Coffeemakers: Certain European small appliance customers have made
claims alleging defects in one of our electro-mechanical controls products. One customer has conducted a recall of their products and two customers have reported several third-party fire incidents. One customer has filed a lawsuit against us,
Jede AB v. Stig Wahlström AB and Sensata Technologies Holland B.V., No. 10017-9, in Soederfoern district court, Sweden. The suit alleges damages amounting to 1.8 million. We filed our answer on December 1, 2009 and denied
liability. Discovery has not yet begun. The other customers claims aggregate to a similar amount. We are contesting these claims. As of December 31, 2009, we have not recorded a reserve for this matter.
Huawei: Huawei, a Chinese telecommunications equipment
customer, has informed us that it is planning to conduct a field replacement campaign for power supply products containing our circuit breakers. The customer has alleged defects in our products, which are sold through distributors to two power
supply subcontractors. There are 24,000 systems in the field and we estimate that a 100% field replacement campaign could cost approximately $6.0 million. The customer has not yet determined the percentage of systems that will need to be
serviced. We are contesting the customers allegations but working with them to analyze the situation.
We have included a reserve in our financial statements in the amount of $0.4 million as of December 31, 2009. There can be no assurances,
however, that this reserve will be sufficient to cover the extent of our costs and potential liability form these matters. Any additional liability in excess of this reserve could have a material adverse effect on our financial condition or results
Audi: Audi, a part of the Volkswagen Auto Group, has alleged defects in certain of our products installed in its vehicles. These products are pressure sensors, whose function in this application is
to measure the pressure in the fuel supply to the vehicles engine. These pressure sensors are part of the system designed to improve the overall fuel efficiency of the vehicle. The customer first brought the claim in 2008 in the amount
8.1 million in expenses related to replacement of our products. The customer recently expanded its claim to 24.0 million. We have contested the customers allegations. To date, the customer has not filed a lawsuit or instituted
any proceedings against us relating to the claim. We recognized a charge in our financial statements in the amount of 0.9 million, or $1.2 million, as of December 31, 2009. There can be no assurances, however, that this reserve will be
sufficient to cover the extent of our costs and potential liability from these matters. Any additional liability in excess of this reserve could have a material adverse effect on our financial condition or results of operations.