15. COMMITMENTS AND CONTINGENCIES

Leases – We lease warehouse and office facilities, manufacturing and production facilities, transportation equipment and other equipment under operating lease agreements expiring through fiscal 2016. In June 2012, we amended our principal location lease agreement; extending the lease term from March 2013 to January 2023. At May 31, 2012, future minimum payments of $2,551 under these non-cancelable operating leases are due as follows: $2,294 (2013), $180 (2014), $69 (2015) and $8 (2016). Rental expense was $2,573, $2,356 and $2,416, respectively, for fiscal 2012, 2011 and 2010.

Purchase Commitments – At May 31, 2012, we were committed to future purchases primarily for inventory related items, including raw materials, packaging and outsourced contract manufacturing, under open purchase orders for specified quantities with fixed price provisions aggregating $19,584.

Litigation - We are involved in various legal actions that arise in the normal course of business. Although ultimate liability cannot be determined at the present time, based on available information, we do not believe the resolution of these matters will have a material adverse effect on our results of operations and financial condition. However, it is possible that future litigation could arise, or that developments could occur in existing litigation, that could have a material adverse effect on our results of operations and financial condition.

We are engaged in litigation concerning advertising statements relating to our Move Free Advanced products. In a case filed in May 2011 and pending in the United States District Court for the Southern District of California (“Lerma”), the plaintiff has brought two California statutory claims (under the Consumer Legal Remedies Act and the Unfair Competition Law) and a common law breach of express warranty claim, each of which alleges false or misleading advertising by us. The plaintiff seeks to certify a class, which would consist of all California residents who purchased Move Free Advanced within the class period. The plaintiff seeks actual damages, punitive damages and injunctive relief on behalf of this purported class. In another case filed in December 2011 in the United States District Court for the Northern District of Illinois, Eastern Division (“Pearson”), the plaintiff alleged violations of the Illinois Consumer Fraud Act and similar consumer fraud statutes of certain other states relating to our advertising for Move Free Advanced, as well as personal injury and negligence claims. In Pearson, the plaintiff sought to certify a class consisting of purchasers of Move Free Advanced within the applicable statute of limitations period or, alternatively, all Illinois residents who purchased these products within the applicable limitations period. The plaintiff also sought actual damages, medical monitoring and attorneys' fees. In February 2012, Pearson was voluntarily dismissed. In March 2012, the plaintiff in Lerma was granted leave of court to add the Pearson named plaintiff and his allegations and claims to the Lerma case. All of the plaintiffs' claims on behalf of respective proposed classes are now pending in Lerma. We dispute the plaintiffs' allegations and intend to vigorously defend ourselves in the litigation. At this time, however, we are unable to determine the amount of loss, if any, from these matters.

We establish liabilities when a particular contingency is probable and estimable. As of May 31, 2012, it is reasonably possible that exposure to loss exists in excess of amounts accrued. However, such amount, if any, cannot be currently estimated.

Royalties - Pursuant to an agreement with WHF and certain other parties, Mariz Gestao E Investimentos Limitada (“Mariz”) obtained the exclusive international rights to use the trademarks and brand names used by WHF and its affiliates on or prior to December 1996. Mariz is a company incorporated under the laws of Portugal and owned by a trust of which the family members of a director are included among the beneficiaries. Pursuant to a sublicense agreement with Mariz dated as of December 1, 1996, we obtained the exclusive international worldwide rights to use these trademarks and brand names outside the United States, Canada, Mexico, Spain and Portugal (for which countries we have the rights outside of the Mariz sublicense), except in Japan. Certain terms of the sublicense were amended and the rights under the sublicense to the Weider name and certain related trademarks were transferred as of March 1, 2005 in connection with the sale of our Weider branded business to Weider Global Nutrition, LLC (“WGN”), a wholly owned subsidiary of WHF.

Under the terms of the amended sublicense agreement, we are required to make annual royalty payments to Mariz on sales of products covered by the agreement in countries other than those listed above. The royalty payments, as amended, are equal to (i) 4.0% of sales up to $7,000 (ii) 3.5% of sales greater than $7,000 and less than $14,000; (iii) 3.0% of sales greater than $14,000 and less than $21,000; and (iv) 2.5% of sales over $21,000. The sublicense agreement includes an irrevocable buy-out option, exercisable by us after February 28, 2009, for a purchase price equal to the greater of $2,000 or 6.5 times the aggregate royalties paid by us in the royalty year immediately preceding the date of the exercise of the option.

On September 19, 2007, we entered into a license agreement with Mariz providing for non-exclusive rights to use the Schiff and Move Free trademarks in connection with the sale of joint care products to Costco Wholesale Corporation (“Costco”) in Japan. The initial term of the license agreement was for three years following the launch of our product into Japan. On March 10, 2011, we renewed and amended the license agreement for an additional three years commencing June 1, 2011. We may renew the license agreement for a successive three-year term if certain minimum sales levels are achieved during the sixth year following the product launch. The amended license agreement provides that we continue to pay royalties equal to 5% of joint care product sales to Costco in Japan with guaranteed minimum annual royalties ranging from $125 to $225 for each year the agreement is in effect. Each party has certain termination rights, and depending on which party terminates and the reason for the termination, we may continue to owe the guaranteed minimum royalties for a period following termination of the license agreement.

Royalty expense, related to the Mariz licensing agreements, amounted to $494, $491 and $512, respectively, for fiscal 2012, 2011 and 2010.

Retirement Plan – We sponsor a contributory 401(k) savings plan covering all employees who have met minimum age and service requirements. We make discretionary contributions of 50% of the employee’s contributions up to the first seven percent of the employee’s compensation. Contribution expense amounted to $452, $483 and $482, respectively, for fiscal 2012, 2011 and 2010.