The Company is also involved in a related, but separate proceeding with
Texas Instruments insurer, American Alternative Insurance. On June 3, 2009, Texas Instruments filed a lawsuit against American Alternative seeking reimbursement for its defense costs in the Whirlpool litigation and third party claims. The
case, Texas Instruments Incorporated v. American Alternative Ins. Corp., was filed in the 193rd Court of Dallas County, Texas, No. DC-09-07045-L. On October 16, 2009, American Alternative filed a third party claims against STI alleging that STI assumed liability for the Whirlpool matters under the
acquisition agreement referred to in the preceding paragraph. On that basis, American Alternative has asserted that the Company owes American Alternative for any amounts that it may ultimately be required to pay to Texas Instruments. Texas
Instruments is defending this claim on STIs behalf, and has filed an answer denying any liability.
Pelonis Appliances. On December 26, 2008, seven individuals filed suit against Pelonis Appliances,
Inc., which sells a fan forced heater product, manufactured by GD Midea Environmental Appliances Mfg. Co. Ltd. (GD Midea), that incorporates one of our thermal cut-off products, which was purchased from one of our distributors. The
lawsuit, Cueller v. Pelonis Appliances, Inc., No. 08-16188, 160th Judicial District Court of Dallas County, Texas, arose out of a residential fire that resulted in one death, personal injuries (including burns) to the other plaintiffs, and property damage.
Pelonis demanded indemnity from Sensata in a letter dated
May 6, 2009, and the Company rejected that demand. On June 9, 2009, the plaintiffs amended their complaint to include STI as a defendant. The plaintiffs seek an unspecified amount of actual and exemplary damages.
On August 3, 2009, the Company answered the amended
complaint, denying any liability. The Company also asserted cross-claims against Pelonis for indemnification and against Pelonis and GD Midea as responsible third parties.
Discovery is ongoing, and a trial has been scheduled for August 2, 2010. As of December 31, 2009, the Company has
not recorded a reserve for this matter.
Huawei. Huawei, a Chinese telecommunications equipment customer, has informed the Company that it is planning to conduct a field replacement campaign for power supply products containing the Companys circuit breakers. The
customer has alleged defects in the Companys products, which are sold through distributors to two power supply subcontractors. There are 24,000 systems in the field and the Company estimates 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. The Company is contesting the customers allegations but working with them to analyze the situation.
The Company has included a reserve in its 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 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.
Audi. Audi, a part of the Volkswagen Auto Group, has alleged defects in certain of the Companys products installed in its
vehicles. The customer first brought the claim in 2008 in the amount 8.1 million in expenses related to replacement of the Companys products. The customer recently expanded its claim to 24.0 million. The Company is contesting
the customers allegations, but has entered into discussions seeking to resolve the dispute. To date, the customer has not filed a lawsuit or instituted any proceedings against the Company relating to the claim. The Company has included a
reserve in its 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 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.
Coffeemakers. Certain European small appliance customers
have made claims alleging defects in one of the Companys electro mechanical controls products. One customer has conducted a recall of their products and two