2 .	Acquisition of O Olive

March 1, 2017,

the Company

purchased substantially all of the assets of O Olive for

$2.5

million in cash plus contingent consideration of up to

$7.5

million over the next

three

years based upon O Olive achieving certain EBITDA targets. All accounting for this acquisition is final

The potential earn out payment up to

$7.5

million is based on O Olive

’s cumulative EBITDA over the Company’s fiscal years

2018

through

2020.

At the end of each fiscal year

, beginning in fiscal year

2018,

the former owners of O Olive will earn the equivalent of the EBITDA achieved by O Olive for that fiscal year in an amount

not

to exceed

$4.6

million over the

three

year period. The former owners can also earn an additional

$2.9

million on a dollar for dollar basis for exceeding

$6.0

million of cumulative EBITDA over the

three

year period. Each quarter the Company performs, with the assistance of a

third

party appraiser, an analysis of O Olive’s projected EBITDA over the earnout period. Based on this analysis the Company records a contingent consideration liability, included in Other non-current liabilities. As of

February 25, 2018

and

May 28, 2017

the contingent consideration liability was

$5.4

million and

$5.9

million

, respectively, representing the present value of the expected earn out payments. The

$500,000

reduction in the contingent consideration liability was recorded during the

first

nine

months of fiscal year

2018

as a reduction to Selling, General and Administrative expenses in the accompanying Consolidated Statements of Comprehensive Income. For this analysis, the Company assumed that the maximum earn out of

$7.5

million would be paid over the

three

year period with over half being earned in fiscal year

2020.

e operating results of O Olive are included in the Company’s financial statements beginning

March 1, 2017

, in the Other segment.

Intangible Assets

The Company identified

two

intangible assets

in connection with the O Olive acquisition: trade names and trademarks valued at

$1.6

million, which are considered to be indefinite lived intangible assets and therefore, will

not

be amortized; and customer relationships valued at

$700,000

with an

eleven

year useful life. The Company recorded

$17,000

and

$67

,000

of amortization expense from the amortization of the customer relationships intangible during the

three

and

nine

months ended

February 25, 2018,

respectively. The trade name/trademark intangible asset was valued using the relief from royalty valuation method and the customer relationship intangible asset was valued using the excess earnings method.