FRANKLIN ELECTRIC CO INC

7. COMMITMENTS AND CONTINGENCIES

In 2011, the Company became aware of a review of alleged issues with certain underground piping connections installed in filling stations in France owned by the French subsidiary of Exxon Mobil, Esso S.A.F ("Esso"). A French court (the "Court") ordered that a designated, subject-matter expert review 103 filling stations to determine what, if any, damages are present and the cause of those damages. The Company has participated in this investigation since 2011, along with several other third parties including equipment installers, engineering design firms who designed and provided specifications for the stations, and contract manufacturers of some of the installed equipment. It is the Company’s position that its products were not the cause of any alleged damage. The Company submitted its response to the expert's final report in February 2023. In the second quarter of 2026, the parties reached a preliminary agreement to resolve the matter. As a part of the proposed settlement agreement, the Company agreed to pay $4.5 million to resolve the Company's portion of the litigation. The settlement is subject to finalization between the parties and approval by the Court. The Company transferred funds of $4.5 million to a third party during the third quarter but retained ownership of the funds until finalization between the parties and approval by the court. As of September 30, 2026, the Company recorded the $4.5 million in "Other current assets" and "Accrued expenses and other current liabilities" until finalization. In October of 2026, the parties finalized the settlement for the amount recorded as of September 30, 2026.

The Company is defending other various claims and legal actions which have arisen in the ordinary course of business. In the opinion of management, based on current knowledge of the facts and after discussion with counsel, these claims and legal actions can be defended or resolved without a material effect on the Company’s financial position, results of operations, and net cash flows.

At September 30, 2026, the Company had $5.4 million of commitments primarily for capital expenditures and purchase of raw materials to be used in production and finished goods.

At September 30, 2026, the Company has a contingent consideration liability associated with the Cat Pumps purchase with an estimated fair value of $19.5 million that could result in a payment in shares of common stock up to $50.0 million if a future profitability milestone is achieved.

The changes in the carrying amount of the warranty accrual, as recorded in the "Accrued expenses and other current liabilities" line of the Company's condensed consolidated balance sheet for the nine months ended September 30, 2026, are as follows: