(i)     During any calendar quarter after the calendar quarter ending September 30, 2006, if the closing sale price of Itron’s common stock, for each of 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter, exceeds 120% of the conversion price

(ii)    During the five consecutive business days immediately after any five consecutive trading day period in which the average trading price per $1,000 principal amount of notes, was equal to or less than 98% of the average conversion value of the notes

(iii)   If the notes have been called for redemption by the issuer

(iv)   Upon specified corporate transactions

(v)    Any time from and including July 1, 2011 to, and including August 1, 2011 and at any time on or after August 1, 2024

Upon conversion, holders will receive, per $1,000 principal amount being converted, a “settlement amount” that is equal to the sum of the “daily settlement amounts” for each of the 20 trading days during the “cash settlement averaging period”. The “cash settlement averaging period” with respect to any note means the 20 consecutive trading days beginning on, and including, the second trading day following the conversion date.

The “daily settlement amount,” for each of the 20 trading days during the cash settlement averaging period, consists of (a) cash equal to the lesser of $50 and the “daily conversion value”; and (b) to the extent the daily conversion value exceeds $50, a number of whole shares equal to the excess of the daily conversion value over $50, divided by the closing sale price of Itron common stock on that trading day, subject to Itron’s right to deliver cash in lieu of all or a portion of such shares.

The “daily conversion value” on a given trading day means 1/20 of the product of the applicable conversion rate and the closing sale price of Itron common stock on that trading day

Conversion Rate Adjustment Upon a

Make-Whole Fundamental Change:

If a make-whole fundamental change occurs and a holder elects to convert its notes in connection with such a fundamental change, Itron will increase the applicable conversion rate for the notes surrendered for conversion by a number of additional shares of Itron common stock (the “make-whole shares”). However, in the case of a public acquirer fundamental change, Itron may, in lieu of increasing the conversion rate, elect to adjust the conversion rate to reflect the exchange ratio for the transaction, in which case the securities will become convertible into shares of the public acquirer’s common stock. If the transaction provides the holders of Itron common stock with the right to receive more than a single type of consideration determined based in part upon any form of stockholder election, the holders of the notes, each treated as a single class, will be given a reasonable opportunity to elect the form of such consideration.

The following table sets forth the number of additional shares per $1,000 principal amount of notes that will be added to the conversion rate of the notes. The applicable prices set forth in the first column of the table below, and the number of additional shares, are subject to adjustment as described in the Preliminary Prospectus Supplement relating to the security.

Subject to the terms and conditions of the underwriting agreement, each of the underwriters has severally agreed to purchase the principal amount of notes listed next to its name in the following table:

UBS Securities LLC

Canaccord Adams Inc.

First Albany Capital Inc.

Wells Fargo Securities, LLC

Total

Any notes sold by the underwriter to securities dealers may be sold at a discount from the public offering price of up to 1.425% of the principal amount of notes. Any of these securities dealers may resell any notes purchased from the underwriters to other brokers or dealers at a discount from the public offering price of up to 0.3% of the principal amount of notes.

The following table shows the per note (expressed as a percentage of the principal amount of notes) and total underwriting discounts and commissions we will pay to the underwriters, assuming both no exercise and full exercise of the underwriters’ option to purchase up to an additional $45 million aggregate principal amount of notes:

Per note

Total