9 .	Commitments and Contingencies

Operating Leases

Landec leases land,

facilities, and equipment under operating lease agreements with various terms and conditions, which expire at various dates through fiscal year

2030.

Certain of these leases have renewal options.

The approximate future minimum lease

payments under these operating leases at

May 28, 2017

are as follows (in thousands):

	Amount
Fiscal year 2018	$	3,349
Fiscal year 2019		2,301
Fiscal year 2020		1,286
Fiscal year 2021		1,138
Fiscal year 2022		906
Thereafter		6,771
Total	$	15,751

Rent expense for operating leases, including month to month arrangements was

$5.6

million,

$4.5

million and

$5.0

million for the fiscal years

2017,

2016

and

2015,

respectively.

Capital Leases

September

2015,

Lifecore leased a

65,000

square foot building in Chaska, MN,

two

miles from its current facility. The initial term of the lease is

seven

years with

two five

-year renewal options. The lease contains a buyout option at any time after year

seven

with the purchase price equal to then mortgage balance on the lessor’s loan secured by the building. Included in property, plant and equipment as of

May 28, 2017

$3.7

million associated with this capital lease. The monthly lease payment was initially

$34,000

and increases by

2.4%

per year. Lifecore and the lessor made capital improvements prior to occupancy and thus the lease did

not

become effective until

January 1, 2016.

Lifecore is currently using the building for warehousing and final packaging. Apio has a capital lease for office equipment for which the value of

$104,000

is included in property, plant and equipment as of

May 28, 2017

Future minimum lease payments under capital leases for each year presented as are follows

(in thousands):

Fiscal year 2018	$	462
Fiscal year 2019		472
Fiscal year 2020		483
Fiscal year 2021		486
Fiscal year 2022		460
Thereafter		3,491
Total minimum lease payment		5,854
Less: amounts representing interest and taxes		(2,053	)
Total		3,801
Less : current portion included in other accrued liabilities		(70	)
Long-term capital lease obligation	$	3,731

Purchase Commitments

May 28, 2017,

the Company was committed to purchase

$19.1

million of produce and other materials during fiscal year

2018

in accordance with contractual terms at market rates. Payments of

$32.2

million,

$30.5

million and

$16.8

million were made in fiscal years

2017,

2016

and

2015,

respectively, under similar arrangements.

Legal Contingencies

In the ordinary course of business, the Company is involved in various legal proceedings and claims.

The Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least each fiscal quarter and adju

sted to reflect the impacts of negotiations, estimate settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. Legal fees are expensed in the period in which they are incurred.

Apio

has been the target of a union organizing campaign which has included

two

unsuccessful attempts to unionize Apio's Guadalupe, California processing plant. The campaign has involved a union and over

100

former and current employees of Pacific Harvest, Inc. and Rancho Harvest, Inc. (collectively "Pacific Harvest"), Apio's labor contractors at its Guadalupe, California processing facility, bringing legal actions before various state and federal agencies, the California Superior Court, and initiating over

100

individual arbitrations against Apio and Pacific Harvest.

The

legal actions consist of

three

main types of claims: (

) Unfair Labor Practice claims ("ULPs") before the National Labor Relations Board (“NLRB”), (

) discrimination/wrongful termination claims before state and federal agencies and in individual arbitrations, and (

) wage and hour claims as part of

two

Private Attorney General Act (“PAGA”) cases in state court and in over

100

individual arbitrations.

A settlement of the ULPs among

the union, Apio, and Pacific Harvest that were pending before the NLRB was approved on

December 27, 2016

for

$310,000.

Apio was responsible for half of this settlement, or

$155,000.

May 5, 2017,

the parties to the remaining actions executed a Settlement Agreement concerning the discrimination/wrongful termination claims and the wage and hour claims which covers all non-exempt employees of Pacific Harvest working at Apio's Guadalupe, California processing facility from

September 2011

through the settlement date. Under the settlement agreement, the plaintiffs are to be paid

$6.0

million in

three

installments,

$2.4

million of which was paid on

July 3, 2017,

with

$1.8

million due in

November 2017

and

$1.8

million due in

July 2018.

The Company and Pacific Harvest have each agreed to pay

one

half of the settlement payments. The Company paid the entire

first

installment of

$2.4

million on

July 3, 2017

and will be reimbursed by Pacific Harvest for its

$1.2

million portion through weekly payments until full paid.

Based on our current agreement with Pacific Harvest, the Company will also pay the entire

second

installment of

$1.8

million in

November 2017,

and will be reimbursed by Pacific Harvest as indicated above. The Company and Pacific Harvest will both make

one

half of the

third

installment in

July 2018.

The Company

’s recourse against non-payment by Pacific Harvest is its security interest in assets owned by Pacific Harvest.

During the

twelve

months ended

May 28, 2017,

the Company recorded a legal settlement charge of

$2.6

million related to these actions. During the

twelve

months ended

May 28, 2017

and

May 29, 2016,

the Company incurred legal expenses of

$2.1

million and

$542

,000,

respectively, related to these actions. As of

May 28, 2017,

the Company had accrued

$3.2

million related to these actions, which is included in Other accrued liabilities in the accompanying Consolidated Balance Sheet.