1381272--1/28/2010--Sensata_Technologies

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Our operating results and financial condition have been and may continue to be adversely affected by the current financial crisis and worldwide economic conditions. Continued fundamental changes in the industries in which we operate have had and could continue to have adverse effects on our businesses. Continued pricing and other pressures from our customers may adversely affect our business. Conditions in the automotive industry have had and may continue to have adverse effects on our results of operations. Our ability to operate our business effectively could be impaired if we fail to attract and retain key personnel. If we fail to maintain our existing relationships with our customers, our exposure to industry and customer specific demand fluctuations could increase and our revenue may decline as a result. We are subject to risks associated with our non-U.S. operations, which could adversely impact the reported results of operations from our international businesses. Our businesses operate in markets that are highly competitive, and competitive pressures could require us to lower our prices or result in reduced demand for our products. We may not be able to keep up with rapid technological and other competitive changes affecting our industry. We may not be able to protect our intellectual property, including our proprietary technology and the Sensata, Klixon, Airpax and Dimensions brands. We may be subject to claims that our products or processes infringe the intellectual property rights of others, which may cause us to pay unexpected litigation costs or damages, modify our products or processes or prevent us from selling our products. Increasing costs for manufactured components and raw materials may adversely affect our profitability. We may incur material losses and costs as a result of product liability and warranty and recall claims that may be brought against us. We may not be successful in recovering damages, including those associated with product liability and warranty and recall claims, from Texas Instruments under the terms of our acquisition agreement entered into with Texas Instruments in connection with the 2006 Acquisition. Our substantial indebtedness could adversely affect our financial condition and our ability to operate our business, and we may not be able to generate sufficient cash flows to meet our debt service obligations. Labor disruptions or increased labor costs could adversely affect our business. The loss of one or more of our suppliers of finished goods or raw materials may interrupt our supplies and materially harm our business. Non-performance by our suppliers may adversely affect our operations. We depend on third parties for certain transportation, warehousing and logistics services. A material disruption at one of our manufacturing facilities could harm our financial condition and operating results. We may not realize all of the revenue or achieve anticipated gross margins from products subject to existing purchase orders or for which we are currently engaged in development. Compliance with Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, may be costly with no assurance of maintaining effective internal controls over financial reporting. Export of our products are subject to various export control regulations and may require a license from either the U.S. Department of State, the U.S. Department of Commerce or the U.S. Department of the Treasury. We may be adversely affected by environmental, safety and governmental regulations or concerns. Changes in existing environmental and/or safety laws, regulations and programs could reduce demand for environmental services, which could cause our revenue to decline. Integration of acquired companies and any future acquisitions and joint ventures or dispositions may require significant resources and/or result in significant unanticipated losses, costs or liabilities. We may not realize all of the anticipated operating synergies and cost savings from acquisitions, and we may experience difficulties in integrating these businesses, which may adversely affect our financial performance. Taxing authorities could challenge our historical and future tax positions or our allocation of taxable income among our subsidiaries, or tax laws to which we are subject could change in a manner adverse to us. We have significant unfunded benefit obligations with respect to our defined benefit and other post-retirement benefit plans. We have recorded a significant amount of impairment charges of our goodwill and other identifiable intangible assets, and we may be required to recognize additional goodwill or intangible asset impairments which would reduce our earnings. Our historical financial information may not be representative of our results as a separate company or indicative of our future financial performance. Our business may not generate sufficient cash flow from operations, or future borrowings under our Senior Secured Credit Facility or from other sources may not be available to us in an amount sufficient, to enable us to repay our indebtedness, including our existing Senior Notes and Senior Subordinated Notes, or to fund our other liquidity needs, including capital expenditure requirements. Our failure to comply with the covenants contained in our credit arrangements, including as a result of events beyond our control, could result in an event of default which could materially and adversely affect our operating results and our financial condition. Our limited history as a stand-alone company could pose challenges in the operation of our business. In the future, we may not secure financing necessary to operate and grow our business or to exploit opportunities. We have reported significant net losses for periods following the 2006 Acquisition and may not achieve profitability in the foreseeable future.

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1381272--1/28/2010--Sensata_Technologies_B.V.