of $0.7 million as of December 31, 2009. There can be no assurances, however, that this reserve will be sufficient to cover the extent of the Companys costs and potential liability
from these matters. Any additional liability in excess of this reserve could have a material adverse effect on the Companys financial condition or results of operations.
Whirlpool Recall Litigation: The Company is involved in litigation relating to certain control products
that TI sold between 2000 and 2004 to Whirlpool Corporation (Whirlpool). The control products were incorporated into the compressors of certain refrigerators in a number of Whirlpool brands, including Maytag, Jenn-Air, Amana, Admiral,
Magic Chef, Performa by Maytag, and Crosley. Whirlpool contends that the control products were defective because they allegedly fail at excessive rates and have allegedly caused property damage, including fires. During fiscal years 2007 and 2008,
the Company paid Whirlpool for certain costs associated with third-party claims and other external engineering costs, in amounts that did not have a material adverse effect on the Companys financial condition or results of operations. During
2009, Whirlpool in conjunction with the Consumer Product Safety Commission (CPSC) announced voluntary recalls of approximately 1.8 million refrigerators.
On January 28, 2009, Whirlpool Corporation, as well as its subsidiaries Whirlpool SA and Maytag Corporation, filed a
lawsuit against TI and the Companys subsidiary, STI. The lawsuit was filed in the Circuit Court of Cook County, Illinois, under the name Whirlpool Corp. et al. v. Sensata Technologies, Inc. et al., Docket No. 2009-L-001022. The
complaint asserts, among other things, contract claims as well as claims for breach of warranty, fraud, negligence, indemnification and deceptive trade practices. It seeks an unspecified amount of compensatory and exemplary damages. The Company and
TI have answered the complaint and denied liability.
The Company and Texas Instruments subsequently filed a cross claim for indemnification against Empresa Braseila de Compressores, S.A., n/k/a Whirlpool SA, and Embraco North America, Inc., together Embraco. The Company asserts,
among other things, that Embraco was responsible for testing the compatibility of the control product with its compressors, and that the Company and TI have become exposed to litigation because of Embracos actions and inactions. The Company
believes that Embraco is now a wholly-owned subsidiary of Whirlpool SA.
Discovery on all claims and cross-claims is ongoing, and the court has reserved time in April 2011 for a possible trial.
In January 2009, TI elected under the acquisition agreement to become the controlling party for this lawsuit
and will manage and defend the litigation on behalf of both TI and the Company. Although the Company is working with TI to defend the litigation, the Company believes that a loss is probable and, as of December 31, 2009, has recorded a reserve
of $5.9 million for this matter. There can be no assurances, however, that this reserve will be sufficient to cover the extent of the Companys costs and potential liability from this or any related matters. Any additional liability in excess
of this reserve could have a material adverse effect on the Companys financial condition or results of operations.
Pursuant to the terms of the acquisition agreement entered into in connection with the 2006 Acquisition, and subject to the limitations set
forth in that agreement, TI has agreed to indemnify the Company for certain claims and litigation, including this matter, provided that the aggregate amount of costs and/or damages from such claims exceeds $30.0 million. If the aggregate amount of
costs and/or damages from these claims exceeds $30.0 million, TI is obligated to indemnify the Company for amounts in excess of the $30.0 million threshold up to a cap on TIs indemnification obligation of $300.0 million. In January 2010, the
Company notified TI that, as of December 31, 2009, the Company believes it had incurred approximately $26.7 million of costs that apply towards the indemnification. TI has reserved all rights to contest that claim, and may dispute all or some
portion of the amount the Company claimed. The Company believes that its costs and/or damages from the Whirlpool Litigation and other claims and litigation matters will ultimately exceed $30.0 million.