineering services. Failure to comply with current or future regulations could result in the imposition of substantial fines, suspension of production, alteration of our production processes, cessation of operations or other actions that could materially and adversely affect our business, financial condition and results of operations.

We face potential liability from asbestos exposure claims.

The Company, along with as many as 200 other companies, is a defendant in several lawsuits filed in various state courts in Mississippi by groups of plaintiffs alleging illnesses from exposure to asbestos or asbestos-containing products and seeking unspecified compensatory and punitive damages. Because the cases are in initial stages, it is uncertain whether any plaintiffs have dealt with any of the Company’s products, were exposed to an asbestos-containing component part of a product of the Company or whether such part could have been a contributing factor to the alleged illness. Although we are entitled to indemnification for legal and indemnity costs for asbestos claims related to these products from certain subsidiaries of Invensys pursuant to the stock purchase agreement for the Acquisition, such indemnities, when aggregated with all other indemnity claims, are limited to the purchase price paid by us in connection with the Acquisition.

We are subject to work stoppages at our facilities, or our customers may be subjected to work stoppages, which could seriously impact the profitability of our business.

As of March 31, 2006, we had 3,859 employees, of whom 1,388 were employed in the United States and 2,471 were employed abroad. As of March 31, 2006, approximately 46% of our total employees, primarily in the United States and Europe, were represented by labor unions.

In the United States, we are a party to labor agreements with the United Steel Workers of America and the United Automobile Workers. The Uniontown, Pennsylvania facility has a five-year agreement with the United Steel Workers of America that expires on February 24, 2008. Sensus Precision Die Casting, Inc., our subsidiary through which we operate our precision die casting product line, has a three-year agreement with the United Automobile Workers that expires on October 8, 2006. The current three-year agreement between Smith-Blair and the United Steel Workers of America expires on March 28, 2007.

In Germany, our employees are represented by IG Metall, which negotiates labor terms and conditions with local Employers Associations that also represent other employers. The outcome of these negotiations also directly affects non-unionized employees to the extent that individual employment agreements contain cross references to relevant metal union contracts. The current union agreement with IG Metall covering our German unionized workforce expires on March 31, 2007.

Although we believe that our relations with our employees are generally good, a strike, work stoppage or other slowdown by our unionized workers could cause a disruption of our operations, which could interfere with our ability to deliver products on a timely basis and could have other negative effects, such as decreased productivity and increased labor costs. In addition, if a greater percentage of our work force becomes unionized, our business and financial results could be materially adversely affected.

15

Many of our suppliers and direct and indirect customers have unionized work forces. Strikes, work stoppages or slowdowns experienced by these customers or their suppliers could result in slowdowns or closures of assembly plants where our products are used and, thus, adversely affect the demand for our products.

We may be unable to identify attractive acquisition candidates, successfully integrate our acquired operations or realize the intended benefits of our acquisitions. As a result, growth from acquisitions could be limited.

We may pursue selective strategic acquisition opportunities. We may evaluate potential acquisitions, some of which could be material, and engage in discussions with acquisition candidates. We cannot assure that suitable acquisition candidates will be identified and acquired in the future, that the financing of any such acquisition will be available on satisfactory terms or that we will be able to accomplish our strategic objectives as a result of any such acquisition. Nor can we assure that our acquisition strategies will be successfully received by customers or achieve their intended benefits. If we consummate an acquisition, our capitalization and results of operations may change significantly. Future acquisitions would likely result in the incurrence of debt and contingent liabilities and an increase in interest expense and amortization expense as well as significant charges relating to integration costs, which could have a material adverse effect on our results of operations or financial condition. Often acquisitions are undertaken to improve the operating results of either or both of the acquirer and the acquired company, and we cannot assure that we will be successful in this regard. We may encounter various risks in acquiring other companies, including the possible inability to integrate an acquired business into our operations, diversion of management’s attention and unanticipated problems or liabilities, some or all of which could materially and adversely affect us.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

The tables below list the properties utilized by the Company at March 31, 2006. The Company believes that its properties are in good operating condition and are suitable for its current needs.

The table below sets forth the locations of the facilities in North America.

Location	Owned/Leased	Square Feet	Principal Use of Facility
Texarkana, AR	Owned	249,912	Manufacturing/Assembly
Goleta, CA	Leased	9,000	Office
Orlando, FL	Owned	48,474	Manufacturing/Assembly
Russellville, KY	Leased	254,904	Manufacturing/Assembly
Juarez, Mexico	Leased	45,720	Manufacturing/Assembly
Raleigh, NC	Leased	9,931	Office
DuBois, PA	Owned	333,496	Manufacturing/Assembly
Pittsburgh (Forest Hills), PA	Leased	8,845	Office
Uniontown, PA	Leased	240,228	Manufacturing/Assembly
Richardson, TX	Leased	215	Office

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The table below sets forth the locations of the facilities outside of North America.

Location	Owned/Leased	Square Feet	Principal Use of Facility
El Eulma, Algeria	Leased	32,818	Manufacturing/Assembly
Minsk, Belorussia	Owned	1,098	Office
Nova Odessa, Brazil	Leased	26,364	Manufacturing/Assembly
Santiago, Chile	Leased	21,653	Manufacturing/Assembly
Beijing, China	Leased	83,143	Manufacturing/Assembly
Shanghai, China	Leased	53,628	Manufacturing/Assembly
Jiangdu City, China	Owned	308,000	Manufacturing/Assembly
Jiangdu City, China	Leased	144,000	Office
Prague, Czech Republic	Leased	10,204	Office
Malakoff, France	Leased	1,970	Office
Lyon, France	Owned	50,235	Manufacturing/Assembly
Neyron, France	Leased	13,933	Office
Babelsberg, Germany (1)	Owned	21,617	Manufacturing/Assembly
Hannover, Germany	Owned	49,453	Manufacturing/Assembly
Ludwigshafen, Germany	Leased	18,808	Manufacturing/Assembly
Ludwigshafen, Germany	Owned	317,624	Manufacturing/Assembly
Yakum, Israel	Leased	3,508	Office
Milan, Italy	Leased	377	Office
Temara, Morocco	Leased	18,299	Manufacturing/Assembly
Stara Tura, Slovakia	Leased	57,631	Manufacturing/Assembly
Gauteng, South Africa	Leased	16,172	Manufacturing/Assembly
Barcelona, Spain	Leased	6,736	Office
Sevilla, Spain	Leased	708	Office
Romsey, U.K.	Leased	31,032	Office
Sumy, Ukraine	Leased	4,132	Office

(1) Leased to third party.

ITEM 3.    LEGAL PROCEEDINGS

Smith-Blair, Inc., our subsidiary, was named a defendant in an action filed in the Supreme Court of New York County, New York on December 5, 2001 (James Trodden v. Consolidated Edison of New York, Felix Industries and Smith-Blair, Inc.) in which the plaintiff seeks $10 million in damages for alleged personal injuries arising from an underground gas explosion of a pipeline that included one of our products. An earlier stay resulting from the bankruptcy of a co-defendant has been lifted, and the lawsuit is presently in the discovery phase. Pursuant to the terms of the Acquisition, we are entitled to full indemnification for this lawsuit from an affiliate of Invensys plc.

The Company, along with as many as 200 or more other companies, is a defendant in several lawsuits filed in various state courts in Mississippi by groups of plaintiffs alleging illnesses from exposure to asbestos or asbestos-containing products and seeking unspecified compensatory and punitive damages. Because the cases are in initial stages, it is uncertain whether any plaintiffs have dealt with any of the Company’s products, were exposed to an asbestos-containing component part of a product of the Company or whether such part could have been a contributing factor to the alleged illness. Although we are entitled to indemnification for liabilities and legal costs for asbestos claims related to these products from certain subsidiaries of Invensys plc, such indemnities, when aggregated with all other indemnity claims, are limited to the purchase price paid by us in connection with the Acquisition.

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In addition, we are, from time to time, party to legal proceedings arising out of the operations of our business. We believe that an adverse outcome of our existing legal proceedings, including the proceedings described above, would not have a material adverse impact on our business, financial condition or results of operations. Nevertheless, unexpected adverse future events, such as an unforeseen development in our existing proceedings, a significant increase in the number of new cases or changes in our current insurance arrangements could result in liabilities that have a material adverse impact on our business, financial condition or results of operations.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER  MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a) None.

(b) Not applicable.

(c) None.

ITEM 6.    SELECTED FINANCIAL DATA

We have derived the following selected consolidated financial data from our audited consolidated financial statements, and those of our predecessor, Invensys Metering Systems. The information set forth below is not necessarily indicative of the results of future operations and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included elsewhere in this annual report.

	Predecessor (3)
(in millions)	Year Ended March 31, 2002		Year Ended March 31, 2003		Period from April 1, 2003 to December 17, 2003		Period from Inception (December 18, 2003) to March 31, 2004			Year Ended March 31, 2005			Year Ended March 31, 2006
Income Statement Data:
Net sales	$	496.4	$	504.5	$	364.6	$	164.4		$	569.8		$	613.9
Income (loss) from continuing operations	$	34.8	$	33.3	$	10.0	$	(1.5	)	$	(4.2	)	$	(3.2	)
Other Financial Data:
EBITDA (1)	$	69.1	$	79.9	$	43.2	$	20.8		$	79.9		$	86.7
Restructuring costs (2)		22.7		12.4		9.6		1.1			8.1			7.2
Capital expenditures		18.7		11.8		8.4		6.1			21.2			23.2
Balance Sheet Data:
Cash and cash equivalents	$	8.9	$	17.1	$	—	$	48.5		$	54.9		$	52.6
Total assets		629.6		670.0		—		952.9			940.2			935.1
Total debt		—		14.1		—		506.6			500.4			485.6
Stockholder’s equity		485.9		496.3		—		198.0			194.0			186.4

(1) For additional information regarding EBITDA, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures”. We have presented EBITDA because management considers EBITDA to be an important measure of financial performance. Management believes that EBITDA provides useful information for our investors for trending, analyzing and benchmarking the performance and value of our business. Management also believes that EBITDA is useful in assessing current performance compared with the historical performance of our predecessor because items within our income statements such as depreciation, amortization and interest expense are significantly impacted by the Acquisition. Internally, EBITDA is used as a financial measure to assess the performance of our business and is an important measure in our incentive compensation plans. EBITDA should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of our financial performance, or as an alternative to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity.

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(2) For additional information regarding restructuring costs, see Note 7 under “Notes to Consolidated Financial Statements.” Restructuring costs are added to net income for purposes of determining compliance by the Company with the financial covenants of both the senior credit facilities and the indentures governing the notes.

(3) On December 18, 2003, the Company acquired the metering systems and certain other businesses from Invensys plc (the “Acquisition”). Prior to the date of the Acquisition, the Company had no operations. As a result of the Acquisition, we changed the basis of accounting and acquired substantial debt, such that the financial results of periods prior to the Acquisition are not necessarily comparable to results after the Acquisition. Information for periods prior to December 18, 2003 reflects the results of operations and other data for our predecessor, Invensys Metering Systems.

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS

This Annual Report on Form 10-K includes certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions as they relate to us are intended to identify these forward-looking statements. All statements by us regarding our expected financial position, sales, cash flow and other operating results, business strategy, financing plans, forecasted trends related to the markets in which we operate, legal proceedings and similar matters, other than those of historical fact, are forward-looking statements. We cannot assure you that our expectations expressed or implied in these forward-looking statements will turn out to be correct. Our actual results could be materially different from our expectations because of various risks. These risks include our dependence on new product development and intellectual property, and our dependence on independent distributors and third-party contract manufacturers, automotive vehicle production levels and schedules, our substantial financial leverage, debt service and other cash requirements, liquidity constraints and risks related to future growth and expansion. Other important risk factors that could cause actual events or results to differ from those contained or implied in the forward-looking statements include, without limitation, our ability to integrate acquired companies, general economic and business conditions, competition, adverse changes in the regulatory or legislative environment in which we operate, and other factors beyond our control.

Our fiscal year ends on March 31 and references herein to a fiscal year refer to the twelve-month period ended as of that date. The “combined fiscal year 2004” refers to the period from April 1, 2003 to December 17, 2003, combined with the period from Inception (December 18, 2003) to March 31, 2004.

General

We are a leading provider of advanced metering and related communications systems to the worldwide utility industry and have over a century of experience in designing and manufacturing metering products. We believe that we are the largest global manufacturer of water meters and have a substantial share of the sales of AMR devices to the North American water utilities market. Additionally, we believe that we are a leading global developer and manufacturer of gas and heat metering systems and are an emerging participant in the North American electric metering market. We are recognized throughout the metering industry for developing and manufacturing metering products with long-term accuracy and unique product features, as well as for providing comprehensive customer service for all of our products. In addition to our metering business, we believe we are the leading North American producer of pipe joining and repair products for water and natural gas utilities and a premier supplier of precision-manufactured, thin-wall, low-porosity aluminum die-castings.

History and the Acquisition

Although we and our predecessors have been supplying metering and related products for over a century, our current business was created in early 1999 when BTR plc and Siebe plc merged to form Invensys plc.

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Following this merger and until the completion of the Acquisition, our business was generally operated by Invensys as a single product group and participated in various strategic initiatives implemented by Invensys plc, including customer development, services, project management and lean supply chain programs. We acquired the Invensys Metering Systems businesses from Invensys plc on December 17, 2003. This sale is described under “Acquisitions” in Note 2 to the audited consolidated financial statements included elsewhere in this annual report. The historical results of operations of Invensys Metering Systems (the “Predecessor”) may not be fully indicative of the results of operations on a stand-alone basis. We are a recently formed company with limited operating history as a stand-alone company, which may lead to risks or unanticipated expenses similar to those of a start-up company.

Recent Event

On June 2, 2006, the Company entered into an agreement to acquire substantially all of the assets and assume certain identified liabilities of Advanced Metering Data Systems, L.L.C. (“AMDS”) for $45.4 million in cash at closing and the payment of additional cash consideration if the acquired business achieves certain performance targets through March 2011. In addition, pursuant to a Subscription Agreement with AMDS, Sensus Metering Systems (Bermuda 1) Ltd., the Company’s parent, will issue certain preference shares to AMDS, which are subject to the performance of the acquired business over a five-year period following the closing. The Company will finance the transaction with equity contributions from the current principal investors in the Company and cash on hand. Closing of the acquisition is subject to the satisfaction of certain conditions, including obtaining certain governmental approvals.

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Results of Operations

The following table provides results of operations of the Company:

																			Predecessor (Note 1)
	Year Ended March 31, 2006			%		Year Ended March 31, 2005			%		Combined Fiscal Year Ended March 31, 2004			%		Period from Inception (December 18, 2003) to March 31, 2004			Period from April 1, 2003 to December 17, 2003
											(in millions)
Sales	$	613.9		100	%	$	569.8		100	%	$	529.0		100	%	$	164.4		$	364.6
Gross profit		186.4		30	%		170.8		30	%		155.3		29	%		45.6			109.7
Selling, general and administrative expenses		107.9		17	%		99.5		18	%		97.8		18	%		28.1			69.7
Restructuring and other similar costs		7.2		1	%		8.1		1	%		10.7		2	%		1.1			9.6
Amortization of intangible assets		22.5		4	%		21.3		4	%		6.0		1	%		5.7			0.3
Other operating expense (income), net		3.4		1	%		3.0		—			(1.0	)	—			(0.1	)		(0.9	)
Operating income from continuing operations		45.4		7	%		38.9		7	%		41.8		8	%		10.8			31.0
Interest (expense) income, net		(39.3	)	(6	)%		(36.7	)	(6	)%		(10.8	)	(2	)%		(12.7	)		1.9
Other (expense) income, net		(1.1	)	—			2.0		—			(0.1	)	—			(0.2	)		0.1
Income (loss) from continuing operations before income taxes and minority interest		5.0		1	%		4.2		1	%		30.9		6	%		(2.1	)		33.0
Provision (benefit) for income taxes		8.2		1	%		8.3		1	%		22.1		4	%		(0.5	)		22.6
(Loss) income from continuing operations before minority interest		(3.2	)	—			(4.1	)	—			8.8		2	%		(1.6	)		10.4
Minority interest		—		—			(0.1	)	—			(0.3	)	—			0.1			(0.4	)
(Loss) income from continuing operations		(3.2	)	—			(4.2	)	—			8.5		2	%		(1.5	)		10.0
Loss from discontinued operations		—		—			(0.8	)	—			(0.5	)	—			(0.3	)		(0.2	)
Net (loss) income	$	(3.2	)	—		$	(5.0	)	—		$	8.0		2	%	$	(1.8	)	$	9.8

Fiscal Year Ended March 31, 2006 Compared with Fiscal Year Ended March 31, 2005

Net Sales. Net sales increased by $44.1 million, or 8%, from $569.8 million for fiscal 2005 to $613.9 million for fiscal 2006. The principal driver of net sales growth in the current fiscal year is the continued strong demand that we are experiencing for metering systems, due to continued growth of AMR applications and strong product sales of water meters. Unfavorable currency translation, due primarily to the devaluation of the euro against the U.S. dollar, accounted for a sales decrease of $3.2 million for fiscal 2006. North American sales of water meters increased by $23.6 million, or 11%, for fiscal 2006 as compared to fiscal 2005, resulting from continued buoyancy for AMR applications and products. Electric meter sales increased 14%, in fiscal 2006 as compared to fiscal 2005 due to continued growth in sales of our iCon electric meter products to electric utilities. Gas meter sales decreased marginally in fiscal 2006 as compared to fiscal 2005.

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The Europe/Middle East/Africa water meter market experienced an increase in sales of $5.0 million in fiscal 2006, net of foreign currency impact, as compared to fiscal 2005. This increase is the result of new ventures and growth in Eastern Europe and Africa offsetting declines in Central Europe. South American sales increased $1.6 million, net of foreign currency impact, in fiscal 2006 as compared to fiscal 2005. This increase resulted primarily from higher residential water meter sales in Brazil and Chile.

Third-party sales of our precision die casting products in fiscal 2006 as compared to fiscal 2005 increased $10.9 million due to expansion into China. Pipe joining and repair products sales increased $6.6 million, or 12%, in fiscal 2006 as compared to fiscal 2005 due to significant price increases and increased demand for our products resulting from adverse weather conditions.

Our top ten customers accounted for approximately 33% of net sales for the fiscal year ended 2006. Sales to distributors affiliated with National Waterworks, Inc., our largest customer and a wholly owned subsidiary of The Home Depot, Inc., constituted approximately 12% of net sales in fiscal 2006. No other individual customer accounted for more than 5% of net sales.

Gross Profit. Gross profit increased by $15.6 million (including a $1.1 million unfavorable foreign currency impact), or 9%, from $170.8 million in fiscal 2005 to $186.4 million in fiscal 2006. Gross profit as a percentage of sales remained flat at 30% in the current fiscal year resulting from favorable market mix, attributable to higher water meter sales and cost reductions resulting from restructuring activities more than offsetting increased worldwide material prices. The improvement in gross margin dollars in fiscal 2006 as compared to fiscal 2005 is primarily due to higher sales volumes.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for fiscal 2006 increased by $8.4 million (including a $0.4 million favorable foreign currency impact), or 8%, to $107.9 million, from $99.5 million in fiscal 2005. Expenses, as a percentage of net sales, decreased to 17% from 18% for fiscal 2006 as compared to fiscal 2005, primarily as a result of the Company beginning to realize some economies of scale as sales volumes continue to grow. The absolute increase in selling, general and administrative expenses in the current fiscal year can be attributed to increased investments in research and development; a $0.9 million receivable write-down in fiscal 2006 relating to the bankruptcy filing of Delphi Corporation, a significant customer of the Company; buildup of our finance and accounting infrastructure and expansion into new markets in China, Italy and Algeria.

Restructuring Costs. Restructuring costs were $7.2 million for fiscal 2006. Fiscal 2006 restructuring costs included costs associated with ceasing production at our Indian joint venture facility, exiting select motorcycle product lines at our PDC Rongtai joint venture and further rationalizing our German manufacturing operations. Current year restructuring costs consisted of $1.1 million relating to the write-off of certain assets that were impaired as a result of the initiatives taken in China and India and $6.1 million relating to headcount reduction initiatives. The decrease in restructuring costs of $0.9 million from fiscal 2005 is primarily the result of the winding down of our current European restructuring activities to achieve our targeted operational footprint.

Amortization of Intangible Assets. Amortization of intangible assets increased by $1.2 million from $21.3 million in fiscal 2005 to $22.5 million in fiscal 2006. The increase was due to high levels of intangible assets resulting from purchases of technology rights. Amortization expense relates primarily to the intangible assets recorded at the time of the Acquisition for non-competition agreements, customer relationships and patents.

Other Operating Expense, Net. Other operating expense, net of $3.4 million for fiscal 2006 increased by $0.4 million compared to $3.0 million for fiscal 2005. For fiscal 2006, other operating expense, net relates to management fees of $2.3 million paid to the Jordan Company, L.P., $0.5 million related to unconsummated acquisition costs and $0.6 million of regulatory and other fees and expenses.

Interest Expense, Net. Interest expense, net was $39.3 million for fiscal 2006 compared with $36.7 million for fiscal 2005. The increase in interest expense, net for the current fiscal year was the result of rising interest rates on our variable-rate debt, partially offset by lower debt outstanding due to accelerated debt repayments.

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Other Non-Operating (Expense) Income, Net. Other non-operating expense, net of $1.1 million for the fiscal year ended March 31, 2006 increased by $3.1 million compared to other non-operating income, net of $2.0 million for the fiscal year ended March 31, 2005. The increase in other non-operating expense, net is related primarily to unrealized foreign exchange losses on remeasurement of intercompany loans, partially offset by unrealized gains on forward contracts related to such loans.

Provision for Income Taxes. Income tax expense was $8.2 million for fiscal 2006 compared to income tax expense of $8.3 million for 2005. The current fiscal year effective tax rate of 164% was the result of income taxes being incurred on the taxable income of our global operations while no income tax benefit was recorded on the operating losses incurred in certain foreign jurisdictions where the realization of related deferred tax assets is considered uncertain.

Minority Interest. Minority interest expense for fiscal 2006 decreased marginally as compared to the comparable prior year and is a result of our partners’ share of earnings of $0.8 million for our Algeria joint venture offset by losses of $0.8 million for our Indian and Chinese joint ventures.

Net Loss. Net loss of $3.2 million for fiscal 2006 decreased by $1.8 million compared to a net loss of $5.0 million for fiscal 2005. The improvement in fiscal 2006 is primarily the result of the increase in sales volumes and gross margins as compared to fiscal 2005.

EBITDA. EBITDA increased by $6.8 million, or 9%, from $79.9 million for fiscal 2005 to $86.7 million for fiscal 2006. The increase in EBITDA in fiscal 2006 as compared to fiscal 2005 is attributable to increased sales resulting in higher gross margins.

Fiscal Year Ended March 31, 2005 Compared with Combined Fiscal Year Ended March 31, 2004

Net Sales. Net sales increased $40.8 million, or 8%, from $529.0 million for the combined fiscal year 2004 to $569.8 million for fiscal 2005. The increase resulted primarily from continued strong demand for metering systems, due to continued growth of AMR applications and strong product sales for water, gas and electric meters. Appreciation of the euro against the U.S. dollar resulted in an increase in net sales of approximately $13.4 million. Total metering systems revenues increased $31.7 million, or 7%, for fiscal 2005 compared with the combined fiscal year 2004. North American sales of water meter systems for the fiscal year ended March 31, 2005 increased by $16.8 million, or 8%, compared to the combined fiscal year ended March 31, 2004, due primarily to continued buoyancy for AMR applications and products, and growth in large meter products. Gas meter sales in North America for fiscal 2005 increased by $7.4 million, or 15%, versus the combined fiscal year 2004, as the current fiscal year began with a large backlog related to the prior year strike at Precision Die Casting, our internal supplier of gas meter shells. Electric meter sales continued to perform well in its first full year of operation with sales for fiscal 2005 nearly doubling from those reported for the combined fiscal year 2004.

The European water meter market delivered lower sales (net of favorable currency impact) of $11.4 million, or 7%, for fiscal 2005 as compared to the combined fiscal year 2004, due to pricing pressures for the majority of the period and general market weakness.

Third-party sales of our precision die-casting products for fiscal 2005 increased by $6.7 million, or 18%, compared to the combined fiscal year 2004. We were able to leverage new platform offerings to the Tier 1 automotive industry suppliers to generate increased sales. Pipe joining and repair products third party sales increased by $2.5 million, or 5%, in fiscal 2005 compared to the combined fiscal year 2004, primarily on the strength of favorable pricing.

Our top ten customers accounted for approximately 33% of total net sales in fiscal 2005. Sales to distributors affiliated with National Waterworks, Inc., our largest customer and wholly owned subsidiary of The Home Depot, Inc., constituted approximately 12% of total net sales, and 13% of metering sales in fiscal 2005. No other one customer accounted for more than 5% of total net sales.

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Gross Profit. Gross profit increased $15.5 million (including a $3.7 million favorable currency impact), or 10%, from $155.3 million for the combined fiscal year 2004 to $170.8 million for fiscal 2005. Gross profit, as a percentage of sales, marginally increased to 30% in fiscal 2005 from 29% for the combined fiscal year 2004. The increase in gross margin dollars primarily related to a purchase accounting inventory adjustment relating to the Acquisition of $10.3 million for the combined fiscal year 2004 and higher sales in fiscal 2005.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $1.7 million (including a $3.0 million unfavorable foreign currency impact resulting from the appreciation of the euro against the U.S. dollar), or 2%, from $97.8 million for the combined fiscal year 2004 to $99.5 million for fiscal 2005. Expenses, as a percentage of net sales, remained flat at 18% for fiscal 2005 and the combined fiscal year 2004. Cost reduction initiatives and restructuring programs more than offset the increases resulting from the unfavorable foreign currency impact and an increase in research and development expenses of $1.6 million associated with the NexusData, Inc. acquisition in fiscal 2005.

Restructuring Costs. Restructuring costs were $8.1 million for fiscal 2005. Actions to cease production at our facility in France, to rationalize our U.K. gas meter operation and to downsize our German manufacturing operations constituted the majority of fiscal 2005 expenses. The decrease in restructuring and other similar costs of $2.6 million from the combined fiscal year 2004 was primarily the result of the winding down of our 5-year European restructuring program.

Amortization of Intangible Assets. Amortization of intangible assets increased by $15.3 million from $6.0 million for the combined fiscal year 2004 to $21.3 million for fiscal 2005. Amortization expense primarily relates to the intangible assets recorded at the time of the Acquisition for non-competition agreements, customer relationships and patents (see Note 2 to the audited consolidated financial statements included elsewhere in this annual report). These intangible assets were not recorded on the balance sheet of the Predecessor. As a result, the Predecessor did not incur significant amortization expense in the portion of the combined fiscal year 2004 prior to the closing of the Acquisition. Amortization of intangible assets in subsequent periods will remain higher than historical levels of the Predecessor as a result of the intangible assets recorded in connection with acquisitions.

Other Operating Expense (Income), Net. Other operating expense, net of $3.0 million for fiscal 2005 increased by $4.0 million compared to other operating income, net of $1.0 million for the combined fiscal year 2004. The increase in other operating expense, net was related to incremental management fees and expenses of $1.6 million, for a total of $2.1 million for the fiscal year, and other fees of $0.7 million related to unconsummated acquisition activities and $0.2 million related to a charge for market securities devaluation. In addition, $0.9 million of Brazilian transactional tax gains were recognized in the combined fiscal year 2004, which did not occur in the current fiscal period. Other operating expense, net in subsequent periods will remain higher than historical levels as a result of the continuing payment of quarterly management fees.

Interest Expense, Net. Interest expense, net was $36.7 million for fiscal year 2005 compared to interest expense, net of $10.8 million for the combined fiscal year 2004. Prior to the Acquisition, the Predecessor had insignificant debt. The Acquisition was financed with a $230.0 million term loan facility and the issuance of $275.0 million of senior subordinated notes. Of the total $25.9 million increase in interest expense, net, $22.6 million was the result of interest on the debt created to support the Acquisition, and $1.1 million was related to the amortization of deferred financing costs incurred in connection with the Acquisition. The remaining increase was related to interest income recognized in the combined fiscal year 2004 that was not recognized in fiscal 2005. Interest expense, net in subsequent periods will remain higher than historical levels of the Predecessor as a result of the debt incurred in connection with the Acquisition.

Other Non-Operating (Expense) Income, Net. Other non-operating income of $2.0 million for fiscal 2005 increased by $2.1 million compared to other non-operating expense of $0.1 million for the combined fiscal year 2004. The increase in other non-operating income was related primarily to net foreign currency exchange gains on intercompany loans in Europe, and gains on the sale of assets by our European operations.

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Provision for Income Taxes. Income tax expense was $8.3 million for fiscal 2005 compared to income tax expense of $22.1 million for the combined fiscal year 2004. The decrease was primarily the result of lower earnings before taxes due to higher interest expense. The current fiscal year effective tax rate was the result of income taxes being incurred on the taxable income of our U.S. operations while no income tax benefit was recorded on the operating losses incurred in certain foreign jurisdictions where the realization of related deferred tax assets is considered uncertain.

Minority Interest. Minority interest expense was $0.1 million for fiscal 2005 compared to minority interest expense of $0.3 million for the combined fiscal year 2004. Minority interest reflects the results of various joint ventures in China, India and Algeria.

Net (Loss) Income. Net income decreased $13.0 million, or 163%, from $8.0 million for the combined fiscal year 2004 to a net loss of $5.0 million for fiscal 2005 primarily due to higher interest expense incurred during the period, greater amortization of intangible assets related to acquisitions, our inability to record an income tax benefit on foreign net operating loss carryforwards in certain jurisdictions and management and other non-recurring fees associated with acquisition activities.

EBITDA. EBITDA increased $15.9 million, or 25%, from $64.0 million for the combined fiscal year 2004 to EBITDA of $79.9 million for fiscal 2005. The increase in EBITDA for fiscal 2005 as compared to the prior year combined period was attributed primarily to increased sales resulting in higher gross margins.

Non-GAAP Measures

The discussion of EBITDA is being provided because management considers EBITDA to be an important measure of financial performance. Management believes that EBITDA provides useful information for our investors for trending, analyzing and benchmarking the performance and value of our business. Management also believes that EBITDA is useful in assessing current performance compared with the historical performance of our predecessor because items within our income statements such as depreciation, amortization and interest expense are significantly impacted by the Acquisition. Internally, EBITDA is used as a financial measure to assess the performance of our business and is an important measure in our incentive compensation plans. EBITDA should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of our financial performance, or as an alternative to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity.

The following table set forth a management reconciliation of the differences between EBITDA and net loss calculated in accordance with GAAP for fiscal 2006 and 2005, respectively, and the combined fiscal year 2004 (in millions):

												Predecessor (Note 1)
	Year Ended March 31, 2006			Year Ended March 31, 2005			Combined Fiscal Year Ended March 31, 2004		Period from Inception (December 18, 2003) to March 31, 2004			Period from April 1, 2003 to December 17, 2003
Net (loss) income	$	(3.2	)	$	(5.0	)	$	8.0	$	(1.8	)	$	9.8
Depreciation and amortization		42.4			39.8			22.8		10.5			12.3
Interest expense (income), net		39.3			36.7			10.8		12.7			(1.9	)
Income tax provision (benefit)		8.2			8.3			22.1		(0.5	)		22.6
Minority interest		—			0.1			0.3		(0.1	)		0.4
EBITDA	$	86.7		$	79.9		$	64.0	$	20.8		$	43.2
Loss from discontinued operations		—			0.8			0.5		0.3			0.2
EBITDA (excluding discontinued operations)	$	86.7		$	80.7		$	64.5	$	21.1		$	43.4

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Liquidity and Capital Resources

During fiscal 2006, we funded our operating, investing and capital requirements through cash on hand. We generally fund operating and capital requirements from a combination of cash on hand, cash flows from operating activities and borrowings under our senior credit facilities.

Net cash flow provided by (used in) operating activities in fiscal 2006, 2005 and 2004 was $47.1 million, $33.7 million and ($13.4) million, respectively. The $13.4 million increase in net cash provided by operating activities in fiscal 2006 as compared to fiscal 2005 was primarily the result of improved collection practices for our accounts receivable and income tax refunds of approximately $2.5 million.

Working capital as a percentage of net sales decreased to 14% for fiscal 2006 as compared to 17% for fiscal 2005. The decrease was primarily due to lower receivable balances and income tax refunds of approximately $2.5 million.

Cash expenditures for restructuring for fiscal years 2006, 2005 and 2004 totaled $7.0 million, $9.9 million and $11.0 million, respectively. As of March 31, 2006, we had $5.7 million of restructuring accruals reflected on our consolidated balance sheet. Additional restructuring expenses of $5.6 million are expected to be incurred in fiscal 2007 as current restructuring programs are completed and new initiatives are undertaken.

Cash used for investing activities represents payments for capital expenditures, business acquisitions and other investments, offset by proceeds from the disposition of property, plant and equipment and business units. Capital expenditures in fiscal 2006 were $23.2 million compared with $21.2 million for fiscal 2005 and $14.5 million for the combined fiscal year 2004. Capital expenditure requirements are comprised of equipment, molds and tooling for replacement and expenditures for cost reduction, safety, maintenance and expansion. For fiscal 2007, we expect to make expenditures of approximately $24.8 million, reflecting our continuing emphasis on a growth-oriented capital expenditures program. Business acquisition expenditures of $13.3 million were attributable to the acquisition of our Chinese joint venture company, Rongtai, and the assets of DuPenn Inc., both of which were consummated in fiscal 2006 (see Note 2 to the audited consolidated financial statements included elsewhere in this annual report).

Cash used in financing activities represents payments for indebtedness to third parties. As a result of the Acquisition, we incurred substantial third-party indebtedness. Our senior credit facilities provide for senior secured financing of $276.2 million, consisting of (a) two term loan facilities in an aggregate amount of $206.2 million, including a $182.0 million U.S. term loan facility and a $24.2 million European term loan facility, and (b) two revolving credit facilities in an aggregate amount of $70.0 million, under one of which $40.0 million is available in the form of U.S. dollar-denominated loans and under the other of which $30.0 million is available in the form of U.S. dollar-denominated loans, or in the form of euro- or U.K. sterling-denominated loans. The term loan facilities mature on December 17, 2010. Borrowing costs under the term loan facility are based on variable rates tied to the London Interbank Offered Rate (“LIBOR”) plus a specified margin, or the greater of the Prime Rate and the Federal Funds Effective Rate (“Alternate Base Rate”) plus a margin. The $6.4 million provided by financing activities for the fiscal year ended March 31, 2006 represents the contribution from our Rongtai joint venture partner of $6.0 million and a long-term loan from the joint venture partner of $0.4 million.

We also have $275.0 million of senior subordinated notes outstanding, which mature on December 15, 2013 and bear interest at the rate of 8 ⁵/8% per annum. Interest on the senior subordinated notes is payable semi-annually in June and December of each year. The senior subordinated notes are our unsecured senior subordinated obligations and rank equally in right of payment to all of our senior subordinated debt, subordinated in right of payment to all of our senior debt, including our indebtedness under our senior credit facilities, and senior in right of payment to all of our subordinated debt. The senior subordinated notes are guaranteed on a senior subordinated, unsecured basis by certain of our subsidiaries.

At any time prior to December 15, 2008, we may redeem all, but not less than all, of the senior subordinated notes at our option at a redemption price equal to 100% of the principal amount of the senior subordinated notes,

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plus a redemption premium and accrued and unpaid interest. On or after December 15, 2008, we may redeem the senior subordinated notes at the redemption prices (expressed as a percentage of the principal amount) plus accrued and unpaid interest, if redeemed during the twelve-month period beginning on December 15 of each of the years indicated below:

Period	Redemption Price
2008	104.313	%
2009	102.875	%
2010	101.438	%
2011 and thereafter	100.000	%

Also, prior to December 15, 2006, we may redeem up to 35% of the aggregate principal amount of the senior subordinated notes at a redemption price of 108.625% of the principal amount of the senior subordinated notes, plus accrued and unpaid interest, from the proceeds of one or more equity offerings. The senior subordinated notes are also redeemable at the option of the holders of such notes at a repurchase price of 101% of the principal amount thereof, plus accrued and unpaid interest, in the event of certain change of control events related to us.

The indenture governing the senior subordinated notes contains certain covenants that limit, among other things, our ability to a) incur additional indebtedness (including by way of guarantee), subject to certain exceptions, unless we meet a consolidated coverage ratio of 2.0 to 1.0 or certain other conditions apply; (b) pay dividends or distributions, or make certain types of investments or other restricted payments, unless we meet certain specified conditions; (c) create any encumbrance or restriction on our subsidiary guarantors’ ability to pay dividends or distributions, repay loans, make loans or advances or transfer any property or assets to us; (d) dispose of certain assets and capital stock of our subsidiary guarantors; (v) enter into certain transactions with affiliates; (vi) engage in any new lines of business in which we were not engaged at the time the senior subordinated notes were issued; or (vii) engage in certain mergers and consolidations.

As of March 31, 2006, we had $485.6 million of total indebtedness outstanding, consisting of $275.0 million under the senior secured facility; $182.0 million under the U.S. term loan facility; $24.2 million under the European term loan facility; $4.0 million in short-term debt, which is renewable annually at an interest rate of 5.58%, assumed in the Rongtai acquisition and a $0.4 million long-term loan from the Rongtai joint venture partner. Interest expense, net, including amortization of deferred financing costs, was $39.3 million for the fiscal year ended March 31, 2006. There are no principal payments due on the term loan facilities until March 2007. There were no borrowings outstanding under the revolving credit facility at March 31, 2006; however, $5.1 million of the facility was utilized in connection with outstanding letters of credit. We were in compliance with all credit facility covenants at March 31, 2006.

We believe that cash on hand and expected cash flows from operations, together with available borrowings under the revolving credit facilities constituting part of our senior secured credit facilities, will provide sufficient funds to enable us to fund our planned capital expenditures, make scheduled principal and interest payments and meet our other cash requirements for the foreseeable future; however, we offer no assurances.

Our ability to make scheduled payments of principal of, or to pay interest on, or to refinance, our indebtedness, or to fund planned capital expenditures will depend on our ability to generate cash in the future. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

Impact of the Acquisition and Related Financing Transactions

In connection with the Acquisition, our assets and liabilities were adjusted to their fair value as of the closing. We increased our aggregate indebtedness as a result of the new financing arrangements that were entered into as a result of the Acquisition; accordingly, interest expense is higher in periods following the Acquisition. A

28

significant portion of the purchase price was allocated to customer relationships, patents, trademarks and tradenames and a non-competition agreement. Because trademarks and tradenames are assets with indefinite lives, they are not amortized unless and until it is determined that they have finite lives, and are subject to annual impairment reviews. The excess of the total purchase price over the fair value of assets acquired at the closing of the Acquisition was allocated to goodwill, and is subject to an annual impairment review.

Contractual Obligations

The following table is a summary of contractual cash obligations (excluding interest) as of March 31, 2006 (in millions). The interest component of the Company’s term loan facilities and senior subordinated notes is discussed in Note 8 of the “Notes to Consolidated Financial Statements” in Item 8 of this Annual Report.

	Payments Due by Period
	Less than 1 year		1-2 years		3-5 years		After 5 years		Total
Term loan facilities	$	0.6	$	4.6	$	201.4	$	—	$	206.6
Revolving loan facilities (1)		—		—		—		—		—
Operating leases		2.8		4.3		2.9		1.5		11.5
Senior subordinated notes		—		—		—		275.0		275.0
Total contractual cash obligations	$	3.4	$	8.9	$	204.3	$	276.5	$	493.1

(1) The revolving loan facilities provide for $70.0 million of borrowing capacity. The revolving credit facilities mature in December 2009. As of March 31, 2006, $5.1 million of letters of credit were issued and are included in the $70.0 million of borrowing capacity under the revolving credit facilities.

Taxes

We are subject to taxation in multiple jurisdictions throughout the world. Our effective tax rate and tax liability are affected by a number of factors, such as the amount of taxable income in particular jurisdictions, the tax rates in such jurisdictions, tax treaties between jurisdictions, the extent to which we transfer funds between jurisdictions and repatriate income, and changes in law. Generally, the tax liability for each legal entity is determined either on a (a) non-consolidated and non-combined basis or (b) consolidated and combined basis only with other eligible entities subject to tax in the same jurisdiction, in either case without regard to the taxable losses of non-consolidated and non-combined affiliated entities. As a result, we may pay income taxes to some jurisdictions even though on an overall basis a net loss for the period is incurred.

Inflation

Inflation can affect the costs of goods and services we use. The majority of the countries that are of significance to us, from either a manufacturing or sales viewpoint, have in recent years enjoyed relatively low inflation. The competitive environment in which we operate inevitably creates pressure on us to provide our customers with cost-effective products and services. We believe our cost reduction programs are critical to maintaining our competitive position.

Critical Accounting Policies

The methods, estimates and judgments used in applying critical accounting policies have a significant impact on the results we report in our financial statements. We evaluate our estimates and judgments on an on-going basis. Estimates are based on historical experience and on assumptions that are believed to be reasonable under the circumstances. Management’s experience and assumptions form the basis for judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may vary from what management anticipates, and different assumptions or estimates about the future could change the reported results.

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We believe the following accounting policies are the most critical to our reported financial statements and require the most difficult, subjective or complex judgments in the preparation of these statements.

Revenue recognition. Sales and related cost of sales are recorded based on the following criteria; a) delivery has occurred or services have been rendered, b) evidence of an arrangement exists, c) pricing is fixed or determinable and d) collection is reasonably assured. We have certain sales rebate programs with some customers that periodically require rebate payments. Management estimates amounts due under these sales rebate programs at the time of shipment. Net sales relating to any particular shipment are based upon the amount invoiced for the shipped goods less estimated future rebate payments and sales returns and allowances. These estimates are based upon historical experience. Revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.

Retirement benefits. Pension obligations are actuarially determined and are affected by several assumptions, including discount rate and assumed annual rate of compensation increase for plan employees. Changes in discount rate and differences from actual results for each assumption affect the amount of pension expense recognized in current and future periods.

As a result of the Acquisition, the liabilities associated with pension obligations were restated to their fair value in accordance with purchase accounting as prescribed by Statement of Financial Accounting Standards No. 141, Accounting for Business Combinations (“FAS 141”), and Statement of Financial Accounting Standards No. 87, Employers’ Accounting for Pensions (“FAS 87”). Following the Acquisition, we retained the defined benefit plans outside the United States and the United Kingdom and replaced the defined benefit plans for non-union employees in the United States and the United Kingdom with defined contribution plans. In addition, the defined benefit plans for unionized labor in the United States were replaced with newly established identical defined benefit plans.

Restructuring. Over the last five fiscal years, we implemented a focused cost reduction program that resulted in restructuring costs being incurred. Additional restructuring programs have been approved and implemented to support new programs and circumstances. The related restructuring reserves reflect estimates, including those pertaining to employee severance costs and contractual lease obligations. Management reassesses the reserve requirements to complete each individual program on a quarterly basis. Actual restructuring costs may be different from the estimates used to establish the restructuring reserves.

Warranty obligations. Product warranty reserves are established in the same period that revenue from the sale of the related products is recognized. The amounts of those reserves are based on warranty terms and best estimates of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Estimates of warranty obligations are reevaluated on a quarterly basis. As actual experience becomes available, it is used to modify the historical averages to ensure that the forecast is within the range of likely outcomes. Resulting balances are then compared with present spending rates to ensure that the accruals are adequate to meet expected future obligations.

Income taxes. At the end of each fiscal quarter, management estimates the effective tax rate expected to be applicable for the full fiscal year. The estimated effective tax rate reflects the expected jurisdiction where income is earned as well as tax planning strategies. If the actual results are different from our estimates, adjustments to the effective tax rate may be required in the period in which such determination is made.

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. Management regularly reviews deferred tax assets for recoverability and establishes a valuation allowance based on historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. As a result of this review, a full valuation allowance has been established against the deferred tax assets related to certain foreign and domestic net operating loss carryforwards.

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Impairment of long-lived assets. Long-lived assets are reviewed for impairment when events or circumstances indicate that the carrying amount of a long-lived asset may not be recoverable and for all assets to be disposed. Long-lived assets held for use are reviewed for impairment by comparing the carrying amount of an asset to the undiscounted future cash flows expected to be generated by the asset over its remaining useful life. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value, and is charged to results of operations at that time. Assets to be disposed of are reported at the lower of the carrying amounts or fair value less cost to sell. Management determines fair value using a discounted future cash flow analysis. The determination of market values based on discounted cash flows requires management to make significant estimates and assumptions, including long-term projections of cash flows, market conditions and appropriate discount rates.

As a result of the Acquisition, tangible fixed assets were restated to their fair value in accordance with purchase accounting as prescribed by FAS 141.

Intangible assets. Intangible assets historically have consisted of goodwill, trademarks and patents. Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired. Patents and trademarks are stated at fair value on the date of acquisition. Goodwill and indefinite-lived intangible assets (trademarks and tradenames) are required to be tested at least annually for impairment using fair value measurement techniques prescribed by Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“FAS 142”). The Company performed its annual impairment testing of its goodwill and indefinite-lived intangible assets as of March 31, 2006 and no impairment was evident.

We assess the fair value of our reporting units for goodwill impairment based upon a discounted cash flow methodology. Those estimated future cash flows, which are based upon historical results and current projections, are discounted at a rate corresponding to a “market” rate. If the carrying amount of the reporting unit exceeds the estimated fair value determined through that discounted cash flow methodology, goodwill impairment may be present. We measure the goodwill impairment loss based upon the fair value of the underlying assets and liabilities of the reporting unit, including any unrecognized intangible assets, and estimate the implied fair value of goodwill. An impairment loss would be recognized to the extent that a reporting unit’s recorded goodwill exceeded the implied fair value of goodwill.

In connection with the Acquisition, the intangible assets were restated to their fair value in accordance with purchase accounting as prescribed by FAS 141. Intangible assets include customer relationships, a non-competition agreement, patents, trademarks and tradenames. All intangible assets, except for trademarks and tradenames, are considered finite-lived assets with lives ranging from 3 to 25 years.

Recent Accounting Pronouncements

On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued a revised Statement No. 123, Accounting for Share-Based Payment, Revised Statement (“FAS 123(R)”). FAS 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and amends FASB Statement No. 95, Statement of Cash Flows. FAS 123(R) requires that the compensation cost related to share-based payment transactions be recognized in the financial statements. The cost recognized in the financial statements will be based on the fair value of the equity or liability instruments issued. FAS 123(R) also offers additional guidance on measuring the fair value of share-based payment awards. The Company will adopt FAS 123(R) in the first quarter of fiscal 2007. As permitted by FAS 123(R), the Company currently accounts for share-based payments to employees in accordance with APB 25. Management does not expect that the adoption of this Statement will have a material effect on our financial statements.

The FASB’s Emerging Issues Task Force Issue No. 05-5, Accounting for the Altersteilzeit Early Retirement Programs and Similar Type Arrangements (“EITF 05-5”), addresses an Altersteilzeit (“ATZ”) program, which is an early retirement program supported by the German government. Generally, a Type II ATZ arrangement provides for a participant to work full-time for half of the ATZ period and not work for the remaining half of the

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ATZ period. The employee receives half of their salary during the entire ATZ period, and the salary (including deferred salary) is recognized over the period the employee works. EITF 05-5 addresses the accounting treatment for benefits provided under a Type II ATZ arrangement and requires that such benefits be accounted for as a termination benefit under Statement of Financial Accounting Standards No. 112, Employers’ Accounting for Postemployment Benefits. Recognition of the cost of the benefits begins at the time individual employees enroll in the ATZ arrangements, for example, sign a contract. EITF 05-5 is effective for plans within its scope for fiscal years beginning after December 15, 2005. The Company does not anticipate that the adoption of EITF 05-5 will have a material impact on its financial statements.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about our market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in forward-looking statements. We are exposed to various market risk factors such as changes in foreign currency rates and fluctuating interest rates.

Currency translation. The results of operations of our foreign subsidiaries are translated into U.S. dollars at the average exchange rates for each period concerned. This translation has no impact on cash flow. The balance sheets of foreign subsidiaries are translated into U.S. dollars at the closing exchange rates. Any adjustments resulting from the translation are recorded as other comprehensive income (loss). As of March 31, 2006, assets of foreign subsidiaries constituted approximately 24% of total assets. Foreign currency exchange rate exposure is most significant with respect to the euro. For the fiscal year ended March 31, 2006, net sales were negatively impacted by the devaluation of foreign currencies, primarily the euro, versus the U.S. dollar by approximately $3.2 million. Net sales for the fiscal years ended March 31, 2005 and 2004, were positively impacted by the appreciation of foreign currencies against the U.S. dollar by $13.4 million and $26.8 million, respectively.

Currency transaction exposure. Currency transaction exposure arises when a business or company has transactions denominated in foreign currencies. We have entered into forward contracts that are denominated in foreign currencies, principally euros and Slovakian korunas, to offset the remeasurement impact of currency rate changes on intercompany receivables and payables and third-party receivables. These contracts are used to offset exchange losses and gains on underlying exposures. The Company does not utilize hedge accounting treatment for its forward contracts. Changes in the fair value of these forward contracts are recorded immediately in earnings. We do not enter into derivative instrument transactions for trading or speculative purposes. The purpose of our foreign currency management policy is to minimize the effect of exchange rate fluctuations on certain foreign denominated anticipated cash flows. Holding all other variables constant, a change in the contracted forward rates of 1% on our forward contracts denominated in the present foreign currencies would result in a gain or loss of $0.4 million, which we believe would offset the impact of currency gains and losses related to certain receivables and payables. We expect to continue to utilize forward contracts to manage foreign currency exchange risks in the future.

Interest rate risk. We have a significant amount of debt, with a large portion being at variable rates. The Company’s total indebtedness as of March 31, 2006 was $485.6 million, of which $206.2 million bears interest at variable rates. As of March 31, 2006, variable-rate borrowings under the senior credit facilities were, at our option, at the adjusted LIBOR plus 2.5% or the Alternate Base Rate plus 1.5%. On May 12, 2006, the Company entered into a second amendment to the Credit Agreement to reduce the interest rates for the Company’s borrowings under the term loan facility. Pursuant to this amendment, the margin on rates linked to LIBOR decreased to 2.0% from 2.5%, and the margin on rates linked to the Alternate Base Rate decreased to 1.0% from 1.5%. At March 31, 2006, the weighted average interest rate on our variable-rate term debt was approximately 7.4% (consisting of approximately 4.9% LIBOR plus 2.5%), all of which was outstanding under the senior credit facilities. Holding all other variables constant, a change in the interest rate of 1% on our variable-rate debt would impact annual interest costs by $1.1 million. On December 9, 2005 and March 24, 2006, the Company entered into interest rate swap agreements, each with a notional amount of $50.0 million, to hedge exposure to variable interest rates. The purpose of the swaps, designated as a cash flow hedge, is to effectively hedge the Company’s

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interest payments on a portion of its variable-rate debt. Under the terms of the swap agreements, which are effective January 20, 2006 and August 22, 2006 and terminate on September 30, 2010 and June 30, 2010, respectively, the Company receives or will receive periodic variable interest payments at the three-month LIBOR rate and makes or will make periodic payments at a fixed rate of 4.927% and 5.121%, respectively. Changes in the Company’s cash flows attributable to the risk being hedged are expected to be completely offset by the hedging derivatives, and therefore changes in the fair value of the swaps are reflected in other comprehensive income (loss), net of tax. Any ineffectiveness of the swaps is required to be recognized in earnings. Other comprehensive income of $0.3 million, net of tax of $0.3 million, recorded during fiscal 2006 reflects the increase in the fair value of the swaps since inception. We expect to continue to utilize interest rate swap agreements to manage interest rate risk in the future.

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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholder of

Sensus Metering Systems (Bermuda 2) Ltd.

We have audited the accompanying consolidated balance sheets of Sensus Metering Systems (Bermuda 2) Ltd. as of March 31, 2006 and 2005, and the related consolidated statements of operations, stockholder’s equity, and cash flows for the two years in the period ended March 31, 2006 and the period from inception (December 18, 2003) through March 31, 2004 and of its Predecessor for the period from April 1, 2003 through December 17, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sensus Metering Systems (Bermuda 2) Ltd. at March 31, 2006 and 2005, and the consolidated results of its operations and its cash flows for each of the two years in the period ended March 31, 2006 and the period from inception (December 18, 2003) through March 31, 2004 and of its Predecessor for the period from April 1, 2003 through December 17, 2003, in conformity with U.S. generally accepted accounting principles.

/s/    Ernst & Young LLP

Richmond, Virginia

June 9, 2006

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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share and share data)

	March 31, 2006			March 31, 2005
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	52.6		$	54.9
Accounts receivable:
Trade, net of allowance for doubtful accounts of $1.4 and $1.7 at March 31, 2006 and March 31, 2005, respectively		88.5			90.4
Other		1.8			2.6
Inventories, net		56.2			49.2
Prepayments and other current assets		9.9			8.2
Deferred income taxes		5.2			5.5
Total current assets		214.2			210.8
Property, plant and equipment, net		136.8			120.2
Intangible assets, net		215.9			235.9
Goodwill		330.5			331.6
Deferred income taxes		12.5			18.0
Other long-term assets		25.2			23.7
Total assets	$	935.1		$	940.2
LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
Accounts payable	$	60.5		$	52.6
Current portion of long-term debt		0.6			0.6
Short-term borrowings		4.0			—
Income taxes payable		2.7			1.2
Restructuring accruals		3.0			4.0
Accruals and other current liabilities		57.6			54.6
Total current liabilities		128.4			113.0
Long-term debt, less current portion		481.0			499.8
Pensions		44.8			38.8
Deferred income taxes		77.3			82.2
Other long-term liabilities		9.8			11.1
Minority interest		7.4			1.3
Total liabilities		748.7			746.2
Commitments and Contingencies (Note 20)
STOCKHOLDER’S EQUITY:
Common stock, par value $1.00 per share, 12,000 shares authorized, issued and outstanding		—			—
Paid-in capital		200.0			200.0
Accumulated deficit		(10.1	)		(6.9	)
Accumulated other comprehensive (loss) income		(3.5	)		0.9
Total stockholder’s equity		186.4			194.0
Total liabilities and stockholder’s equity	$	935.1		$	940.2

The accompanying notes are an integral part of these consolidated financial statements.

35

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions)

										Predecessor (Note 1)
	Year Ended March 31, 2006			Year Ended March 31, 2005			Period from Inception (December 18, 2003) to March 31, 2004			Period from April 1, 2003 to December 17, 2003
NET SALES:
To third parties	$	613.9		$	569.8		$	164.4		$	361.9
To affiliates		—			—			—			2.7
TOTAL NET SALES		613.9			569.8			164.4			364.6
COST OF SALES		427.5			399.0			118.8			254.9
GROSS PROFIT		186.4			170.8			45.6			109.7
OPERATING EXPENSES:
Selling, general and administrative expenses		107.9			99.5			28.1			69.7
Restructuring and other similar costs		7.2			8.1			1.1			9.6
Amortization of intangible assets		22.5			21.3			5.7			0.3
Other operating expense (income), net		3.4			3.0			(0.1	)		(0.9	)
OPERATING INCOME FROM CONTINUING OPERATIONS		45.4			38.9			10.8			31.0
NON-OPERATING (EXPENSE) INCOME:
Interest (expense) income, net:
From/to third parties		(39.3	)		(36.7	)		(12.7	)		—
From/to affiliates		—			—			—			1.9
Other (expense) income, net		(1.1	)		2.0			(0.2	)		0.1
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST		5.0			4.2			(2.1	)		33.0
PROVISION (BENEFIT) FOR INCOME TAXES		8.2			8.3			(0.5	)		22.6
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST		(3.2	)		(4.1	)		(1.6	)		10.4
MINORITY INTEREST		—			(0.1	)		0.1			(0.4	)
(LOSS) INCOME FROM CONTINUING OPERATIONS		(3.2	)		(4.2	)		(1.5	)		10.0
DISCONTINUED OPERATIONS:
Loss from discontinued operations, net of tax		—			(0.5	)		(0.3	)		(0.2	)
Loss on disposition of discontinued operations, net of tax		—			(0.3	)		—			—
LOSS FROM DISCONTINUED OPERATIONS		—			(0.8	)		(0.3	)		(0.2	)
NET (LOSS) INCOME	$	(3.2	)	$	(5.0	)	$	(1.8	)	$	9.8

The accompanying notes are an integral part of these consolidated financial statements.

36

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(in millions)

	Invested Capital			Long-term Funding (to)/from Affiliates			Common Stock		Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total
Predecessor Company Balance at March 31, 2003	$	624.0		$	(128.8	)	$	—	$	—	$	—		$	1.1		$	496.3
Other comprehensive income:
Net income		9.8			—			—		—		—			—			9.8
Foreign currency translation adjustment		—			—			—		—		—			11.5			11.5
Total comprehensive income																		21.3
Change in funding from/(to) affiliates		—			22.6			—		—		—			—			22.6
Other activity with affiliates		24.7			—			—		—		—			—			24.7
Payment of dividends		(0.7	)		—			—		—		—			—			(0.7	)
Predecessor Company Balance at December 17, 2003	$	657.8		$	(106.2	)	$	—	$	—	$	—		$	12.6		$	564.2
Initial contribution of capital	$	—		$	—		$	—	$	200.0	$	—		$	—		$	200.0
Other comprehensive loss:
Net loss		—			—			—		—		(1.8	)		—			(1.8	)
Foreign currency translation adjustment		—			—			—		—		—			(0.1	)		(0.1	)
Total comprehensive loss																		(1.9	)
Payment of dividends		—			—			—		—		(0.1	)		—			(0.1	)
Balance at March 31, 2004		—			—			—		200.0		(1.9	)		(0.1	)		198.0
Other comprehensive (loss) income:
Net loss		—			—			—		—		(5.0	)		—			(5.0	)
Foreign currency translation adjustment		—			—			—		—		—			1.0			1.0
Total comprehensive loss																		(4.0	)
Balance at March 31, 2005		—			—			—		200.0		(6.9	)		0.9			194.0
Other comprehensive (loss) income:
Net loss		—			—			—		—		(3.2	)		—			(3.2	)
Foreign currency translation adjustment		—			—			—		—		—			2.1			2.1
Additional minimum pension liability adjustment, net of tax of $0.2 million		—			—			—		—		—			(6.8	)		(6.8	)
Unrealized gain on interest rate swaps, net of tax of $0.3 million		—			—			—		—		—			0.3			0.3
Total comprehensive loss																		(7.6	)
Balance at March 31, 2006	$	—		$	—		$	—	$	200.0	$	(10.1	)	$	(3.5	)	$	186.4

The accompanying notes are an integral part of these consolidated financial statements.

37

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

										Predecessor (Note 1)
	Year Ended March 31, 2006			Year Ended March 31, 2005			Period from Inception (December 18, 2003) to March 31, 2004			Period from April 1, 2003 to December 17, 2003
OPERATING ACTIVITIES:
Net (loss) income	$	(3.2	)	$	(5.0	)	$	(1.8	)	$	9.8
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation		19.9			18.5			4.8			12.0
Amortization of intangible assets		22.5			21.3			5.7			0.3
Amortization of deferred financing costs		2.0			2.1			0.7			—
Deferred income taxes		2.2			1.1			(2.6	)		(2.0	)
Net gain on sale of assets		(0.2	)		(0.7	)		—			—
Non-cash restructuring charges		1.1			—			—			0.8
Impact of inventory fair value adjustment		—			—			10.3			—
Loss (gain) on foreign currency transactions		2.1			(0.8	)		(0.1	)		—
Minority interest		—			0.2			—			(0.1	)
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
Accounts receivable		(1.8	)		(7.9	)		(13.1	)		(5.3	)
Inventories		(5.4	)		(1.6	)		10.9			(7.7	)
Accounts payable, accruals and other current liabilities		10.4			9.3			5.3			(20.7	)
Other current assets		(1.4	)		2.2			(0.1	)		(6.3	)
Other long-term assets		(2.2	)		0.3			0.2			(3.0	)
Other long-term liabilities		(0.7	)		(5.3	)		(1.9	)		(0.7	)
Income taxes		1.3			(1.5	)		0.6			(10.5	)
Pensions		0.5			1.5			0.5			0.6
Net cash provided by (used in) operating activities		47.1			33.7			19.4			(32.8	)
INVESTING ACTIVITIES:
Expenditures for property, plant and equipment		(23.2	)		(21.2	)		(6.1	)		(8.4	)
Purchases of intangible assets		(1.6	)		(1.2	)		—			—
Rongtai acquisition		(11.6	)		—			—			—
DuPenn acquisition		(1.7	)		—			—			—
Nexus acquisition		(0.1	)		(6.7	)		—			—
Invensys acquisition, net of cash acquired		—			—			(648.6	)		—
Proceeds from Invensys acquisition adjustment		—			6.5			—			—
Proceeds from sale of investments		0.4			—			—			—
Proceeds from sale of assets		1.1			2.9			—			—
Net cash used in investing activities		(36.7	)		(19.7	)		(654.7	)		(8.4	)
FINANCING ACTIVITIES:
Cash dividends		—			—			(0.1	)		(0.7	)
Increase (decrease) in short-term borrowings		—			(2.2	)		2.2			(14.1	)
Principal payments on debt		(19.2	)		(4.0	)		(0.6	)		—
Debt issuance costs		—			(1.9	)		(22.8	)		—
Proceeds from issuance of debt		0.4			—			505.0			—
Proceeds from issuance of common stock		—			—			200.0			—
Proceeds from joint venture partner		6.0			—			—			—
Net change in amounts due from affiliates		—			—			—			47.3
Net cash (used in) provided by financing activities		(12.8	)		(8.1	)		683.7			32.5
Effect of exchange rate changes on cash		0.1			0.5			0.1			0.8
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(2.3	)		6.4			48.5			(7.9	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	$	54.9		$	48.5		$	—		$	17.1
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	52.6		$	54.9		$	48.5		$	9.2
SUPPLEMENTAL DISCLOSURES OF CASH FLOW:
Cash paid during the period for:
Interest	$	37.7		$	34.3		$	0.2		$	—
Income taxes, net	$	2.8		$	9.2		$	2.5		$	47.9

The accompanying notes are an integral part of these consolidated financial statements.

38

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Sensus Metering Systems (Bermuda 2) Ltd., a wholly owned subsidiary of Sensus Metering Systems (Bermuda 1) Ltd., together with its subsidiaries, referred to herein as the Company, is a leading provider of advanced metering and related communications solutions to the worldwide utility industry. The Company is a global manufacturer of water, gas, heat and electric meters and automatic meter reading (“AMR”) devices. In addition, the Company produces pipe joining and repair products for water and natural gas utilities and is a supplier of precision-manufactured aluminum die-castings.

The Acquisition

The Company was formed on December 17, 2003 through the acquisition (the “Acquisition”) of the metering systems and certain other businesses of Invensys plc (“Invensys Metering Systems” or “Predecessor”). Prior to the Acquisition, the Company had no active business operations. The Acquisition was financed through a combination of borrowings under a $230.0 million term loan facility that is part of the Company’s senior credit facilities, the issuance of $275.0 million of 8.625% senior subordinated notes due 2013 (“the Notes”), and equity contributions from the principal investors in the Company and certain officers and directors of the Company.

The consolidated financial statements of the Company included herein include the accounts of Sensus Metering Systems (Bermuda 2) Ltd. subsequent to the Acquisition on December 18, 2003.

The financial statements of the Predecessor are presented for comparative purposes and include the combined historical financial statements of the subsidiaries and operations of Invensys Metering Systems.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Subsidiaries that are less than 100% owned, but greater than 50% owned, and for which the Company can control, are consolidated. All intercompany transactions and accounts have been eliminated.

Reclassifications

Certain reclassifications have been made to the financial statements for the year ended March 31, 2005 and the periods December 18, 2003 to March 31, 2004 and April 1, 2003 to December 17, 2003 to conform to the year ended March 31, 2006 presentation. The reclassifications had no impact on net (loss) income in our consolidated results of operations reported for any period.

Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the financial statements. Due to various factors affecting future costs and operations, actual results could differ from those estimates.

Cash and Cash Equivalents

Highly liquid investments with original maturity dates of three months or less are classified as cash equivalents. Cash equivalents are stated at cost, which approximates fair value.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Third-Party Receivables

The Company provides an allowance for doubtful accounts equal to estimated collection losses that will be incurred in the collection of receivables. Estimated losses are based on historical collection experience, as well as a review by management of the current status of all receivables.

Predecessor

The Predecessor factored certain third-party trade receivables to unrelated financial institutions on a non-recourse basis pursuant to certain agreements. The Predecessor accounted for the transfer of receivables pursuant to these agreements as a sale of financial assets. The agreements, which were negotiated and administered by Invensys or its affiliates, required the Predecessor to collect funds with respect to the factored receivables and remit the funds to the financial institutions. For the period from April 1, 2003 to December 17, 2003, costs incurred relating to factoring agreements amounted to $0.3 million. The Predecessor ceased all factoring activities prior to December 17, 2003.

Inventories

Inventories are stated at the lower of cost or market using the first-in, first-out (“FIFO”) method. Cost is determined based on standard cost with appropriate adjustments to approximate FIFO cost. Market is determined on the basis of estimated realizable values.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation of property, plant and equipment is provided using the straight-line method over the estimated useful life of the asset, as follows:

Buildings and improvements	13 to 50 years
Machinery and equipment	3 to 13 years
Computer equipment and software	3 to 5 years

Improvements and replacements are capitalized to the extent that they increase the useful economic life or increase the expected economic benefit of the underlying asset. Repairs and maintenance expenditures are charged to expense as incurred.

Goodwill and Identifiable Intangible Assets

Intangible assets consist of tradenames, patents, non-competition agreements and customer and distributor relationships. Goodwill at March 31, 2006 represents the excess of the purchase price paid by the Company for the Predecessor and NexusData, Inc. (“Nexus”) over the fair value of the net assets acquired (see Note 2). The purchase price allocation for these acquisitions resulted in $330.5 million of goodwill at March 31, 2006. The goodwill can be attributed to the value placed on the Company being an industry leader with market leading positions in the North American and European water metering markets, the North American clamps and couplings market and the North American and Asian precision die-casting markets. The Company is also a market leader in the North American gas metering market, the European heat metering market and the North American water AMR market. The Company has achieved these leadership positions by developing and manufacturing innovative products. In addition, future expansion of AMR technology provides a significant

40

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

opportunity for the Company. Patents, trademarks, and customer and distributor relationships are stated at fair value on the date of acquisition as determined by an independent valuation firm. The non-competition agreement is stated at fair value per the stock purchase agreement. Trademarks are assumed to have indefinite lives and are not amortized. Patents and customer and distributor relationships are being amortized using the straight-line method over 3 to 15 years, and 5 to 25 years, respectively. The non-competition agreement is being amortized over 4 years, the contractual period of the agreement.

The Company performs annual goodwill and other identifiable intangibles impairment tests based upon a discounted cash flow methodology. Estimated future cash flows are based upon historical results and current projections are discounted at a rate corresponding to a “market” rate. If the carrying amount of the reporting unit exceeds the estimated fair value determined through that discounted cash flow methodology, goodwill impairment would be recognized. The Company measures the goodwill impairment loss based upon the fair value of the underlying assets and liabilities of the reporting unit, including any unrecognized intangible assets, and estimates the implied fair value of goodwill. An impairment loss would be recognized to the extent that a reporting unit’s recorded goodwill exceeded the implied fair value of goodwill. The Company performed goodwill impairment testing of the reporting units as of March 31, 2006 and determined that the fair value of each of the reporting units exceeded its carrying value and therefore no impairment was evident. In addition, the Company performed impairment testing of its indefinite-lived intangible assets as of March 31, 2006 and no impairment was evident.

Impairment of Long-Lived Assets

Long-lived assets held for use are reviewed for impairment when events or circumstances indicate that the carrying amount of a long-lived asset, or group of assets, may not be recoverable. These assets are reviewed for impairment by comparing the carrying amount of an asset to the undiscounted future cash flows expected to be generated by the asset over its remaining useful life. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value, and is charged to results of operations at that time. Assets to be disposed of are reported at the lower of the carrying amounts or fair value less cost to sell. Management determines fair value using a discounted future cash flow analysis or other accepted valuation techniques.

The Company recorded a $1.1 million restructuring charge relating to the impairment of long-lived assets for the year ended March 31, 2006. For the year ended March 31, 2005 and the period from December 18, 2003 to March 31, 2004, the Company did not identify any impairment to the carrying value of long-lived assets. In the period from April 1, 2003 to December 17, 2003, the Predecessor identified certain assets that were considered impaired following changes in business activity, and impairment charges for such period were $0.8 million.

Deferred Financing Costs

Other long-term assets at March 31, 2006 and 2005 include deferred financing costs of $19.6 million and $21.6 million, net of accumulated amortization of $4.8 million and $2.8 million, respectively. These costs were incurred to obtain and re-finance long-term financing and are being amortized using the effective interest method over the term of the related debt. Amortization of deferred financing costs was $2.0 million, $2.1 million and $0.7 million for the years ended March 31, 2006 and 2005 and the period from December 18, 2003 to March 31, 2004, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement basis and the tax basis of the Company’s assets and liabilities using enacted statutory tax rates applicable to future years when the temporary differences are expected to reverse. The Company records a valuation allowance when it determines that it is more likely than not that all or a portion of a deferred tax asset will not be realized. The Company has tax holidays in Algeria and China that provide an income tax benefit of $0.5 million and which expire in calendar year 2008.

Foreign Currency

Assets and liabilities of subsidiaries operating outside of the United States with a functional currency other than the U.S. dollar are translated into U.S. dollars using exchange rates at the end of the respective period. Revenues and expenses are translated at average exchange rates effective during the respective period.

Foreign currency translation adjustments are included in accumulated other comprehensive income (loss) as a separate component of stockholder’s equity. Transactional currency gains (losses) are included in the results of operations in the period incurred and were not material for the years ended March 31, 2006 and 2005 and the periods from December 18, 2003 to March 31, 2004 and April 1, 2003 to December 17, 2003. Currency remeasurement gains (losses) are included in other non-operating income (expense) and were ($2.0 million) and $1.3 million for the years ended March 31, 2006 and 2005, respectively. Currency remeasurement gains (losses) were not material for the periods from December 18, 2003 to March 31, 2004 and April 1, 2003 to December 17, 2003, respectively.

Revenue Recognition

Revenues are recognized when a) persuasive evidence of an arrangement exists, b) delivery has occurred or services have been rendered, c) the sales price is fixed or determinable and d) collectibility is reasonably assured. The Company has certain sales rebate programs with some customers that periodically require rebate payments. The Company estimates amounts due under these sales rebate programs at the time of shipment. Net sales relating to any particular shipment are based upon the amount invoiced for the shipped goods less estimated future rebate payments and sales returns and allowances. These estimates are based upon the Company’s historical experience. The Company records an allowance for sales returns based on the historical relationship between shipments and returns. The Company believes that historical experience is an accurate reflection of future returns. Revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.

Revenue from fees collected and allocated to post-contract customer support for the Company’s AMR systems included with the initial licensing fee and for renewals is deferred and recognized ratably over the term of the service provided, which is generally 12 months. Consideration from multiple element products and services are allocated based on the fair market value of the individual elements and recognized as revenue as the respective products are delivered or services are provided.

Advertising Costs

Advertising costs are charged to selling, general and administrative expenses as incurred and totaled $2.8 million, $2.9 million, $1.6 million and $3.0 million for the years ended March 31, 2006 and 2005 and the periods from December 18, 2003 to March 31, 2004 and April 1, 2003 to December 17, 2003, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Research and Development Costs

Research and development costs are charged to selling, general and administrative expenses as incurred and totaled $26.1 million, $23.5 million, $6.1 million and $17.0 million for the years ended March 31, 2006 and 2005 and the periods from December 18, 2003 to March 31, 2004 and April 1, 2003 to December 17, 2003, respectively.

Stock-Based Compensation

The Company’s parent, Sensus Metering Systems (Bermuda 1) Ltd., maintains a Restricted Share Plan that provides for the award of restricted common shares to officers, directors and consultants of the Company. The restricted shares issued pursuant to the Restricted Share Plan are service time vested over five years from the date of grant, provided that no vesting occurs prior to the second anniversary of the date of grant. In addition, the vesting of the restricted shares may accelerate upon the occurrence of certain stated liquidity events. Common shares awarded under the Restricted Share Plan are generally subject to restrictions on transfer rights, repurchase rights and other limitations as set forth in the management subscription and shareholders’ agreement. The Company accounts for share-based payments to employees in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”). No compensation expense related to the Restricted Share Plan was recognized for the years ended March 31, 2006 and 2005 and the period from December 18, 2003 to March 31, 2004.

The Predecessor provided stock-based compensation plans to certain members of senior management, which are described more fully in Note 14. The Predecessor accounted for those plans under the intrinsic value method prescribed by APB 25, and related Interpretations. Compensation cost recognized in the period from April 1, 2003 to December 17, 2003 and the year ended March 31, 2003 was not material to the net earnings of the Predecessor.

Concentration of Credit and Workforce

Credit is extended by the Company based upon an evaluation of the customer’s financial position, and generally collateral is not required. Credit losses are provided for in the consolidated financial statements and consistently have been within management’s expectations.

Approximately 12%, 12%, 12% and 11% of total net sales for the years ended March 31, 2006 and 2005 and the periods from December 18, 2003 to March 31, 2004 and April 1, 2003 to December 17, 2003, respectively, were with one customer and its affiliates.

Approximately 45% and 92% of the Company’s labor force in the United States and Europe, respectively, is covered by collective bargaining agreements.

Shipping and Handling Costs

The Company classifies costs associated with shipping and handling activities within cost of sales in the consolidated statements of operations. Shipping and handling costs were $10.8 million, $9.7 million, $2.2 million and $5.3 million for the years ended March 31, 2006 and 2005 and the periods from December 18, 2003 to March 31, 2004 and April 1, 2003 to December 17, 2003, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fair Value of Financial Instruments

The carrying amounts of cash, trade receivables and trade payables approximated fair values as of March 31, 2006 and 2005. The carrying value of the Company’s term loans and revolving credit facility borrowings approximates fair value as they bear interest at a variable market rate. The fair value of the Company’s 8.625% senior subordinated notes was $266.8 million and $272.3 million at March 31, 2006 and 2005, respectively. The fair value of these notes was determined based upon a discounted cash flow analysis at the prevailing market rates.

Recent Accounting Pronouncements

On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued a revised Statement No. 123, Accounting for Share-Based Payment, Revised Statement (“FAS 123(R)”). FAS 123(R) supersedes APB 25 and amends FASB Statement No. 95, Statement of Cash Flows. FAS 123(R) requires that the compensation cost related to share-based payment transactions be recognized in the financial statements. The cost recognized in the financial statements will be based on the fair value of the equity or liability instruments issued. FAS 123(R) also offers additional guidance on measuring the fair value of share-based payment awards. The Company will adopt FAS 123(R) in the first quarter of fiscal 2007. As permitted by FAS 123(R), the Company currently accounts for share-based payments to employees in accordance with APB 25. Management does not expect that the adoption of this Statement will have a material effect on our financial statements.

The FASB’s Emerging Issues Task Force Issue No. 05-5, Accounting for the Altersteilzeit Early Retirement Programs and Similar Type Arrangements (“EITF 05-5”), addresses an Altersteilzeit (“ATZ”) program, which is an early retirement program supported by the German government. Generally, a Type II ATZ arrangement provides for a participant to work full-time for half of the ATZ period and not work for the remaining half of the ATZ period. The employee receives half of their salary during the entire ATZ period, and the salary (including deferred salary) is recognized over the period the employee works. EITF 05-5 addresses the accounting treatment for benefits provided under a Type II ATZ arrangement and requires that such benefits be accounted for as a termination benefit under Statement of Financial Accounting Standards No. 112, Employers’ Accounting for Postemployment Benefits. Recognition of the cost of the benefits begins at the time individual employees enroll in the ATZ arrangements, for example, sign a contract. EITF 05-5 is effective for plans within its scope for fiscal years beginning after December 15, 2005. The Company does not anticipate that the adoption of EITF 05-5 will have a material impact on its financial statements.

2.    ACQUISITIONS

The Company was formed on December 17, 2003 through the Acquisition of the metering systems and certain other businesses of Invensys. Prior to the Acquisition, the Company had no active business operations. The Acquisition was completed pursuant to the terms of a stock purchase agreement, dated as of October 21, 2003 (the “Stock Purchase Agreement”) between Invensys and certain of its affiliates and Sensus Metering Systems Inc. Sensus Metering Systems Inc. is a wholly-owned subsidiary of Sensus Metering Systems (Bermuda 2) Ltd. The businesses acquired from Invensys are referred to herein as the Predecessor and form the basis for the financial information of the Predecessor included herein.

This transaction has been accounted for in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations (“FAS 141”). The consolidated financial statements herein include the Company’s results of operations for the period since inception.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The purchase price for the Acquisition of $657.3 million was financed through a combination of borrowings under a $230.0 million term loan facility that is part of the Company’s senior credit facilities, the issuance of $275.0 million of senior subordinated notes (“the Notes”), and equity contributions from the principal investors in the Company and certain officers and directors of the Company. The purchase price payable under the Stock Purchase Agreement for the Acquisition was subject to adjustment based on the a) level of working capital as of the closing date of the Acquisition, b) projected pension benefit obligations of Invensys Metering Systems as of the closing date and c) net level of intercompany payables and receivables as of the closing date. Following the closing of the Acquisition, discussions were held by Invensys and the Company regarding the appropriate level of the adjustment, and on July 27, 2004, the parties reached agreement on the adjustment amount that resulted in a cash payment of $5.0 million by Invensys to the Company and a corresponding reduction to the purchase price and goodwill. In December 2004, Invensys paid $2.0 million to the Company related to bonus obligations that were previously thought to be assumed by the Company. The $2.0 million payment was reflected as a reduction of goodwill.

During fiscal 2005, the Company adjusted the purchase price allocation by $(10.7) million, reflecting the final adjustment to the fair value of the net assets acquired, and for the Acquisition transaction costs incurred. The $10.7 million increase in net assets was reflected as a reduction to goodwill. During fiscal 2006, the Company adjusted the purchase price allocation by ($1.2) million to reflect revised net operating loss carryforwards.

The final allocation of the purchase price resulted in the recognition of $328.7 million of goodwill primarily related to the anticipated future earnings and cash flows of the businesses acquired. The Company allocated $260.1 million to intangible assets, of which $27.3 million were indefinite-lived assets related to tradenames and trademarks and $232.8 million related to finite-lived assets, including patents, distributor and other customer relationships and a non-compete agreement that are being amortized over periods ranging from 3 to 15 years for patents, 5 to 25 years for distributor and customer relationships, and 4 years for the non-compete agreement.

The following describes the Company’s other acquisitions subsequent to the Acquisition:

Nexus. On June 4, 2004, the Company purchased certain assets of Nexus for $6.0 million of cash consideration, excluding transaction costs. This purchase provided the Company with full ownership of a fixed-based network AMR system for the water, gas and electric utility markets. Prior to this acquisition, the Company had an exclusive distribution agreement with Nexus for the water utility market. This transaction has been accounted for in accordance with FAS 141.

The final allocation of the purchase price resulted in the recognition of $1.7 million of goodwill attributable to the anticipated future earnings and related cash flows, which includes transaction costs of $0.7 million related to this acquisition. The Company allocated $4.5 million of the purchase price to intangible assets, which includes $4.0 million of intellectual property and $0.5 million of non-competition agreements. The intellectual property and non-competition agreements are being amortized over 3 years and 7 years, respectively.

The purchase agreement also included provisions for the payment of additional consideration, up to a total of $1.5 million, to be paid to Nexus based on specific performance criteria of the acquired business through June 4, 2007. Any payments made based on these criteria will adjust the Nexus purchase price and be allocated to goodwill. Through March 31, 2006, approximately $0.1 million of additional consideration has been paid to Nexus and classified as goodwill.

Rongtai. On July 27, 2005, the Company formed a joint venture in China for its Sensus Precision Die Casting business with Yangzhou Runlin Investment Co., Ltd. (“Runlin”). The purpose of this joint venture is to

45

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

secure low-cost manufacturing capability in China, as well as pursue precision die casting product opportunities on a global basis. The joint venture is called Sensus-Rongtai Precision Die Casting (Yangzhou) Co., Ltd. (“PDC Rongtai”) and is headquartered in Jiangdu, China. The joint venture was capitalized with $9.0 million of cash from the Company and $6.0 million of cash from Runlin. The capital was used to purchase certain operating assets of Yangzhou Rongtai Industrial Development Co., Ltd. (“Rongtai”), a leading producer of aluminum die-casting parts for Chinese automotive and motorcycle manufacturers. The initial purchase price for the net assets acquired of Rongtai was $12.5 million, consisting of $10.2 million and $0.7 million of cash consideration paid in July 2005 and November 2005, respectively, and approximately $0.8 million to be paid one year after closing, subject to adjustment for any indemnification claims. In addition, the Company paid approximately $0.8 million of acquisition costs related to this acquisition during fiscal 2006.

The acquisition of Rongtai has been accounted for in accordance with FAS 141. The Company owns 60% of the joint venture and fully consolidates the financial statements of PDC Rongtai. The consolidated financial statements herein include the results of operations of PDC Rongtai for the period from the date of acquisition.

The Company has completed its preliminary purchase price allocation attributable to the Rongtai acquisition. The final allocation will be completed within one year of the transaction, and any resulting adjustment is not expected to have a material impact on the Company’s financial position or results of operations. The preliminary purchase price allocation based on management’s estimates at the date of acquisition is as follows (in millions):

Inventories	$	2.1
Property, plant and equipment		15.0
Accounts payable		(0.1	)
Short-term debt		(4.0	)
Other liabilities		(0.5	)
Fair value of net assets acquired	$	12.5

DuPenn. On February 17, 2006, we acquired certain assets and assumed certain liabilities of DuPenn, Inc. (“DuPenn”), a provider of machined castings for our gas metering business. This purchase is expected to enable the Company to enhance its gas metering supply chain and improve its on-time delivery performance to key customers. The initial purchase price for the net assets of DuPenn was $2.3 million, consisting of $1.7 million and $0.4 million of cash consideration paid on February 17, 2006 and in May 2006, respectively, and the remaining $0.2 million to be paid one year after closing, subject to any adjustment for any indemnification claims. The net assets acquired consisted of property, plant and equipment of $2.1 million and net working capital components of $0.2 million. The acquisition of DuPenn has been accounted for in accordance with FAS 141.

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SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3.    INTANGIBLE ASSETS

Intangible assets are summarized as follows (in millions):

	March 31, 2006					March 31, 2005
	Cost		Accumulated Amortization			Cost		Accumulated Amortization
Intangible assets not subject to amortization:
Goodwill	$	330.5	$	—		$	331.6	$	—
Trademarks (indefinite lived)		27.3		—			27.3		—
		357.8		—			358.9		—
Intangible assets subject to amortization:
Distributor and marketing relationships		193.0		(26.4	)		190.3		(14.3	)
Non-competition agreements		30.5		(17.3	)		30.5		(9.7	)
Patents		15.1		(6.3	)		15.2		(3.4	)
		238.6		(50.0	)		236.0		(27.4	)
Total intangible assets	$	596.4	$	(50.0	)	$	594.9	$	(27.4	)

The following presents the estimated amortization expense (in millions) for intangible assets for each of the next five years:

	Years Ended March 31,
2007	$	22.3
2008		18.4
2009		11.0
2010		8.6
2011		8.4

The following summarizes the weighted average amortization periods in years for intangible assets subject to amortization as of March 31, 2006:

Patents	8.0
Customer and distributor relationships	21.5
Non-compete	4.0
All intangible assets	19.8

The following represents a reconciliation of the changes in goodwill (in millions) for the periods presented:

Goodwill at March 31, 2005	$	331.6
Goodwill arising from Nexus additional consideration paid (Note 2)		0.1
Reduction from revised net operating loss carryforwards (Note 2)		(1.2	)
Goodwill at March 31, 2006	$	330.5

The Company performed its required impairment tests of goodwill for fiscal 2006 and no impairment was evident. The Company cannot predict the occurrence of certain events that might adversely affect the reported value of goodwill. Such events may include, but are not limited to, strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on the Company’s customer base, or a material negative change in its relationships with significant customers.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

4.    PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is summarized as follows (in millions):

	March 31, 2006			March 31, 2005
Land, buildings and improvements	$	43.7		$	39.9
Machinery and equipment		126.4			93.8
Construction in progress		7.9			8.7
Total property, plant and equipment		178.0			142.4
Less accumulated depreciation		(41.2	)		(22.2	)
Property, plant and equipment, net	$	136.8		$	120.2

5.    INVENTORIES

Inventories consist of the following (in millions):

	March 31, 2006			March 31, 2005
Raw materials, parts and supplies	$	31.7		$	28.3
Work in process		13.4			12.4
Finished goods		13.3			10.9
Allowance for shrink and obsolescence		(2.2	)		(2.4	)
Inventories, net	$	56.2		$	49.2

6.    FINANCIAL INSTRUMENTS

We utilize derivative instruments, specifically forward contracts and interest rate swap agreements, to manage our exposure to market risks such as foreign currency exchange and interest rate risks. We record derivative instruments as assets or liabilities on the consolidated balance sheet, measured at fair value.

As of March 31, 2006, we had various foreign currency forward and option contracts outstanding to purchase approximately $41.4 million net U.S. dollars by selling approximately a) EUR 25.2 million net, b) GBP 1.5 million and c) SKK 253.6 million with expiration dates ranging from April 5, 2006 through June 30, 2006. These contracts are arranged to manage the exposure to foreign currency risks related to certain intercompany receivable and payable balances and third-party receivables denominated in those currencies. Gains and losses on these contracts, as well as gains and losses on the items being hedged, are included as a component of other non-operating income and expense in our consolidated statements of operations. The Company does not utilize hedge accounting treatment for its forward contracts. The Company recorded a net loss of $0.1 million on the forward contracts for the fiscal year ended March 31, 2006, which includes a $0.1 million realized gain upon settlement of certain contracts.

We utilize interest rate swap agreements to mitigate our exposure to fluctuations in interest rates on variable-rate debt by converting variable-rate debt to fixed-rate debt. On December 9, 2005 and March 24, 2006 (the “trade dates”), the Company entered into interest rate swap agreements, each with a notional amount of $50.0 million, in which we receive or will receive periodic variable interest payments at the three-month LIBOR rate and make or will make periodic payments at a fixed rate of 4.927% and 5.121%, respectively. The first swap agreement was effective on January 20, 2006 and terminates on September 30, 2010, and the second swap agreement will be effective on August 22, 2006 and terminates on June 30, 2010. These interest rate swaps have

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

been designated as cash flow hedges, and changes in the Company’s cash flows attributable to the risk being hedged are expected to be completely offset by the hedging derivatives. To the extent the swaps provide an effective hedge, changes in the fair value of the interest rate swaps are reflected in other comprehensive income (loss), net of tax. Any ineffectiveness related to the interest rate swaps will be recorded through earnings. Other comprehensive income of $0.3 million, net of tax of $0.3 million, recorded for fiscal 2006 reflects the increase in fair value of the interest rate swaps at March 31, 2006 due to changes in interest rates since the trade dates.

7.    RESTRUCTURING COSTS

During the fiscal year ended March 31, 2006, the Company incurred restructuring costs of $7.2 million. In fiscal 2006, the Company announced two new restructuring initiatives to cease manufacturing of gas meters at its India joint venture in Pune, India and to exit select motorcycle product lines at its Rongtai joint venture in China. Non-cash restructuring costs of $0.6 million and $0.5 million were incurred for the India and Rongtai joint ventures, respectively, and related to the write-off of certain assets that were impaired as a result of the restructuring initiatives undertaken. The remaining $6.1 million of restructuring costs incurred for fiscal 2006 primarily related to the Company’s ongoing restructuring activities to rationalize its water meter product lines in Germany and the reorganization of executive management. These costs are attributable to the Company’s focus on improving returns in core businesses by consolidating excess manufacturing capacity, rationalizing certain product lines and streamlining of administrative overheads. Fiscal 2006 activities affected both direct and indirect personnel and resulted in a net headcount reduction of 115 employees, primarily in the Company’s Asian gas meter and German water meter production facilities.

For the fiscal year ended March 31, 2005, the Company incurred restructuring costs of $8.1 million primarily related to ongoing restructuring initiatives to rationalize its water and gas meter product lines in Europe, including the United Kingdom, and to align the South American structure with current market conditions. The $8.1 million consists of $7.7 million in severance and other related costs and $0.4 million primarily relating to legal and facility costs attributable to the relocation of certain facilities. Actions in Europe affected both direct and indirect personnel and resulted in a headcount reduction of 39 employees. The South American reorganization also affected both direct and indirect personnel, resulting in a headcount reduction of 31 employees.

For the combined fiscal year ended March 31, 2004, restructuring costs of $10.7 million were primarily the result of restructuring initiatives undertaken by the Predecessor to rationalize certain product lines in Europe, mainly in Germany, France and Belgium. These initiatives included the closure of the Predecessor piston meter manufacturing plant in Liege, Belgium, the downsizing of an administrative office in France and continued headcount reductions at its Ludwigshafen, Germany manufacturing facility as part of a larger restructuring effort implemented in preceding years to move labor-intensive processes to lower labor cost regions. In addition, a restructuring initiative was undertaken by the Predecessor to fully outsource production of gas regulators to a third party with respect to its North American operations. A total of 72 positions were eliminated as a result of the aforementioned restructuring initiatives. The $10.7 million in restructuring costs consists of $9.5 million in severance costs, $0.8 million in asset-write offs due to the Belgium plant closure and gas regulator outsourcing and $0.4 million of other costs relating to the relocation of fixed assets and reconfiguration of manufacturing facilities related to plant closures and manufacturing rationalization.

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Restructuring costs consist of the following (in millions):

							Predecessor (Note 1)
	Year Ended March 31, 2006		Year Ended March 31, 2005		Period from Inception (December 18, 2003) to March 31, 2004		Period from April 1, 2003 to December 17, 2003
Severance and other related costs:
Related to headcount reduction initiatives	$	6.0	$	7.5	$	1.1	$	3.1
Related to outsourcing		—		0.2		—		0.1
Related to plant closures and consolidation		0.1		—		—		5.2
		6.1		7.7		1.1		8.4
Asset impairments:
Related to outsourcing		—		—		—		0.4
Related to plant closures and consolidation		1.1		—		—		0.4
		1.1		—		—		0.8
Other		—		0.4		—		0.4
Restructuring and other similar costs charged to operations	$	7.2	$	8.1	$	1.1	$	9.6

The charge for restructuring costs comprised of the following (in millions):

							Predecessor (Note 1)
	Year Ended March 31, 2006		Year Ended March 31, 2005		Period from Inception (December 18, 2003) to March 31, 2004		Period from April 1, 2003 to December 17, 2003
Employee severance and exit costs accrued	$	4.7	$	6.5	$	1.1	$	8.2
Impairment of long-lived assets		1.1		—		—		0.8
Expensed as incurred		1.4		1.6		—		0.6
Total	$	7.2	$	8.1	$	1.1	$	9.6

Restructuring accruals are summarized as follows (in millions):

	Years Ended March 31,
	2006			2005
Balance at beginning of year	$	7.0		$	8.6
Cash payments		(5.6	)		(8.3	)
Accrue for new committed/announced programs		4.7			6.5
Effect of foreign currency translation		(0.4	)		0.2
Balance at end of year	$	5.7		$	7.0
Current portion	$	3.0		$	4.0
Non-current portion	$	2.7		$	3.0
Total	$	5.7		$	7.0

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Restructuring accruals are reflected within current liabilities and other long-term liabilities on the Company’s consolidated balance sheets. At March 31, 2006, the non-current portion includes $0.7 million of restricted cash, classified as other long-term assets, set aside during fiscal 2006 for the Company’s early retirement contracts for certain of its German employees. For further discussion of this early retirement program see “Recent Accounting Pronouncements” in Note 1.

8.    DEBT

On December 17, 2003, the Company entered into a bank term loan credit agreement (the “Credit Agreement”) with Credit Suisse (formerly known as Credit Suisse First Boston) under which the Company has outstanding term loans at March 31, 2006 of $206.2 million, comprised of $182.0 million of Term B-1 Loans and $24.2 million of Term B-2 Loans. On October 14, 2004, the Company entered into an amendment to the Credit Agreement to reduce the interest rates the Company is charged on borrowings under the term loan facility. Under the terms of the repricing amendment, the margin on rates linked to LIBOR was reduced to 2.5% from 3.0%, and the margin on rates linked to the Alternate Base Rate was reduced to 1.5% from 2.0%. On May 12, 2006, the Company entered into a second amendment to the Credit Agreement to further reduce the interest rates for the Company’s borrowings under the term loan facility. Pursuant to this amendment, the margin on rates linked to LIBOR decreased to 2.0% from 2.5%, and the margin on rates linked to the Alternate Base Rate decreased to 1.0% from 1.5%. The weighted average interest rate for these loans was approximately 7.4% at March 31, 2006. The term loans require quarterly payments of principal and interest, and the facility matures on December 17, 2010. The Credit Agreement, as amended, contains numerous terms, covenants, conditions and financial ratio requirements that impose substantial limitations on the Company. The Company was in compliance with all covenants at March 31, 2006. The Credit Agreement is guaranteed by the Company’s wholly-owned U.S. domestic subsidiaries and is secured by substantially all of their real and personal property. The Company is required under the Credit Agreement to make mandatory prepayments of its loan facilities, subject to certain exceptions, out of, among other things a) net cash proceeds received from the sales of certain assets; b) the issuance of indebtedness for money borrowed; and c) a percentage of the Company’s excess cash flow, as defined. The Company has a $70.0 million revolving credit facility in connection with the term loan facility with an interest rate of adjusted LIBOR plus 2.5%, or the Alternate Base Rate plus 1.5% (exclusive in each case of a 0.50% facility fee) at March 31, 2006. There was $5.1 million of the facility utilized in connection with outstanding letters of credit at March 31, 2006. Letter of credit fees are based on 2.625% of the outstanding letters of credit balance and amounted to $0.1 million in fiscal 2006. This facility expires on December 17, 2009.

At March 31, 2006, the Company’s subsidiary, Sensus Metering Systems Inc., had $275.0 million of 8.625% senior subordinated notes outstanding, which mature on December 15, 2013. Interest is payable semi-annually on June 15 and December 15. The Notes are unsecured obligations of Sensus Metering Systems Inc. and are guaranteed on a senior subordinated basis by the Company and, subject to certain limited exceptions, the Company’s U.S. subsidiaries. The remaining $0.4 million is related to a long-term loan from the Rongtai joint venture partner.

The following represents the scheduled maturities of long-term debt for the years ended March 31 (in millions):

2007	$	0.6
2008		2.5
2009		2.1
2010		51.5
2011		149.9
Thereafter		275.0
Total long-term debt	$	481.6

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition, the Company assumed $4.0 million in short-term debt, resulting from the Rongtai acquisition, which is renewable annually at an interest rate of 5.58%.

9.    WARRANTY OBLIGATIONS

Product warranty reserves are established in the same period that revenue from the sale of the related products is recognized. The amounts of those reserves are based on established terms and the Company’s estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Warranty reserves are reflected within accruals and other current liabilities and other long-term liabilities in the accompanying consolidated balance sheets.

The following represents a reconciliation of the changes in product warranty reserves for the periods presented (in millions):

	March 31,
	2006			2005
Balance at beginning of year	$	7.8		$	8.6
Warranties issued		4.2			3.2
Settlements made		(4.1	)		(4.1	)
Effect of foreign currency translation		(0.1	)		0.1
Balance at end of year	$	7.8		$	7.8
Current portion		4.4			4.2
Non-current portion		3.4			3.6
Total	$	7.8		$	7.8

10.    ACCRUALS AND OTHER CURRENT LIABILITIES

Accruals and other current liabilities are summarized as follows (in millions):

	March 31,
	2006		2005
Accrued employee related and payroll costs	$	25.4	$	26.7
Interest payable		9.3		9.2
Customer support accruals		7.2		7.0
Accrued other taxes payable		4.3		4.5
Other		11.4		7.2
Accruals and other current liabilities	$	57.6	$	54.6

11.    RETIREMENT BENEFITS

The Company has defined benefit plans, principally in Germany and the United States. The U.S. defined benefit plan consists of only unionized hourly employees. The Company has established defined benefit plans for its unionized hourly employees in the United States identical to the Predecessor’s pension plans. Pension benefits in Germany for salaried employees generally are based on years of credited service and average earnings. Pension benefits for hourly employees generally are based on specified benefit amounts and years of service. The Company’s policy is to fund its pension obligations in conformity with the funding requirements of laws and governmental regulations applicable in the respective country.

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The Company also has defined contribution plans and arrangements with its salaried and non-union hourly employees in the United States and the United Kingdom, replacing defined benefit plans of the Predecessor. Arrangements in the United States for its salaried and non-union hourly employees were established in conjunction with the acquisition of the Company effective January 1, 2004.

Predecessor

Invensys sponsored defined benefit plans that covered most of the Predecessor’s employees in the United States, Germany, the United Kingdom and France and provided for monthly pension payments to eligible employees upon retirement. The Predecessor’s eligible employees were covered by Invensys’ various pension plans, which were different for the United States, German, French and British employees. Pension benefits for salaried employees generally are based on years of credited service and average earnings. Pension benefits for hourly employees generally are based on specified benefit amounts and years of service. The Predecessor’s policy was to fund its pension obligations in conformity with the funding requirements of laws and governmental regulations applicable in the respective country.

As part of the Acquisition, Invensys retained all liabilities in respect of benefits earned by eligible employees in the United States and the United Kingdom up to the date of sale of the Company, as well as all of the related assets. Accordingly, no pension assets or liabilities have been reflected in the balance sheet of the Predecessor in respect of the defined benefit plans in the United States and the United Kingdom. Pension costs of $2.3 million for the period from April 1, 2003 to December 17, 2003 with regard to eligible employees in the United States and the United Kingdom have been reflected in the consolidated statement of operations of the Company. As these amounts were allocated based on service cost, they are not necessarily representative of ongoing costs.

The Predecessor also had defined benefit plans, principally in Germany, where such plans are typically unfunded and provide for monthly pension payments to eligible employees upon retirement. Pension benefits for salaried employees generally were based on years of credited service and average earnings. Pension benefits for hourly employees generally were based on specified benefit amounts and years of service. The Predecessor’s policy was to fund its pension obligations in conformity with the funding requirements of laws and governmental regulations applicable in the respective country.

The Predecessor used an actuarial measurement date of December 31 to measure its benefit obligations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following information reflects the benefit obligation and net liability information for participants in the Company’s German retirement benefit plan. That information is summarized as follows (in millions):

										Predecessor (Note 1)
	Year Ended March 31, 2006			Year Ended March 31, 2005			Period from Inception (December 18, 2003) to March 31, 2004			Period from April 1, 2003 to December 17, 2003
Benefit obligation at beginning of period	$	39.9		$	36.9		$	36.7		$	31.3
Service cost		0.7			0.9			0.2			0.5
Interest cost		1.9			2.0			0.4			1.4
Amendments		0.9			—			—			—
Actuarial loss (gain)		7.0			(0.8	)		0.7			0.1
Benefits paid		(1.8	)		(1.9	)		(0.1	)		(1.2	)
Currency translation		(2.8	)		2.8			(1.0	)		4.6
Benefit obligation at end of period		45.8			39.9			36.9			36.7
Funded status		45.8			39.9			36.9			36.7
Unrecognized prior service cost		(1.0	)		—			—			—
Unrecognized net actuarial loss		(6.8	)		—			(0.7	)		(0.6	)
Additional minimum pension liability adjustment		7.4			—			—			—
Accrued benefit cost at end of period		45.4			39.9			36.2			36.1
Net liability on balance sheet consists of:
Current pension liability		1.8			2.0			—			—
Long-term pension liability		43.6			37.9			36.2			36.1
Net liability on balance sheet	$	45.4		$	39.9		$	36.2		$	36.1

At March 31, 2006, the Company recognized an additional minimum pension liability of $7.4 million for the additional pension liability in excess of the accumulated benefit obligation relating to its German pension plan. The offsets to the additional minimum liability are an intangible asset of $0.9 million, representing the amount of unrecognized prior service cost, and a charge to other comprehensive loss of $6.5 million, reflecting the excess of additional pension liability over unrecognized prior service cost. A deferred tax asset of $2.3 million relating to the charge to other comprehensive loss was recorded at March 31, 2006, for which a valuation allowance was fully provided since it is more likely than not that all of the deferred tax asset will not be realized.

For the years ended March 31, 2006 and 2005 and the combined fiscal year ended March 31, 2004, net periodic benefit cost, which includes service cost and interest cost, for participants in the Company’s German retirement benefit plan was $2.6 million, $2.9 million and $2.5 million, respectively.

The Company expects to pay benefits under its German retirement benefit plans of $2.0 million in fiscal 2007 and fiscal 2008, $2.1 million in fiscal 2009, $2.2 million in fiscal 2010 and fiscal 2011 and $11.9 million for the five years thereafter.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company uses an actuarial measurement date of March 31 to measure benefit obligations under its German retirement benefit plan. Significant assumptions used in determining these benefit obligations and net periodic benefit cost for participants are summarized as follows (in weighted averages):

							Predecessor (Note 1)
	Year Ended March 31, 2006		Year Ended March 31, 2005		Period from Inception (December 18, 2003) to March 31, 2004		Period from April 1, 2003 to December 17, 2003
Discount rate	4.25	%	5.25	%	5.25	%	5.75	%
Compensation increase rate	1.50	%	1.50	%	1.50	%	3.00	%

The following table provides a reconciliation of projected benefit obligation, plan assets and funded status for the Company’s U.S. pension plan, using a measurement date of January 1 (in millions):

	Year Ended March 31, 2006			Year Ended March 31, 2005
Change in projected benefit obligation
Benefit obligation at beginning of year	$	0.9		$	0.2
Service cost		0.8			0.7
Interest cost		—			—
Actuarial loss		0.5			—
Benefits paid		(0.1	)		—
Projected benefit obligation at end of year		2.1			0.9
Change in plan assets and funded status
Fair value of plan assets at beginning of year		—			—
Actual return on plan assets		0.1			—
Employer contributions		0.9			—
Benefits paid		(0.1	)		—
Fair value of plan assets at end of year		0.9			—
Benefit obligation at end of year		2.1			0.9
Benefit obligation in excess of fair value of plan assets		1.2			0.9
Unrecognized net actuarial loss		(0.5	)		—
Additional minimum pension liability adjustment		0.5			—
Accrued benefit cost at end of year	$	1.2		$	0.9

The accumulated benefit obligation for the U.S. retirement benefit plan was $2.1 million and $0.9 million at March 31, 2006 and 2005, respectively. The Company utilized discount rates of 5.75% and 6.50% at March 31, 2006 and 2005, respectively, in determining its benefit obligation.

For the years ended March 31, 2006 and 2005, net periodic benefit cost was $0.8 million and $0.7 million, respectively, and consisted primarily of service cost.

At March 31, 2006, the Company recognized an additional minimum pension liability of $0.5 million for the additional pension liability in excess of the accumulated benefit obligation relating to its U.S. pension plan. The

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

offset to the additional minimum liability was a charge to other comprehensive loss of $0.3 million, net of tax of $0.2 million, reflecting the excess of additional pension liability over unrecognized prior service cost.

The Company’s primary investment objective is to maximize the growth of the pension plan assets to meet its projected obligation to the beneficiaries over a long period of time, and to do so in a manner that is consistent with the Company’s earnings strength and risk tolerance. The Company’s U.S. pension plan assets by category at March 31 are as follows:

	Year Ended March 31, 2006		Year Ended March 31, 2005
Equity securities	49	%	—	%
Debt securities	44	%	100	%
Real estate	7	%	—	%
Total	100	%	100	%

The assumed rate of return on plan assets represents an estimate of long-term returns on an investment portfolio consisting of a mixture of equities, fixed income and alternative investments. In determining the expected return on plan assets, the Company considers long-term rates of return on the asset classes (historically and forecasted) in which the Company expects the pension funds to be invested. The Company’s expected long-term rate of return on plan assets was 8.5% for the fiscal years ended March 31, 2006 and 2005.

The Company expects to continue to make contributions sufficient to fund benefits paid under its U.S. retirement benefit plan of $0.1 million in fiscal 2007, fiscal 2008, fiscal 2009 and fiscal 2010, $0.2 million in fiscal 2011 and $1.6 million for the five years thereafter.

Defined-Contribution Savings Plans

The Company sponsors certain defined-contribution savings plans for eligible employees. Expense related to these plans was $2.9 million for the years ended March 31, 2006 and 2005 and $0.9 million and $0.3 million for the periods from December 18, 2003 to March 31, 2004 and April 1, 2003 to December 17, 2003, respectively.

12.    OPERATING LEASES

The Company leases certain offices, warehouses, manufacturing facilities, automobiles, and equipment. Generally, these leases carry renewal provisions. Rent expense for operating leases was $2.6 million, $2.1 million, $0.5 million and $1.8 million for the years ended March 31, 2006 and 2005 and the periods from December 18, 2003 to March 31, 2004 and April 1, 2003 to December 17, 2003, respectively. Future minimum lease payments, by year and in the aggregate, under operating leases consisted of the following at March 31, 2006 (in millions):

	Year Ending March 31,
2007	$	2.8
2008		2.4
2009		1.9
2010		1.5
2011		1.4
Thereafter		1.5
Total	$	11.5

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13.    STOCKHOLDER’S EQUITY

As of March 31, 2006, the Company’s total stockholder’s equity was $186.4 million, and the Company had 12,000 authorized, issued and outstanding shares of common shares, $1.00 par value per share, all of which were owned by the Company’s parent, Sensus Metering Systems (Bermuda 1) Ltd.

14.    STOCK COMPENSATION

The Company’s parent, Sensus Metering Systems (Bermuda 1) Ltd., maintains a Restricted Share Plan that provides for the award of restricted common shares to officers, directors and consultants of the Company. As of March 31, 2006, there were 2,000,000 restricted shares of Sensus Metering Systems (Bermuda 1) Ltd. authorized and 1,037,000 shares issued and outstanding. Cash received from participants for shares issued during the year were exchanged for $0.01 par value restricted common stock. The Company granted 40,000 restricted shares to certain officers and directors of the Company in fiscal 2006. Compensation expense was not recognized in the Company’s results of operations because the fair value of the stock was determined to be $0.01 per share.

Predecessor

Invensys operated two stock option plans in which certain of the Company’s senior management participated, neither of which was adopted by the Company.

Executive Stock Option Scheme (“the 1998 Scheme”)

Invensys maintained a discretionary stock option scheme under which options to purchase the Invensys stock may be granted each year to senior management at multiples of salary, which reflect the prevailing market practice in the relevant country. When options were granted during 2003 and 2002, Invensys concluded that the salary multiple, which was appropriate for the Predecessor’s senior management, was between 0.5 and 2.1 times annual salary. The options granted under the 1998 Scheme were granted at a price equal to the market price of Invensys’ shares immediately preceding the date of grant.

For the year under review, no option could be exercised unless a performance condition based on Total Shareholder Return (“TSR”) was met. TSR was calculated as the percentage variance in the price of shares and the value of re-invested net dividend payments over the performance period compared to that of a group of comparator companies (“Peer Group”) selected at discretion of the Remuneration Committee. The performance period was the period of three, four or five years commencing on the date of the grant of the option. On the third anniversary of the date of the grant, each constituent of the Peer Group was ranked in descending order of TSR. The TSR ranking of Invensys against the TSR of the Peer Group determined the number of shares vested. Invensys must rank at the median position for 40% of the shares under option to become exercisable, rising to all the shares if the upper quartile position was achieved. Between these positions, the shares under option vested on a straight-line basis. If the Invensys shares did not meet the performance condition in full at the first measurement, then it was re-tested, from a fixed base, in years four and five. If the median position had not been achieved by the end of the fifth year, the option lapsed. The Peer Groups for the grants made on or after June 17, 2002 were the companies that comprise the FTSE 100 Index on the dealing day preceding the date of the grant. The Remuneration Committee set appropriate and stretching performance targets depending on the specific demands of the business and the operating environment. It was the Invensys Parent’s policy to extend participation in the 1998 Scheme to overseas executives on terms as close as practicable to those applicable in the United Kingdom.

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Savings Related Stock Option Scheme (“SRSOS”)

Invensys established an SRSOS that operates in the United Kingdom together with a related international SRSOS that operates in over 20 overseas countries. It was based on a three, five or seven year savings plan and offered to eligible full- and part-time employees. Options may be granted at a 20% discount to the market price of Invensys’ shares immediately preceding the date of grant. Historically, all options granted under the SRSOS were granted at a 20% discount to the market price of Invensys’ shares.

The Predecessor accounted for stock-based compensation in accordance with APB 25. Stock compensation expense recognized in the period from April 1, 2003 though December 17, 2003 was not significant. Information relative to stock options granted to the Company’s senior management pursuant to the aforementioned plans for the period ended December 17, 2003 was as follows (weighted average exercise prices are in pounds sterling since all stock options are issued and exercisable in that currency):

	Period from April 1, 2003 to December 17, 2003
	Options		Weighted- Average Exercise Price in £ (1)
Number of shares under option:
Outstanding at beginning of period:	6,171,495		£	1.71
Granted	—			—
Exercised	—			—
Adjustments:
Canceled or expired	(691,175	)		1.31
Outstanding at end of period	5,480,320		£	1.76
Exercisable at end of period	2,012,031		£	2.76
Granted at market price	1,989,125		£	2.77
Granted below market price	22,906		£	2.61

(1) Average exchange rates for the conversion of amounts denominated in pounds sterling to U.S. dollars were approximately £1.00/ $1.65.

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding at December 17, 2003	Weighted Average Remaining Contractual Years	Weighted Average Exercise Price		Number Outstanding at December 17, 2003	Weighted Average Exercise Price
£0.43-1.28	1,890,489	5.55	£	0.94	—		—
£1.45-2.71	2,876,506	4.16	£	1.98	1,298,706	£	2.62
£2.89-5.97	713,325	2.05	£	3.02	713,325	£	3.02

The Predecessor’s net income would not have been significantly different had the Predecessor accounted for stock-based compensation using the fair value method provided by FAS No. 123, Accounting for Stock-Based Compensation.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

15.    INCOME TAXES

The components of the income tax provision (benefit) are as follows (in millions):

										Predecessor (Note 1)
	Year Ended March 31, 2006			Year Ended March 31, 2005			Period from Inception (December 18, 2003) to March 31, 2004			Period from April 1, 2003 to December 17, 2003
Current:
United States	$	1.3		$	1.3		$	0.1		$	19.3
Non-United States		2.1			2.3			0.8			1.7
State and local		2.6			3.6			1.2			3.6
Total current		6.0			7.2			2.1			24.6
Deferred:
United States		3.3			2.8			(1.0	)		(0.9	)
Non-United States		(1.6	)		(1.0	)		(0.6	)		(0.9	)
State and local		0.5			(0.7	)		(1.0	)		(0.2	)
Total deferred		2.2			1.1			(2.6	)		(2.0	)
Income tax provision (benefit)	$	8.2		$	8.3		$	(0.5	)	$	22.6

The provision (benefit) for income taxes was calculated based upon the following components of income (loss) before income taxes (in millions):

										Predecessor (Note 1)
	Year Ended March 31, 2006			Year Ended March 31, 2005			Period from Inception (December 18, 2003) to March 31, 2004			Period from April 1, 2003 to December 17, 2003
United States	$	14.7		$	13.2		$	(2.2	)	$	52.8
Non-United States		(9.7	)		(9.0	)		0.1			(19.8	)
Income (loss) before income taxes	$	5.0		$	4.2		$	(2.1	)	$	33.0

The relationship of non-United States income tax expense to non-United States income before income taxes is attributable to operating losses being incurred on which income tax carryforward benefits have been fully reserved as of March 31, 2006 and March 31, 2005. The losses in these taxing jurisdictions exceeded income in other non-United States jurisdictions in the years ended March 31, 2006 and 2005 and the period from April 1, 2003 to December 17, 2003.

59

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Deferred income taxes consist of the tax effects of the following temporary differences (in millions):

	March 31, 2006			March 31, 2005
Deferred tax assets:
Net operating loss carryforwards:
Non-United States	$	67.1		$	60.2
Federal and state		9.9			16.1
Warranty reserves		2.4			2.1
Other reserves		1.4			1.1
Tax credits		0.2			1.6
Other		2.1			2.3
Subtotal		83.1			83.4
Valuation allowance		(65.4	)		(59.9	)
Total deferred tax assets	$	17.7		$	23.5
Deferred tax liabilities:
Intangible assets	$	64.0		$	68.5
Property, plant and equipment		13.3			13.7
Total deferred tax liabilities		77.3			82.2
Net deferred tax liabilities	$	59.6		$	58.7

These deferred tax assets and liabilities are classified in the consolidated balance sheet based on the balance sheet classification of the related assets and liabilities.

A valuation allowance is established for any portion of a deferred tax asset that management believes may not be realized. A valuation allowance was established at March 31, 2006 and March 31, 2005 for deferred tax assets related to foreign and state net operating loss carryforwards for which utilization is uncertain. Valuation allowances related to purchase accounting adjustments, which offset goodwill, totaled $53.3 million at March 31, 2006, and any changes to such valuation allowances will be recorded as an adjustment to goodwill.

At March 31, 2006, the Company had federal tax loss carryovers of $21.5 million, which will begin to expire after the year ending March 31, 2020. At March 31, 2006, the Company had non-United States tax loss carryovers of $186.0 million, which will begin expiring after March 31, 2010.

The Predecessor financial statements have been prepared on the basis that the Company files a consolidated United States federal income tax return composed of its United States domiciled affiliates.

							Predecessor (Note 1)
	Year Ended March 31, 2006		Year Ended March 31, 2005		Period from Inception (December 18, 2003) to March 31, 2004		Period from April 1, 2003 to December 17, 2003
U.S. federal statutory tax rate	35.0	%	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal benefit	45.9	%	45.9	%	13.1	%	6.4	%
Statutory tax rate difference between the U.S. and foreign locations	(31.9	)%	(8.0	)%	8.9	%	0.6	%
Foreign net operating losses for which the benefit was not provided	110.6	%	113.0	%	(2.1	)%	23.2	%
Foreign dividend, and withholding	—		—		(29.5	)%	—
Other	4.4	%	11.7	%	(1.6	)%	3.3	%
Effective income tax rate	164.0	%	197.6	%	23.8	%	68.5	%

60

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16.    DISCONTINUED OPERATIONS

On September 10, 2004, the Company sold the assets of its utility billing software company, IMSofTech, Inc. (“IMSofTech”) for $1.1 million. IMSofTech was not considered by the Company to be a core component of its metering systems business strategy of providing intelligent metering systems-based solutions to the global utility markets. The sales price included (1) an initial cash payment of $850,000 received in September 2004, and (2) a subsequent cash payment of $225,000 received in March 2005.

On September 30, 2004, the Company sold its 51% interest in Measurement Solutions International LLC (“MSI”), a full service meter asset management organization based in Paulsboro, New Jersey, for $0.6 million. The sale was also effected as part of the Company’s strategy to focus on its core business within the metering systems segment. The sales price consisted of (1) $300,000 cash received in September 2004, (2) $30,000 cash received in December 2004, (3) $225,000 cash, receivable upon renewal of specific service contracts, and (4) an amount in cash equal to 2% of revenue earned by MSI on new service contracts generated by the Company through August 31, 2006. The contingent portion of the purchase consideration will be recognized once collectibility is assured.

These dispositions were accounted for as discontinued operations in accordance with Statement of Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and accordingly, amounts in the consolidated statements of operations for all periods presented were reclassified to reflect the dispositions as discontinued operations. Neither operation had activity or results of operations in the year ended March 31, 2006. The results of operations for the discontinued businesses are as follows (in millions):

							Predecessor (Note 1)
	Year Ended March 31, 2005			Period from Inception (December 18, 2003) to March 31, 2004			Period from April 1, 2003 to December 17, 2003
Net sales	$	2.2		$	1.1		$	3.2
Cost of sales		1.7			0.8			2.0
Gross profit		0.5			0.3			1.2
Operating expenses:
Selling, general and administrative expenses		0.8			0.5			1.4
Other operating expense, net		—			0.1			—
Operating loss from discontinued operations		(0.3	)		(0.3	)		(0.2	)
Non-operating income (expense)		—			0.2			(0.4	)
Loss from discontinued operations before income taxes and minority interest		(0.3	)		(0.1	)		(0.6	)
Provision (benefit) for income taxes		0.1			—			(0.5	)
Loss from discontinued operations before minority interest		(0.4	)		(0.1	)		(0.1	)
Minority interest		(0.1	)		(0.2	)		(0.1	)
Loss from discontinued operations	$	(0.5	)	$	(0.3	)	$	(0.2	)
Loss on disposition of discontinued operations, net of tax of $0.3 million	$	(0.3	)	$	—		$	—
Loss from discontinued operations	$	(0.8	)	$	(0.3	)	$	(0.2	)

61

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

17.    GUARANTOR SUBSIDIARIES

The following tables present the condensed consolidating audited financial information of the Company for the fiscal years ended March 31, 2006 and 2005 and for the period from Inception (December 18, 2003) to March 31, 2004, and the condensed combining audited financial information of the Predecessor for the period from April 1, 2003 to December 17, 2003, as applicable, for: (a) Sensus Metering Systems (Bermuda 2) Ltd. (referred to as Parent), (b) Sensus Metering Systems Inc., the issuer of the Notes (referred to as Issuer), (c) on a combined basis, the subsidiaries of Sensus Metering Systems (Bermuda 2) Ltd. that are guaranteeing the Notes, which include all of the wholly-owned U.S. domestic subsidiaries of Sensus Metering Systems (Bermuda 2) Ltd. (“Guarantor Subsidiaries”), and (d) on a combined basis, the subsidiaries of Sensus Metering Systems (Bermuda 2) Ltd. that are not guaranteeing the Notes (“Non-Guarantor Subsidiaries”). Separate financial statements for the Issuer and the Guarantor Subsidiaries are not presented because their guarantees are full and unconditional and joint and several, and the Company believes separate financial statements and other disclosures are not material to investors.

62

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Balance Sheets

March 31, 2006

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Assets
Current assets:
Cash and cash equivalents	$	—		$	—		$	27.4		$	25.2		$	—		$	52.6
Accounts receivable:
Trade, net of allowance for doubtful accounts		—			—			49.1			39.4			—			88.5
From affiliates		(2.0	)		62.0			(30.8	)		(29.2	)		—			—
Other		—			—			1.5			0.3			—			1.8
Inventories, net		—			—			31.3			24.9			—			56.2
Prepayments and other current assets		—			0.2			4.8			4.9			—			9.9
Deferred income taxes		—			—			4.6			0.6			—			5.2
Total current assets		(2.0	)		62.2			87.9			66.1			—			214.2
Notes receivable from affiliates		—			433.2			—			29.1			(462.3	)		—
Property, plant and equipment, net		—			—			73.7			63.1			—			136.8
Intangible assets, net		—			12.8			163.4			39.7			—			215.9
Goodwill		—			—			299.6			30.9			—			330.5
Investment in subsidiaries		650.5			502.5			8.5			—			(1,161.5	)		—
Deferred income taxes		—			—			10.9			1.6			—			12.5
Other long-term assets		0.2			19.6			3.0			2.4			—			25.2
Total assets	$	648.7		$	1,030.3		$	647.0		$	232.9		$	(1,623.8	)	$	935.1
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	—		$	—		$	38.9		$	21.6		$	—		$	60.5
Current portion of long-term debt		—			0.5			—			0.1			—			0.6
Short-term borrowings		—			—			—			4.0			—			4.0
Income taxes payable		—			(19.3	)		20.8			1.2			—			2.7
Restructuring accruals		—			—			0.1			2.9			—			3.0
Accruals and other current liabilities		—			9.1			22.9			25.6			—			57.6
Total current liabilities		—			(9.7	)		82.7			55.4			—			128.4
Notes payable to affiliates		462.3			(2.4	)		—			2.4			(462.3	)		—
Long-term debt, less current portion		—			456.5			—			24.5			—			481.0
Pensions		—			—			1.2			43.6			—			44.8
Deferred income taxes		—			0.2			55.2			21.9			—			77.3
Other long-term liabilities		—			—			5.4			4.4			—			9.8
Minority interest		—			—			—			7.4			—			7.4
Total liabilities		462.3			444.6			144.4			159.6			(462.3	)		748.7
Stockholders’ equity		186.4			585.7			502.5			73.3			(1,161.5	)		186.4
Total liabilities and stockholders’ equity	$	648.7		$	1,030.3		$	647.0		$	232.9		$	(1,623.8	)	$	935.1

63

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Balance Sheets

March 31, 2005

	Parent		Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Assets
Current assets:
Cash and cash equivalents	$	—	$	—		$	39.1		$	15.8		$	—		$	54.9
Accounts receivable:
Trade, net of allowance for doubtful accounts		—		—			50.7			39.7			—			90.4
From affiliates		—		(38.4	)		44.5			(6.1	)		—			—
Other		—		—			1.3			1.3			—			2.6
Inventories, net		—		—			27.1			22.1			—			49.2
Prepayments and other current assets		—		0.4			4.9			2.9			—			8.2
Deferred income taxes		—		—			4.9			0.6			—			5.5
Total current assets		—		(38.0	)		172.5			76.3			—			210.8
Notes receivable from affiliates		—		433.2			—			29.1			(462.3	)		—
Property, plant and equipment, net		—		—			66.9			53.3			—			120.2
Intangible assets, net		—		20.4			173.6			41.9			—			235.9
Goodwill		—		—			300.7			30.9			—			331.6
Investment in subsidiaries		656.3		596.4			6.5			—			(1,259.2	)		—
Deferred income taxes		—		—			16.8			1.2			—			18.0
Other long-term assets		—		21.0			1.0			1.7			—			23.7
Total assets	$	656.3	$	1,033.0		$	738.0		$	234.4		$	(1,721.5	)	$	940.2
Liabilities and stockholder’s equity
Current liabilities:
Accounts payable	$	—	$	—		$	32.2		$	20.4		$	—		$	52.6
Current portion of long-term debt		—		0.5			—			0.1			—			0.6
Income taxes payable		—		(21.5	)		22.6			0.1			—			1.2
Restructuring accruals		—		—			0.5			3.5			—			4.0
Accruals and other current liabilities		—		8.9			19.2			26.5			—			54.6
Total current liabilities		—		(12.1	)		74.5			50.6			—			113.0
Notes payable to affiliates		462.3		(0.8	)		(0.5	)		1.3			(462.3	)		—
Long-term debt, less current portion		—		470.5			—			29.3			—			499.8
Pensions		—		—			0.8			38.0			—			38.8
Deferred income taxes		—		—			60.0			22.2			—			82.2
Other long-term liabilities		—		—			6.8			4.3			—			11.1
Minority interest		—		—			—			1.3			—			1.3
Total liabilities		462.3		457.6			141.6			147.0			(462.3	)		746.2
Stockholder’s equity		194.0		575.4			596.4			87.4			(1,259.2	)		194.0
Total liabilities and stockholder’s equity	$	656.3	$	1,033.0		$	738.0		$	234.4		$	(1,721.5	)	$	940.2

64

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statements of Operations

Year Ended March 31, 2006

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Net sales	$	—		$	—		$	424.1		$	198.9		$	(9.1	)	$	613.9
Cost of sales		—			—			292.2			144.4			(9.1	)		427.5
Gross profit		—			—			131.9			54.5			—			186.4
Selling, general and administrative expenses		—			0.2			57.8			49.9			—			107.9
Restructuring costs		—			—			0.3			6.9			—			7.2
Amortization of intangible assets		—			7.5			11.9			3.1			—			22.5
Other operating expense, net		—			0.1			3.1			0.2			—			3.4
Operating (loss) income		—			(7.8	)		58.8			(5.6	)		—			45.4
Non-operating (expense) income:
Interest (expense) income, net:
From/to third parties		—			(37.3	)		1.5			(3.5	)		—			(39.3	)
Equity in (loss) earnings of subsidiaries		(3.2	)		55.3			1.3			—			(53.4	)		—
Other expense, net		—			—			(0.3	)		(0.8	)		—			(1.1	)
(Loss) income before income taxes		(3.2	)		10.2			61.3			(9.9	)		(53.4	)		5.0
Provision for income taxes		—			1.0			6.0			1.2			—			8.2
Net (loss) income	$	(3.2	)	$	9.2		$	55.3		$	(11.1	)	$	(53.4	)	$	(3.2	)

65

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statements of Operations

Year Ended March 31, 2005

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Net sales	$	—		$	—		$	391.5		$	182.9		$	(4.6	)	$	569.8
Cost of sales		—			—			270.4			133.2			(4.6	)		399.0
Gross profit		—			—			121.1			49.7			—			170.8
Selling, general and administrative expenses		—			0.6			51.6			47.3			—			99.5
Restructuring costs		—			0.3			—			7.8			—			8.1
Amortization of intangible assets		—			7.5			11.0			2.8			—			21.3
Other operating expense, net		—			0.4			2.1			0.5			—			3.0
Operating (loss) income from continuing operations		—			(8.8	)		56.4			(8.7	)		—			38.9
Non-operating (expense) income:
Interest (expense) income, net:
From/to third parties		—			(35.4	)		0.9			(2.2	)		—			(36.7	)
Equity in (loss) earnings of subsidiaries		(4.2	)		27.4			(4.3	)		—			(18.9	)		—
Other income, net		—			—			0.2			1.8			—			2.0
(Loss) income from continuing operations before income taxes and minority interest		(4.2	)		(16.8	)		53.2			(9.1	)		(18.9	)		4.2
(Benefit) provision for income taxes		—			(18.3	)		25.8			0.8			—			8.3
(Loss) income from continuing operations before minority interest		(4.2	)		1.5			27.4			(9.9	)		(18.9	)		(4.1	)
Minority interest		—			—			—			(0.1	)		—			(0.1	)
(Loss) income from continuing operations		(4.2	)		1.5			27.4			(10.0	)		(18.9	)		(4.2	)
(Loss) income from discontinued operations, net of tax		(0.8	)		(0.1	)		(0.1	)		(0.7	)		0.9			(0.8	)
Net (loss) income	$	(5.0	)	$	1.4		$	27.3		$	(10.7	)	$	(18.0	)	$	(5.0	)

66

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Combining Statements of Operations

Period from Inception (December 18, 2003) to March 31, 2004

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Net sales	$	—		$	—		$	103.8		$	61.7		$	(1.1	)	$	164.4
Cost of sales		—			—			73.7			46.2			(1.1	)		118.8
Gross profit		—			—			30.1			15.5			—			45.6
Selling, general and administrative expenses		—			1.9			13.2			13.0			—			28.1
Restructuring costs		—			—			(0.1	)		1.2			—			1.1
Amortization of intangible assets		—			2.1			3.1			0.5			—			5.7
Other operating income, net		—			—			—			(0.1	)		—			(0.1	)
Operating (loss) income from continuing operations		—			(4.0	)		13.9			0.9			—			10.8
Non-operating (expense) income:
Interest (expense) income, net:
From/to third parties		—			(12.3	)		0.1			(0.5	)		—			(12.7	)
Equity in (loss) earnings of subsidiaries		(1.8	)		15.4			(0.1	)		—			(13.5	)		—
Other expense, net		—			—			(0.1	)		(0.1	)		—			(0.2	)
(Loss) income from continuing operations before income taxes and minority interest		(1.8	)		(0.9	)		13.8			0.3			(13.5	)		(2.1	)
Provision (benefit) for income taxes		—			0.9			(1.6	)		0.2			—			(0.5	)
(Loss) income from continuing operations before minority interest		(1.8	)		(1.8	)		15.4			0.1			(13.5	)		(1.6	)
Minority interest		—			—			—			0.1			—			0.1
(Loss) income from continuing operations		(1.8	)		(1.8	)		15.4			0.2			(13.5	)		(1.5	)
Loss from discontinued operations, net of tax		—			—			—			(0.3	)		—			(0.3	)
Net (loss) income	$	(1.8	)	$	(1.8	)	$	15.4		$	(0.1	)	$	(13.5	)	$	(1.8	)

67

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Combining Statements of Operations—Predecessor

Period from April 1, 2003 to December 17, 2003

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Combined
	(in millions)
Net sales	$	247.1		$	120.8		$	(3.3	)	$	364.6
Cost of sales		168.0			90.2			(3.3	)		254.9
Gross profit		79.1			30.6			—			109.7
Selling, general and administrative expenses		36.1			33.6			—			69.7
Restructuring and other similar costs		0.4			9.2			—			9.6
Amortization of intangible assets		0.3			—			—			0.3
Other operating income, net		—			(0.9	)		—			(0.9	)
Operating income (loss) from continuing operations		42.3			(11.3	)		—			31.0
Non-operating income (expense):
Interest (expense) income, net:
From/to third parties		(0.1	)		0.1			—			—
From/to affiliates		13.6			(11.7	)		—			1.9
Equity in earnings (loss) of subsidiaries		0.4			—			(0.4	)		—
Other income, net		—			0.1			—			0.1
Income (loss) from continuing operations before income taxes and minority interest		56.2			(22.8	)		(0.4	)		33.0
Provision for income taxes		21.3			1.3			—			22.6
Income (loss) from continuing operations before minority interest		34.9			(24.1	)		(0.4	)		10.4
Minority interest		—			(0.4	)		—			(0.4	)
Income (loss) from continuing operations		34.9			(24.5	)		(0.4	)		10.0
Loss from discontinued operations, net of tax		—			(0.2	)		—			(0.2	)
Net income (loss)	$	34.9		$	(24.7	)	$	(0.4	)	$	9.8

68

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statements of Cash Flows

Year Ended March 31, 2006

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Operating activities
Net (loss) income	$	(3.2	)	$	9.2		$	54.3		$	(11.1	)	$	(53.4	)	$	(3.2	)
Non-cash adjustments		—			9.6			25.9			14.1			—			49.6
Undistributed equity in loss (earnings) of subsidiaries		3.2			(55.3	)		(1.3	)		—			53.4			—
Changes in operating assets and liabilities		—			51.3			11.4			21.3			(83.3	)		0.7
Net cash provided by (used in) operating activities		—			14.8			91.3			24.3			(83.3	)		47.1
Investing activities
Expenditures for property, plant and equipment and intangibles		—			—			(17.6	)		(7.2	)		—			(24.8	)
Acquisitions, net		—			—			(2.4	)		(11.0	)		—			(13.4	)
Proceeds from sale of investments		—			—			—			0.4			—			0.4
Proceeds from sale of assets		—			—			0.4			0.7			—			1.1
Net cash used in investing activities		—			—			(19.6	)		(17.1	)		—			(36.7	)
Financing activities
Activity with affiliates		—			(0.8	)		(83.4	)		0.9			83.3			—
Increase in borrowings		—			—			—			0.4			—			0.4
Principal payments on debt		—			(14.0	)		—			(5.2	)		—			(19.2	)
Proceeds from joint venture partner		—			—			—			6.0			—			6.0
Net cash (used in) provided by financing activities		—			(14.8	)		(83.4	)		2.1			83.3			(12.8	)
Effect of exchange rate changes on cash		—			—			—			0.1			—			0.1
(Decrease) increase in cash and cash equivalents	$	—		$	—		$	(11.7	)	$	9.4		$	—		$	(2.3	)
Cash and cash equivalents at beginning of year	$	—		$	—		$	39.1		$	15.8		$	—		$	54.9
Cash and cash equivalents at end of year	$	—		$	—		$	27.4		$	25.2		$	—		$	52.6

69

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statements of Cash Flows

Year Ended March 31, 2005

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Operating activities
Net (loss) income	$	(5.0	)	$	1.4		$	27.3		$	(10.7	)	$	(18.0	)	$	(5.0	)
Non-cash adjustments		—			7.8			18.4			15.5			—			41.7
Undistributed equity in loss (earnings) of subsidiaries		5.0			(25.9	)		2.9			—			18.0			—
Changes in operating assets and liabilities		—			18.8			(19.8	)		(2.0	)		—			(3.0	)
Net cash provided by operating activities		—			2.1			28.8			2.8			—			33.7
Investing activities
Expenditures for property, plant and equipment and intangibles		—			—			(14.6	)		(7.8	)		—			(22.4	)
Proceeds from Invensys acquisition adjustment		—			—			6.5			—			—			6.5
Proceeds from sale of assets		—			—			0.3			2.6			—			2.9
Acquisitions, net		—			(6.7	)		—			—			—			(6.7	)
Net cash used in investing activities		—			(6.7	)		(7.8	)		(5.2	)		—			(19.7	)
Financing activities
Debt issuance costs		—			(1.9	)		—			—			—			(1.9	)
Decrease on short-term borrowings		—			(2.2	)		—			—			—			(2.2	)
Payments of long-term debt		—			(4.0	)		—			—			—			(4.0	)
Net cash used in financing activities		—			(8.1	)		—			—			—			(8.1	)
Effect of exchange rate changes on cash		—			—			—			0.5			—			0.5
(Decrease) increase in cash and cash equivalents	$	—		$	(12.7	)	$	21.0		$	(1.9	)	$	—		$	6.4
Cash and cash equivalents at beginning of year	$	—		$	12.7		$	18.1		$	17.7		$	—		$	48.5
Cash and cash equivalents at end of year	$	—		$	—		$	39.1		$	15.8		$	—		$	54.9

70

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Combining Statements of Cash Flows

Period from Inception (December 18, 2003) to March 31, 2004

	Parent			Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
	(in millions)
Operating activities
Net (loss) income	$	(1.8	)	$	(1.8	)	$	15.4		$	(0.1	)	$	(13.5	)	$	(1.8	)
Non-cash adjustments		—			2.1			10.5			6.2			—			18.8
Undistributed equity in loss (earnings) of subsidiaries		1.8			(15.4	)		0.1			—			13.5			—
Changes in operating assets and liabilities		—			7.2			1.8			(6.6	)		—			2.4
Net cash (used in) provided by operating activities		—			(7.9	)		27.8			(0.5	)		—			19.4
Investing activities
Expenditures for property, plant and equipment		—			—			(3.5	)		(2.6	)		—			(6.1	)
Acquisitions, net		(657.3	)		—			7.3			1.4			—			(648.6	)
Net cash (used in) provided by investing activities		(657.3	)		—			3.8			(1.2	)		—			(654.7	)
Financing activities
Activity with affiliates		457.3			(432.0	)		(13.5	)		(11.8	)		—			—
Payments of dividends		—			—			—			(0.1	)		—			(0.1	)
Debt issuance costs		—			(21.9	)		—			(0.9	)		—			(22.8	)
Increase on short-term borrowings		—			—			—			2.2			—			2.2
Proceeds from debt issuance		—			475.0			—			30.0			—			505.0
Proceeds from common stock issuance		200.0			—			—			—			—			200.0
Payments of long-term debt		—			(0.5	)		—			(0.1	)		—			(0.6	)
Net cash provided by (used in) financing activities		657.3			20.6			(13.5	)		19.3			—			683.7
Effect of exchange rate changes on cash		—			—			—			0.1			—			0.1
Increase in cash and cash equivalents	$	—		$	12.7		$	18.1		$	17.7		$	—		$	48.5
Cash and cash equivalents at beginning of period	$	—		$	—		$	—		$	—		$	—		$	—
Cash and cash equivalents at end of year	$	—		$	12.7		$	18.1		$	17.7		$	—		$	48.5

71

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Combining Statements of Cash Flows—Predecessor

Period from April 1, 2003 to December 17, 2003

	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Combined
	(in millions)
Operating activities
Net income (loss)	$	34.9		$	(24.7	)	$	(0.4	)	$	9.8
Non-cash adjustments		5.5			5.6			—			11.1
Equity in (earnings) loss of subsidiaries		(0.4	)		—			0.4			—
Changes in operating assets and liabilities		(38.5	)		(12.5	)		(2.7	)		(53.7	)
Net cash provided by (used in) operating activities		1.5			(31.6	)		(2.7	)		(32.8	)
Investing activities
Expenditures for property, plant and equipment		(6.1	)		(2.3	)		—			(8.4	)
Net cash used in investing activities		(6.1	)		(2.3	)		—			(8.4	)
Financing activities
Decrease in short-term borrowings		(7.7	)		(6.4	)		—			(14.1	)
Other financing activities		4.5			39.4			2.7			46.6
Net cash (used in) provided by financing activities		(3.2	)		33.0			2.7			32.5
Effect of exchange rate changes on cash		—			0.8			—			0.8
Decrease in cash and cash equivalents	$	(7.8	)	$	(0.1	)	$	—		$	(7.9	)
Cash and cash equivalents at beginning of year	$	6.1		$	11.0		$	—		$	17.1
Cash and cash equivalents at end of period	$	(1.7	)	$	10.9		$	—		$	9.2

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

18.    RELATED-PARTY TRANSACTIONS

Management Fee. On December 18, 2003, Sensus Metering Systems (Bermuda 2) Ltd. entered into a management services agreement with The Jordan Company, L.P. for advisory and consulting services related to corporate management, finance, product strategy, investment, acquisitions and other matters relating to the business of the Company. Under the terms of the agreement, the Company agreed to pay a fee equal to the greater of $2.0 million per year or 2.5% of EBITDA (as defined in the Credit Agreement) thereafter, plus out-of-pocket expenses. For fiscal 2006 and 2005, fees paid to the Jordan Company, L.P. were $2.3 million and $2.1 million, respectively. This agreement will remain in effect until December 2013. One-third of these fees will be paid to GS Capital Partners and/or its affiliates. The Jordan Company, L.P. and/or its affiliates received a one-time transaction fee of $13.0 million upon consummation of the Acquisition, approximately $2.7 million of which was paid to Goldman, Sachs & Co. and/or its affiliates.

During fiscal 2006 and 2005, the Company obtained administrative services from Jordan Industries, Inc., a subsidiary of The Jordan Company, LP. These services were primarily for assistance in securing low-cost supply alternatives in China. Expenses of $0.2 million and $0.1 million were incurred for the services in fiscal 2006 and fiscal 2005, respectively, and the Company expects to continue to obtain similar services in fiscal 2007.

Rongtai. On July 27, 2005, the Company formed a joint venture in China for its Sensus Precision Die Casting business with Runlin. During fiscal 2006, our joint venture partner, Runlin, loaned the joint venture approximately $0.4 million. In addition, the Company’s Rongtai joint venture pays approximately $0.2 million of annual rent to Runlin, for use of offices and dormitories.

Algeria. In December 2004, the Company formed a joint venture in Algeria with a former producer and a customer. The joint venture customer partner, ADE, owns 15% of the joint venture. Sales to ADE in fiscal 2006 and fiscal 2005 were approximately $4.9 million or 71% and $0.8 million or 55%, respectively, of total sales in Algeria. Terms of these sales to ADE are unchanged from the arrangement prior to the formulation of the joint venture.

Transition Services. In connection with the Acquisition, the Company entered into certain transitional service agreements with Invensys pursuant to which Invensys agreed to provide the Company with transitional support services until June 16, 2004. The transition services included assistance in establishing stand-alone information technology capability, including assistance in connection with the removal of the acquired business from Invensys’ computer network and e-mail system. The transitional service agreement included the reimbursement of certain information technology costs from Invensys to the Company for excess costs incurred during the first year after the acquisition date. Excess information technology costs of $1.3 million were invoiced to Invensys in January 2005. The cost reimbursement was recorded as a direct reduction to information technology expenses in selling, general and administration for the year ended March 31, 2005. In addition, under the agreements, Invensys agreed to provide the Company with certain human resources and other general administrative services for the transition period. These services were provided to the Company at an approximation of market price for such services and did not exceed in any material respects the historical cost of obtaining such services from Invensys.

Predecessor Related-Party Transactions

Management Charges. Included within selling, general and administrative expenses are charges for administrative expenses estimated by the Predecessor to reflect amounts incurred by Invensys on behalf of the Predecessor. These charges are primarily for accounting, legal and treasury services. These charges totaled $2.2 million for the period from April 1, 2003 to December 17, 2003.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The expenses allocated have been calculated on a basis that the Predecessor considered to be reasonable estimates of the utilization of services provided or the benefit received by the Predecessor for certain administrative services provided by Invensys. The financial information included herein may not reflect the combined financial position, operating results and cash flows of the Predecessor in the future or what they would have been had the Predecessor been a separate, independent entity during the periods presented.

Trading Activity. The Predecessor sold to affiliates various products in the normal course of business. Pricing was generally negotiated based on standard pricing schedules and were at market prices.

19.    BUSINESS SEGMENT INFORMATION

Reporting Segments. The Company has two principal product groups: metering systems products and support products. Metering systems products include metering, and/or AMR, communications systems and four principal metering product categories: water, gas, heat and electricity. Support products include pipe joining and repair products and die-casting products. The two product groups, plus corporate operations, are organized into two reporting segments: Metering and Related Communication Systems and All Other. The segment information is based on the Company’s current segment reporting structure and historical information has been conformed to the current structure.

Inter-segment sales are generally made at cost. Cost of sales is based on standard cost, which includes materials, direct labor, warranty expense, overhead allocation, as well as variances from standard costs. Operating expenses directly associated with the reporting group may include sales, marketing, product development and administrative expenses and amortization of intangible assets.

Corporate operating expenses, interest expense, amortization of deferred financing costs and management fees are not allocated to the product lines, and are incorporated in the All Other operating segment.

Reporting Segment Products

Reporting Segment	Major Products
Metering and Related Communication Systems	Commercial and residential water, gas, electric and heat meters and AMR systems used by utilities. AMR systems include handheld computers related to installation services and implementation support.
All Other	Pipe joining, tapping and repair products that consist principally of pipe couplings, tapping sleeves and saddles, and repair clamps that are used by utilities in pipe joining and pipe repair applications. Die casting products consist of high quality thin-wall, low porosity aluminum die-castings, generally targeting the automotive industry and gas utility markets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following tables provide significant changes in trends or components of revenue, gross profit percentage, operating income (loss), depreciation and amortization, assets, goodwill and capital expenditures (including intangibles) for each segment (in millions):

												Predecessor (Note 1)
	Year Ended March 31, 2006			% Change		Year Ended March 31, 2005			Period from Inception (December 18, 2003) to March 31, 2004			Period from April 1, 2003 to December 17, 2003
Segment revenues
Metering and related communication systems	$	496.8		6	%	$	470.2		$	139.0		$	299.5
All other		131.1		14	%		115.4			29.4			74.2
Eliminations		(14.0	)	11	%		(15.8	)		(4.0	)		(9.1	)
Total	$	613.9		8	%	$	569.8		$	164.4		$	364.6
Gross profit %
Metering and related communication systems		32	%	3	%		31	%		28	%		31	%
All other		23	%	(4	)%		24	%		24	%		26	%
Total		30	%	—	%		30	%		28	%		30	%
Operating income (loss)
Metering and related communication systems	$	45.2		17	%	$	38.6		$	11.6		$	25.4
All other		0.3		—			0.3			(0.8	)		5.6
Total	$	45.5		17	%	$	38.9		$	10.8		$	31.0
Depreciation and amortization
Metering and related communication systems	$	25.4		11	%	$	22.9		$	6.5		$	9.5
All other		17.0		1	%		16.9			4.0			2.8
Total	$	42.4		7	%	$	39.8		$	10.5		$	12.3

	Year Ended March 31, 2006		% Change		Year Ended March 31, 2005
Total assets
Metering and related communication systems	$	799.4	(3	)%	$	824.2
All other		135.7	17	%		116.0
Total	$	935.1	(1	)%	$	940.2
Total goodwill
Metering and related communication systems	$	275.8	—	%	$	276.7
All other		54.7	—	%		54.9
Total	$	330.5	—	%	$	331.6
Total capital expenditures (including intangibles)
Metering and related communication systems	$	14.5	(1	)%	$	14.6
All other		10.3	32	%		7.8
Total	$	24.8	11	%	$	22.4

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Geographic Segments. Net sales to third parties and long-lived assets by geographic region are as follows (in millions):

	Net Sales to Third Parties								Long-Lived Assets
							Predecessor (Note 1)
	Year Ended March 31, 2006		Year Ended March 31, 2005		Period from December 18, 2003 to March 31, 2004		Period from April 1, 2003 to December 17, 2003		March 31, 2006		March 31, 2005
North America	$	423.8	$	391.2	$	103.9	$	247.4	$	552.3	$	566.3
Europe, Mid East, Africa		166.3		166.5		57.7		108.2		107.1		112.4
South America		10.6		7.3		1.9		4.6		1.4		1.3
Asia		13.2		4.8		0.9		4.4		22.4		7.7
Total	$	613.9	$	569.8	$	164.4	$	364.6	$	683.2	$	687.7

Net sales to third parties are attributed to the geographic regions based on the country in which the shipment originates. Amounts attributed to the geographic regions for long-lived assets are based on the location of the entity that holds such assets.

20.    COMMITMENTS AND CONTINGENCIES

The Company is involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of its business involving product liability, product warranty, property damage, insurance coverage, patents and environmental matters. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss or recovery, based upon current information, management believes these unresolved legal actions will not have a material effect on the financial position or results of operations of the Company.

The Company, as well as many other third parties, has been named as a defendant in several lawsuits filed related to illnesses from exposure to asbestos or asbestos-containing products. The complaints fail to specify which plaintiffs allegedly were involved with the Company’s products, and because the cases are in initial stages, it is uncertain whether any plaintiffs have asbestos-related illnesses or dealt with the Company’s products, much less whether any plaintiffs were exposed to an asbestos-containing component part of the Company’s product or whether such part could have been a substantial contributing factor to the alleged illness. Although we are entitled to indemnification for legal and indemnity costs for asbestos claims related to these products from certain subsidiaries of Invensys, under the stock purchase agreement pursuant to which we acquired Invensys, such indemnities, when aggregated with all other indemnity claims, are limited to the purchase price paid by us in connection with the Acquisition. The Company is unable to estimate the amount of its exposure, if any, related to these claims at this time. The Company does not believe the ultimate resolution of these issues will have a material adverse effect on the Company’s net earnings or financial position.

The Company entered into contracts that contain guarantees that could require performance or payment under certain conditions. The Company has entered into various agreements that require letters of credit for financial assurance purposes. These letters of credit are available to fund the payment of such obligations. At March 31, 2006, we had $5.1 million of letters of credit outstanding with expiration dates ranging from one month to 12 months.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Environmental Matters

The Company is aware of known contamination at the following United States facilities: Russellville, Kentucky; DuBois, Pennsylvania; Texarkana, Arkansas; and Uniontown, Pennsylvania, as a result of historic releases of hazardous materials. The former owner of these sites is investigating, remediating and monitoring these properties. The Company is obligated to reimburse the former owner for a minority of monies expended on the remediation plus interest on monies paid at all sites other than Russellville (“Reimbursement Sites”), where the former owner pays all remediation costs. The Company is unable to estimate the amount of such costs at this time. In connection with the Acquisition, certain subsidiaries of Invensys plc agreed to retain liability for the reimbursement obligations related to the Reimbursement Sites. As a result, the Company does not expect to have any future liabilities for the costs of remediation or other reimbursement costs associated with the Reimbursement Sites.

In addition, there is contamination in the soil and groundwater at the Company’s facility in Ludwigshafen, Germany. The Company is indemnified against costs that may result from the contamination. This indemnification obligation is subject to the condition that the plots of land continue in industrial use, unless the former owner has agreed to the change from industrial use. The Company also has an indemnity, subject to certain limitations, from certain subsidiaries of Invensys plc regarding this facility pursuant to the terms of the purchase agreement governing the Acquisition.

Based on information currently available, the Company believes that future environmental compliance expenditures will not have a material effect on its financial position or results of operations, and has established allowances the Company believes are adequate to cover potential exposure to environmental liabilities. However, as to any of the above-described indemnities, the Company cannot make any assurance that the indemnifying parties will be able to satisfy their obligations. Environmental compliance costs and liabilities could reduce the Company’s net income and cash available for operations.

21.    VALUATION AND QUALIFYING ACCOUNTS

	Balance at beginning of period		Charged to costs and expenses		Deductions for write-offs			Balance at end of period
Year ended March 31, 2006
Allowance for doubtful accounts	$	1.7	$	0.2	$	(0.5	)	$	1.4
Deferred tax asset valuation allowance		59.9		5.5		—			65.4
	$	61.6	$	5.7	$	(0.5	)	$	66.8
Year ended March 31, 2005
Allowance for doubtful accounts	$	1.3	$	0.4	$	—		$	1.7
Deferred tax asset valuation allowance		53.4		6.5		—			59.9
	$	54.7	$	6.9	$	—		$	61.6
Period from December 18, 2003 to March 31, 2004
Allowance for doubtful accounts	$	1.3	$	—	$	—		$	1.3
Deferred tax asset valuation allowance		53.3		0.1		—			53.4
	$	54.6	$	0.1	$	—		$	54.7
Period from April 1, 2003 to December 17, 2003
Allowance for doubtful accounts	$	0.6	$	0.7	$	—		$	1.3
Deferred tax asset valuation allowance		12.7		40.6		—			53.3
	$	13.3	$	41.3	$	—		$	54.6

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

22.    QUARTERLY RESULTS OF OPERATIONS (IN MILLIONS) (UNAUDITED)

The Company operates on a 4 week, 4 week, 5 week financial and business closing schedule for all periods, except year end, which is March 31. The following tables provide quarterly results of operations of the Company:

Fiscal 2005	First			Second			Third			Fourth (1)
Net sales	$	139.4		$	143.2		$	124.3		$	162.9
Gross profit		41.3			43.0			35.3			51.2
Loss from discontinued operations		(0.2	)		(0.4	)		—			(0.2	)
Net (loss) income		(0.7	)		(2.7	)		(8.1	)		6.5
Fiscal 2006	First			Second (2)			Third (2)			Fourth
Net sales	$	146.8		$	142.1		$	146.9		$	178.1
Gross profit		44.3			42.3			43.5			56.3
Net (loss) income		(4.2	)		(4.9	)		(2.5	)		8.4

(1) Includes income of $1.2 million reflecting an adjustment for net foreign currency exchange gains on intercompany loans in Europe, a reduction of selling, general and administrative expenses of $1.1 million related to reimbursement of IT costs from Invensys plc., and a $0.6 million gain on sale of a building by our subsidiary in France.

(2) Includes a $0.7 million and $0.2 million receivable write-down related to the bankruptcy filing of Delphi Corporation in the second and third quarters, respectively.

23.    SUBSEQUENT EVENT (UNAUDITED)

On June 2, 2006, the Company entered into an agreement to acquire substantially all of the assets and assume certain identified liabilities of Advanced Metering Data Systems, L.L.C. (“AMDS”) for $45.4 million in cash at closing and the payment of additional cash consideration if the acquired business achieves certain performance targets through March 2011. In addition, pursuant to a Subscription Agreement with AMDS, Sensus Metering Systems (Bermuda 1) Ltd., the Company’s parent, will issue certain preference shares to AMDS, which are subject to the performance of the acquired business over a five-year period following the closing. The Company will finance the transaction with equity contributions from the current principal investors in the Company and cash on hand. Closing of the acquisition is subject to the satisfaction of certain conditions, including obtaining certain governmental approvals.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND  FINANCIAL DISCLOSURE

There were no disagreements with our independent accountants on accounting methods and financial disclosures for the fiscal years ended March 31, 2006 and 2005 and the combined fiscal year ended March 31, 2004.

ITEM 9A.    CONTROLS AND PROCEDURES

We have continued to place a priority on the short-term and long-term improvement or enhancement of our internal controls over financial reporting. The process began during fiscal 2005 by implementing process and staffing improvements in our accounting and finance groups; enhancing the financial consolidation system; implementing a company disclosure policy; standardizing account reconciliation and analysis procedures; and developing an accounting policies and procedures system.

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During fiscal 2006, we have continued to evaluate the effectiveness of our disclosure controls and internal control over financial reporting on an on-going basis including activities in planning for of Sarbanes-Oxley Section 404 compliance; and the development of additional accounting policies and procedures.

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-15 under the Securities Exchange Act of 1934 (“Exchange Act”) promulgated thereunder, our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of disclosure controls and procedures as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective, at a reasonable assurance level, as of the Evaluation Date, to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

ITEM 9B.    OTHER INFORMATION

None.

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PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth information regarding our executive officers and directors.

Name	Age	Position and Offices
Daniel W. Harness	57	Chief Executive Officer, President and Director
Peter Mainz	41	Chief Financial Officer
Barry W. Seneri	55	Executive Vice President of Operations
R. Douglas Neely	53	Vice President of Sales and Marketing North America Water
George G. Uram	60	Vice President of Energy
Jose Hernandez	42	Vice President, Europe, South America and Asia Pacific
James Spool	77	Secretary
Jonathan F. Boucher	49	Director
John W. Jordan II	58	Director
David W. Zalaznick	52	Director
Thomas H. Quinn	58	Director
Gerald J. Cardinale	39	Director
Bryan Kelln	40	Director
J. Jack Watson	78	Director
H. Russel Lemcke	66	Director
Charles H. Gailliot	28	Director

Daniel W. Harness became our Chief Executive Officer and President in April 2001 and became a director upon completion of the Acquisition. Mr. Harness was President of Metering Systems North America from 2000 to 2001 and President of Sensus Technologies from 1990 to 2000. Mr. Harness has been with our company and its predecessors since 1982.

Peter Mainz became our Vice President of Finance in January 2003 and became our Chief Financial Officer upon completion of the Acquisition. He was Vice President of Operations and Finance in Europe and Asia Pacific from 2001 to 2002 and held other senior financial positions with our Metering Systems Division from 1999 to 2001. Mr. Mainz held various senior financial positions with Schlumberger Ltd. from 1992 to 1999, including Financial Manager for the Commonwealth of Independent States (former Russia and Baltic countries) from 1998 to 1999.

Barry W. Seneri became our Executive Vice President of Operations for our Metering Systems Division in November 2002. Mr. Seneri also served as Vice President of Finance for our Metering Systems Division from 1999 to 2002 and Vice President of Finance North American Water from 1998 to 1999.

R. Douglas Neely became our Vice President of Sales and Marketing North America Water in October 1990. Mr. Neely has held various marketing and sales positions with our company since 1975.

George G. Uram became our Vice President of Energy in June 2001. Mr. Uram was Vice President, Marketing and Sales/Director, Business Development of our company from 1999 to 2001. Prior to joining our company, he held various managerial positions with the Westinghouse Commercial Nuclear Fuel Division, a division of CBS Inc., for 31 years, including Director of Fuel Projects and Marketing from 1997 to 1999.

Jose Hernandez became our Vice President of Europe, South America and Asia Pacific in November 2005. Mr. Hernandez served as Vice President of Central and South America from December 2004 to November 2005. He served as General Manager for Saint-Gobain Diamantwerkzeuge GmbH and CoKG from February 2002 to November 2004. Mr. Hernandez also served as Executive Director of Central and South America for Invensys Metering Systems from January 2000 to January 2002.

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James Spool became our Secretary in December 2003. Mr. Spool served as Division Senior Counsel and Principal Contact Attorney for the Metering Systems Division from 1999 through 2003, and has held a number of senior legal positions with Invensys and its predecessors since 1983. Mr. Spool also serves as Vice President, Secretary and General Counsel of the Company and its U.S. subsidiaries.

Jonathan F. Boucher became a director upon completion of the Acquisition. Since 1983, Mr. Boucher has been a Member and Senior Principal of The Jordan Company, L.P., a private merchant banking firm and its predecessors. Since 2002, Mr. Boucher has been a Member of Resolute Fund Partners, LLC, the general partner of The Resolute Fund L.P. Mr. Boucher is also a director of various other privately held companies. He also served as a director of W-H Energy Services, Inc. until May 2005.

John W. Jordan II became a director upon completion of the Acquisition. Since 1982, Mr. Jordan has been a Member and Managing Principal of The Jordan Company, L.P., a private merchant banking firm and its predecessors. Since 2002, Mr. Jordan has been a Managing Member of Resolute Fund Partners, LLC, the general partner of The Resolute Fund L.P. Mr. Jordan is also a director of various other privately held companies.

David W. Zalaznick became a director upon completion of the Acquisition. Since 1982, Mr. Zalaznick has been a Member and Managing Principal of The Jordan Company, L.P., a private merchant banking firm, and its predecessors. Since 2002, Mr. Zalaznick has been a Managing Member of Resolute Fund Partners, LLC, the general partner of The Resolute Fund L.P. Mr. Zalaznick is also a director of various other privately held companies.

Thomas H. Quinn became a director upon completion of the Acquisition. Since 2002, Mr. Quinn has been a Member and Senior Principal of The Jordan Company, L.P., a private merchant banking firm, and since 1988, he has been President and Chief Operating Officer of Jordan Industries, Inc., a diversified industrial company. Mr. Quinn is also a director of other privately held companies. Mr. Quinn was a director and Chief Executive Officer of Fannie May Holdings, Inc. within two years of its Chapter 11 bankruptcy filing in June 2002.

Gerald J. Cardinale became a director upon completion of the Acquisition. Since 2002, Mr. Cardinale has been a Managing Director of the Principal Investment Area of Goldman, Sachs & Co. Mr. Cardinale joined Goldman, Sachs & Co. in 1992. Mr. Cardinale also serves on the board of directors of Cooper-Standard Automotive, Inc.

Bryan Kelln has been a director since February 10, 2004. Mr. Kelln currently serves as Vice President of Nortek where he began in May 2005. From June 2002 through May 2005, Mr. Kelln acted as a consultant of The Jordan Company, L.P., a private merchant banking firm. From January 2000 until June 2002, Mr. Kelln was President and Chief Executive Officer of Rock Shox, Inc., a global bicycle industry supplier. Prior to that time, Mr. Kelln served as a Senior Vice President and General Manager of the telecommunications and utilities businesses of General Cable Corporation.

J. Jack Watson has been a director since February 10, 2004. Mr. Watson was Chairman, President and Chief Executive Officer of Newflo Corporation, a manufacturer of pumps, valves and meters, from 1987 until his retirement in 1996. During the last five years, Mr. Watson has served as a director of W-H Energy Services and various other privately held companies.

H. Russel Lemcke has been a director since February 10, 2004. Since 1989, Mr. Lemcke has been President of H. Russel Lemcke Group, Inc., a private consulting business. Mr. Lemcke is also a director of Graham Corporation.

Charles H. Gailliot has been a director since October 20, 2005. Mr. Gailliot is an Associate in the Principal Investment Area of Goldman, Sachs & Co. Mr. Gailliot joined as a financial analyst in 2003. Mr. Gailliot is also a director of Signature Hospital Holdings, LLC.

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Board of Directors

Our board of directors consists of ten directors. Our board of directors appoints our executive officers, directs the management of our business and affairs and conducts its business through meetings of the board of directors and two standing committees, the Audit Committee and the Compensation Committee. In addition, from time to time, other committees may be established under the direction of the board when necessary to address specific issues. Our Audit Committee consists of Jonathan F. Boucher, Thomas H. Quinn, Gerald J. Cardinale and J. Jack Watson. The board of directors has reviewed the qualifications and backgrounds of the members of the Audit Committee, and although it has not made a determination as to whether any one individual member of the Audit Committee would qualify as a financial expert, it has determined that each of its members is able to read and understand fundamental financial statements and has substantial business experience that results in such member’s financial sophistication. As a result, the board of directors has determined that the combined qualifications and experience of the Audit Committee members, when taken together, give the Audit Committee the financial expertise necessary to discharge its responsibilities. Our Compensation Committee consists of Thomas H. Quinn, Jonathan F. Boucher, Gerald J. Cardinale and H. Russel Lemcke.

Code of Ethics

We have adopted a code of ethics that applies to our principal executive officer and our principal financial officer. We hereby undertake to provide to any person without charge, upon request, a copy of such code of ethics provided that such request is sent in writing to James Spool, Sensus Metering Systems Inc., 8601 Six Forks Road, Suite 300, Raleigh, North Carolina 27615.

ITEM 11.    EXECUTIVE COMPENSATION

Director Compensation

To the extent that directors are employed either by us, The Jordan Company, L.P. or GS Capital Partners or their respective affiliates, or otherwise serve as a paid consultant, they will not be separately compensated for their service as directors. Directors, who are not designated by The Resolute Fund or GS Capital Partners and who are not employed by us, The Jordan Company, L.P. or GS Capital Partners or their respective affiliates, or who do not serve as a paid consultant, receive compensation for their services.

Executive Compensation

The following table sets forth all compensation earned by the Chief Executive Officer and the four most highly paid executive officers for services rendered in fiscal 2006, 2005 and 2004.

		Annual Compensation
Name and Principal Position	Fiscal Year	Salary		Bonus		Other Compensation (1)		Company’s Matching 401-K Contribution
Daniel W. Harness (2) Chief Executive Officer and President	2006 2005 2004	$ $ $	416,668 400,008 329,169	$ $ $	151,200 75,000 464,709	$ $ $	24,041 7,967 7,352	$ $ $	6,466 4,000 9,880
Peter Mainz (2), (3) Chief Financial Officer, Vice President, Finance	2006 2005 2004	$ $ $	283,794 275,579 206,808	$ $ $	72,765 45,000 227,017	$ $ $	4,687 4,880 35,182	$ $ $	6,974 1,913 10,167
Barry W. Seneri (2) Executive Vice President of Operations	2006 2005 2004	$ $ $	243,240 240,673 235,008	$ $ $	62,181 58,750 331,782	$ $ $	7,829 7,158 7,829	$ $ $	7,183 2,432 10,150
R. Douglas Neely (2) Vice President of Sales and Marketing North American Water	2006 2005 2004	$ $ $	223,735 214,754 172,845	$ $ $	65,942 —   167,625	$ $ $	3,760 5,440 6,765	$ $ $	6,108 2,060 8,726
Jose Hernandez (2), (3) Vice President, Europe, South America and Asia Pacific	2006 2005	€ €	200,443 61,884	€ €	2,980 —	€ €	23,750 —	€ €	—   —

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(1) Includes relocation expense reimbursement and personal use of company provided automobile.

(2) In March and December 2004, Daniel W. Harness, Peter Mainz, Barry W. Seneri, R. Douglas Neely and Jose Hernandez were issued 200,000, 140,000, 100,000, 40,000 and 10,000 Class B Common Shares, par value $.01 per share, of Sensus Metering Systems (Bermuda 1) Ltd., our ultimate holding company (“Holdings”) (the “Class B Restricted Shares”), respectively. The Class B Restricted Shares were issued pursuant to the Restricted Share Plan, and accordingly, are subject to vesting, restrictions on transfer, repurchasing rights and other limitations. At the time of issuance, the board of directors of Holdings determined that the fair market value of the Class B Restricted Shares was equal to the par value thereof, or $.01 per share, due to the lack of a public market for the Class B Restricted Shares, their illiquidity and their subordinated position within the capital structure of Holdings. Each of the named executive officers paid $.01 per share for the Class B Restricted Shares issued to them. Accordingly, no compensation expense is reflected for the restricted share grants.

(3) Average exchange rates for the conversion of amounts denominated in euros to U.S. dollars were approximately as follows: fiscal 2006, € 1.00/$1.21; and fiscal 2005, € 1.00/$1.26.

Shareholders’ Agreement

Holdings, our ultimate parent company, entered into a shareholders’ agreement with The Resolute Fund and GS Capital Partners, which, in the aggregate, own approximately 98.8% of Holdings’ outstanding equity. Under the shareholders’ agreement, The Resolute Fund has the right to designate four members of the board of directors, and GS Capital Partners has the right to designate two members of the board of directors. The shareholders’ agreement provides The Resolute Fund and GS Capital Partners certain registration rights and contains customary terms, including terms regarding transfer restrictions, rights of first offer, tag along rights, drag along rights, preemptive rights and veto rights. Each member of management, consultant and director who contributed capital to Holdings entered into an agreement with Holdings pursuant to which each such individual agreed to be subject to certain repurchase provisions, transfer restrictions, rights of first offer and drag-along rights with respect to shares of Holdings acquired by them.

Employment Agreements

Effective as of December 17, 2003, each of Messrs. Harness and Mainz entered into an employment agreement with us. Each agreement has a three-year term and will be extended automatically for successive one-year periods thereafter unless either party delivers notice within specified notice periods. The following table sets forth the stated annual base salary, which may be increased by our board of directors, for Messrs. Harness and Mainz:

Name	Title	Base Salary
Daniel W. Harness	Chief Executive Officer	$	420,000
Peter Mainz	Chief Financial Officer	$	290,000

Under the terms of each agreement, the executive will be eligible to receive a discretionary bonus under the terms of our Executive Bonus Plan. The executives also are entitled to participate in the Restricted Share Plan of Holdings and are expected to be awarded restricted shares pursuant to the terms of the Restricted Share Plan and the respective executive’s restricted share agreement. Each executive is entitled to participate in our employee benefit plans, programs and arrangements currently in effect, and is entitled to reimbursement for all reasonable travel and other expenses incurred during performance of the executive’s duties in accordance with our expense reimbursement policy.

Each of these employment agreements provides that, upon termination of employment, the executive will be entitled to receive the sum of the executive’s unpaid annual base salary through the date of termination, any unpaid travel expenses, any unpaid accrued vacation, and any amount arising from the executive’s participation in, or benefits under, any of our employee benefits plans, programs or arrangements. Upon termination of employment by the executive for good reason, termination due to death or disability or termination pursuant to a mutual agreement by us and the executive, the executive will be entitled to an amount equal to the executive’s

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stated annual base salary for 12 months; provided that if the termination occurs after a change of control, the executive shall be entitled to an amount equal to the executive’s stated annual base salary for 24 months. Upon termination of employment by us without cause, including the non-renewal of the term by us, the executive will be entitled to an amount equal to the executive’s stated annual base salary for 12 months or for the duration of the term, whichever is longer; provided that if the termination occurs after a change of control, the executive shall be entitled to an amount equal to the executive’s stated annual base salary for 24 months or for the duration of the term, whichever is longer. During the severance period, the executive will be entitled to continued coverage under all of our group health benefit plans in which the executive and any of the executive’s dependents were entitled to participate immediately prior to termination.

Each executive is prohibited from competing with us during the term of his employment and for two years following termination of his employment.

Restricted Share Plan

Holdings has a Restricted Share Plan pursuant to which our officers, directors and consultants may be awarded restricted shares. The Restricted Share Plan permits the award of restricted common shares of Holdings. The maximum number of restricted common shares that are issuable under the Restricted Share Plan is equal to approximately 5% of the total issued shares outstanding of Holdings, subject to adjustment for changes in the capital structure such as share dividends, share splits, mergers, amalgamations and reorganizations of Holdings. The Compensation Committee of the board of directors of Holdings will administer the plan.

The number of restricted shares to be awarded from time to time will be determined by the Compensation Committee or, in the case of an award to a director, the entire board of Holdings. The restricted shares issued pursuant to the plan will be service time vested ratably over each of the five years from the date of grant, provided that no vesting will occur until the second anniversary of the date of grant.

In addition, the vesting of the restricted shares may accelerate upon the occurrence of certain stated liquidity events. Common shares awarded under the Restricted Share Plan are generally subject to restrictions on transfer, repurchase rights and other limitations as set forth in the management subscription and shareholders’ agreement.

Executive Bonus Plan

We have adopted an Executive Bonus Plan that provides officers, directors and consultants with an incentive to achieve key business objectives. The plan allows our key officers to achieve performance-based compensation in addition to their annual base salary. Under the plan each participating officer is eligible to receive a performance bonus for each bonus period based on a stated percentage of the officer’s base pay if our financial performance is equal to or greater than certain stated financial and other performance targets.

Defined Benefit Plan

Certain of our employees, including Peter Mainz and Jose Hernandez, are entitled to participate in the Sensus German Management Pension Program, which is a defined benefit pension plan. Retirement benefits under the plan are computed on the basis of the employee’s final annual salary and bonus multiplied by a percentage based on years of service.

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The following tables show the estimated annual benefit payable to employees in various compensation and years of service categories based upon the management accrual rates. The estimated benefits apply to an employee retiring at age sixty-five who receives his or her benefit in the form of a single life annuity. The benefit amounts reflected in the table include a reduction related to the income limit up to which contributions for social welfare insurance are paid.

German Pension Plan Table

	Years of Service
Compensation	15		20		25		30		35
€125,000	€	17,337	€	26,005	€	43,342	€	43,342	€	43,342
€150,000	€	22,337	€	33,505	€	55,842	€	55,842	€	55,842
€175,000	€	27,337	€	41,005	€	68,342	€	68,342	€	68,342
€200,000	€	32,337	€	48,505	€	80,842	€	80,842	€	80,842
€250,000	€	42,337	€	63,505	€	105,842	€	105,842	€	105,842
€300,000	€	52,337	€	78,505	€	130,842	€	130,842	€	130,842
€350,000	€	62,337	€	93,505	€	155,842	€	155,842	€	155,842
€400,000	€	72,337	€	108,505	€	180,842	€	180,842	€	180,842
€450,000	€	82,337	€	123,505	€	205,842	€	205,842	€	205,842
€500,000	€	92,337	€	138,505	€	230,842	€	230,842	€	230,842

On March 31, 2006, the euro to U.S. dollar exchange rate was €1.00/$1.21. As of March 31, 2006, Mr. Mainz had six years of creditable service and Mr. Hernandez had four years of creditable service.

Benefit Plans

We have adopted other benefit plans, including cash incentive plans, for our officers and employees that are, in the aggregate, substantially similar to those plans previously provided by Invensys Metering Systems. We have also retained the defined benefit plans outside the United States and the United Kingdom and replaced the defined benefit plans for non-union employees in the United States and the United Kingdom with defined contribution plans. In addition, the defined benefit plans for unionized labor in the United States were replaced with newly established identical defined benefit plans.

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ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

All of the issued and outstanding voting equity interests of Sensus Metering Systems, Inc. are owned by Sensus Metering Systems (Bermuda 2) Ltd. Sensus Metering Systems (Bermuda 2) Ltd. is in turn owned entirely by Sensus Metering Systems (Bermuda 1) Ltd., our ultimate parent. The following table sets forth certain information with respect to the beneficial ownership of the Class A common shares and the Class B common shares of Holdings as of March 31, 2006 by a) each person or group known to us who beneficially owns more than five percent of each such class of voting equity interests of Holdings, b) each of our directors and named executive officers and c) all of our directors and executive officers as a group:

	Class A Common Shares			Class B Common Shares
Name of Beneficial Owner	Number of Shares Beneficially Owned	% of Class		Number of Shares Beneficially Owned	% of Class
The Resolute Fund L.P. (1)	26,344,666.60	65.9	%	—	—
Jonathan F. Boucher (1)	—	—		—	—
John W. Jordan II (1)	—	—		—	—
David W. Zalaznick (1)	—	—		—	—
Thomas H. Quinn (1)	—	—		—	—
The Goldman Sachs Group, Inc. (2)	13,172,333.40	32.9	%	—	—
Gerald J. Cardinale (2)	—	—		—	—
Daniel W. Harness (3)	45,000	*		200,000	19.3	%
Peter Mainz (3)	25,000	*		140,000	13.5	%
Barry W. Seneri (3)	30,000	*		100,000	9.6	%
R. Douglas Neely (3)	10,000	*		40,000	3.9	%
George G. Uram (3)	10,000	*		40,000	3.9	%
Jose Hernandez (3)	—	—		10,000	1.0	%
Bryan Kelln (4)	30,000	*		45,000	4.3	%
J. Jack Watson (5)	50,000	*		30,000	2.9	%
H. Russel Lemcke (6)	50,000	*		30,000	2.9	%
All Executive Officers and Directors as a Group	250,000	*		635,000	61.3	%

* Indicates less than 1%.

(1) Certain affiliated funds of The Resolute Fund are managed by The Jordan Company, L.P. The Jordan Company, L.P. exercises investment discretion and control over the shares held by The Resolute Fund. Certain of our directors are also members of management of The Jordan Company, L.P. Each of Messrs. Boucher, Jordan, Zalaznick and Quinn may be deemed to share voting and investment power over the shares owned by The Resolute Fund as a result of their position with The Jordan Company, L.P. Each such individual disclaims beneficial ownership of the shares owned by The Resolute Fund. The address for The Jordan Company, L.P. and Messrs. Boucher, Jordan and Zalaznick is 767 Fifth Avenue, 48^th Floor, New York, New York 10153. The address for Messr. Quinn is Arbor Lake Center, Suite 5500, 1751 Lake-Cook Road, Deerfield, Illinois 60015.

(2) Represents 13,172,333.40 shares of common stock owned by investment partnerships, of which affiliates of The Goldman Sachs Group, Inc. (“GS Group”) and Goldman, Sachs & Co. (“GS & Co.), a direct and indirect wholly-owned subsidiary of GS Group, are the general partner or managing general partner. The investment partnerships and their respective beneficial ownership of shares of common stock are: (a) GS Capital Partners 2000, L.P.- 7,057,380.56; (b) GS Capital Partners 2000 Offshore, L.P.- 2,564,379.74; (c) GS Capital Partners 2000 GmbH & Co. Beteiligungs KG- 294,982.25; (d) GS Capital Partners 2000 Employee Fund, L.P.- 2,242,334.43; and (e) Goldman Sachs Direct Investment Fund 2000, L.P.- 1,013,256.42. GS & Co. is the investment manager of certain of the investment partnerships. Each of GS Group and GS & Co. disclaims beneficial ownership of the shares of common stock owned by such investment partnerships to the extent attributable to partnership interests therein held by persons other than GS Group and its affiliates. Each of such investment partnerships shares voting and investment power with

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certain of its respective affiliates. Mr. Cardinale is a Managing Director of the Principal Investment Area of Goldman, Sachs & Co. Goldman, Sachs & Co. is an affiliate of GS Capital Partners 2000, L.P. Mr. Cardinale may be deemed to share voting and investment power over the shares owned by GS Capital Partners 2000, L.P. and its affiliates and therefore to beneficially own such shares. Mr. Cardinale disclaims beneficial ownership of the shares owned by GS Capital Partners 2000, L.P. and its affiliates, except to the extent, if any, of his pecuniary interest in those shares. The address for this beneficial owner is 85 Broad Street, 10th Floor, New York, New York 10004.

(3) The address of these beneficial owners is 8601 Six Forks Road, Suite 300, Raleigh, North Carolina 27615.

(4) The address of this beneficial owner is 50 Kennedy Plaza, Providence, Rhode Island 02903.

(5) The address of this beneficial owner is 1890 Jelinda Drive, Montecito, California 93108.

(6) Mr. Lemcke beneficially owns the 50,000 Class A common shares through the Russel Lemcke 2004 Irrevocable Trust. The address of this beneficial owner is 767 Fifth Avenue, 48th Floor, New York, New York 10153.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Management Agreement

In connection with the Acquisition, we entered into a management services agreement with The Jordan Company, L.P. for advisory and consulting services related to corporate management, finance, product strategy, investment, acquisitions and other matters relating to the business of the Company. Under the terms of the agreement, the Company agreed to pay a fee equal to the greater of $2.0 million per year or 2.5% of EBITDA (as defined in the Credit Agreement) thereafter, plus out-of-pocket expenses. For fiscal 2006 and 2005, fees paid to the Jordan Company, L.P. were $2.3 million and $2.1 million, respectively. This agreement will remain in effect until December 2013. One-third of these fees will be paid to GS Capital Partners and/or its affiliates. The Jordan Company, L.P. and/or its affiliates received a one-time transaction fee of $13.0 million upon consummation of the Acquisition, approximately $2.7 million of which was paid to Goldman, Sachs & Co. and/or its affiliates.

Goldman, Sachs & Co. and Goldman Sachs Credit Partners, L.P.

Goldman, Sachs & Co. and Goldman Sachs Credit Partners, L.P. are affiliates of GS Capital Partners. Goldman Sachs Credit Partners, L.P. is the joint lead arranger, joint book runner and administrative agent under our senior secured credit facilities and in fiscal 2004 received $2.4 million in fees and commissions related thereto. Goldman, Sachs & Co., Goldman Sachs Credit Partners, L.P. and their affiliates may engage in commercial banking, investment banking or other financial advisory transactions with our affiliates and us.

Transactions with Affiliates

During the period from April 1, 2003 to December 17, 2003, the Predecessor had net sales of $2.7 million to affiliates of its parent, Invensys. In addition, Invensys Metering Systems received interest income of $1.6 million from Invensys during the period from April 1, 2003 to December 17, 2003. Immediately following the Acquisition, Invensys and its affiliates were no longer our affiliates. Therefore, any sales we make to Invensys and its affiliates are now considered sales to unaffiliated third parties. In addition, subsequent to the Acquisition, we do not maintain loan balances with Invensys or any of its affiliates that would result in interest income or expense being incurred.

During fiscal 2006 and 2005, the Company obtained administrative services from Jordan Industries, Inc., a subsidiary of The Jordan Company, LP. These services were primarily for assistance in securing low-cost supply alternatives in China. Expenses of $0.2 million and $0.1 million were incurred for the services in fiscal 2006 and fiscal 2005, respectively, and the Company expects to continue to obtain similar services in fiscal 2007.

On July 27, 2005, the Company formed a joint venture in China for its Sensus Precision Die Casting business with Runlin. During fiscal 2006, our joint venture partner, Runlin, loaned the joint venture

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approximately $0.4 million. In addition, the Company’s Rongtai joint venture pays approximately $0.2 million of annual rent to Runlin, for use of offices and dormitories.

In December 2004, the Company formed a joint venture in Algeria with a former producer and a customer. The joint venture customer partner, ADE, owns 15% of the joint venture. Sales to ADE in fiscal 2006 and fiscal 2005 were approximately $4.9 million or 71% and $0.8 million or 55%, respectively, of total sales in Algeria. Terms of these sales to ADE are unchanged from the arrangement prior to the formulation of the joint venture.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit and Non-Audit Fees

The following table presents fees for audit and other services provided by Ernst & Young LLP for the years ended March 31, 2006 and 2005 (in millions):

	March 31, 2006		March 31, 2005
Audit (1)	$	1.4	$	1.6
Tax		0.1		—
Total	$	1.5	$	1.6

(1) Audit fees consist of fees for services provided in connection with the audit of our financial statements, services rendered in connection with our registration statements filed with the Securities and Exchange Commission, statutory audits, the delivery of related consents and reviews of our quarterly financial statements.

The Audit Committee reviewed the audit services rendered by Ernst & Young LLP and concluded that such services were compatible with maintaining the auditors’ independence. All audit and non-audit services performed by our independent accountants are approved in advance by the Audit Committee to assure that such services do not impair the auditors’ independence from us.

88

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The financial statements filed as part of this report are included in Part II, Item 8, “Financial Statements and Supplementary Data” in this 2006 Annual Report on Form 10-K, under the headings “Consolidated Balance Sheets,” Consolidated Statements of Operations,” “Consolidated Statements of Stockholder’s Equity” and “Consolidated Statements of Cash Flows.” Financial statement schedules are omitted because the information required in these schedules is included in the “Notes to Consolidated Financial Statements.”

(b) A list of exhibits filed herewith is contained on the Exhibit Index immediately preceding such exhibits and is incorporated herein by reference.

(c) None.

89

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Sensus Metering Systems (Bermuda 2) Ltd. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Raleigh, State of North Carolina, on June 15, 2006.

SENSUS METERING SYSTEMS (BERMUDA 2) LTD.
By:	/s/    Daniel W. Harness
	Daniel W. Harness Chief Executive Officer and President

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this annual report has been signed by the following persons in the capacities indicated on June 15, 2006.

Name	Positions
/s/    Daniel W. Harness	Director, Chief Executive Officer and President
Daniel W. Harness	(Principal Executive Officer)
/s/    Peter Mainz	Chief Financial Officer (Principal Financial Officer)
Peter Mainz
/s/    Thomas D’Orazio	Vice President, Finance (Principal Accounting
Thomas D’Orazio	Officer)
/s/    Jonathan F. Boucher	Director and Vice President
Jonathan F. Boucher
/s/    John W. Jordan II	Director
John W. Jordan II
/s/    David W. Zalaznick	Director
David W. Zalaznick
/s/    Thomas H. Quinn	Director
Thomas H. Quinn
/s/    Gerald J. Cardinale	Director
Gerald J. Cardinale
/s/    Bryan Kelln	Director
Bryan Kelln
/s/    J. Jack Watson	Director
J. Jack Watson
/s/    H. Russel Lemcke	Director
H. Russel Lemcke
/s/    Charles H. Gailliot	Director
Charles H. Gailliot

90

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Sensus Metering Systems Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Raleigh, State of North Carolina, on June 15, 2006.

SENSUS METERING SYSTEMS INC.
By:	/s/    Daniel W. Harness
	Daniel W. Harness Chief Executive Officer and President

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this annual report has been signed by the following persons in the capacities indicated on June 15, 2006.

Name	Positions
/s/    Daniel W. Harness	Director, Chief Executive Officer and President
Daniel W. Harness	(Principal Executive Officer)
/s/    Peter Mainz	Chief Financial Officer (Principal Financial Officer)
Peter Mainz
/s/    Thomas D’Orazio	Vice President, Finance (Principal Accounting
Thomas D’Orazio	Officer)
/s/    Jonathan F. Boucher	Director and Vice President
Jonathan F. Boucher
/s/    John W. Jordan II	Director
John W. Jordan II
/s/    David W. Zalaznick	Director
David W. Zalaznick
/s/    Thomas H. Quinn	Director
Thomas H. Quinn
/s/    Gerald J. Cardinale	Director
Gerald J. Cardinale
/s/    Bryan Kelln	Director
Bryan Kelln
/s/    J. Jack Watson	Director
J. Jack Watson
/s/    H. Russel Lemcke	Director
H. Russel Lemcke
/s/    Charles H. Gailliot	Director
Charles H. Gailliot

91

EXHIBIT INDEX

Exhibit No.	Description
3.1	Amended and Restated Certificate of Incorporation of Sensus Metering Systems Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2005).
3.2	By-Laws of Sensus Metering Systems Inc. (incorporated by reference to Exhibit 3.2 to Registration Statement on Form S-4 filed on March 16, 2004).
3.3	Memorandum of Association of Company Limited by Shares of Sensus Metering Systems (Bermuda 2) Ltd. (incorporated by reference to Exhibit 3.3 to Registration Statement on Form S-4 filed on March 16, 2004).
3.4	Certificate of Incorporation of Sensus Metering Systems (Bermuda 2) Ltd. (incorporated by reference to Exhibit 3.4 to Registration Statement on Form S-4 filed on March 16, 2004).
3.5	Bye-Laws of Sensus Metering Systems (Bermuda 2) Ltd. (incorporated by reference to Exhibit 3.5 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2005).
4.1	Indenture, dated as of December 17, 2003, between Sensus Metering Systems Inc., Sensus Metering Systems (Bermuda 2) Ltd., the Subsidiary Guarantors defined therein and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-4 filed on March 16, 2004).
4.2	Form of Senior Subordinated Note due 2013 (incorporated by reference to Exhibit 4.2 to Registration Statement on Form S-4 filed on March 16, 2004).
4.3	Registration Rights Agreement, dated as of December 17, 2003, between Sensus Metering Systems Inc., Sensus Metering Systems (Bermuda 2) Ltd., M&FC Holding LLC, Invensys Metering Headquarters Corporation, Smith-Blair Inc., Invensys Metering Systems—North America Inc., Invensys Precision Die Casting Inc., Sensus Metering Systems IP Holdings, Inc. and Credit Suisse First Boston Corporation and Goldman, Sachs & Co., as initial purchasers (incorporated by reference to Exhibit 4.3 to Registration Statement on Form S-4 filed on March 16, 2004).
10.1	Credit Agreement, dated as of December 17, 2003, among Sensus Metering Systems Inc., Sensus Metering Systems (Luxco 2) S.A.R.L., Sensus Metering Systems (Bermuda 2) Ltd., the lenders party thereto, Credit Suisse First Boston Corporation, as Administrative Agent, Credit Suisse First Boston Corporation and Goldman Sachs Credit Partners L.P., as Joint Bookrunners and Joint Lead Arrangers, Goldman Sachs Credit Partners L.P., as Syndication Agent and National City Bank, as Documentation Agent (incorporated by reference to Exhibit 10.1 to Registration Statement on Form S-4 filed on March 16, 2004).
10.2	U.S. Guarantee and Collateral Agreement, dated as of December 17, 2003, among Sensus Metering Systems Inc., Sensus Metering Systems (Bermuda 2) Ltd., the Subsidiaries of Sensus Metering Systems Inc. identified therein, and Credit Suisse First Boston, as U.S. Collateral Agent (incorporated by reference to Exhibit 10.2 to Registration Statement on Form S-4 filed on March 16, 2004).
10.3	European Guarantee Agreement, dated as of December 17, 2003, among Sensus Metering Systems (Luxco 2) S.AR.L., Sensus Metering Systems (Bermuda 3) Ltd., Sensus Metering Systems (Luxco 1) S.AR.L., the Subsidiaries of Sensus Metering Systems (Luxco 2) S.AR.L. identified therein, and Credit Suisse First Boston, as European Collateral Agent (incorporated by reference to Exhibit 10.3 to Registration Statement on Form S-4 filed on March 16, 2004).

92

Exhibit No.		Description
10.4		Pledge Agreement, dated December 17, 2003, among Sensus Metering Systems (Luxco 3) S.AR.L. and Credit Suisse First Boston, as European Collateral Agent, relating to shares of Sensus Metering Systems France Holdings (incorporated by reference to Exhibit 10.4 to Registration Statement on Form S-4 filed on March 16, 2004).
10.5		Pledge Agreement, dated December 17, 2003, among Sensus Metering Systems France Holdings and Credit Suisse First Boston, as European Collateral Agent, relating to shares of Financiere Pollux (incorporated by reference to Exhibit 10.5 to Registration Statement on Form S-4 filed on March 16, 2004).
10.6		Pledge Agreement, dated December 17, 2003, among Financiere Pollux and Credit Suisse First Boston, as European Collateral Agent, relating to shares of Invensys Metering Systems SAS (incorporated by reference to Exhibit 10.6 to Registration Statement on Form S-4 filed on March 16, 2004).
10.7		Shareholders Agreement, dated as of December 17, 2003, by and among Sensus Metering Systems (Bermuda 1) Ltd., The Resolute SIE, L.P., The Resolute Fund Netherlands PV I, L.P., The Resolute Fund Netherlands PV II, L.P., The Resolute Fund NQP, L.P., The Resolute Fund Singapore PV, L.P., GS Capital Partners 2000, L.P., GS Capital Partners 2000 Offshore, L.P., GS Capital Partners 2000 GmbH & Co. Beteiligungs KG, GS Capital Partners 2000 Employee Fund, L.P., and Goldman Sachs Direct Investment Fund 2000, L.P. (incorporated by reference to Exhibit 10.7 to Registration Statement on Form S-4 filed on March 16, 2004).
10.8		Management Subscription and Shareholders Agreement, dated March 5, 2004, by and among Sensus Metering Systems (Bermuda 1) Ltd. and the persons named therein (incorporated by reference to Exhibit 10.8 to Registration Statement on Form S-4 filed on March 16, 2004).
10.9	*	Employment and Non-Interference Agreement, dated December 17, 2003, by and between Dan Harness and Sensus Metering Systems Inc. (incorporated by reference to Exhibit 10.9 to Registration Statement on Form S-4 filed on March 16, 2004).
10.10	*	Employment and Non-Interference Agreement, dated December 17, 2003, by and between Peter Mainz and Sensus Metering Systems Inc. (incorporated by reference to Exhibit 10.10 to Registration Statement on Form S-4 filed on March 16, 2004).
10.11	*	Restricted Share Plan of Sensus Metering Systems (Bermuda 1) Ltd. (incorporated by reference to Exhibit 10.11 to Registration Statement on Form S-4 filed on March 16, 2004).
10.12	*	Form of Restricted Share Agreement (incorporated by reference to Exhibit 10.12 to Registration Statement on Form S-4 filed on March 16, 2004).
10.13		Consultant Subscription and Shareholder Agreement, dated March 5, 2004, by and among Sensus Metering Systems (Bermuda 1) Ltd. and the person named therein (incorporated by reference to Exhibit 10.13 to Registration Statement on Form S-4 filed on March 16, 2004).
10.14		The Jordan Company, L.P. Management Consulting Agreement, dated December 17, 2003, by and among The Jordan Company, L.P., Sensus Metering Systems Inc. and its direct and indirect subsidiaries party thereto (incorporated by reference to Exhibit 10.14 to Registration Statement on Form S-4 filed on March 16, 2004).
10.15		Letter Agreement, dated December 17, 2003, among The Jordan Company, L.P., Sensus Metering Systems Inc. and Goldman, Sachs & Co. (incorporated by reference to Exhibit 10.15 to Registration Statement on Form S-4 filed on March 16, 2004).
10.16		Non-Competition Agreement, dated December 17, 2003, by and between Invensys plc and Sensus Metering Systems Inc. (incorporated by reference to Exhibit 10.17 to Registration Statement on Form S-4 filed on March 16, 2004).

93

Exhibit No.		Description
10.17		Purchase Agreement, dated December 11, 2003, among Sensus Metering Systems Inc., Sensus Metering Systems (Bermuda 2) Ltd. and the Purchasers named therein (incorporated by reference to Exhibit 1.1 to Registration Statement on Form S-4 filed on March 16, 2004).
10.18		Stock Purchase Agreement, dated October 21, 2003, by and among the sellers identified therein, Invensys plc and IMS Meters Holdings, Inc. (incorporated by reference to Exhibit 2.1 to Registration Statement on Form S-4 filed on March 16, 2004).
10.19		Amendment No. 1 to Stock Purchase Agreement, dated December 17, 2003 (incorporated by reference to Exhibit 2.2 to Registration Statement on Form S-4 filed on March 16, 2004).
10.20		Amendment No. 1 to the Credit Agreement, dated October 14, 2004, among Sensus Metering Systems Inc., Sensus Metering Systems (Luxco 2) S.AR.L., Sensus Metering Systems (Bermuda 2) Ltd., the Lenders and Credit Suisse First Boston (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 18, 2004 (filed on October 18, 2004)).
10.21		Amendment No. 2 and Agreement to the Credit Agreement, dated May 12, 2006, among Sensus Metering Systems Inc., Sensus Metering Systems (Luxco 2) S.AR.L., Sensus Metering Systems (Bermuda 2) Ltd., the Lenders and Credit Suisse (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 12, 2006 (filed on May 17, 2006)).
10.22	*	Summary of Compensation Arrangements for Certain Named Executive Officers.
10.23	*	Management Incentive Plan of Sensus Metering Systems (Bermuda 2) Ltd. (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2005).
10.25		Asset Purchase Agreement, date June 2, 2006, by and between Sensus Metering Systems Inc. and Advanced Metering Data Systems, L.L.C.
21.1		Subsidiaries of Sensus Metering Systems (Bermuda 2) Ltd.
31.1		Certificate of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).
31.2		Certificate of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).
32.1		Certificate of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contracts and compensation plans.

94

EX-10.22

EXHIBIT 10.22

Summary of Compensation Arrangements for Certain Named Executive Officers

Employment-at-Will for Barry W. Seneri

Mr. Seneri does not have a written employment agreement. As an at-will employee, Mr. Seneri is eligible to receive a discretionary bonus under the terms of our Executive Bonus Plan, as approved by the Board of Directors and he is entitled to participate in all employee fringe benefit plans offered to our salaried employees. Mr. Seneri also receives a company car as part of his compensation package, equivalent to approximately $7,000 per year. Mr. Seneri is entitled to participate in the Restricted Share Plan of Holdings and is expected to be awarded restricted shares pursuant to the terms of the Restricted Share Plan and his restricted share agreement. Mr. Seneri is entitled to reimbursement for all reasonable travel and other expenses incurred during the performance of his duties in accordance with our expense reimbursement policy. In the event of an involuntary termination, Mr. Seneri would be entitled to 26 weeks of base salary payments, which is the standard severance package, based on his time of service, available to all of our salaried employees. Mr. Seneri’s annual base salary is $243,240.

Employment-at-Will for R. Douglas Neely

Mr. Neely does not have a written employment agreement. As an at-will employee, Mr. Neely is eligible to receive a discretionary bonus under the terms of our Executive Bonus Plan, as approved by the Board of Directors and he is entitled to participate in all employee fringe benefit plans offered to our salaried employees. Mr. Neely also receives a company car as part of his compensation package, equivalent to approximately $7,000 per year. Mr. Neely is entitled to participate in the Restricted Share Plan of Holdings and is expected to be awarded restricted shares pursuant to the terms of the Restricted Share Plan and his restricted share agreement. Mr. Neely is entitled to reimbursement for all reasonable travel and other expenses incurred during the performance of his duties in accordance with our expense reimbursement policy. In the event of an involuntary termination, Mr. Neely would be entitled to 26 weeks of base salary payments, which is the standard severance package, based on his time of service, available to all of our salaried employees. Mr. Neely’s annual base salary is $216,312.

Employment-Agreement for Jose Antonio Hernandez Morales

Mr. Hernandez Morales has a written German based employment agreement. Per the terms of his employment agreement, Mr. Hernandez Morales is eligible to receive a discretionary bonus under the terms of our Executive Bonus Plan, as approved by the Board of Directors and he is entitled to participate in all employee fringe benefit plans offered to our management level German employees. Mr. Hernandez Morales also receives a company car as part of his compensation package, equivalent to approximately €12,000 per year. Mr. Hernandez Morales is entitled to participate in the Restricted Share Plan of Holdings and is expected to be awarded restricted shares pursuant to the terms of the Restricted Share Plan and his restricted share agreement. Mr. Hernandez Morales is entitled to reimbursement for all reasonable travel and other expenses incurred during the performance of his duties in accordance with our expense reimbursement policy. In the event of an involuntary termination, per the terms of his employment agreement Mr. Hernandez Morales would be entitled to a nine month’s notice period prior to termination. Mr. Hernandez Morales’ annual base salary is €236,000.

EX-10.25

EXHIBIT 10.25

CONFIDENTIAL EXECUTION COPY

ASSET PURCHASE AGREEMENT

between

SENSUS METERING SYSTEMS INC.,

as Purchaser

and

ADVANCED METERING DATA SYSTEMS, L.L.C.,

as Seller

June 2, 2006

TABLE OF CONTENTS

		Page
ARTICLE 1     DEFINITIONS		1
1.1	Certain Defined Terms	1
1.2	Other Defined Terms	10
1.3	Accounting Terms	11
1.4	Other Definitional Provisions	11
ARTICLE 2     PURCHASE AND SALE OF ASSETS		11
2.1	Purchase and Sale of the Purchased Assets	11
2.2	Non-Transferable Contracts and Permits	14
2.3	Assumption of Liabilities	14
2.4	Closing Date Consideration; Adjustment of Closing Date Consideration	15
2.5	Earnout	16
2.6	Withholding and Transfer Taxes	16
2.7	Purchase Price Allocation	17
2.8	Closing	17
ARTICLE 3     REPRESENTATIONS AND WARRANTIES OF SELLER		20
3.1	Organization, Power and Authority; Capitalization	20
3.2	Due Authorization	20
3.3	No Violation; Consents and Notices	20
3.4	Ownership of Purchased Assets	21
3.5	Financial Statements; Distributions	21
3.6	Absence of Changes	21
3.7	Absence of Undisclosed Liabilities	23
3.8	Leased Personal Property	23
3.9	Real Property	23
3.10	Contracts	24
3.11	Intellectual Property	26
3.12	Sufficiency and Condition of Assets	27
3.13	Insurance	27
3.14	Environmental Matters and OSHA	27
3.15	Litigation	29

i

TABLE OF CONTENTS

(continued)

		Page
3.16	Tax Matters	29
3.17	Employee Benefit Plans	29
3.18	Labor Matters	30
3.19	Compliance with Laws	31
3.20	Accounts Receivable	32
3.21	Customers and Suppliers	32
3 22	Permits	32
3.23	FCC Licenses and Related Matters	32
3.24	Products	33
3.25	Inventory	34
3.26	Transactions with Affiliates	34
3.27	Brokers and Finders	34
3.28	Disclosure	34
3.29	No Other Representations or Warranties	35
ARTICLE 4     REPRESENTATIONS AND WARRANTIES OF PURCHASER		35
4.1	Organization and Corporate Power	35
4.2	Due Authorization	35
4.3	No Violation; Consents and Notices	35
4.4	Brokers and Finders	36
4.5	Litigation and Claims	36
4.6	Financial Capability	36
4.7	FCC Licenses	36
4.8	Operations	36
4.9	Inspections; No Other Representations or Warranties	36
ARTICLE 5     COVENANTS		37
5.1	Efforts	37
5.2	Conduct of Business Prior to Closing	37
5.3	Access and Cooperation Prior to Closing	38
5.4	Notification of Changes	39
5.5	HSR; Consents	39

ii

TABLE OF CONTENTS

(continued)

		Page
5.6	FCC Matters	39
5.7	Certain Tax Matters	40
5.8	Employees and Benefit Plans	40
5.9	Consultants	41
5.10	No Solicitation or Negotiation	41
5.11	Confidential Information	41
5.12	Public Statements	42
5.13	Collection; Inquiries	42
5.14	Repayment of Indebtedness	42
5.15	TGB Funding Commitment and Marketing Undertaking	42
5.16	Asset Transfer or Liquidation Transactions	43
5.17	Financial Statements	44
5.18	Southern Telecom Agreement	44
5.19	Assignment and Recordation	44
5.20	Confidential Information	44
5.21	Alpha Storage Agreement	45
5.22	Purchaser Loan	45
5.23	Employment Agreements	45
ARTICLE 6     CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER		45
6.1	Representations and Warranties	45
6.2	Covenants	46
6.3	Required Consent	46
6.4	Governmental Approvals	46
6.5	No Prohibition	46
6.6	Documents	46
ARTICLE 7     CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER		46
7.1	Representations and Warranties	46
7.2	Covenants	46
7.3	HSR Waiting Period	46
7.4	No Prohibition	46

iii

TABLE OF CONTENTS

(continued)

		Page
7.5	Documents	47
7.6	Purchaser Parent Bye-Laws	47
ARTICLE 8     TERMINATION		47
8.1	Termination	47
8.2	Effect of Termination	47
ARTICLE 9     INDEMNIFICATION		47
9.1	Survival	47
9.2	Obligation to Indemnify	48
9.3	Procedures for Indemnification: Third Party Claims	50
9.4	Procedures for Indemnification: Other Claims	51
9.5	Right of Setoff	52
9.6	Adjustments to Losses	52
9.7	Characterization of Indemnification Payments	52
9.8	Remedies	52
ARTICLE 10     GENERAL PROVISIONS		52
10.1	Fees and Expenses	52
10.2	Bulk Sales Laws	53
10.3	Notices	53
10.4	Further Assurances	54
10.5	Assignment; Binding Effect	54
10.6	No Third Party Beneficiaries	54
10.7	Independent Contractors; No Implied Obligations	54
10.8	Headings	55
10.9	Counterparts	55
10.10	Integration of Agreement; Amendments and Waivers	55
10.11	Schedules	55
10.12	Governing Law; Waiver of Trial by Jury	55
10.13	Partial Invalidity	56
10.14	Construction	56

iv

Exhibits

Exhibit A		Forms of Bill of Sale and Bill of Sale and Assignment and Assumption Agreement
Exhibit B		Forms of Intellectual Property Assignments
Exhibit C		Form of Metrocall Assignment and Assumption Agreement
Exhibit D		Form of STI Assignment and Assumption Agreement
Exhibit E		Form of Noncompetition Agreement
Exhibit F		Form of Subscription Agreement
Exhibit G		Form of Termination and Release Agreement
Exhibit H		Form of Sensus/AMDS Termination Agreement
Exhibit I		Financial Statements
Exhibit J		Amended and Restated Bye-Laws
Exhibit K		Form of Loan and Security Agreement
Schedules
A	-	Excluded Assets
2.1(c)	-	Assigned Contracts
2.1(d)	-	Personal Property Leases
2.1(e)	-	Real Property Leases
2.1(f)	-	Purchased Intellectual Property
2.1(l)(i)	-	Open Customer Orders
2.1(l)(ii)	-	Open Supplier Orders
2.3(c)	-	Accounts Payable and Accrued Expenses
2.4(b)(i)	-	Example Current Asset Calculation
2.4(b)(ii)	-	Definition of Adjusted Closing Current Assets
2.5	-	Earnout Terms
3.1(b)	-	Capitalization
3.3(a)	-	Violations
3.3(b)	-	Consents and Approvals
3.4	-	Ownership of Purchased Assets
3.6	-	Absence of Changes
3.8	-	Leased Personal Property
3.10	-	Material Contracts
3.11(f)	-	Persons who have contributed to Owned Intellectual Property
3.11(i)	-	Open Source Software
3.13	-	Insurance
3.14	-	Environmental Matters and OSHA
3.15	-	Litigation
3.16	-	Tax Matters
3.17(a)	-	Employee Benefit Plans
3.18(a)(i)	-	Labor Matters – Employees
3.18(a)(ii)	-	Labor Matters – Independent Contractors
3.18(b)	-	Collective Bargaining Agreements
3.18(c)	-	Labor Matters
3.18(d)	-	Labor Claims

v

3.21	-	Major Customers and Major Suppliers
3.23(a)	-	FCC Licenses
3.23(b)	-	Compliance with FCC Licenses
3.23(c)	-	FCC Licenses – Violations and Other Restrictions
3.25	-	Inventory
3.26	-	Transactions with Affiliates
3.27	-	Brokers and Finders
5.2	-	Permitted Actions
5.8(a)	-	Subject Employees
5.9	-	Subject Consultants
5.20	-	Retained NDAs

vi

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT is entered into on this 2nd day of June, 2006 by SENSUS METERING SYSTEMS INC., a corporation organized and existing under the laws of the State of Delaware, having its principal place of business located at 8601 Six Forks Road, Suite 300, Raleigh, North Carolina 27615 (“Purchaser”), and ADVANCED METERING DATA SYSTEMS, L.L.C., a limited liability company organized and existing under the laws of the State of Louisiana, having its principal place of business located at 19411 Helenberg Road, Suite 103, Covington, Louisiana 70433 (“Seller”).

RECITALS

WHEREAS, Purchaser desires to acquire the Purchased Assets (as defined herein) from Seller;

WHEREAS, Seller desires to sell to Purchaser such Purchased Assets, all as more particularly set forth in this Agreement; and

NOW, THEREFORE, in consideration of the covenants, agreements, representations and warranties set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Purchaser and Seller agree as follows:

AGREEMENT

ARTICLE 1

DEFINITIONS

1.1 Certain Defined Terms. The following terms used in this Agreement have the following meanings:

“Accounts Payable” means trade accounts payable of Seller (including payables owing pursuant to Open Supplier Orders), excluding payables owing to any Affiliate of Seller.

“Accounts Receivable” means (i) all trade accounts receivable and other rights to payment from customers of Seller and the full benefit of all security for such accounts or rights of payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or services rendered to customers of Seller, (ii) all other accounts or notes receivable of Seller and the full benefit of all security for such accounts or notes and (iii) any claim, remedy or other right related to any of the foregoing.

“Adjusted Closing Current Assets” has the meaning set forth in Schedule 2.4(b)(ii).

“Affiliate” means, as to any Person, any other Person that directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities, or partnership or other

ownership interests, by contract or otherwise), provided, that without limiting the foregoing: (a) any Person that owns directly or indirectly securities or ownership interests having more than fifty percent (50%) of the voting power for the election of directors or other members of the governing body of any other Person will be deemed to control such other Person; (b) each director, executive officer, limited liability company manager, or general partner of a Person shall be deemed to be an Affiliate of such Person; (c) spouses of any natural persons contemplated by clause (b) and any persons related to natural persons contemplated by clause (b) or their spouses to the second degree, by blood or marriage, shall be deemed to be Affiliates of the Person of which the persons contemplated by clause (b) is a director, executive officer, limited liability company manager, or general partner; and (d) if such Affiliate is an officer, director, limited liability company manager, or general partner of a corporation, company or partnership, such corporation, company or partnership shall be deemed to be an Affiliate of such Person. Anything to the contrary notwithstanding, Axonn L.L.C. and Axonn Corporation shall be considered Affiliates of Seller for purposes hereof.

“Aggregate Consideration” means, as of any particular date, the aggregate of (i) the Closing Cash Payment, (ii) the product of the total number of Vested Shares (as defined in the Subscription Agreement) on such date multiplied by $1,000 and (iii) all Earnout Payments made on or prior to such date.

“Agreement” means this Asset Purchase Agreement, as it may be amended from time to time.

“Bulk Sales Laws” means the Laws of any jurisdiction relating to bulk sales that are applicable to the sale of the Purchased Assets by Seller hereunder.

“Business” means Seller’s business and operations, as presently conducted or proposed to be conducted, including the provision of technology, equipment, applications, software or monitoring services in respect of (i) automatic meter reading, as well as interfaces to electricity, water and gas meters; (ii) radio frequency monitoring or control of equipment or devices; (iii) tower-based telemetry; (iv) sub-metering; and (v) equipment monitoring software-based value-added services relating to any of the foregoing.

“Business Day” means any day that is not a Saturday, a Sunday or a day on which commercial banks in New York, New York are required or permitted to be closed for business.

“CERCLA” has the meaning set forth in the definition of “Environmental Laws.”

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute.

“Consideration Shares” means 30,000 shares of Purchaser Parent’s Series C Convertible Redeemable Preference Shares.

“Contract” means any contract, agreement, lease, commitment, understanding, whether oral or written, which is intended by the parties thereto or purports to be legally binding and enforceable.

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“Controlled Affiliate” means, as to any Person, any other Person that directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities, or partnership or other ownership interests, by contract or otherwise), provided, that without limiting the foregoing: (a) any Person that owns directly or indirectly securities or ownership interests having more than fifty percent (50%) of the voting power for the election of directors or other members of the governing body of any other Person will be deemed to control such other Person; (b) each director, executive officer, limited liability company manager, or general partner of a Person shall be deemed to be an Affiliate of such Person; and (c) spouses of any natural persons contemplated by clause (b) and any persons related to natural persons contemplated by clause (b) or their spouses to the second degree, by blood or marriage, shall be deemed to be Affiliates of the Person of which the persons contemplated by clause (b) is a director, executive officer, limited liability company manager, or general partner.

“Copyrights” means all United States and foreign copyrights, including all copyright registrations and applications therefor, works of authorship (whether or not copyrightable), and Software.

“Current Assets” means the book value of the current assets of the Company included among the Purchased Assets, which current assets shall include only the assets which would be classified as current assets under GAAP.

“Distribution” means (i) any and all dividends or distributions of any nature made or paid in respect of any of Seller’s membership interests or other equity interests, whether in cash or property or any combination thereof, or (ii) the aggregate amount paid by Seller in respect of any and all membership interests or other equity interests of Seller redeemed, repurchased or otherwise acquired, directly or indirectly, by Seller.

“Distribution Amount” shall mean the aggregate value of all Distributions during the period from December 31, 2004 until Closing.

“Dollars” and “$” mean the lawful money of the United States of America.

“Earnout Payments” means the payments to Seller contemplated by Section 2.5.

“Earnout Term” has the meaning set forth in Schedule 2.5.

“Employee Benefit Plan” means any of the following which is sponsored, maintained or contributed to by Seller or any ERISA Affiliates, in which Seller or an ERISA Affiliate is a party or a participant, or pursuant to which Seller or any ERISA Affiliate has any Liability:

(i) any employee benefit plan as defined in Section 3(3) of ERISA;

(ii) any other pension; profit sharing; retirement; deferred compensation; stock purchase, stock option, stock appreciation, phantom stock or other equity-based; incentive; bonus; performance; vacation; termination; retention; change of control; severance; “golden

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parachute;” disability; hospitalization; medical; life insurance; cafeteria; flexible spending account; fringe benefit; or other employee benefit plan, program, policy, or arrangement.

“Environmental Laws” means all Laws relating to pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface, or subsurface strata), including, without limitation (i) the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. §§9601 et seq., as amended (“CERCLA”); (ii) the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, as amended, 42 U.S.C. §§6901 et seq.; (iii) the Emergency Planning and Community Right to Know Act (42 U.S.C. §§11001 et seq.); (iv) the Clean Air Act (42 U.S.C. §§ 7401 et seq.); (v) the Clean Water Act (33 U.S.C. §§1251 et seq.); (vi) the Toxic Substances Control Act (15 U.S.C. §§2601 et seq.); (vii) the Hazardous Materials Transportation Act (49 U.S.C. §§5101 et seq.); (viii) the Safe Drinking Water Act (41 U.S.C. §§300f et seq.); (ix) any state, county, municipal or local statutes, laws or ordinances similar or analogous to the federal statutes listed in parts (i)-(viii) of this subparagraph, and (x) any rules, regulations, guidelines, directives, orders or the like adopted by governmental agencies pursuant to or implementing the statutes, laws, ordinances and amendments listed in parts (i)-(ix) of this subparagraph.

“Environmental Permits” means all permits, licenses, approvals, consents, orders and authorizations which are required under or issued pursuant to Environmental Laws.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor statute.

“ERISA Affiliate” means, with respect to any Person, any trade or business (whether or not incorporated) which is a member of a controlled group with such Person , or which is under common control with such Person within the meaning of Section 414 of the Code or Section 4001 of ERISA.

“Excluded Assets” means, collectively, all assets of Seller not included within the definition of “Purchased Assets,” including:

(i) all Contracts other than the Assigned Contracts;

(ii) Seller’s corporate charter, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, minute books, stock transfer books, blank stock certificates, and other documents relating to the organization, maintenance, and existence of Seller as a limited liability company, as well as photocopies of any Records transferred to Purchaser reasonably necessary for Seller to file Tax Returns or administer its affairs after the Closing;

(iii) all Tax Returns of Seller;

(iv) all refunds, rebates or similar payments in respect of Taxes to the extent they relate to events or periods prior to Closing;

(v) all of Seller’s rights under this Agreement and the other Transaction Documents;

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(vi) all rights in connection with and assets of the Employee Benefit Plans;

(vii) all insurance policies and rights thereunder, including all insurance proceeds which Seller has a right to receive based upon events, circumstances or occurrences prior to the Closing; and

(viii) all of the assets listed on Schedule A attached hereto.

“FCC” means the United States Federal Communications Commission.

“FCC Expenses” means all Liabilities owed to the FCC incurred by Purchaser or Seller as a result of the assignments of the FCC Licenses as contemplated by this Agreement, including filing fees and any “unjust enrichment” or similar payment required to be made in connection therewith, but excluding any fees or expenses related to Seller’s Modification Application.

“Furniture and Fixtures” means furniture, fixtures and leasehold improvements and any and all assignable warranties covering such furniture, fixtures and leasehold improvements owned by Seller or in which Seller has an interest.

“GAAP” means generally accepted accounting principles in the United States, as promulgated in the official publications of the American Institute of Certified Public Accountants, consistently applied for all relevant periods presented.

“Governmental Authority” means the government of the United States of America, the government of any State therein, the government of any municipality therein, the government of any political subdivision therein and any department, division, commission, board, bureau, agency, judicial or administrative tribunal, or instrumentality of any of the foregoing.

“Hazardous Materials” means any chemical, waste, by-product, pollutant, contaminant, compound, product, substance, equipment or fixture defined as or deemed hazardous, carcinogenic, ignitable, corrosive, reactive or toxic under, or otherwise subject to regulation, control or remediation under, any Environmental Law. Without limiting the generality of the foregoing, the term Hazardous Materials includes, but is not limited to, petroleum and petroleum products.

“Health and Safety Laws” means any Law pertaining to the worker safety or workplace conditions, including, without limitation, the Occupational Safety and Health Act, as amended.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“Indebtedness” of any Person at any date means, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services which, in accordance with GAAP, would be required to be shown as a liability on the face of a balance sheet of such Person on such date (other than trade liabilities and accrued expenses, in each case to the extent incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under capitalized

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lease obligations, (d) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (e) the principal balance outstanding under any synthetic lease, off-balance sheet loan or similar off-balance sheet financing product, (f) all indebtedness referred to in clauses (a) through (e) above to the extent secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness and (g) any obligation of the type described in clauses (a) through (f) above of another Person for which and to the extent such Person has or may become liable pursuant to a guarantee of payment or performance.

“Intellectual Property” means any Trademark, Patent, Copyright, Trade Secret, domain name or any other similar type of intellectual property right under any law, statutory provision or common law doctrine in the United States or any other country.

“IRS” means the Internal Revenue Service of the United States.

“Law” means any code, law (including, without limitation, common law), ordinance, regulation, reporting or licensing requirement, rule or statute applicable to a Person or its assets, Liabilities or business, including, without limitation, those promulgated, interpreted or enforced by any Governmental Authority, in each case as amended or in effect prior to or on the Closing Date, including, in the case of Seller, the FCC Licenses.

“Liabilities” means liabilities or obligations of any nature, whether absolute, accrued, contingent or otherwise, whether due or to become due and whether or not required to be reflected or reserved against on a balance sheet under GAAP.

“Licensed Intellectual Property” means all Intellectual Property throughout the world that is licensed by third parties to Seller, including Software licensed to Seller pursuant to any Open Source Software licenses, and that is embodied by or embedded in the Seller Products or used or held for use in connection with the Purchased Assets or the conduct of the Business.

“Lien” means any mortgage, pledge, security interest, encumbrance, lien, claim, option, easement, deed of trust, right-of-way, encroachment, restriction on transfer (such as a right of first refusal or other similar rights), defect of title or charge of any kind, whether voluntary or involuntary, including any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.

“Losses” means any damages, dues, penalties, fines, costs, reasonable amounts paid in settlement, liabilities, obligations, taxes, Liens, losses, fees and expenses (including costs of investigation and defense, court costs, reasonable attorneys’ fees) or diminution of value, whether or not involving a third-party claim.

“Material Adverse Effect” means any circumstance, change or effect (i) on the Purchased Assets or the operations of the Business that, individually, or when taken together with all other

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related circumstances, changes to or effects on the Purchased Assets or the operations of the Business, is materially adverse to the condition (financial or otherwise), prospects, or results of operations of the Purchased Assets or the Business, taken as a whole, or (ii) which impairs or could reasonably be expected to impair Seller’s or its applicable Affiliates’ ability to timely consummate the transactions contemplated by this Agreement or timely perform their material obligations under this Agreement in accordance with the terms hereof; provided that none of the following (or the results thereof) shall be, or shall be deemed to result in, a Material Adverse Effect: (A) any change in Law or accounting standards or interpretations thereof applicable to the Business or the Purchased Assets, (B) any change in prevailing economic or general business conditions in the United States or internationally, or (C) any change in financial market conditions generally.

“Metrocall Assignment and Assumption Agreement” means an Assignment and Assumption Agreement, substantially in the form of Exhibit C hereto.

“Metrocall Obligations” has the meaning set forth in the form of the Metrocall Assignment and Assumption Agreement attached hereto as Exhibit C.

“Metrocall Rights” has the meaning set forth in the form of the Metrocall Assignment and Assumption Agreement attached hereto as Exhibit C.

“Modification Application” means the modification application filed with the FCC by Seller on May 1, 2006 and amended on May 23, 2006 (FCC File No. 0002587670), seeking to convert Seller’s Nationwide Narrowband PCS station license (KNKV203) to non-common carrier status, under Section 20.9(b) of the FCC’s rules.

“Ordinary Course of Business” means the ordinary course of Seller’s business and operations, consistent with Seller’s past custom and practice (including with respect to quantity and frequency).

“Owned Intellectual Property” means all Purchased Intellectual Property that is not (i) Licensed Intellectual Property, or (ii) freely available for use in the public domain.

“Patents” means all United States and foreign patents and patent applications, including all provisional, utility, continuation, continuation-in-part or divisional applications and all reissues thereof and all reexamination certificates issuing therefrom.

“Permits” means permits, certificates, licenses, orders, franchises, authorizations and approvals issued or granted by Governmental Authorities, other than the FCC Licenses.

“Permitted Liens” means (i) liens for Taxes not yet due and payable (other than taxes arising out of the transactions contemplated by the Agreement); (ii) mechanics’, materialmen’s, workers’, repairmen’s or other similar common law or statutory Liens arising or incurred in the Ordinary Course of Business and which secure obligations not yet due and payable, and (iii) other Liens or minor imperfections of title that do not adversely detract from the value of, and do not adversely interfere with the present use of, any of the Purchased Assets.

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“Person” means and includes natural persons, corporations, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, business trusts and other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof.

“Proceeding” means any action, arbitration, audit, hearing, investigation, claim, litigation or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Authority or arbitrator.

“Purchase Price” means, collectively, the Closing Cash Payment, the Consideration Shares, Seller’s right to receive the Earnout Payments, and the Assumed Liabilities assumed by Purchaser pursuant hereto.

“Purchaser Loan” means Purchaser’s loan to Seller, in the principal amount of $2,250,000, made pursuant to the Purchaser Loan Agreement.

“Purchaser Parent” means Sensus Metering Systems (Bermuda 1) Ltd., a Bermuda limited company.

“Purchaser Products” has the meaning set forth in Schedule 2.5.

“Purchaser Services” has the meaning set forth in Schedule 2.5.

“Registered Intellectual Property” means all Owned Intellectual Property that is registered or applied for with the applicable Governmental Authority in the United States and/or registered or applied for with any applicable governmental authority abroad and all domain names owned by Seller.

“Release” shall have the same meaning ascribed thereto under CERCLA Section 101(22), except that it shall apply to any and all Hazardous Materials, not just CERCLA hazardous substances.

“Seller’s Knowledge” means the actual knowledge, after reasonably diligent investigation of the applicable subject matter, of any of H. Britton Sanderford, Jr., Mohamad Motahari, Rick Rees, Gregg Larson, Phil Franklin, Marc Reed and Robert Davis.

“Seller Products” means any product manufactured, marketed, offered for sale or sold, or proposed to be manufactured, marketed, offered for sale or sold, from time to time by or on behalf of Seller.

“SMS (Bermuda 2)” means Sensus Metering Systems (Bermuda 2) Ltd., a Bermuda limited company.

“Software” means any computer program, including, without limitation, all application software, databases, compilations, tool sets, compilers, higher level or proprietary languages, related documentation and materials, whether in source code, object code or human readable form.

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“Southern Telecom Agreement” means that certain Agreement, dated as of August 24, 2004, between STI and Seller, as amended, restated or otherwise modified from time to time.

“STI” means Southern Telecom, Inc., a Delaware corporation.

“STI Assignment and Assumption Agreement” means an Assignment and Assumption Agreement, substantially in the form of Exhibit D hereto.

“STI Lease Obligations” has the meaning set forth in the form of the Metrocall Assignment and Assumption Agreement attached hereto as Exhibit D.

“STI Lease Rights” has the meaning set forth in the form of the Metrocall Assignment and Assumption Agreement attached hereto as Exhibit D.

“Target Current Assets” means $975,000.

“Tax” means any federal, state, county, local, franchise or foreign income, payroll, employment, excise, environmental, customs, franchise, windfall profits, withholding, social security (or similar), unemployment, real property, personal property (tangible or intangible), sales, use, transfer, registration, value added, gross receipts, net proceeds, turnover, license, ad valorem, capital stock, disability, stamp, leasing, lease, excess profits, occupational and interest equalization, fuel, severance, alternative or add-on minimum or estimated tax, charge, fee, levy, duty or other assessment, and other obligations of the same or of a similar nature to any of the foregoing due or claimed to be due by or to any Governmental Authority, including any interest, penalty or addition thereto, whether disputed or not.

“Tax Return” means any return, report, declaration, form, claim for refund or information return or statement required to be supplied to any Tax authority with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof, that includes any information relating to the business or assets of Seller.

“TGB” means any Tower Gateway Base Station built, used or operated in connection with the Business before or after the Closing.

“Trade Secrets” means all know-how, trade secrets and confidential or proprietary information, including concepts, methods, practices, processes, designs, customer lists, technical information, inventions and discoveries, in each case, in any form or medium.

“Trademarks” means all United States and foreign trade names, trade dress, registered and unregistered trademarks, service marks, logos and other source-identifying designations, including all registrations and applications therefor and all of the goodwill of the business connected with the use of and symbolized by the same.

“Transaction Documents” means this Agreement, the Bills of Sale, the Metrocall Assignment and Assumption Agreement, the Intellectual Property Assignments, the Subscription Agreement, the Noncompetition Agreement and any other agreements, documents, assignments or instruments to be executed and delivered pursuant to this Agreement.

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“Vehicles” means all motor vehicles and all assignable warranties of third parties related thereto.

1.2 Other Defined Terms. The following terms are defined in the sections indicated.

Assigned Contracts	2.1(c)
Assumed Liabilities	2.3
Bill of Sale	2.1
Cash	2.1(j)
Closing	2.8(a)
Closing Cash Payment	2.4
Closing Date	2.8(a)
COBRA	3.17(d)
Communications Act	3.23(b)
Confidential Information	5.11
Drop-Dead Date	8.1(b)
Equipment	2.1(b)
Excluded Liabilities	2.3
FCC Approvals	5.6(a)
FCC Licenses	3.23(a)
Final Amount	9.5
Financial Statements	3.5(a)
Goodwill	2.1(m)
Indemnification Cap	9.2(a)
Indemnification Deductible	9.2(a)
Intangibles	2.1(k)
Intellectual Property Assignments	2.1
Interim Balance Sheet	3.5(a)
Inventory	2.1(a)
Labor Claims	3.18(d)
Major Customer	3.21
Major Supplier	3.21
Material Contracts	3.10
Motahari	5.21
Motahari Assignment Agreement	5.21
Noncompetition Agreement	2.8(b)(iii)
Open Customer Orders	2.1(l)(i)
Open Source Software	3.11(i)
Open Supplier Orders	2.1(l)(ii)
Payoff Letters	2.8(b)(xi)
Personal Property Leases	2.1(d)
Pre-Paid Expenses	2.1(n)
Purchased Intellectual Property	2.1(f)
Purchased Assets	2.1
Purchaser	Preamble
Purchaser Indemnitee	9.2(a)
Purchaser Loan Agreement	5.22

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Real Property Leases	2.1(e)
Records	2.1(g)
Required Consent	6.3
Seller	Preamble
Seller Indemnitee	9.2(b)
Sensus/AMDS Termination Agreement	2.8(b)(xiv)
State Regulators	3.23(a)
Subject Consultants	5.9
Subject Employees	5.8
Subscription Agreement	2.8(b)(iv)
Transfer Taxes	2.6
Transferred Employees	5.8
Transferred Permits	2.1(h)
WARN Act	3.18(e)

1.3 Accounting Terms. For purposes of this Agreement, all accounting terms not otherwise defined herein have the meanings assigned to them in conformity with GAAP.

1.4 Other Definitional Provisions.

(a) Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular and vice versa. The term “including” is not limiting, and the words “hereof,” “herein,” “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. References to “Sections,” “Exhibits” and “Schedules” are to Sections, Exhibits and Schedules, respectively, of this Agreement, unless otherwise specifically provided. Terms defined herein may be used in the singular or the plural. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

(b) Accounting principles and practices are “consistently applied” when the accounting principles and practices observed in a current period are comparable in all material respects to the accounting principles and practices applied in the preceding period.

(c) Any representations or warranties concerning the enforceability of agreements shall in all cases be limited by the effects of bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights and remedies of creditors, and the effects of general principles of equity, whether applied by a court of law or equity.

ARTICLE 2

PURCHASE AND SALE OF ASSETS

2.1 Purchase and Sale of the Purchased Assets. Upon the terms and subject to the conditions contained herein, Purchaser agrees to purchase from Seller at the Closing, and Seller agrees to sell, grant, convey, assign, transfer and deliver to Purchaser or Purchaser Parent, as contemplated by the Bills of Sale, at the Closing, all of Seller’s right, title and interest, as of the Closing, in and to all of Seller’s property and assets, real personal or mixed, tangible and

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intangible, of every kind and description, wherever located (the “Purchased Assets”) including the following (but excluding the Excluded Assets):

(a) Inventory, Raw Materials and Supplies. To the extent owned by Seller on the Closing Date, all inventories of Seller, including all finished goods, work-in-process, raw materials, parts, components and supplies (the “Inventory”);

(b) Equipment, All of Seller’s machinery, equipment, Furniture and Fixtures, office equipment, computer equipment and peripherals, telephone equipment, parts, fixed assets, Vehicles and all other personal property used in the operations of the Business, together with all assignable warranties by the manufacturers or sellers of those items, and all maintenance records, brochures, catalogues and other documents relating to those items or to the installation or functioning of those items (the “Equipment”);

(c) Contracts. All of Seller’s right, title and interest in and to (i) those Contracts identified on Schedule 2. 1(c), (ii) all purchase orders evidencing Open Customer Orders contemplated by Section 2.1(1)(i), Accounts Receivable contemplated by Section 2.1(i), or Accounts Payable contemplated by Section 2.3(c), (iii) all other Contracts entered into by Seller in the Ordinary Course of Business that involve payments or other consideration not in excess of $25,000, in the aggregate, or that are accepted in writing by Purchaser prior to the Closing Date, and in each case, any security or similar deposits relating to such Contracts (the Contracts contemplated by clauses (i) through (iii) are referred to herein as the “Assigned Contracts”), (iv) the Metrocall Rights, and (v) the STI Lease Rights;

(d) Personal Property Leases. All leases for all leased personal property of Seller, as listed on Schedule 2.1(d), and any security or similar deposits relating to those leases (the “Personal Property Leases”);

(e) Real Property Leases. All leases for all leased real property of Seller, as listed on Schedule 2.1 (e), and any security or similar deposits relating to those leases (the “Real Property Leases”);

(f) Intellectual Property. All of Seller’s right, title and interest in and to all Intellectual Property throughout the world that is owned, possessed, used or licensed (as licensor or licensee) by or to Seller, including all of the Registered Intellectual Property, the Licensed Intellectual Property and the other Intellectual Property identified on Schedule 2.1(f) (the “Purchased Intellectual Property”);

(g) Records. All production records, product files, technical information, specifications, designs, drawings, maintenance and production records, test records, laboratory notebooks, confidential information, price lists, marketing plans and strategies, sales records, product development techniques or plans, customer lists and files (including customer credit and collection information), details of client or consultant contracts, operational methods, operating taxes, historical and financial records and files, and other proprietary information (the “Records”);

(h) Permits; FCC Licenses. All Permits held by or issued to Seller (the “Transferred Permits”) and all of the FCC Licenses;

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(i) Accounts Receivable. All Accounts Receivable that are owing as of the close of business on the Closing Date;

(j) Cash. Seller’s cash and marketable securities, if any, as of the Closing (the “Cash”);

(k) Intangible Property Rights. All choses in action, claims, rights to sue, and intangible property rights or rights to recovery or offset of any kind or character arising from or concerning the Business, the other Purchased Assets, or the Assumed Liabilities, including confidentiality obligations and similar obligations (“Intangibles”);

(l) Open Orders.

(i) To the extent not fulfilled prior to Closing, all open orders for goods and services with customers listed on Schedule 2.1(l)(i) and any additional open orders for goods and services with customers received by Seller in the Ordinary Course of Business after the date hereof (the “Open Customer Orders”); and

(ii) The right to receive all goods or services to be provided to Seller pursuant to open orders for goods and services with suppliers that are listed on Schedule 2.1(l)(ii) which remain unfulfilled as of the Closing Date, or pursuant to any additional open orders for goods and services with suppliers in respect of goods or services to be provided to Seller placed by Seller between the date hereof and the Closing Date (the “Open Supplier Orders”);

(m) Goodwill. All goodwill of the Business as a going concern, and all information and documents related thereto, including the exclusive right to represent itself as carrying on the Business in succession to Seller (“Goodwill”); and

(n) Pre-Paid Expenses. All pre-paid expenses, including all utility deposits, rental deposits, equipment deposits and prepaid taxes relating to the Business (“Pre-Paid Expenses”).

Notwithstanding the foregoing, the transfer of the Purchased Assets pursuant to this Agreement shall not include any Excluded Assets or the assumption of any Liability related to the Purchased Assets unless Purchaser expressly assumes the Liability pursuant to Section 2.3.

The Consideration Shares constitute consideration for the Purchased Assets sold, granted, conveyed, assigned and transferred to Purchaser Parent as contemplated hereby. The remaining portion of the Purchase Price constitutes consideration for the Purchased Assets sold, granted, conveyed, assigned and transferred to Purchaser as contemplated hereby. The Purchased Assets shall be transferred to Purchaser and Purchaser Parent pursuant to a Bill of Sale and a Bill of Sale and Assignment and Assumption Agreement substantially in the applicable form attached hereto as Exhibit A (together, the “Bills of Sale”), or, in the case of the Metrocall Rights, the Metrocall Assignment and Assumption Agreement, or, in the case of the STI Lease Rights, the STI Assignment and Assumption Agreement, or, in the case of Registered Intellectual Property, an assignment substantially in the form of the applicable forms of assignment attached as Exhibit B hereto (the “Intellectual Property Assignments”). The Bills of Sale will specify which Purchased

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Assets are purchased by Purchaser and which Purchased Assets are purchased by Purchaser Parent.

2.2 Non-Transferable Contracts and Permits. Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign or transfer any Assigned Contract (or any other Contract rights specified in Section 2.1(c)), Permit or FCC License or any claim or right or any benefit or obligation thereunder or resulting therefrom if an assignment or transfer thereof is prohibited or, without the consent of a third party thereto, would constitute a breach or violation thereof or is otherwise prohibited and such consent has not been obtained. If such a consent is required and has not been obtained or if an attempted assignment or transfer is ineffective or prohibited, Seller shall use its commercially reasonable efforts to cooperate with Purchaser in any reasonable arrangement requested and approved by Purchaser to provide for Purchaser the benefits under any such Assigned Contract or Transferred Permit. In connection with any such arrangement, (i) Seller shall bear the expense of structuring and implementing the arrangement and (ii) Purchaser shall honor Seller’s commitments under any such Assigned Contract or Transferred Permit to the extent arising following the close of Business on the Closing Date in connection with Purchaser’s use of any such Assigned Contract or Transferred Permit that is the subject of such arrangement (or assets or rights relating thereto) and not pertaining to any prior period.

2.3 Assumption of Liabilities. Subject to the terms and conditions of this Agreement, including Section 9.2(a)(iv) hereof, on the Closing Date, Purchaser agrees to irrevocably assume and become exclusively responsible for all of the following Liabilities of Seller related to the Business pursuant to the Bill of Sale (collectively, the “Assumed Liabilities”):

(a) all Liabilities arising under the Assigned Contracts, the Personal Property Leases and the Real Property Leases, in each case to the extent assigned to Purchaser, to the extent arising following the close of business on the Closing Date and to the extent not constituting a Liability relating to a breach by Seller under such Assigned Contracts, Personal Property Leases or Real Property Leases prior to Closing;

(b) without duplication, all obligations of Seller to deliver products or provide services pursuant to the Open Customer Orders or to purchase products or services pursuant to Open Supplier Orders;

(c) without duplication, to the extent owing as of the close of business on the Closing Date, the Accounts Payable and accrued expenses listed on Schedule 2.3(c) and any other Accounts Payable and accrued expenses arising after the date hereof in the Ordinary Course of Business, in each case to the extent that such accounts payable and accrued expenses relate to goods or services for which Purchaser will derive benefits after Closing;

(d) the Metrocall Obligations;

(e) the STI Lease Obligations;

(f) all other Liabilities arising out of or relating to Purchaser’s operation of the Business or Purchaser’s use, ownership or operation of the Purchased Assets on and after the Closing Date that do not pertain to the period prior to the Closing Date.

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All Liabilities of Seller or the Business or relating to the Purchased Assets other than the Assumed Liabilities (the “Excluded Liabilities”) are expressly not assumed by Purchaser pursuant to this Agreement.

2.4 Closing Date Consideration; Adjustment of Closing Date Consideration.

(a) Closing Date Consideration. The cash portion of the Purchase Price payable to Seller at Closing (the “Closing Cash Payment”) shall equal (i) forty-five million four-hundred thousand Dollars ($45,400,000), plus (ii) interest on $45,000,000, calculated at a rate of seven and one-half percent (7.5%) per annum from May 1, 2006 through the Closing Date, minus (iii) the Distribution Amount, minus (iv) one-half of the aggregate amount of all FCC Expenses incurred prior to Closing or agreed in good faith by Purchaser and Seller, as of Closing, to be incurred, minus (v) $22,500 (representing one-half of the HSR Act filing fee to be reimbursed by Seller pursuant to Section 5.5(a)), minus (vi) the outstanding principal amount and accrued and unpaid interest through the Closing Date on the Purchaser Loan, and plus or minus, as applicable (vii) the Closing Date Adjustment Amount. On the Closing Date, Purchaser shall (x) pay or cause to be paid the Closing Cash Payment, by wire transfer of immediately available funds, to an account designated by Seller in writing to Purchaser at least two (2) Business Days prior to Closing and shall (y) cause Purchaser Parent to deliver to Seller the Consideration Shares.

(b) Adjustment of Purchase Price.

(i) No later than two (2) Business Days prior to the Closing Date, Seller, at its sole cost, shall prepare and deliver to Purchaser a reasonably detailed good faith written estimate (“Seller’s Estimated Current Assets”) of the Current Assets as of the close of business on the Closing Date (the “Closing Current Assets”). At Closing, the Closing Cash Payment shall be (A) increased, dollar for dollar, by the amount by which Seller’s Estimated Current Assets exceeds the Target Current Assets, or (B) decreased, dollar for dollar, by the amount by which the Seller’s Estimated Current Assets is less than the Target Current Assets. The amount by which the Closing Cash Payment is to be increased or decreased is referred to herein as the Closing Date Adjustment Amount. Each determination of Current Assets pursuant to this Section 2.4(b) shall be made in accordance with GAAP. An example such determination as of December 31, 2005 is set forth in Schedule 2.4(b)(i).

(ii) Within sixty (60) days after the Closing Date, Purchaser, at its sole cost, shall prepare and deliver to Purchaser a reasonably detailed good faith written determination (“Purchaser’s Current Asset Calculation”) of Adjusted Closing Current Assets (as defined in Schedule 2.4(b)(ii). Seller shall have thirty (30) days from the date of receipt of Purchaser’s Current Asset Calculation to agree or disagree therewith. If Seller agrees with Purchaser’s Current Asset Calculation, the amount of Adjusted Closing Current Assets shown thereon shall be final and conclusive. If Seller does not agree with Purchaser’s Current Asset Calculation, Seller shall, within such thirty (30) day period, deliver a written objection (the “Objection”) to Purchaser which shall specify in reasonable detail the basis for the objection and set forth an alternative computation of Adjusted Closing Current Assets (the “Seller’s Current Asset Calculation”). If Seller does not deliver an Objection within such thirty (30) day period, then Purchaser’s Current Asset Calculation shall be final and conclusive. Upon Purchaser’s

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receipt of an Objection, Purchaser and Seller shall negotiate in good faith to resolve the Objection. If Purchaser and Seller resolve the Objection, the amount they agree upon shall be final and binding, but if the Objection cannot be resolved by such negotiation within thirty (30) days after Purchaser’s receipt of the Objection, either Purchaser or Seller may submit Purchaser’s Current Asset Calculation and Seller’s Current Asset Calculation, the Objection, and all work papers related thereto (collectively, the “Determination Materials”), to PricewaterhouseCoopers LLP or another nationally recognized accounting firm reasonably acceptable to Seller and Purchaser (the “Accounting Arbiter”), which shall review the Determination Materials and shall determine the amount of Adjusted Closing Current Assets, which may not be outside the range of Purchaser’s Current Asset Calculation and Seller’s Current Asset Calculation. The Accounting Arbiter shall notify the parties of its determination within thirty (30) days following the receipt of the Determination Materials, which determination shall be final and conclusive and binding on Purchaser and Seller. The fees and expenses of the Accounting Arbiter shall be borne by Purchaser and Seller in proportion to the degree to which their determinations of the Adjusted Closing Current Assets are determined by the Accounting Arbiter to be incorrect, as determined by the Accounting Arbiter. The calculation of Adjusted Closing Current Assets finally determined in accordance with this Section 2.4(b)(ii) is referred to herein as the “Final Closing Current Assets”.

(iii) If the Final Closing Current Assets is greater than the Estimated Closing Current Assets, Purchaser shall pay the amount of such difference (together with interest thereon as provided below) to Seller in cash by wire transfer of immediately available funds. If the Final Closing Current Assets is less than the Estimated Closing Current Assets, Seller shall pay the amount of such difference (together with interest thereon as provided below) to Purchaser by wire transfer of immediately available funds. The parties shall make any deliveries or payment required by this Section 2.4(b)(iii) within five (5) days after the earlier to occur of the date (A) the parties agree in writing as to the Final Closing Current Assets in accordance with Section 2.4(b)(ii) hereof or (B) the Accounting Arbiter notifies the parties in writing of its determination of the Final Closing Current Assets according to the provisions of Section 2.4(b)(ii) hereof. The payment, whether to or from Purchaser, shall bear interest from the Closing Date until the date of payment at an annual interest rate (calculated on the basis of a 365-day year) equal to the prime rate published by The Wall Street Journal on the Closing Date.

2.5 Earnout. The provisions set forth in Schedule 2.5 are incorporated herein by this reference.

2.6 Withholding and Transfer Taxes.

(a) Any transfer taxes, use or sales taxes, stamp duties, filing fees, registration fees, recordation expenses or other similar taxes, fees, charges or expenses incurred in connection with the transfer of the Purchased Assets to Purchaser or in connection with any of the other transactions contemplated by this Agreement, including, without limitation, any interest or penalties in respect thereof (the “Transfer Taxes”), shall be shared one-half by Purchaser and one-half by Seller. Seller and Purchaser shall cooperate with each other to use their commercially reasonable efforts to minimize the Transfer Taxes attributable to the transfer of the Purchased Assets.

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(b) Purchaser shall be entitled to deduct and withhold from the consideration otherwise payable to any person pursuant to this Article such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign tax law. If Purchaser so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to Seller.

2.7 Purchase Price Allocation. Not later than October 31, 2006, Purchaser shall prepare and deliver to Seller Purchaser’s proposed draft of IRS Form 8594 to be filed with the IRS. Seller and Purchaser shall cooperate in good faith to finalize a mutually agreeable Form 8594 before December 31, 2006. Seller and Purchaser acknowledge that the allocation of the Purchase Price set forth in such form shall be binding upon the parties for all applicable federal, state, local and foreign tax purposes. Seller and Purchaser covenant (i) to report gain or loss or cost basis, as the case may be, in a manner consistent with such allocation; (ii) not to voluntarily take any position inconsistent therewith in any Proceeding relating to such returns; and (iii) to use commercially reasonable efforts to sustain such allocation in any subsequent Tax audit or Tax dispute.

2.8 Closing.

(a) Time and Place of Closing. The transactions provided for herein shall be consummated at a closing (the “Closing”) to be held at the offices of Mayer, Brown, Rowe & Maw LLP in New York, New York, commencing at 10:00 a.m. local time on the fifth Business Day following satisfaction of the conditions precedent set forth in Articles 6 and 7, or at such other place and on such other date as may be mutually agreed upon by the parties. Subject to Article 8, failure to consummate the transactions contemplated hereby on the date and time and place determined pursuant to this Section 2.8(a) will not result in the termination of this Agreement and will not relieve either any party of any obligation under this Agreement. In such situation, the Closing shall occur as soon as reasonably practicable, subject to Article 8. The date on which the Closing actually occurs is referred to herein as the “Closing Date.”

(b) Seller’s Closing Deliverables. At the Closing, Seller shall deliver or cause to be delivered to Purchaser, the following:

(i) a counterpart of each Bill of Sale, duly executed on behalf of Seller;

(ii) assignments, in forms of the applicable Intellectual Property Assignments, in respect of all Patents, Trademarks and Copyrights included in the Purchased Intellectual Property;

(iii) a counterpart signature page to a Noncompetition Agreement, substantially in the form of Exhibit E hereto (the “Noncompetition Agreement”), duly executed by each of Mohamad Motahari and each Member of Seller, other than 225 Telecom, Inc. and Odlan Holdings, LLC;

(iv) a counterpart of a Subscription and Shareholders Agreement substantially in the form attached as Exhibit F hereto (the “Subscription Agreement”), duly executed on behalf of Seller;

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(v) a certificate from the Secretary of State of the State of Louisiana, dated a recent date prior to Closing, certifying as to Seller’s good standing;

(vi) a certificate from the Secretary of Seller, certifying as to (i) the resolutions adopted or other written records of the actions taken by the managers and members of Seller approving the transactions contemplated by this Agreement and (ii) to the incumbency of each individual signing this Agreement or any of the other Transaction Documents on behalf of Seller;

(vii) evidence, in form reasonably satisfactory to Purchaser, that the Required Consent has been obtained;

(viii) a certificate dated the Closing Date, of an executive officer of Seller certifying as to the satisfaction of the conditions set forth in Sections 6.1 and 6.2;

(ix) a certificate, signed by an executive authorized officer of Seller, certifying as to Seller’s non-foreign status complying with the provisions of U.S. Treasury Regulations section 1.1445-2(b);

(x) any and all Cash included among the Purchased Assets;

(xi) duly executed payoff letters in respect of all funded Indebtedness of Seller from each applicable lender to Seller evidencing or specifying the amount necessary to effect the repayment in full of the Indebtedness owing to such lenders, in each case, in form and substance reasonably satisfactory to Purchaser (the “Payoff Letters”);

(xii) evidence reasonably satisfactory to Purchaser that Seller has satisfied all of the requirements set forth in the Payoff Letters necessary for the release of all Liens against the Purchased Assets in favor of the secured parties delivering such Payoff Letters;

(xiii) an opinion of Schwaminger & Associates, P.C., Seller’s FCC counsel, in form and substance reasonably satisfactory to Purchaser;

(xiv) a counterpart to a Termination Agreement, substantially in the form of Exhibit H hereto (the “Sensus/AMDS Termination Agreement”), duly executed on behalf of Seller;

(xv) evidence in a form reasonably satisfactory to Purchaser that the FCC Approvals have been obtained, that Seller’s Modification Application has been granted by the FCC, and that the FCC has approved Purchaser to manufacture and market the radio equipment that Seller is authorized to manufacture and market before Closing;

(xvi) a counterpart to the Metrocall Assignment and Assumption Agreement, duly executed on behalf of Seller;

(xvii) a counterpart to the STI Assignment and Assumption Agreement, duly executed on behalf of Seller; and

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(xviii) a counterpart of the Motahari Assignment Agreement, duly executed by Motahari.

(c) Purchaser’s Closing Deliverables. At the Closing, Purchaser shall deliver or cause to be delivered to Seller, the following:

(i) the Closing Cash Payment, in accordance with Section 2.4;

(ii) a duly executed share certificate evidencing the Consideration Shares;

(iii) a counterpart of each Bill of Sale, duly executed on behalf of Purchaser or Purchaser Parent, as applicable;

(iv) certificates from the Secretaries of each of Purchaser and Purchaser Parent, certifying as to (i) the resolutions adopted or other written records of the actions taken by the Boards of Directors of each of Purchaser and Purchaser Parent approving the transactions contemplated by this Agreement and (ii) the incumbency of each individual signing this Agreement or any of the other Transaction Documents on behalf of Purchaser or Purchaser Parent, as applicable;

(v) a certificate from the Secretary of State of the State of Delaware, dated a recent date prior to Closing, certifying as to Purchaser’s good standing;

(vi) a certificate of compliance from the Office of Registrar of Companies of Bermuda in respect of Purchaser Parent, dated a recent date prior to Closing;

(vii) a certificate, dated the Closing Date, of an executive officer of Purchaser, certifying as to the satisfaction of the conditions set forth in Sections 7.1 and 7.2;

(viii) a counterpart of the Subscription Agreement, duly executed by Purchaser Parent;

(ix) a counterpart of the Sensus/AMDS Termination Agreement, duly executed on behalf of Purchaser;

(x) a counterpart to the Metrocall Assignment and Assumption Agreement, duly executed on behalf of Purchaser;

(xi) a counterpart to the STI Assignment and Assumption Agreement, duly executed on behalf of Purchaser;

(xii) an opinion of Conyers Dill & Pearman, Purchaser Parent’s Bermuda counsel, in form and substance reasonably satisfactory to Seller; and

(xiii) a counterpart of the Motahari Assignment Agreement, duly executed by Purchaser.

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Purchaser as follows:

3.1 Organization, Power and Authority; Capitalization.

(a) As of the date hereof and as of the Closing Date, Seller is duly organized, validly existing and in good standing under the laws of Louisiana. Seller has full limited liability company power, capacity and authority necessary under all applicable Laws to enter into and perform its obligations under this Agreement and the Transaction Documents to which it is a party, to consummate the transactions contemplated hereby and thereby and to own, operate or lease the properties that it purports to own, operate or lease and to carry on its business as it is now being conducted. Seller has no subsidiaries.

(b) Set forth on Schedule 3.1(b) hereto is a true and correct list of all holders of Seller’s issued and outstanding equity securities as of the date of this Agreement and a list of all holders of options, warrants, convertible securities and other rights to acquire equity securities of Seller, including, in each case, the number and type of security or right held by such holder. The terms of each class of Seller’s equity securities are as set forth in Seller’s Amended And Restated Operating Agreement, dated as of February 4, 2004, as amended by the First Amendment to Amended and Restated Operating Agreement, dated as of May 25, 2004, the Second Amendment to Amended and Restated Operating Agreement dated as of November 1, 2004, and the Third Amendment to Amended and Restated Operating Agreement dated as of July 12, 2005. Except as set forth on Schedule 3.1(b), Seller does not presently intend to effect any change in Seller’s equity capitalization.

3.2 Due Authorization. The execution and delivery by Seller of this Agreement and the other Transaction Documents and the consummation by Seller of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Seller and no other corporate proceeding is necessary for the execution and delivery of this Agreement or such other agreements by Seller, the performance by Seller of its obligations hereunder or thereunder and the consummation by Seller of the transactions contemplated hereby and thereby. This Agreement has been, and, when executed and delivered in accordance herewith, the other Transaction Documents to which Seller is a party shall have been, duly executed and delivered by Seller and constitute or shall constitute, as applicable, legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their terms.

3.3 No Violation; Consents and Notices.

(a) Except as disclosed on Schedule 3.3(a), the execution, delivery and performance by Seller of this Agreement and the other Transaction Documents to which it is or will be a party do not and will not (i) violate in any material respect any Law or any decree or judgment of any court or other Governmental Authority applicable to Seller, the Business, any of the Purchased Assets, or the Assumed Liabilities; (ii) violate or conflict in any material respect with, result in a material breach of, constitute a material default (or an event which, with or

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without notice or lapse of time or both, would constitute a material default) under, permit cancellation of, or result in the creation of any Lien upon any of the Purchased Assets under, any Contract; or (iii) violate or conflict with any provision of the Certificate of Formation, operating agreement or other organizational documents of Seller.

(b) Except as disclosed on Schedule 3.3(b), no consents or approvals of, or notices, filings or registrations by Seller to or with, any Governmental Authority or any other Person not a party to this Agreement are necessary in connection with the execution, delivery and performance of this Agreement or the other Transaction Documents, or in connection with the sale, transfer, conveyance, assignment or delivery of the Purchased Assets or Purchaser’s assumption of the Assumed Liabilities.

3.4 Ownership of Purchased Assets. Seller has sole good and indefeasible or marketable, as appropriate, title to, or a valid leasehold interest in, or valid license to use, all of the Purchased Assets, and the Purchased Assets are subject to no Liens except for Permitted Liens. Except as set forth on Schedule 3.4, there are no leases, subleases, licenses, sublicenses, concession or other agreements granting to any third party or parties the right of use any Purchased Asset, or any portion thereof or interest therein. There are no outstanding options or rights of first refusal to purchase any Purchased Asset, or any portion thereof or interest therein.

3.5 Financial Statements; Distributions.

(a) Attached hereto as Exhibit I are the following financial statements (collectively the “Financial Statements”): (i) an audited balance sheet of Seller as of December 31, 2005, (ii) unaudited balance sheets of Seller as of December 31, 2004, (iii) unaudited statements of income, cash flow and members’ capital accounts of Seller for the twelve-month periods ended December 31, 2005 and 2004 and for the period from Seller’s inception to December 31, 2003 and (iv) an unaudited balance sheet (the “Interim Balance Sheet”) and statements of income and cash flow for Seller as of and for the three (3) months ended March 31, 2006 (collectively, with the Interim Balance Sheet, the “Interim Financial Statements”). Each of the Financial Statements fairly presents in all material respects the financial position and operating results and cash flows of Seller at and as of the respective dates thereof or for the periods ended on such dates, as applicable, subject, in the case of the Interim Financial Statements, to normal recurring year-end adjustments recorded in a manner consistent with prior periods. The Financial Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, except that, with respect to the Interim Financial Statements: (i) notes have been omitted and (ii) certain of the long-term liabilities have been reclassified as short-term liabilities.

(b) Since December 31, 2004, Seller has not declared, set aside, paid or effected any Distributions.

3.6 Absence of Changes. Since December 31, 2005, no fact, event or circumstance has occurred or arisen which has had or is reasonably expected to have a Material Adverse Effect. Without limiting the foregoing, except as set forth on Schedule 3.6 or as expressly permitted by this Agreement, since such date:

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(a) Seller has not incurred any Liabilities of any nature, other than Accounts Payable incurred in the Ordinary Course of Business;

(b) Seller has not entered into any Contracts, other than purchase orders in respect of Accounts Receivable and Accounts Payable incurred in the Ordinary Course of Business;

(c) Seller has not modified the salary or other compensation (including benefits) of any of its employees, other than in the Ordinary Course of Business consistent with past practice;

(d) Seller has not sold, leased, transferred, licensed, assigned or otherwise disposed of any Purchased Asset, other than the sale of Inventory in the Ordinary Course of Business and Seller has not permitted, allowed or suffered any of the Purchased Assets to become subjected to any Lien, other than Permitted Liens;

(e) Seller has not written down or written up the value of any Inventory (including write-downs by reason of shrinkage or markdowns), determined as collectible any Accounts Receivable or any portion thereof which were previously considered uncollectible or written off as uncollectible any Accounts Receivable or any portion thereof, except in the Ordinary Course of Business and consistent with GAAP;

(f) Seller has not entered into any collective bargaining or labor agreement (oral and legally binding or written) or experienced any organized slowdown, work interruption, strike or work stoppage;

(g) Seller has not made any change in any of its methods of accounting or accounting principles, practices or policies, other than as a result of changes adopted in response to promulgations by national accounting bodies;

(h) No party (including Seller) has accelerated, terminated, modified, or canceled any Contract involving more than $25,000, individually or together with any related Contracts;

(i) Seller has not delayed or postponed the payment of any Accounts Payable or other Liabilities;

(j) Seller has not canceled, compromised, waived, or released any right or claim (or series of related rights or claims) either involving more than $25,000 or outside the Ordinary Course of Business;

(k) Seller has not suffered any casualty losses or damages in excess of $25,000 in the aggregate (whether or not insured against);

(l) Seller has not taken any action or omitted to take any action affecting the Business, other than in the Ordinary Course of Business; and

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(m) Seller has not agreed or committed to take any of the actions described in the foregoing clauses of this Section 3.6 not otherwise expressly permitted by this Agreement.

3.7 Absence of Undisclosed Liabilities. Seller has no Liabilities, contingent or otherwise, and no unrealized or anticipated losses, except (i) those reflected on the face of the Interim Balance Sheet, (ii) those incurred in the Ordinary Course of Business since March 31, 2006, and (iii) those that arise out of any matter specifically disclosed in any other Section of or Schedule to this Article 3.

3.8 Leased Personal Property. Except as set forth on Schedule 3.8, each of the leases described on Schedule 2.1(d) is in full force and effect and there are no existing defaults or events of default, real or claimed, under any of such leases by Seller or, to Seller’s Knowledge, any other party to such leases and there has been no occurrence or condition which, with notice or lapse of time or both, would constitute a default thereunder by Seller or, to Seller’s Knowledge, any other party to such leases. No rights of Seller under such leases have been assigned or otherwise transferred as security for any obligation of Seller. Except as described on Schedule 3.8, the consummation of the transactions provided for in this Agreement and the other Transaction Documents will not create or constitute a default or event of default under any such lease or require the consent of any other party to any such lease in order to avoid a default or event of default.

3.9 Real Property.

(a) Real Property Leases. The real property that is the subject of the Real Property Leases comprises all of the locations where the Business is conducted. Seller has delivered to Purchaser correct and complete copies of all of the Real Property Leases, together with all amendments, supplements, and modifications to each such Real Property Lease. With respect to each Real Property Lease:

(i) Seller has, and immediately after the Closing Purchaser will have, good title to the leasehold estates in each parcel of real property that is the subject of each such Real Property Lease, free and clear of any Lien (excluding Permitted Liens);

(ii) the Real Property Lease is legal, valid, binding, enforceable, and in full force and effect;

(iii) the Real Property Lease will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the Closing, subject to the receipt of all consents or approvals identified with respect thereto on Schedule 3.3(b) being obtained;

(iv) neither Seller nor, to Seller’s Knowledge, any other party to the Real Property Lease is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification, or acceleration thereunder;

(v) no party to the Real Property Lease has repudiated any provision thereof;

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(vi) there are no disputes, oral agreements, or forbearance programs in effect as to the Real Property Lease;

(vii) with respect to each sublease among the Real Property Leases, the representations and warranties set forth in subsections (i) through (vi) above are true and correct with respect to each lease or sublease under which such Real Property Lease was granted;

(viii) Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold or subleasehold granted pursuant to such Real Property Lease;

(ix) Seller has not subleased, licensed or otherwise granted any Person the right to use or occupy the real property that is the subject of such Real Property Lease or any portion thereof;

(x) all facilities leased or subleased thereunder have received all approvals of Governmental Authorities (including Permits) required in connection with the operation thereof and have been operated and maintained in accordance with applicable Laws;

(xi) all facilities leased or subleased thereunder are supplied with utilities and other services necessary for the operation of the Business; and

(xii) all rents, assessments, charges and other amounts owed by or to Seller have been paid when due through the date hereof and shall be paid, as and when due, through the Closing Date.

(b) Owned Real Property. Seller does not own any real property.

3.10 Contracts. Schedule 3.10 contains an accurate and complete list (delineated by reference to the appropriate clause below) of all Contracts of the following types to which Seller is a party or by which Seller or the Purchased Assets are bound (the “Material Contracts”):

(a) any Contract for the lease of personal property to or from any Person providing for lease payments in excess of $25,000 for any one lease;

(b) any Contract evidencing Indebtedness owed by Seller to any other Person;

(c) any Contract that evidences or grants or purports to grant a Lien on any of the Purchased Assets;

(d) any Contract for the purchase or sale of raw materials, equipment, commodities, supplies, products, or other personal property, or for the furnishing or receipt of services, the performance of which will extend over a period of more than one year or involve consideration of more than $25,000;

(e) any Contract between Seller and any Major Customer or Major Supplier other than Contracts that constitute Open Customer Orders or Open Supplier Orders;

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(f) any capitalized lease, pledge, conditional sale or title retention agreement involving the payment of more than $25,000, in the aggregate;

(g) any Contract with a sales representative, manufacturer’s representative, distributor, dealer, broker, sales agency, advertising agency or other Person engaged in sales, distributing or promotional activities, or any agreement to act as one of the foregoing on behalf of any Person, the performance of which will extend over a period of more than one year or involve or potentially involve payments of more than $25,000, in the aggregate;

(h) any Contract (including confidentiality or other similar arrangements) with any Person containing covenants limiting the freedom or ability of Seller to engage in any line of business or compete with any Person;

(i) any license, royalty or other Contract relating to the ownership, development, use or transfer of Intellectual Property;

(j) any Contract with any Governmental Authority;

(k) any collective bargaining agreement or similar labor Contract;

(l) any Contract with any Person for consulting or similar services;

(m) any Contract not entered into in the ordinary course;

(n) any Contract between Seller and any of its Affiliates, including any Contract pursuant to which Seller has borrowed or advanced or loaned any amount to any Affiliate;

(o) any Contract concerning a partnership or joint venture; and

(p) any other Contract (or group of related Contracts) the performance of which involves consideration in excess of $50,000.

True and complete copies of each of the Material Contracts, including all amendments, supplements and modifications to each such Material Contract, have been provided to Purchaser. In the case of any Material Contract described above which is not written, Seller has provided to Purchaser a written description of the material terms of such Material Contract. Except as disclosed on Schedule 3.10: (i) each Material Contract is in full force and effect and is a valid, legal and binding agreement of Seller, and to Seller’s Knowledge, enforceable against the other party or parties thereto in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law); (ii) neither Seller nor, to Seller’s Knowledge, any other party thereto, is in breach of or default under any Material Contract in any material respect; and (iii) to Seller’s Knowledge, no event has occurred and no circumstance exists that (with or without notice or the passage of time) may contravene, conflict with or result in the breach of or default under, or give Seller or any other party thereto the right to exercise of any remedy under, or to cancel, terminate, accelerate, or modify any Material Contract.

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3.11 Intellectual Property.

(a) Schedule 2.1(f) contains a complete and accurate list of all Registered Intellectual Property, Licensed Intellectual Property and Software owned or used by Seller.

(b) Seller owns or has all necessary rights in, to and under all Intellectual Property necessary for the manufacture and sale of the Seller Products that are presently manufactured, marketed, sold or offered for sale and the operation of the Business as presently conducted, free and clear of all Liens (excluding Permitted Liens). The Purchased Intellectual Property constitutes all of the Intellectual Property that is necessary for or used in the manufacture, development, marketing, distribution or sale of the Seller Products that are presently manufactured, marketed, sold or offered for sale and the operation of the Business as presently conducted. Seller has the right to use without payment to a third party all of the Purchased Intellectual Property. Seller’s rights in, to and under the Purchased Intellectual Property are freely transferable and assignable.

(c) Seller has taken commercially reasonable actions to protect the Purchased Intellectual Property. The transactions contemplated by this Agreement shall have no effect on the validity and enforceability of any of the Purchased Intellectual Property and the rights, title and interest thereto of Purchaser immediately after the Closing shall be identical to that of Seller immediately prior to the Closing. Seller has not received any written opinion of counsel (whether internal or external) relating to the patentability, infringement, validity or enforceability of any Purchased Intellectual Property or of any Intellectual Property of any third party.

(d) Seller has not disclosed to any third party any Trade Secrets that are embodied by or embedded in the Seller Products or used or held for use in connection with the Purchased Assets or the conduct of the Business without an appropriate non-disclosure agreement. To Seller’s Knowledge, Seller is not making any unauthorized use of any Trade Secret of any other Person in connection with the Seller Products, the Purchased Assets or the Business.

(e) The Owned Intellectual Property has not been sold, assigned or transferred to a third party, or abandoned (except for those items of Intellectual Property expressly identified on Schedule 2.1(f) as having been abandoned) or permitted to lapse (except for those items of Intellectual Property expressly identified on Schedule 2.1(f) as having lapsed), is not the subject of any pending opposition proceedings, pending cancellation proceedings, pending interference proceedings, pending lawsuit naming Seller as a party or any other pending challenges or proceedings. Except to the extent that certain items of Intellectual Property identified on Schedule 2.1(f) as having been abandoned or having lapsed have been abandoned or have lapsed, as applicable (i) the Registered Intellectual Property is valid and enforceable under all Laws pursuant to which it exists or was issued and (ii) all of the Registered Intellectual Property is currently in compliance with all legal requirements (including timely payment of all filing, examination and maintenance fees and the timely filing of all applications and affidavits of working, use and incontestability). None of the Registered Intellectual Property is subject to any maintenance fees or taxes or actions falling due within ninety (90) days after the Closing Date. Seller has the sole and exclusive right to bring actions for infringement or misappropriation of all of the Owned Intellectual Property.

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(f) Each of the Persons who have contributed to or participated in the discovery, creation or development of any Owned Intellectual Property (except with respect to Trademarks): (i) shall be listed on Schedule 3.11(f) and (ii) prior to the Closing, shall have assigned in an express written agreement in favor of Seller all rights, title and interest in, to and under such Owned Intellectual Property.

(g) No employee or third party has asserted any written claim or, to Seller’s Knowledge, any oral claim or, to Seller’s Knowledge, has threatened to assert any claim against Seller alleging that Seller, the Business, the Purchased Intellectual Property, the Seller Products, the Purchased Assets or the manufacture, development, marketing, distribution or use thereof misappropriate or infringe any Intellectual Property right of any such employee or third party, nor, to Seller’s Knowledge, does any employee or third party have any valid grounds or a valid basis for asserting any such claim.

(h) No claims have been made by Seller or any of its Affiliates against any Person in connection with the misappropriation, infringement or dilution of any Purchased Intellectual Property and, to Seller’s Knowledge, no Person is misappropriating, infringing or diluting any Purchased Intellectual Property.

(i) Except as listed on Schedule 3.11(i), (i) Seller does not make use of any open source, shareware, freeware code or other freely available Software (“Open Source Software”); (ii) Seller is in full compliance with all licenses applicable to any Open Source Software that it uses; (iii) Seller has not made any derivative works, improvements, enhancements or modifications of or to any Open Source Software; and (iv) no Software that is published or distributed by Seller incorporates any Open Source Software, and no Software included in the Purchased Assets has been contributed to open source development or forfeited to the public domain.

3.12 Sufficiency and Condition of Assets. The Purchased Assets (a) constitute all of the properties and assets, tangible and intangible (including Intellectual Property), real, personal and mixed, of any nature whatsoever, necessary for the conduct of the Business and (b) include all of the operating assets of Seller. The Equipment and other tangible Purchased Assets are in good operating condition, ordinary wear and tear excepted, and are in all material respects fit for the uses to which they are now being put. Seller does not own or lease any vehicles in connection with operating the Business.

3.13 Insurance. Schedule 3.13 contains a list of each insurance policy currently providing coverage for the Purchased Assets or liabilities of the Business and a copy of each such policy has been made available to Purchaser. Such insurance policies provide types and amounts of insurance customarily obtained by businesses similar to the Business.

3.14 Environmental Matters and OSHA.

(a) Except as set forth in Schedule 3.14 hereto, Seller:

(i) has been and is in compliance with all Environmental Laws and Health and Safety Laws, and has not (A) been notified that it is potentially liable under or

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(B) received any requests for information or other correspondence under any Environmental Law or Health and Safety Law;

(ii) has accurately prepared and timely filed with the appropriate jurisdictions all material reports and filings required pursuant to any Environmental Laws or Health and Safety Laws applicable to or affecting Seller, any Purchased Asset or the Business;

(iii) has not entered into or received any consent decree, compliance order, administrative order, settlement, indemnification, release agreement or proposed agreement from any Governmental Authority relating to Environmental Laws or Health and Safety Laws;

(iv) has not entered into or received, and is not in default under any judgment, order, writ, injunction or decree of, any Governmental Authority relating to Environmental Laws or Health and Safety Laws; and

(v) has obtained all Environmental Permits necessary in connection with the operations of the Business or the ownership, use or lease of any Purchased Assets. Except as described in Schedule 3.14, Seller is in material compliance with each such Environmental Permit (including any information provided on the applications therefor) and no such Environmental Permit restricts Seller from operating any Equipment covered by such Environmental Permit as currently being conducted.

(b) Except as set forth on Schedule 3.14,

(i) there are no actions, suits, claims, arbitration proceedings or complaints pending or, to Seller’s Knowledge, threatened by any Governmental Authority against Seller relating to compliance with Environmental Laws or Health and Safety Laws;

(ii) there has been no Release of Hazardous Materials by Seller or, to Seller’s Knowledge, any of its predecessors on, in, at or from any facility owned or operated by Seller;

(iii) waste generated, used, handled, stored, treated or disposed of by the Seller or, to Seller’s Knowledge, any other party on, in, at or from any facility owned or operated by Seller has been released or disposed of in material compliance with all applicable reporting requirements under any Environmental Laws or Health and Safety Laws; and

(iv) all above-ground and underground storage tanks, oil/water separators, sumps and septic systems located at any facility owned or operated by Seller are in material compliance with all Environmental Laws.

(c) Seller is in material compliance with Health and Safety Laws, and Seller has not received any notice that past or present conditions of its properties or assets violate any applicable Health and Safety Laws or otherwise can be made the basis of any claim, citation, proceeding or investigation, based on or related to violations of Health and Safety Laws.

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3.15 Litigation. Except as listed and described in reasonable detail on Schedule 3.15, and except for Labor Claims (which are addressed in Section 3.18(a)), there are no claims, charges, arbitrations, grievances, actions, suits, proceedings or investigations pending, or to Seller’s Knowledge, threatened, against Seller at law or in equity, before or by any Governmental Authority.

3.16 Tax Matters. Except as set forth in Schedule 3.16 hereto:

(a) All Tax Returns with respect to the Purchased Assets or income attributable therefrom that are required to be filed before the Closing Date, have been or will be filed, the information provided on such Tax Returns is or will be complete and accurate in all material respects, and all Taxes shown to be due on such Tax Returns or otherwise required to be paid have been or will be paid in full, to the extent that a failure to file such Tax Returns or pay such Taxes, or an inaccuracy in such Tax Returns, could result in Purchaser being liable for such Taxes or could give rise to a Lien on the Purchased Assets.

(b) Seller has not requested any extension of time within which to file any Tax Return, which Tax Return has not since been filed.

(c) There is no pending or, to Seller’s Knowledge, threatened action, audit, proceeding, or investigation by any taxing authority with respect to the assessment or collection of Taxes of Seller.

(d) Seller is not obligated to make, and as a result of any event connected with the transactions contemplated by this Agreement, will not become obligated to make, any “excess parachute payment” within the meaning of Section 280G of the Code, determined without regard to subsection (b)(4) thereof.

(e) Seller is not and has not been a member of an affiliated group (as defined in Section 1504(a) of the Code) or filed or been included in a combined, consolidated or unitary income tax return; Seller is not liable for the Taxes of any taxpayer other than Seller for any taxable period beginning before the Closing Date as a result of filing unitary, combined, or consolidated Tax Returns, as a transferee or successor, by contract or otherwise; and Seller is not a party to any Tax sharing agreement.

(f) Seller is not a “foreign person” within the meaning of Section 1445(f)(3) of the Code.

3.17 Employee Benefit Plans.

(a) Schedule 3.17(a) contains a true and complete list of all Employee Benefit Plans, including, without limitation, incentive, bonus, vacation and severance programs and agreements.

(b) True and complete copies of all Employee Benefit Plans have been furnished to Purchaser for review, including correct and complete copies of: (i) all current determination letters and, if any, rulings, opinion letters, information letters or advisory opinions issued by the IRS or the United States Department of Labor with respect thereto; (ii) annual

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reports or returns, audited or unaudited financial statements, actuarial valuations and reports, and summary annual reports prepared for any Employee Benefit Plan with respect to the most recent plan year; (iii) the most recent summary plan descriptions and any modifications thereto; and (iv) any filing or compliance action taken under Revenue Procedures 2000-16 (or any predecessor thereto).

(c) All Employee Benefit Plans listed on Schedule 3.17(c) comply in form and operation in all material respects with all applicable provisions of ERISA, the Code and other applicable laws. Each Employee Benefit Plan which is an employee pension benefit plan and which is intended to be qualified under Section 401(a) of the Code is the subject of a favorable determination letter or opinion letter that covers all amendments to any such plan for which the remedial amendment period (within the meaning of Section 401(b) of the Code and applicable regulations) has expired; and no event has occurred which will or could give rise to disqualification of any such plan under section 401(a) or 501(a) of the Code.

(d) None of the Employee Benefit Plans is a multiemployer plan (as defined in section 3(37) of ERISA), or is subject to title IV or ERISA or Section 312 of the Code. Seller has no Liabilities for providing, under any Employee Benefit Plan or otherwise, any post-retirement medical or life insurance benefits to any employee, other than statutory Liability for providing group health plan continuation coverage under Part 6 of Title I of ERISA and Section 4980B of the Code (collectively, “COBRA”) or applicable state Law.

(e) There have been no acts or omissions by Seller or any of its ERISA Affiliates which have given rise to or may give rise to interest, fines, penalties, taxes or related charges under section 502 of ERISA or Chapters 43, 47, 68 or 100 of the Code for which Purchaser or any of its ERISA Affiliates may be liable or under Section 409A of the Code for which Purchaser, any of its ERISA Affiliates or any participant in any Employee Benefit Plan that is a nonqualified deferred compensation plan (within the meaning of section 409A of the Code) may be liable.

3.18 Labor Matters.

(a) Schedule 3.18(a)(i) contains a complete and accurate list of the name; job title; date of employment; and current compensation paid or payable for each employee of Seller. Schedule 3.18(a)(ii) contains a complete and accurate list of the name; job title; date of engagement; and current compensation paid or payable for each independent contractor that provides consulting or similar services to Purchaser. True and complete copies of all agreements between Seller and its employees, and Seller and independent contractors that provide consulting or similar services to Seller, including in each case all amendments, supplements and modifications thereto, have been furnished to Purchaser. All such agreements are in full force and effect and are valid, legal and binding agreements of Seller and such employees and independent contractors. Neither Seller nor, to Seller’s Knowledge, any such employee or independent contractor (A) is in breach of or default under any such agreement, or (B) has terminated any such agreement. To Seller’s Knowledge, none of the Subject Employees or Subject Consultants desires or intends to discontinue, reduce or adversely modify any employment, consultancy or business relationship with Seller, or after Closing, Purchaser. Seller has not made any agreements or entered into any arrangements with any employees or

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independent contractors that would have the effect of depriving Purchaser of their services after Closing. Seller is not a party to any employment or severance agreements except as set forth on Schedule 3.18(a).

(b) Except as set forth on Schedule 3.18(b), Seller is neither a party to nor has any obligation pursuant to any collective bargaining or other Contract regarding the rates of pay or working conditions of its employees. Seller is not obligated under any Contract to recognize or bargain with any labor organization or union on behalf of such employees. Neither Seller nor any of its officers, directors or employees is subject to a charge or, to Seller’s Knowledge, threatened with the charge, of any unfair labor practice applicable to or affecting Seller or its employees. There is no strike, work stoppage, walkout, slowdown, handbilling, picketing or other “concerted action” involving any of Seller’s employees, and no grievance proceeding or other controversy is in progress, pending or threatened between Seller and any of its employees or any union or collective bargaining unit relating thereto.

(c) Seller is in material compliance with all applicable Laws concerning the employer-employee relationship and with all Contracts relating to employment, including all Laws relating to terms and conditions of employment, wages, hours, collective bargaining, workers’ compensation, occupational safety and health, equal employment opportunity and immigration, and are not engaged in any unfair labor or unlawful employment practice. Except as set forth on Schedule 3.18(c), there is no employment Contract, retention Contract, or consulting or services Contract between Seller and any of its employees.

(d) Except as set forth on Schedule 3.18(d), there are no material pending or, to Seller’s Knowledge, threatened claims, investigations, charges, citations, hearings, consent decrees or litigation concerning: wages, compensation, bonuses, commissions, awards or payroll deductions; equal employment or human rights violations regarding race, color, religion, sex, national origin, age, handicap, veteran’s status, marital status, disability or any other recognized class, status or attribute under any applicable federal, state, local or foreign equal employment Law prohibiting discrimination; unfair labor practices; current or expired collective bargaining agreements; occupational safety and health; workers’ compensation; wrongful termination, negligent hiring, invasion of privacy or defamation; immigration; or any other claim based on the employment relationship or termination of the employment relationship (collectively, “Labor Claims”).

(e) Seller has not taken any action that could constitute a “mass layoff” or “plant closing” within the meaning of the Worker Adjustment and Retraining Notification Act (the “WARN Act”) or could otherwise trigger any notice requirement or liability under any local or state plant closing notice Law. Further, Seller has fully complied with the WARN Act and its rules and regulations.

3.19 Compliance with Laws. Seller is not engaging in any activity or omitting to take any action so as to violate in any material respect any Law applicable to the operations of the Business, the Purchased Assets and the Assumed Liabilities. Seller is not subject to any judgment, order, writ, injunction or decree issued by any Governmental Authority applicable to Seller, the Business, the Purchased Assets, or the Assumed Liabilities.

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3.20 Accounts Receivable. All of the Accounts Receivable to be included among the Purchased Assets have or will have arisen out of bona fide transactions in the Ordinary Course of Business and are carried on Seller’s books and records at values determined in accordance with GAAP and consistently applied. Each such Account Receivable constitutes a valid and binding obligation of the obligor, maker, co-maker, guarantor, endorser or debtor thereof or thereunder. No request or agreement for deduction or discount has been made with respect to any of such Account Receivable and to Seller’s Knowledge all of such Accounts Receivable are fully collectible in the Ordinary Course of Business within 90 days after the day on which each respective receivable first becomes due and payable.

3.21 Customers and Suppliers. Schedule 3.21 sets forth (i) a list of names and addresses of the ten (10) largest customers (each, a “Major Customer”) and the ten (10) largest suppliers (each, a “Major Supplier”) (measured in each case by Dollar volume of purchases or sales during the year ended December 31, 2005) of the Business and the Dollar amount of purchase or sales which each such Major Customer or Major Supplier represented during each of the years ended December 31, 2003, 2004 and 2005 and the period from January 1, 2006 through March 31, 2006. Except as set forth in Schedule 3.21, no Major Customer (other than Purchaser) or Major Supplier has terminated or canceled its business relationship with Seller, or threatened in writing or, to Seller’s Knowledge, orally, to terminate, cancel, or materially reduce its business relationship with Seller (other than by virtue of becoming a customer or supplier of Purchaser following consummation of the transactions contemplated hereby). To Seller’s Knowledge, there exists no condition or state of facts or circumstances involving customers or suppliers that can reasonably be expected to result in a Material Adverse Effect or materially impair the conduct of the Business after the Closing in substantially the same manner in which the Business is currently being conducted (subject to changes resulting from transactions expressly contemplated hereunder).

3.22 Permits. The Transferred Permits constitute all of the Permits necessary to (i) operate the Business as currently conducted and (ii) use, occupy and own, as applicable, all of the Purchased Assets in the same manner as the Purchased Assets are currently used, occupied and owned. All of the Transferred Permits are valid and in full force and effect and Seller has paid all fees that are currently due in connection therewith. Seller has not received any written or, to Seller’s Knowledge, any other notice alleging a violation under any Transferred Permits or a failure to obtain any Permit applicable to the Business or the Purchased Assets. The consummation of the transactions provided for herein will not violate the terms of, or create a default or event of default under, any Transferred Permits or require the consent of any other party in order to avoid such a violation or default.

3.23 FCC Licenses and Related Matters.

(a) The attached Schedule 3.23(a) contains a complete listing of all approvals, authorizations, certificates and licenses issued by the FCC to Seller (the “FCC Licenses”). True and complete copies of all of the FCC Licenses which exist in a tangible form have been provided to or made available to Purchaser by Seller. Except as indicated on Schedule 3.23(a), Seller is in material compliance with the terms and conditions of each FCC License and has not received written notice or, to Seller’s Knowledge, any other notice, that it is currently in violation of any of the terms or conditions of such FCC License. Each FCC License is valid and

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in full force and effect. Seller owns or possesses all right, title and interest in and to each FCC License and, except as indicated on Schedule 3.23(a), has taken all necessary action to maintain such FCC Licenses, except to the extent as would not reasonably be expected to result in the revocation, termination or other loss thereof. No loss or expiration of any such FCC License is pending or reasonably foreseeable other than expiration (or, in the case of the multiple address system licenses included among the FCC Licenses, cancellation based on non-use) in accordance with the terms thereof. To Seller’s Knowledge, no event has occurred, and no agreement has been entered into by Seller with respect to the FCC Licenses that permits or after notice or lapse of time would result in any impairment of the rights of Seller with respect to such FCC Licenses. Except as indicated on Schedule 3.23(a), other than the FCC Licenses, there are no other regulatory licenses or authorizations of the FCC or any state regulatory agency having jurisdiction over similar matters (“State Regulators”) necessary for Seller to conduct its business operations in the manner presently conducted or to hold any of its assets.

(b) Except as indicated on Schedule 3.23(b), the operations of Seller are in material compliance with the terms and conditions of the FCC Licenses and with the Communications Act of 1934, as amended, applicable state law and the published rules, regulations, and policies promulgated by the FCC and the State Regulators thereunder, including without limitation, the obligations of Seller to make Universal Service Fund payments and comply with the provisions of the Communications Assistance to Law Enforcement Act, if any, and Seller has not done anything or failed to do anything which would reasonably be expected to cause the loss of any FCC License. In operating its business in the ordinary course or as marketed to customers, Seller does not provide common carrier or telecommunications service as defined by the Communications Act of 1934, as amended (the “Communications Act”), or rules or regulations promulgated thereunder.

(c) Except as set forth in Schedule 3.23(c), (i) no petition, action, investigation, notice of violation or apparent liability, notice of forfeiture, order to show cause, complaint, or proceeding seeking to revoke, reconsider the grant of, cancel, suspend, or modify any of the FCC Licenses is pending or, to Seller’s Knowledge, threatened before the FCC or any other forum or agency and (ii) none of the FCC Licenses is subject to any restriction or condition, including any Lien, that is not set forth in the terms of the FCC Licenses. Except as indicated on Schedule 3.23(c), the transactions contemplated by this Agreement (x) will not adversely change, alter or impair any of the FCC Licenses; and (y) will be, upon grant of the FCC Approvals, permissible under the FCC Licenses.

3.24 Products.

(a) There are no orders, decrees, statements, citations or decisions by any Governmental Authority that any of the Seller Products manufactured, marketed, distributed or sold by Seller is defective or fails to meet any standards promulgated by any Governmental Authority. There have been no recalls ordered by any Governmental Authority with respect to any Seller Product. To Seller’s Knowledge, there is no (i) fact relating to any Seller Product that could reasonably be expected to impose upon Seller, the Business or Purchaser a duty to recall any Seller Product or (ii) latent or overt design, manufacturing or other defect in any Seller Product.

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(b) Seller has furnished to Purchaser copies of each form of warranty used by it in respect of any of the Seller Products during the three (3) years preceding the date hereof, as well as copies of any warranty made which materially deviates from such forms. To Seller’s Knowledge, all of the Seller Products manufactured, sold, leased, and delivered by Seller have conformed in all material respects with all applicable contractual commitments and all express warranties, and Seller has no material Liability for replacement or repair thereof or other damages in connection therewith.

(c) To Seller’s Knowledge, Seller has no liability (whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product manufactured, sold, leased, or delivered by Seller and no Person has asserted any written claim alleging that Seller is responsible for any Liability arising out of any injury to individuals or property caused by any product manufactured, sold, leased or delivered by Seller.

3.25 Inventory. Each item of the Inventories is (i) merchantable and of a quality and quantity saleable and usable in the Ordinary Course of Business, (ii) fit for the purpose for which it was manufactured or purchased, and (iii) free from any material defects in workmanship and materials. None of the Inventory is obsolete or non-saleable, and none of such items has been pledged or otherwise given as collateral or is held by Seller on assignment or consignment. The Inventory is adequate for the present needs of the Business consistent with past practices. Set forth on Schedule 3.25 is a complete list of the Inventory, setting forth, in respect of each item thereof, description, class, quantity and value (at the lower of cost or market).

3.26 Transactions with Affiliates. Except as described in Schedule 3.26 and with respect to remuneration for services rendered as a director, officer or employee in the Ordinary Course of Business, (i) no Affiliate or member of Seller provides or causes to be provided any assets, services or facilities to Seller, (ii) Seller does not provide or cause to be provided any assets, services or facilities to its Affiliates or members, (iii) Seller does not beneficially own, directly or indirectly, any investment assets issued by its Affiliates or members, (iv) Seller has not entered into any Contract with its Affiliates or members (other than contracts with equity owners pertaining solely to such equity owners’ equity or debt interests in Seller) and (v) as of the Closing Date, there will be no Indebtedness, Accounts Receivable or accounts payable, between Seller, on the one hand, and its Affiliates or members, on the other.

3.27 Brokers and Finders. Except as set forth on Schedule 3.27, neither Seller nor any of its Affiliates has employed any investment banker, broker or finder, or incurred any liability for any investment banking fees, brokerage fees, commissions or finders’ fees in connection with the transactions contemplated by this Agreement. Seller has not retained or used, and will not retain or use, the services of any investment banker, broker or finder which would result in the imposition of a fee upon Purchaser should the transactions contemplated hereby be consummated. Seller shall pay any fee charged by England Securities, LLC in connection with the transactions contemplated hereby.

3.28 Disclosure. Neither any representation or warranty by Seller in this Agreement, nor any exhibit or schedule to this Agreement contains an untrue statement of material fact or

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omits to state a material fact necessary to make the statements contained herein and therein, in light of the context in which they are made, not misleading.

3.29 No Other Representations or Warranties. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE 3, NEITHER SELLER NOR ANY OTHER PERSON MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY ON BEHALF OF SELLER.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to Seller as follows:

4.1 Organization and Corporate Power. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Purchaser has full corporate power, capacity and authority necessary to enter into and perform its obligations under this Agreement and the Transaction Documents to which it is a party, to consummate the transactions contemplated hereby and thereby and to own, operate or lease the properties that it purports to own, operate or lease and to carry on its business as it is now being conducted.

4.2 Due Authorization. The execution and delivery by Purchaser of this Agreement and the other Transaction Documents and the consummation by Purchaser of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Purchaser and no other corporate proceeding is necessary for the execution and delivery of this Agreement or such other agreements by Purchaser, the performance by Purchaser of its obligations hereunder or thereunder and the consummation by Purchaser of the transactions contemplated hereby and thereby. This Agreement has been, and, when executed and delivered in accordance herewith, the other Transaction Documents to which Purchaser is a party shall have been, duly executed and delivered by Purchaser and constitute or shall constitute, as applicable, legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their terms.

4.3 No Violation; Consents and Notices.

(a) The execution, delivery and performance by Purchaser of this Agreement and the other Transaction Documents to which it is or will be a party do not and will not (i) violate any Law or any decree or judgment of any court or other Governmental Authority applicable to Purchaser; (ii) violate or conflict with, result in a breach of, constitute a default (or an event which, with or without notice or lapse of time or both, would constitute a default) under, permit cancellation of any material Contract to which Purchaser is a party or by which it is bound; or (iii) violate or conflict with any provision of the Certificate of Incorporation or By laws of Purchaser.

(b) No consents or approvals of, or notices, filings or registrations by Purchaser to or with, any Governmental Authority or any other Person not a party to this Agreement are necessary in connection with the execution, delivery and performance of this Agreement or the other Transaction Documents or Purchaser’s assumption of the Assumed Liabilities.

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4.4 Brokers and Finders. Neither Purchaser nor any of its Affiliates has employed any investment banker, broker or finder, or incurred any liability for any investment banking fees, brokerage fees, commissions or finders’ fees in connection with the transactions contemplated by this Agreement. Purchaser has not retained or used, and will not retain or use, the services of any investment banker, broker or finder which would result in the imposition of a fee upon Seller should the transactions contemplated hereby be consummated.

4.5 Litigation and Claims. As of the date of this Agreement, there is no civil, criminal or administrative action, suit, demand, claim, hearing or proceeding pending or, to the knowledge of Purchaser, threatened against Purchaser that, individually or in the aggregate, would reasonably be expected to impair or delay the ability of Purchaser to perform its obligations arising under this Agreement on or before the Closing Date. As of the date of this Agreement, Purchaser is not subject to any order of any Governmental Authority of competent jurisdiction or any arbitrator or arbitrators that would reasonably be expected to prevent or materially impair or delay the ability of Purchaser to perform its obligations arising under this Agreement on or before the Closing Date.

4.6 Financial Capability. At the Closing, Purchaser will have sufficient funds to make the Closing Cash Payment.

4.7 FCC Licenses. Purchaser has the legal right, capacity, eligibility, qualifications and power to assume responsibility for owning the FCC Licenses to be assigned to it hereunder (including accepting authority from the FCC to manufacture and market equipment under applicable equipment authorizations), and performing all obligations of the owner thereunder in accordance with the respective terms and conditions of such assigned licenses, in each case pursuant to the Communications Act and the rules of the FCC promulgated thereunder.

4.8 Operations. Purchaser is not an entity of which more than 25% of its revenues are derived from providing or maintaining communications towers and/or communications tower site management services.

4.9 Inspections; No Other Representations or Warranties.

(a) Purchaser has undertaken such independent investigation and has been provided with and has evaluated such documents and information as it has deemed necessary to make an independent evaluation of the past performance and future prospects of the Business and an informed and intelligent decision with respect to the execution, delivery and performance of this Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby and thereby.

(b) EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE 4, NEITHER PURCHASER NOR ANY OTHER PERSON MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY ON BEHALF OF PURCHASER.

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ARTICLE 5

COVENANTS

The parties hereto covenant and agree as follows:

5.1 Efforts. Upon the terms and subject to the conditions of this Agreement, each of the parties hereto shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Law to consummate the transactions contemplated by this Agreement (including the issuance of the Consideration Shares) and to cause each of the conditions to Closing set forth in Articles 6 and 7 below to be satisfied and shall otherwise act in good faith in connection with the transactions contemplated hereby and by the other Transaction Documents.

5.2 Conduct of Business Prior to Closing. On and after the date hereof until the Closing Date, except as expressly permitted or required by this Agreement, as expressly required by applicable Law or any Governmental Authority, or as otherwise expressly consented to by Purchaser in writing, Seller will:

(a) operate the Business only in the Ordinary Course of Business;

(b) not purchase or acquire any assets or properties for use in the Business, whether real or personal, tangible or intangible, other than raw materials purchased in the Ordinary Course of Business, and not sell or otherwise dispose of any property or asset constituting or used in the Business, except for the sale of Inventory in the Ordinary Course of Business;

(c) maintain the tangible Purchased Assets in their present order and condition, reasonable wear and tear excepted, and maintain all policies of insurance on the tangible Purchased Assets in amounts and on terms substantially equivalent to those in effect on the date hereof;

(d) not take any action or omit to take any action which will (i) cause a material breach of any Assigned Contract or Assumed Liability, or (ii) modify, amend or otherwise alter or change any term of any Assumed Contract or Assumed Liability;

(e) take all steps reasonably necessary to maintain the Purchased Intellectual Property and the Intangibles;

(f) not make or effect any Distribution;

(g) effect any changes in its equity capitalization, other than as set forth on Schedule 3.1(b);

(h) pay all Accounts Payable, and collect all Accounts Receivable, in the Ordinary Course of Business;

(i) comply in all material respects with all Laws applicable to Seller, the Business, the ownership and operation of the Purchased Assets and the Assumed Liabilities;

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(j) maintain the books and records and accounts of or applicable to the Business in the Ordinary Course of Business;

(k) not hire any new employees and use commercially reasonable efforts to retain the employment of all of the Subject Employees and not modify the salary or other compensation (including benefits) of any of its employees;

(l) continue the engagement of all of the Subject Consultants and not modify the fees or other compensation of any of its independent contractors;

(m) use commercially reasonable efforts to preserve the goodwill and patronage of the customers, employees, suppliers and others having a business relationship with Seller related to the Business;

(n) not institute or settle or compromise any Proceeding involving the Business, the Purchased Assets or the Assumed Liabilities;

(o) not engage in any practice, enter into any transaction, take any action or omit to take any action which, if engaged in, entered into, taken or omitted to be taken prior to the date of this Agreement, would be required to be disclosed on Schedule 3.6;

(p) except as required by bona fide incentive agreements or commitments with employees or consultants of Seller that are in effect on the date hereof, not issue or agree to issue any shares of voting stock or any other voting security or any rights to acquire any such additional stock or voting security; and

(q) not agree or commit to take any action precluded by any of the foregoing clauses of this Section 5.2.

Notwithstanding the foregoing, Seller shall be permitted to take those actions specified on Schedule 5.2 hereto.

5.3 Access and Cooperation Prior to Closing. Between the date of this Agreement and the Closing Date, Seller shall afford or cause to be afforded to the employees, authorized representatives and financing sources of Purchaser reasonable access to the offices, facilities, properties, assets, inventories, books, records, and documents of Seller during regular business hours, and will furnish Purchaser with such additional financial and operating data and other information relating to the Business, the Assumed Liabilities, the Purchased Assets and Seller’s employees as Purchaser may from time to time reasonably request. Seller shall use its commercially reasonable efforts to make its officers and employees available to Purchaser and its representatives to the extent as Purchaser and its representatives shall from time to time reasonably request. Purchaser will extend its full cooperation to Seller and its lawyers, accountants and other representatives and Seller, its lawyers, accountants and other representatives shall have full access to Purchaser’s books and records, facilities, accountants and key employees, in each case for purposes of Seller’s tax evaluation of the Consideration Shares.

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5.4 Notification of Changes. Prior to the Closing, each party will give prompt written notice to the other party of any discovery of a breach of any of the representations and warranties in Article 3 and Article 4 above or any development precluding or materially impairing or delaying its ability to perform its obligations under this Agreement or the other Transaction Documents or to satisfy the conditions to the other party’s obligations hereunder. No disclosure by any party pursuant to this Section 5.4, however, shall be deemed to amend or supplement the Schedules to this Agreement or to prevent or cure any misrepresentation, breach of warranty, or breach of covenant.

5.5 HSR; Consents.

(a) Purchaser and Seller have filed with the appropriate Governmental Authority the materials required by the HSR Act in connection with the transactions contemplated hereby, which materials comply in all material respects with the requirements of the HSR Act. Purchaser and Seller will promptly provide the Federal Trade Commission and the Department of Justice any supplemental information that may be reasonably requested in connection with the parties’ filings pursuant to the HSR Act in connection with the transactions contemplated hereby. Such supplemental information will comply in all material respects with the requirements of the HSR Act. Each of Purchaser and Seller will promptly furnish to the other (i) all necessary information as the other may reasonably request in connection with the preparation of any filing or submission pursuant to the HSR Act and (ii) copies of all written communications (and a written summary of the substance of any oral communication) to or from the Federal Trade Commission or Department of Justice or any other Governmental Authority in connection with the transactions contemplated by this Agreement. Purchaser and Seller shall share equally the filing fee in respect of the filing under the HSR Act contemplated hereby. To the extent that Purchaser has paid any of Seller’s portion of such filing fee, Seller shall promptly reimburse Purchaser for the amount of such portion paid by Purchaser.

(b) Except as relates to the FCC and the FCC Licenses, which are addressed in Section 5.6, (i) Seller shall use commercially reasonable efforts to obtain, make or give, as applicable, prior to the Closing, all of the consents and approvals of, and notices, filings or registrations with or to, third parties set forth on Schedule 3.3(b), (ii) in any case, subject to Section 2.2, where a necessary consent or approval has not been obtained at or prior to the Closing, Seller shall use commercially reasonable efforts to assist Purchaser, at Purchaser’s request and at Seller’s expense, to obtain such consent or approval after Closing and (iii) each party shall cooperate fully with the other party in furnishing any necessary information required in connection with obtaining any and all consents pursuant to this Section 5.5.

5.6 FCC Matters.

(a) The parties acknowledge that they have filed applications with the FCC for consent to the assignment of the Transferred FCC Licenses to Purchaser (the “FCC Approvals”). The parties acknowledge and agree that no assignment of any Transferred FCC License shall be deemed effective for any purpose until and unless the FCC Approvals have been granted by the FCC and any condition to the FCC Approvals have been satisfied by the parties. The parties will coordinate and cooperate with each other, will provide all necessary information and signatures for, and will diligently prosecute all filings relating to the FCC Approvals. For

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purposes hereof, “Transferred FCC Licenses” shall mean all of the FCC Licenses, except Seller’s authorization to manufacture and market radio equipment, which is addressed in Section 5.6(b) below.

(b) The parties will coordinate and cooperate with each other to notify the FCC of the change in ownership of Seller’s authorizations to manufacture and market radio equipment, as contemplated by Section 2.929(d) of the FCC’s rules and to obtain authorization from the FCC to allow Purchaser to manufacture and market that radio equipment for which FCC authorization has been obtained by Seller to operate the Business.

(c) Seller will diligently prosecute the Modification Application.

(d) Purchaser and Seller shall share equally the FCC Expenses. In the event either party becomes aware of a change in the FCC Expenses after the Closing Date, it will inform the other party and both parties will take such action as may be necessary to ensure that the definitive amount of FCC Expenses is shared equally by Purchaser and Seller.

5.7 Certain Tax Matters.

(a) Seller will (i) prepare properly and file duly and validly all Tax Returns required to be filed prior to the Closing Date with the appropriate taxing authority, (ii) pay duly and fully all Taxes that are due with respect to the periods covered by such Tax Returns or otherwise levied or assessed upon Seller or any of its assets or properties and (iii) withhold or collect and pay to the proper taxing authorities all Taxes that Seller is required to so withhold or collect and pay.

(b) All real estate, personal property, ad valorem and similar Taxes related to the Purchased Assets which shall have accrued and become payable with respect to any period ending on or prior to the Closing Date shall be paid by Seller. All such Taxes which shall be accrued but unpaid shall be prorated to the Closing Date. In connection with such proration of Taxes, in the event that actual Tax figures are not available at the Closing Date, proration of Taxes shall be based on 105% of the actual Taxes for the preceding year for which actual Tax figures are available. The amount due one party as a result of such proration shall be paid to the other party at the Closing.

5.8 Employees and Benefit Plans.

(a) As of Closing, Seller shall terminate the employment of all Subject Employees and shall encourage such employees to accept offers of employment from Purchaser effective as of the Closing Date. Seller covenants that it will not directly or indirectly induce, encourage, incentivise or otherwise influence any Subject Employee to discontinue, reduce or adversely modify such employment with Purchaser. Purchaser, in cooperation with Seller, shall, on or before the Closing Date and effective as of the Closing Date, extend an offer of employment to each of the Subject Employees at a wage or salary not less than the respective wages or salaries specified for such Subject Employees in that certain letter agreement, dated the date hereof, between Purchaser and Seller. Each Subject Employee shall be offered benefits consistent with those currently offered to other employees of Purchaser who are employed in comparable positions. Purchaser shall waive any applicable medical examinations of the Subject

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Employees. For purposes hereof, “Subject Employees” means all the individuals listed on Schedule 5.8(a), which Seller shall update prior to the Closing Date to (i) delete any individuals who are no longer employed by Seller and (ii) add any new employees employed after the date hereof with Purchaser’s written consent. Those Subject Employees who accept offers of employment with Purchaser and who become employees of Purchaser as of the Closing Date are referred to as “Transferred Employees.” Purchaser shall have no obligation to pay, and Seller shall indemnify Purchaser for, any severance benefit, short term or long term disability benefit, sick leave benefit, medical, health and dental benefits (including any benefits required by COBRA) or any other benefit or compensation payable to or with respect to Subject Employees or any other employees or former employees of Seller, in each case, arising out of such Subject Employees’ or other employees’ or former employees’ employment by Seller, except for any benefit that may be payable as a result of Purchaser’s failure to offer employment to such Subject Employee as required hereunder.

(b) Transferred Employees shall be given credit for all service with Seller, to the same extent as such service was credited for such purpose by Seller, under each benefit plan of Purchaser in which such Transferred Employees are eligible to participate for purposes of eligibility, vesting and benefit accrual; provided, however that service for benefit accrual purposes will only be credited under such plans which are not “employee pension benefit plans” under ERISA.

5.9 Consultants. As of Closing, Seller shall terminate the engagement of all of the individuals listed on Schedule 5.9 (the “Subject Consultants”) and shall encourage such Subject Consultants to accept offers of engagement from Purchaser effective as of the Closing Date. Seller covenants that it will not directly or indirectly induce, encourage, incentivise or otherwise influence any Subject Consultant to discontinue, reduce or adversely modify such consultancy or business relationship with Purchaser. Purchaser shall, on or before the Closing Date and effective as of the Closing Date, extend an offer of engagement to each of the Subject Consultants on such terms and conditions as Purchaser determines in its sole discretion.

5.10 No Solicitation or Negotiation. Unless this Agreement is terminated, Seller will not, and will cause its Controlled Affiliates and its and their respective directors, officers, employees, representatives, agents, advisors, accountants and attorneys not to, enter into any Contracts or engage in negotiations concerning, or provide any confidential information or data to any Person with respect to, or have any discussions with any Person relating to, any merger, consolidation, liquidation, dissolution, acquisition, business combination or purchase of all or any significant asset of, or any equity interest in, directly or indirectly, Seller, and will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing.

5.11 Confidential Information. From and after the Closing Date, Seller shall not, and shall ensure that its Controlled Affiliates and its and their respective directors, officers, employees, representatives, agents, advisors, accountants and attorneys do not, use or disclose to any Person any trade secrets, confidential information or other proprietary information of the Business or pertaining to the Seller Products, the Purchased Assets or the Assumed Liabilities that it possesses or has knowledge of, including any of the forgoing relating to (i) product designs, drawings and specifications, (ii) production or manufacturing processes, (iii) pricing of

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products or services and (iv) the terms of agreements with customers or suppliers (the “Confidential Information”). This restriction shall not apply to (a) the disclosure of any Confidential Information which becomes generally available to the public, other than as a result of a breach of this Agreement, or (b) the disclosure of any Confidential Information which is required by any Law, order or decree from any Governmental Authority, or, to the extent necessary, to assert its rights under this Agreement or any Transaction Document in any court or alternative dispute resolution proceeding, provided that Seller gives Purchaser prior written notice of any such disclosure and cooperates with Purchaser in any reasonable manner to protect the confidentiality of such information to the fullest extent possible. Seller acknowledges that in view of the nature of the Business and the objectives of the parties in entering into the Agreement, the restrictions contained in this Section 5.11 are reasonable and necessary to protect the legitimate business interests of Purchaser after the Closing, and that any breach or threatened breach of the provisions of this Section 5.11 will cause irreparable injury to Purchaser for which an adequate monetary remedy does not exist. Accordingly, in the event of any such breach or threatened breach of this Section 5.11, Purchaser shall be entitled, in addition to the exercise of other remedies, to seek and obtain injunctive relief, without necessity of posting a bond, restraining Seller or its Affiliate from committing such breach or threatened breach.

5.12 Public Statements. The parties shall consult with each other prior to issuing any public announcement or statement with respect to this Agreement or the transactions contemplated hereby and neither party shall issue any such public announcement or statement without the prior written consent of the other party hereto, except as may be required by applicable Law or the rules or regulations of any securities exchange or over the counter market on which the applicable party’s securities are traded, or pursuant to a form of press release agreed upon by the parties hereto prior to the Closing.

5.13 Collection; Inquiries. In recognition of the fact that following the Closing Seller may continue to receive payments in connection with the Accounts Receivable included among the Purchased Assets or in connection with any other Purchased Assets, Seller agrees to remit promptly (and at intervals not less often than weekly) to Purchaser all amounts so received by Seller. Any amounts received in any given week may be remitted either by wire transfer or physical delivery of endorsed checks. Seller agrees to use commercially reasonable efforts to cooperate in notifying customers, or prior customers, of Seller to make payments in connection with the aforementioned Accounts Receivable and other Purchased Assets directly to Purchaser and shall otherwise direct correspondence and inquiries relating to the Business or the Seller Products to Purchaser.

5.14 Repayment of Indebtedness. Notwithstanding anything to the contrary contained herein, Seller shall be entitled to expend cash to repay, prior to Closing, funded Indebtedness existing on the date of this Agreement or that is incurred in the Ordinary Course of Business after the date hereof. On or prior to the Closing Date, Seller shall repay all Indebtedness contemplated by the Payoff Letters, in accordance with the Payoff Letters.

5.15 TGB Funding Commitment and Marketing Undertaking.

(a) Purchaser will use Commercially Reasonable Efforts to fund the expenditure of $1,500,000 to build and install TGBs over the twenty-four (24) months following

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the Closing Date. Purchaser will use Commercially Reasonable Efforts to install those 100 TGBs to be ordered pursuant to that certain TGB purchase order contemplated on Schedule 5.2 within Purchaser’s fiscal year ending March 31, 2007.

(b) Until the second anniversary of the Closing Date, Purchaser will cause Purchaser Parent to adopt the Purchaser Products and Purchaser Services as Purchaser Parent’s and its subsidiaries’ principal approach for radio frequency fixed based automatic meter reading system sales for the electric power, water, and gas metering markets. After the second anniversary of the Closing Date, until the expiration of the Earnout Term, Purchaser will cause Purchaser Parent to use Commercially Reasonable Efforts to adopt the Purchaser Products and Purchaser Services as Purchaser Parent’s and its subsidiaries’ principal approach for radio frequency fixed based automatic meter reading system sales for the electric power, water, and gas metering markets.

(c) During the Earnout Term, Purchaser will use Commercially Reasonable Efforts to (i) support the development of its electric metering sales and marketing staff and (ii) as appropriate based upon customer requirements, license to at least one significant electric meter manufacturer the right to produce residential electric metering products which incorporate and use FCC licensed radio frequency communication technology mat Seller owned prior to the Closing Date.

(d) As used in this Section 5.15, “Commercially Reasonable Efforts” means those efforts and resources that Purchaser would use in respect of any other product, service or business initiative owned or undertaken by it that is materially similar to the Purchaser Products and Purchaser Services and the business opportunity represented thereby, taking into account present and future market potential, changes in technology, customer preferences, performance, changes in ownership, financial return, regulatory environment, and competitive market conditions, all as measured by Purchaser’s facts and circumstances at the time Purchaser is obligated to utilize such efforts.

(e) Each party agrees and acknowledges that (i) the covenants set forth in this Section 5.15, in Section 5.16 and in Schedule 2.5 hereof are the only covenants of Purchaser in respect of or in connection with the Earnout Payments, (ii) such covenants express the specifically bargained for and negotiated agreement of the parties and (iii) Purchaser expressly disclaims any covenants with respect to or in connection with the Earnout Payments other than as expressly set forth in this Section 5.15, Section 5.16 and in Schedule 2.5 hereof.

5.16 Asset Transfer or Liquidation Transactions.

(a) Purchaser shall not, except with respect to sales of product to customers in the ordinary course of business, agree to or consummate an Asset Transfer (as defined below) without the prior written consent of Seller, such consent not to be unreasonably withheld or delayed; provided, however, that Purchaser may engage in an Asset Transfer with (i) any of its Affiliates in the manner contemplated under Section 10.5 or (ii) any other Person if such other Person duly executes and delivers to Purchaser and Seller a written agreement to expressly assume all of Purchaser’s obligations under Sections 2.5, 5.15 and 5.16.

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(b) For purposes of paragraph (a) above, an “Asset Transfer” means any direct or indirect sale, assignment or transfer to any Person in any manner (including by a sale of assets, a sale of securities or an assignment) of all or substantially all of the Purchased Assets used or proposed to be used to provide products or services to electric utility companies, to gas utility companies or to water utility companies.

5.17 Financial Statements. If at any time during the Earnout Term Purchaser Parent ceases for any reason to file reports with the U.S. Securities and Exchange Commission, Purchaser shall, promptly upon the completion of each Year (as defined on Schedule 2.5), furnish to Seller copies of the annual financial statements for Purchaser and Purchaser Parent.

5.18 Southern Telecom Agreement.

(a) Seller shall use commercially reasonable efforts to cause the Southern Telecom Agreement to be terminated, to discharge Seller’s obligations with respect thereto and to obtain from STI a counterpart of a STI Termination and Release Agreement, substantially in the form of Exhibit G hereto (the “STI Termination and Release”), duly executed on behalf of STI prior to the Closing Date. Without limiting the foregoing, Seller shall exercise the Buyout Option under and as defined in the Southern Telecom Agreement if such Buyout Option is not earlier exercised by STI. In the event that Seller is not able to obtain such STI Termination and Release prior to Closing, Seller shall obtain from STI a counterpart of a STI Termination and Release as soon as practicable, and in no event later than sixty (60) days, after the Closing Date.

(b) From and after the Closing, Purchaser hereby agrees to pay rebates to STI Affiliates (as defined in the Southern Telecom Agreement) in the amount and on the other terms contemplated by, and subject to the limitations set forth in, Section 9 of the Southern Telecom Agreement, as in effect on the date hereof.

5.19 Assignment and Recordation. Prior to the Closing Date, Seller shall take all actions and execute all documents necessary to effect the assignments to Seller of all Owned Intellectual Property, if any. Seller shall take all actions and execute all documents necessary to effect the recordations of such assignments as promptly as possible with the appropriate agencies (including the United States Patent and Trademark Office) and shall do so prior to the Closing. Seller shall be responsible for the payment of all payments, charges, fees, taxes and tariffs, if any, levied or payable in connection with such assignments and recordations, and for the costs of all legal services in connection therewith.

5.20 Confidential Information. Schedule 5.20 sets forth a list of non-disclosure agreements to which Seller is a party and that are not included among the Assigned Contracts (the “Retained NDAs”). Seller represents and warrants that true, complete and correct copies of such Retained NDAs have been provided to Purchaser. Purchaser shall use its reasonable best efforts to maintain the confidentiality of, and to not disclose to third parties, any information or materials included among the Purchased Assets that Seller notifies Purchaser in writing and with specificity is subject to a particular Retained NDA; provided, however, that Purchaser’s obligation hereunder shall be no more onerous than the confidentiality obligation on Seller set forth in the applicable Retained NDA. Notwithstanding the foregoing, the obligation set forth in this Section 5.20 shall not preclude Purchaser or any of its Affiliates from disclosing any

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information or materials to the extent they are compelled to do so by law or legal, regulatory or other similar process, including pursuant to the order or requirement of a court, administrative or regulatory agency, or other governmental or similar body.

5.21 Alpha Storage Agreement. Seller shall cause Mohamad Motahari (“Motahari”) to assign to Purchaser, on or prior to Closing, pursuant to an Assignment and Assumption Agreement in a form substantially similar to the form of Bill of Sale and Assignment Assumption Agreement attached hereto Exhibit A-1, all of Motahari’s right, title and interest in and to that certain rental agreement dated December 12, 2005 between Motahari and Alpha Storage (the “Motahari Assignment Agreement”).

5.22 Purchaser Loan. Purchaser agrees to advance the Purchaser Loan subject to the terms and conditions set forth in this Section 5.22. Within two (2) Business Days following Purchaser’s receipt of a Payoff Letter (the “SBA Payoff Letter”) in respect of the full and final satisfaction and repayment of, and the release of any and all liens or other encumbrances arising under (i) that certain Note, dated June 3, 2003, in the principal amount of $348,500 made by Advanced Metering Systems, L.L.C. and payable to the order of BizCapital Bidco and (ii) any other loan or security agreements related thereto, (x) Purchaser and Seller shall execute and deliver to one another a Loan and Security Agreement in the form and substance of Exhibit K hereto (the “Purchaser Loan Agreement”) and (y) Purchaser shall advance the Purchaser Loan. The Purchaser Loan shall be funded in part to BizCapital Bidco or its designee in accordance with the SBA Payoff Letter and in part to AMDS in accordance with its funding instructions.

5.23 Employment Agreements. On or prior to June 13, 2006, Seller shall cause Mark Reid, Phil Franklin and Greg Larsen to execute and deliver Employment and Non-Interference Agreements (the “Additional Employment Agreements”) to Purchaser which reflect their respective titles and the salaries, potential bonuses and vacation time set forth in that certain letter referenced in Section 5.8(a), and otherwise are in substantially the same form and substance as that certain Employment and Non-Interference Agreement, dated the date hereof, between Purchaser and H. Britton Sanderford, Jr., except that (i) the Additional Employment Agreements shall exclude Section 12 of Mr. Sanderford’s agreement and (ii) “Business” shall be defined in the Additional Employment Agreements in the same way that “Business” is defined in this Agreement.

ARTICLE 6

CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER

The obligation of Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each of the following conditions all or any of which may be waived in writing, in whole or in part, by Purchaser:

6.1 Representations and Warranties. The representations and warranties set forth in Article 3 shall be true and correct in all material respects at and as of the Closing Date, except to the extent that such representations and warranties are qualified by terms such as “material” and “Material Adverse Effect,” in which case such representations and warranties shall be true and correct in all respects at and as of the Closing Date.

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6.2 Covenants. Seller shall have performed and complied in all material respects with all covenants and agreements contained herein and required to be performed or complied with by it on or prior to the Closing Date.

6.3 Required Consent. Seller shall have obtained any necessary consent, authorization, or approval of Metrocall USA, Inc. that is required for the transfer of the Purchased Assets and Assumed Liabilities or otherwise required for the execution, delivery and performance of this Agreement and the other Transaction Documents by Seller (the “Required Consent”).

6.4 Governmental Approvals. The applicable waiting period, if any, under the HSR Act shall have expired or been terminated, and the FCC Approvals shall be effective, as defined in Section 5.6(a).

6.5 No Prohibition. No Governmental Authority (including the FCC) having competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, regulation, decree, judgment, injunction or order (whether temporary, preliminary or permanent), in any case, which is in effect and which prohibits or enjoins the performance of this Agreement or the consummation of any of the transactions contemplated hereby; provided, however, that each of the parties shall use its reasonable best efforts to promptly cause any such decree, judgment, injunction or other order to be vacated or lifted, or to otherwise eliminate the grounds of such prohibition or enjoinder.

6.6 Documents. Purchaser shall have received all of the agreements, documents and items specified in Section 2.8(b).

ARTICLE 7

CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

The obligation of Seller to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each of the following conditions, all or any of which may be waived, in whole or in part, by Seller.

7.1 Representations and Warranties. The representations and warranties set forth in Article 4 shall be true and correct in all material respects at and as of the Closing Date, except to the extent that such representations and warranties are qualified by terms such as “material” and “Material Adverse Effect,” in which case such representations and warranties shall be true and correct in all respects at and as of the Closing Date.

7.2 Covenants. Purchaser shall have performed and complied in all material respects with all covenants and agreements contained herein and required to be performed or complied with by it on or prior to the Closing Date.

7.3 HSR Waiting Period. The applicable waiting period, if any, under the HSR Act shall have expired or been terminated.

7.4 No Prohibition. No Governmental Authority (including the FCC) having competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute,

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regulation, decree, judgment, injunction or order (whether temporary, preliminary or permanent), in any case, which is in effect and which prohibits or enjoins the performance of this Agreement or the consummation of any of the transactions contemplated hereby.

7.5 Documents. Seller shall have received all of the agreements, documents and items specified in Section 2.8(c).

7.6 Purchaser Parent Bye-Laws. Purchaser Parent shall have adopted Amended and Restated Bye-Laws in the substance attached hereto as Exhibit J (the “Amended and Restated Bye-Laws”). The Amended and Restated Bye-Laws shall be in full force and effect as of the Closing Date.

ARTICLE 8

TERMINATION

8.1 Termination. This Agreement may be terminated at any time prior to the Closing as follows:

(a) Purchaser and Seller may terminate this Agreement by mutual written consent; or

(b) Purchaser may terminate this Agreement by giving written notice to Seller at any time prior to the Closing if the Closing shall not have occurred on or before September 15, 2006 (the “Drop-Dead Date”), by reason of the failure of any condition precedent under Article 6 hereof (provided that Purchaser is not responsible for such failure of the Closing to occur through a breach of any of its representations, warranties, covenants or agreements contained herein); or

(c) Seller may terminate this Agreement by giving written notice to Purchaser at any time prior to the Closing if (i) the Closing shall not have occurred on or before the Drop-Dead Date, by reason of the failure of any condition precedent under Article 7 hereof (provided that Seller is not responsible for such failure of the Closing to occur through a breach of any of its representations, warranties, covenants or agreements contained herein) or (ii) the Closing shall not have occurred within sixty (60) days of the date that the FCC shall have provided written notice to Seller of its rejection of the Modification Application (provided that Seller is not responsible for such rejection through a breach of any of its representations, warranties, covenants or other agreements contained herein).

8.2 Effect of Termination. If this Agreement is terminated pursuant to Section 8.1, all obligations of the parties hereunder shall terminate, except that the obligations set forth in Sections 5.12 and 10.1 shall survive the termination of this Agreement, and except that no such termination shall relieve any party from liability for any prior breach of this Agreement.

ARTICLE 9

INDEMNIFICATION

9.1 Survival. All of the representations, warranties, agreements and covenants contained herein or in any instrument or document delivered or to be delivered pursuant to this

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Agreement, shall survive the execution of this Agreement and the Closing Date. Notwithstanding the foregoing, (a) the representations and warranties contained in Sections 3.1(a) (Organization and Power), 3.2 (Due Authorization), 3.27 (Brokers and Finders), 4.1 (Organization and Power), 4.2 (Due Authorization) and 4.4 (Brokers and Finders) of this Agreement shall survive the Closing and continue in full force and effect indefinitely; (b) the representations and warranties of Seller contained in Sections 3.14 (Environmental), 3.16 (Tax) and 3.17 (Employee Benefits) of this Agreement shall survive the Closing and continue in full force and effect until the expiration of the statute of limitations applicable thereto (including any extensions or waivers thereof); (c) the representations and warranties of Seller contained in Section 3.11 (Intellectual Property) shall survive and continue in full force and effect for sixty (60) months from the Closing Date, and (d) all other representations and warranties contained herein shall survive and continue for twenty-four (24) months from the Closing Date; provided, however, that in all cases, representations and warranties in respect of which an indemnification claim shall be pending as of the end of the applicable period referred to above shall survive with respect to such indemnification claim until the final disposition thereof. Unless otherwise stated, the agreements and covenants set forth in this Agreement shall survive and continue until the expiration of the statute of limitations applicable thereto or until all obligations set forth therein shall have been performed and satisfied.

9.2 Obligation to Indemnify.

(a) Subject to the terms and conditions of this Article 9, Seller shall indemnify Purchaser, its Affiliates and each of their respective directors, officers, employees, stockholders and partners (each a “Purchaser Indemnitee” and, collectively the “Purchaser Indemnitees”) in respect of, and save and hold each Purchaser Indemnitee harmless against any Losses such Purchaser Indemnitee incurs, suffers, sustains or becomes subject to as a result of or by virtue of, without duplication:

(i) the breach or inaccuracy of any representation or warranty of Seller contained in this Agreement or any other Transaction Document;

(ii) a breach of or failure to duly and timely perform any covenant or agreement of Seller made pursuant to this Agreement or any other Transaction Document;

(iii) any Excluded Liability;

(iv) any amount by which the aggregate Liabilities in respect of the Accounts Payable and accrued expenses assumed by Purchaser pursuant to Section 2.3(c) exceed, as of Closing, $400,000 and any amount by which the aggregate Liabilities assumed by Purchaser pursuant to the Metrocall Assignment and Assumption Agreement exceed $3,500,000;

(v) any Liability attributable to any complaint, claim or allegation made or asserted by Axonn, L.L.C., Axonn Corporation or their respective successors, Affiliates, employees or independent contractors attributable to Seller, Seller’s employees, the Purchased Assets or the Business prior to Closing;

(vi) one-half of any FCC Expenses not deducted from the Closing Cash Payment;

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(vii) any claim, demand, action or proceeding brought by any Person against any Purchaser Indemnitee after Closing asserting any Liability for Seller’s Taxes due prior to Closing or due after Closing with respect to any period or portion of a period prior to Closing; or

(viii) any claim by creditors of Seller arising out of or based upon the failure of Seller to satisfy its creditors or to comply with Bulk Sales Laws in connection with the transactions contemplated hereby except to the extent that such claim is a liability or obligation expressly assumed by Purchaser as an Assumed Liability;

provided, however, that (1) Seller shall not be required to indemnify Purchaser Indemnitees in respect of any Losses any Purchaser Indemnitee suffers, sustains or becomes subject to as a result of or by virtue of any of the occurrences referred to in Section 9.2(a)(i) above unless and until the aggregate of all such Losses exceeds $250,000 (the “Indemnification Deductible”), at which point Seller will be obligated to indemnify the applicable Purchaser Indemnitee(s) for all such Losses in excess of such deductible, and (2) in no event shall Seller be obligated to indemnify Purchaser Indemnitees in respect of any Losses any Purchaser Indemnitee suffers, sustains, or becomes subject to, as a result of or by virtue of any of the occurrences referred to in Section 9.2(a)(i) in excess of an amount equal to forty percent (40%) of the Aggregate Consideration as of the date of Seller’s indemnity payment (the “Indemnification Cap”), Notwithstanding any other provision of this Section 9.2(a), (i) the Indemnification Deductible and the Indemnification Cap shall not apply with respect to any Loss any Purchaser Indemnitee suffers, sustains or becomes subject to as a result of or by virtue of (x) any breach of Sections 3.1(a), 3.2, 3.4, 3.5(b), 3.11, 3.16 or 3.27, or (y) the fraud or the willful misconduct on the part of Seller or Seller’s Affiliates and (ii) the Indemnification Cap shall not apply with respect to any Loss any Purchaser Indemnitee suffers, sustains or becomes subject to as a result of or by virtue of any breach of Sections 3.4, 3.11, 3.14, 3.16, or 3.17, in which event Seller’s obligation to indemnify Purchaser Indemnitees shall be limited to 100% of the Aggregate Consideration as of the date of Seller’s indemnity payment. For the purposes of determining under this Article 9 the existence of any breach and for measuring Losses or for satisfying the Indemnification Deductible, to the extent such representation or warranty is qualified by reference to materiality or Material Adverse Effect (each a “Materiality Qualifier”), such representation or warranty shall be treated as if it did not contain such Materiality Qualifier.

(b) Subject to the terms and conditions of this Article 9, Purchaser shall indemnify Seller, its Affiliates and each of their respective directors, officers, employees, members and managers (each a “Seller Indemnitee” and, collectively the “Seller Indemnitees”) in respect of, and save and hold each Seller Indemnitee harmless against any Losses such Seller Indemnitee incurs, suffers, sustains or becomes subject to as a result of or by virtue of, without duplication:

(i) the breach or inaccuracy of any representation or warranty of Purchaser contained in this Agreement or any other Transaction Document;

(ii) a breach of or failure to duly and timely perform any covenant or agreement of Purchaser made pursuant to this Agreement or any other Transaction Document; or

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(iii) any Assumed Liability;

provided, however, that (1) Purchaser shall not be required to indemnify Seller Indemnitees in respect of any Losses any Seller Indemnitee suffers, sustains or becomes subject to as a result of or by virtue of any of the occurrences referred to in Section 9.2(b)(i) above unless and until the aggregate of all such Losses exceeds the Indemnification Deductible, at which point Purchaser will be obligated to indemnify the applicable Seller Indemnitee(s) for all such Losses in excess of such deductible and (2) in no event shall Purchaser be obligated to indemnify Seller Indemnitees in respect of any Losses any Seller Indemnitee suffers, sustains, or becomes subject to, as a result of or by virtue of any of the occurrences referred to in Section 9.2(b)(i) in excess of the Indemnification Cap. Notwithstanding any other provision of this Section 9.2(b), the Indemnification Deductible and the Indemnification Cap shall not apply with respect to any Loss any Seller Indemnitee suffers, sustains or becomes subject to as a result of or by virtue of (x) any breach of Sections 4.1 (Organization and Power), 4.2 (Due Authorization) or 4.4 (Brokers and Finders) or (y) the fraud or the willful misconduct on the part of Purchaser. For the purposes of determining under this Article 9 the existence of any breach and for measuring Losses or for satisfying the Indemnification Deductible, to the extent such representation or warranty is qualified by reference to materiality or Material Adverse Effect (each a “Materiality Qualifier”), such representation or warranty shall be treated as if it did not contain such Materiality Qualifier.

(c) The right to indemnification or other remedy based on representations, warranties, covenants, and obligations contained herein or in the other agreements or instruments delivered pursuant hereto will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation, recognizing, in part, the negotiated and agreed allocation of risk, obligation and liability between the parties.

9.3 Procedures for Indemnification: Third Party Claims.

(a) Notification of Proceeding. After receipt by an indemnified party under Section 9.2 of notice of the commencement of any Proceeding against it, such indemnified party, if a claim is to be made against an indemnifying party under such Section, shall promptly notify each indemnifying party thereof in writing; provided, however, that no delay on the part of the indemnified party in notifying any indemnifying party shall relieve the indemnifying party from any obligation hereunder unless (and then solely to the extent) the indemnifying party thereby is prejudiced.

(b) Right of Indemnifying Party to Defend Against Proceeding. Any indemnifying party will have the right to defend the indemnified party against the Proceeding with counsel of its choice reasonably satisfactory to the indemnified party so long as (i) the indemnifying party notifies the indemnified party in writing within fifteen (15) days after the indemnified party has given notice of the Proceeding that the indemnifying party will indemnify the indemnified party from and against the entirety of any Losses the indemnified party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the claim, (ii) the indemnifying party provides the indemnified party with evidence reasonably acceptable to the

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indemnified party that the indemnifying party will have the financial resources to defend against the Proceeding and fulfill its indemnification obligations hereunder, (iii) the claim for indemnification will not exceed the indemnifying party’s limitation of liability set forth in Section 9.2(a) or 9.2(b), as the case may be, (iv) the Proceeding involves only money damages and does not seek an injunction or other equitable relief, (v) settlement of, or an adverse judgment with respect to, the Proceeding is not, in the good faith judgment of the indemnified party, likely to establish a precedential custom or practice materially adverse to the continuing business interests or the reputation of the indemnified party or otherwise adversely affect its or its Affiliates other than as a result of monetary damages for which it would be entitled to indemnification, (vi) if the indemnifying party is also a party to such Proceeding, the indemnified party has determined in good faith that joint representation would not be inappropriate or result in different, conflicting, or adverse legal positions or interests, and (vii) the indemnifying party conducts the defense of the Proceeding actively and diligently.

(c) Participation in Defense; Consent to Entry of Judgment. So long as the indemnifying party is conducting the defense of the Proceeding in accordance with Section 9.3(b) above, (i) the indemnified party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Proceeding, (ii) the indemnified party will not consent to the entry of any judgment or enter into any settlement with respect to the Proceeding without the prior written consent of the indemnifying party (not to be withheld unreasonably), and (iii) the indemnifying party will not consent to the entry of any judgment or enter into any settlement with respect to the Proceeding without the prior written consent of the indemnified party (not to be withheld unreasonably), unless such judgment or settlement provides solely for money damages which are to be paid by the indemnifying party and includes a full and unconditional release of all indemnified parties.

(d) Assumption of Defense; Reimbursement for Costs; Responsibility for Losses. In the event any of the conditions in Section 9.3(b) above is not satisfied or becomes unsatisfied and remains uncured for ten (10) days following the indemnifying party’s receipt of written notice thereof, (i) the indemnified party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Proceeding in any manner it may deem appropriate (and the indemnified party need not consult with, or obtain any consent from, any indemnifying party in connection therewith), (ii) the indemnifying parties will reimburse the indemnified party promptly and periodically for the costs of defending against the Proceeding (including reasonable attorneys’ fees and expenses), and (iii) the indemnifying parties will remain responsible for any Losses the indemnified party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Proceeding to the fullest extent provided in this Article 9.

(e) Consent to Jurisdiction; Process. Seller hereby consents to the non exclusive jurisdiction of any court in which a Proceeding is brought against any indemnified party for purposes of any claim that an indemnified party may have under this Agreement with respect to such Proceeding or the matters alleged therein.

9.4 Procedures for Indemnification: Other Claims. A claim for indemnification for any matter not involving a third-party claim may be asserted by written notice to the party from whom indemnification is sought.

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9.5 Right of Setoff. Upon ten (10) days prior written notice to Seller, Purchaser may set off any Final Amount to which a Purchaser Indemnitee may be entitled under this Article 9 against any cash payments otherwise payable by Purchaser hereunder or, in the manner contemplated by the Subscription Agreement, the rights and preferences of the Consideration Shares. The exercise of such right of setoff by Purchaser in good faith, whether or not ultimately determined to be justified, will not constitute a breach under this Agreement. Neither the exercise of nor the failure to exercise such right of setoff will constitute an election of remedies or limit Purchaser in any manner in the enforcement of any other remedies that may be available to it. As used herein, “Final Amount” means any amount for or against which Seller is obligated to indemnify any Purchaser Indemnitee pursuant to this Article 9, as determined (i) upon the written agreement or acknowledgment of Seller or (ii) pursuant to a final and binding judgment of a court of competent jurisdiction.

9.6 Adjustments to Losses.

(a) Insurance. In calculating the amount of any Loss, the proceeds actually received by the indemnified party or any of its Controlled Affiliates under any insurance policy or pursuant to any claim, recovery, settlement or payment by or against any other Person shall be deducted from such amount.

(b) Reimbursements and Adjustments. In calculating the amount of any Loss for which either party is entitled to indemnification hereunder, to the extent such Loss is actually recovered by a party pursuant to other terms of this Agreement or any Transaction Document, it shall be deducted from the amount owed under this Article 9 in order to prevent the same amount from being paid twice.

(c) Taxes. In calculating the amount of any Loss, there shall be deducted an amount equal to any net Tax benefit actually realized as a result of such Loss by the party claiming such Loss, and there shall be added an amount equal to any Tax imposed on the receipt of any indemnity payment with respect thereto.

9.7 Characterization of Indemnification Payments. Except as otherwise required by Law, all payments made by an indemnifying party to an indemnified party in respect of any claim pursuant to Section 9.2 hereof shall be treated as adjustments to the Purchase Price for Tax purposes.

9.8 Remedies. In the absence of fraud and except as otherwise expressly specified in this Agreement, the rights and remedies of Seller and Purchaser under this Article 9 are exclusive following the Closing and in lieu of any and all other rights and remedies which Seller and Purchaser may have under this Agreement or otherwise for monetary relief with respect to the subject matter hereof.

ARTICLE 10

GENERAL PROVISIONS

10.1 Fees and Expenses. Except as specifically provided in this Agreement, including in Section 5.5(a), Purchaser and Seller each shall pay its respective fees and expenses incidental to the preparation, negotiation and consummation of this Agreement and the transactions

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contemplated hereby, including the fees and expenses of its respective brokers, finders, attorneys and financial advisors.

10.2 Bulk Sales Laws. The parties hereto waive compliance with the requirements of the Bulk Sales Laws in connection with the consummation of the transactions contemplated hereby. In lieu thereof, Seller shall hold Purchaser harmless as provided in Article 9.

10.3 Notices. All notices, request, demands and other communications hereunder shall be in writing and shall be delivered (a) in person or by courier or nationally recognized overnight courier service, (b) mailed by first class registered or certified mail, postage prepaid, return receipt requested, or (c) by facsimile transmission, as follows:

(a) If to Seller:

Advanced Metering Data Systems, L.L.C.

1941I Helenberg Road, Suite 103

Covington, LA 70433

Attention: President

Telephone: (504) 342-4943

Facsimile: (985) 246-7888

with a copy (which shall not constitute notice) to:

Stone Pigman Walther Wittman LLC

546 Carondelet Street

New Orleans, LA 701310

Attention: Joseph Caverly

Telephone: (504) 593-0845

Facsimile: (504) 596-0845

(b) If to Purchaser:

Sensus Metering Systems Inc.

8601 Six Forks Road, Suite 300

Raleigh, North Carolina 27615

Attention: Dan Harness

Telephone: (919) 870-3269

Facsimile: (919) 845-3995

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with a copy (which shall not constitute notice) to:

Mayer, Brown, Rowe & Maw LLP

1675 Broadway

New York, NY 10019

Attention: Philip O. Brandes

Telephone: (212) 506-2558

Facsimile: (212) 849-5958

Any party may change the address to which notices are to be sent by giving written notice of such change of address to the other parties in the manner above provided for giving notice. If delivered personally or by courier, the date on which the notice, request, instruction or document is delivered shall be the date of deemed receipt; if delivered by nationally recognized overnight courier service, the Business Day after the date such notice, request, instruction or document is delivered shall be the date of deemed receipt; if delivered by facsimile transmission there shall be no deemed receipt unless a confirming copy is sent by another permissible means, and the date of deemed receipt shall occur in accordance with such other permissible means; and if delivered by mail as aforesaid, three Business Days after the date on which such notice, request, instruction or document is delivered shall be the date of deemed receipt.

10.4 Further Assurances. Each of the Parties shall execute such documents and other papers and take such further actions as may be reasonably required to carry out the provisions hereof and the transactions contemplated hereby.

10.5 Assignment; Binding Effect. Neither party may assign its rights or obligations under this Agreement without the prior written consent of the other party; provided, however, Purchaser may, subject to compliance with the terms and conditions of Section 5.16, designate one or more wholly-owned direct or indirect subsidiaries to be the transferees of any of the Purchased Assets and may assign this Agreement and any or all of its rights, remedies, liabilities or obligations under this Agreement to (a) any Affiliate of the Purchaser, provided that Purchaser remains liable for the performance of such Affiliate hereunder, (b) any Person in connection with a change in control of Purchaser or a sale of all or substantially all the Purchased Assets, or (c) any Person providing financing to Purchaser. Any purported assignment in contravention of this Section 10.5 shall be null and void. This Agreement (including all of the terms and conditions of Sections 2.5, 5.15 and 5.16) shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns.

10.6 No Third Party Beneficiaries. The representations, warranties, covenants and agreements contained in this Agreement are for the sole benefit of the parties hereto and their successors and permitted assigns, and in the case of Article 9 hereof, the Purchaser Indemnitees and Seller Indemnitees, and they shall not be construed as conferring any rights on any other Persons.

10.7 Independent Contractors; No Implied Obligations. The parties hereto are independent contractors, and nothing contained in this Agreement shall be deemed to create the relationship of partners, fiduciaries, joint venturers, or of principal and agent, franchisor and franchisee, or of any other implied association, relationship or obligations between the parties

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other than as expressly provided in this Agreement. Seller acknowledges, on behalf of itself and its Controlled Affiliates, that it does not have, and it shall not and shall ensure that its Controlled Affiliates do not make any representation to any third party, either directly or indirectly, indicating that such Person has, any authority to act for or on behalf of Purchaser in any way whatsoever. To the maximum extent permitted by Law, nothing contained herein shall create any implied right or obligation on any party hereto that is not expressly contemplated herein.

10.8 Headings. All section headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.

10.9 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one counterpart has been signed by each party and delivered to the other party hereto.

10.10 Integration of Agreement; Amendments and Waivers. This Agreement (together with all schedules and exhibits hereto and all letter agreements between Purchaser and Seller dated as of the date hereof) supersedes all prior agreements, oral and written, between the parties hereto with respect to the subject matter hereof and may be amended or modified only by a written instrument executed by Purchaser and Seller. The waiver by one party of any breach of this Agreement by the other party shall not be considered to be a waiver of any succeeding breach (whether of a similar or a dissimilar nature) of any such provision or other provision or a waiver of any such provision itself. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by either party hereto.

10.11 Schedules. The Schedules to this Agreement constitute a part of this Agreement and are incorporated into this Agreement for all purposes as if fully set forth herein.

10.12 Governing Law; Waiver of Trial by Jury. This Agreement shall be construed under the laws of the State of New York, United States of America, without giving effect to the conflict of law provisions thereof. The parties hereby irrevocably and unconditionally submit to the exclusive jurisdiction of any State or Federal court sitting in New York, New York, over any suit, action or proceeding arising out of or relating to this Agreement. Each of the parties hereby agrees that service of any process, summons, notice or document by U.S. registered mail addressed to it at the address set forth above shall be effective service of process for any action, suit or proceeding brought against it in any such court. The parties hereby irrevocably and unconditionally waive any objection to the laying of venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Each of the parties agrees that a final, non-appealable judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon it and may be enforced in any other courts to whose jurisdiction such party is or may be subject, by suit upon such judgment. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, AS AGAINST THE OTHER PARTY HERETO, ANY RIGHTS IT MAY HAVE TO A JURY TRIAL IN RESPECT OF ANY CIVIL ACTION OR PROCEEDING (WHETHER ARISING IN CONTRACT OR TORT OR OTHERWISE), INCLUDING ANY COUNTERCLAIM, ARISING UNDER OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, INCLUDING IN

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RESPECT OF THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT HEREOF OR THEREOF.

10.13 Partial Invalidity. Whenever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had never been contained herein unless the deletion of such provision or provisions would result in such a material change as to cause completion of the transactions contemplated hereby to be unreasonable.

10.14 Construction. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

[Signature page follows]

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IN WITNESS WHEREOF, each party hereto has caused this Asset Purchase Agreement to be executed on its behalf by its duly authorized officer, all as of the day and year first above written.

PURCHASER:
SENSUS METERING SYSTEMS INC.
By:	/s/ Dan W. Harness
Name:	Dan W. Harness
Title:	President & CEO
SELLER:
ADVANCED METERING DATA SYSTEMS, L.L.C.
By:	/s/ H. Britton Sanderford, Jr.
Name:	H. Britton Sanderford, Jr.
Title:	President

Asset Purchase Agreement

EX-21.1

EXHIBIT 21.1

Subsidiaries of Sensus Metering Systems (Bermuda 2) Ltd.

Sensus Metering Systems Inc.	Delaware
Sensus Metering Systems IP Holdings, Inc.	Delaware
M&FC Holding, LLC	Delaware
Smith-Blair, Inc.	Delaware
Sensus Precision Die Casting, Inc.	Delaware
Sensus Metering do Brasil Ltda	Brazil
Sensus Metering Systems (Chile) SA	Chile
Sensus Metering Systems de Mexico S de RL de CV	Mexico
Sensus Metering Systems (Bermuda 3) Ltd.	Bermuda
Sensus Metering Systems (LuxCo 1) S.A.R.L.	Luxembourg
Sensus Metering Systems (LuxCo 2) S.A.R.L.	Luxembourg
Sensus Metering Systems (LuxCo 3) S.A.R.L.	Luxembourg
Sensus Metering Systems (LuxCo 4) S.A.R.L.	Luxembourg
Sensus Metering Systems (LuxCo 5) S.A.R.L.	Luxembourg
Sensus Metering Systems (UK Holdings) Ltd.	United Kingdom
Sensus Metering Systems Ltd.	United Kingdom
Sensus Energy Metering Ltd.	United Kingdom
UGI Global (Sales & Distribution) Ltd.	United Kingdom
UGI Global Ltd.	United Kingdom
UGI Licensees Ltd.	United Kingdom
Sensus Metering Systems Israel Ltd.	Israel
Beijing United Gas Meters Co. Ltd.	China
Sensus Metering Systems India Ltd.	India
IMS Holdings GmbH	Germany
Sensus Metering Services GmbH	Germany
Sensus Metering Systems (Hannover) GmbH	Germany

Pollux Meter GmbH & Co KG	Germany
Sensus Metering Systems (Ludwigshafen) GmbH	Germany
Sensus Meter Manufacturing Shanghai Ltd.	China
Sensus – Rongtai (Yangzhou) Precision Die Casting Co., Ltd.	China
Medidores Meinecke SA	Argentina
Invensys Thai Metering Systems Ltd.	Thailand
Sensus Metering Systems South Africa (Pty) Limited	South Africa
Sensus Metering Systems a.s.	Slovak Republic
Sensus Metering Systems S.r.l	Italy
Sensus Metering Systems SA	Spain
Sensus Metering Systems (France Holdings) SAS	France
Sensus Metering Systems (Czech Republic) Spol Sro	Czech Republic
Premex Bel IP	Belarus
Invest-Premex, o.o.o.	Ukraine
Financiere Pollux SAS	France
Sensus Metering Systems SAS	France
Sensus Metering Systems SPA	Algeria
Sensus Metering Systems (Morocco) sa	Morocco

EX-31.1

EXHIBIT 31.1

CERTIFICATE

I, Daniel W. Harness, Chief Executive Officer and President of Sensus Metering Systems (Bermuda 2) Ltd. and Sensus Metering Systems Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Sensus Metering Systems (Bermuda 2) Ltd. and Sensus Metering Systems Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of each registrant as of, and for, the periods presented in this report;

4. The registrants’ other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for each registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to each registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the registrants’ disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the registrants’ internal control over financial reporting that occurred during the registrants’ most recent fiscal quarter (the registrants’ fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants’ internal control over financial reporting; and

5. The registrants’ other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants’ auditors and the audit committee of the registrants’ board of directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants’ ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants’ internal control over financial reporting.

Date: June 15, 2006

	/s/    Daniel W. Harness
Name: Title:	Daniel W. Harness Chief Executive Officer and President

EX-31.2

EXHIBIT 31.2

CERTIFICATE

I, Peter Mainz, Chief Financial Officer of Sensus Metering Systems (Bermuda 2) Ltd. and Sensus Metering Systems Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Sensus Metering Systems (Bermuda 2) Ltd. and Sensus Metering Systems Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of each registrant as of, and for, the periods presented in this report;

4. The registrants’ other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for each registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to each registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the registrants’ disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) disclosed in this report any change in the registrants’ internal control over financial reporting that occurred during the registrants’ most recent fiscal quarter (the registrants’ fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants’ internal control over financial reporting; and

5. The registrants’ other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants’ auditors and the audit committee of the registrants’ board of directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants’ ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants’ internal control over financial reporting.

Date: June 15, 2006

	/s/    Peter Mainz
Name:	Peter Mainz
Title:	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Section 906 Certification

The following statement is provided by the undersigned to accompany the Annual Report on Form 10-K for the period ended March 31, 2006 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and shall not be deemed filed pursuant to any provision of the Securities Exchange Act of 1934 or any other securities law.

Each of the undersigned certifies that the foregoing Annual Report on Form 10-K fully complies with the requirements of Section 13(a), or 15(d), as applicable, of the Securities Exchange Act of 1934 (15 U.S.C. 78m) and that the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Sensus Metering Systems (Bermuda 2) Ltd. and Sensus Metering Systems Inc.

	/s/    Daniel W. Harness		/s/    Peter Mainz
Name:	Daniel W. Harness	Name:	Peter Mainz
Title:	Chief Executive Officer and President	Title:	Chief Financial Officer
Company:	Sensus Metering Systems (Bermuda 2) Ltd. and Sensus Metering Systems Inc.	Company:	Sensus Metering Systems (Bermuda 2) Ltd. and Sensus Metering Systems Inc.
Date:	June 15, 2006	Date:	June 15, 2006