2.	Investment in Non - public Company

February

15,

2011,

Apio entered into a share purchase agreement (the “Windset Purchase Agreement”) with Windset. Pursuant to the Windset Purchase Agreement, Apio purchased from Windset

150,000

Senior A preferred shares for

$15

million and

201

common shares for

$201.

July

15,

2014,

Apio increased its investment in Windset by purchasing from the Newell Capital Corporation an additional

shares of common stock and

51,211

shares of junior preferred stock of Windset for

$11

million. After this purchase, the Company’s common shares represent a

26.9%

ownership interest in Windset. The non - voting Senior A preferred shares yield a cash dividend of

7.5%

annually. The dividend is payable within

days of each anniversary of the execution of the Windset Purchase Agreement The non - voting junior preferred stock does not yield a dividend unless declared by the Board of Directors of Windset and no such dividend has been declared.

The Windset Purchase Agreement includes a put and call option, which can be exercised on the

sixth

anniversary of the Windset Purchase Agreement whereby Apio can exercise the put to sell its common, Senior A preferred shares, and junior preferred shares to Windset, or Windset can exercise the call to purchase those shares from Apio, in either case, at a price equal to

26.9%

of the fair market value of Windset

’s common shares, plus the liquidation value of the preferred shares of

$20.1

million

($15

million for the Senior A preferred shares and

$5.1

million for the junior preferred shares). Under the terms of the arrangement with Windset, the Company is entitled to designate

one

five

members on the Board of Directors of Windset.

October

29,

2014,

Apio further increased its investment in Windset by purchasing

70,000

shares of Senior B preferred shares for

million. The Senior B Preferred Stock pays an annual dividend of

7.5%

on the amount outstanding at each anniversary date of the Windset Purchase Agreement. The Senior B shares purchased by Apio have a put feature whereby Apio can sell back to Windset

$1.5

million of shares on the

first

anniversary, an additional

$2.75

million of shares on the

second

anniversary, and the remaining

$2.75

million on the

third

anniversary. After the

third

anniversary, Apio

may

at any time put any or all of the shares not previously sold back to Windset. At any time on or after

February

15,

2017,

Windset has the right to call any or all of the outstanding common shares, but at such time must also call the same proportion of Senior A preferred shares, Senior B preferred shares, and junior preferred shares owned by Apio. Windset

’s partial call provision is restricted such that a partial call cannot result in Apio holding less than

10%

of Windset’s common shares outstanding.

The investment in Windset does not qualify for equity method accounting as the investment does not meet the criteria of in - substance common stock due to returns through the annual dividend on the non - voting senior preferred shares that are not available to the common stock holders. As the put and call options require all of the various shares to be put or called in equal proportions, the Company has deemed that the investment, in substance, should be treated as a single security for purposes of accounting.

The fair value of the Company

’s investment in Windset was determined utilizing the Windset Purchase Agreement’s put/call calculation for value and a discounted cash flow model based on projections developed by Windset, and considers the put and call conversion options. These features impact the duration of the cash flows utilized to derive the estimated fair values of the investment. These

two

discounted cash flow models’ estimate for fair value are then weighted. Assumptions included in these discounted cash flow models will be evaluated quarterly based on Windset’s actual and projected operating results to determine the change in fair value.

During each of the

three

months ended

November

27,

2016

and

November

29,

2015,

the Company recorded

$412,500

in dividend income. During each of the

six

months ended

November

27,

2016

and

November

29,

2015,

the Company recorded

$825,000

in dividend income. The increase in the fair market value of the Company

’s investment in Windset for the

three

months ended

November

27,

2016

and

November

29,

2015

was

and

$200,000,

respectively, and is included in other income in the Consolidated Statements of Comprehensive Income. The increase in the fair market value of the Company’s investment in Windset for the

six

months ended

November

27,

2016

and

November

29,

2015

was

and

$1.0

million, respectively, and is included in other income in the Consolidated Statements of Comprehensive Income.