6.	REDEEMABLE NON-CONTROLLING INTERESTS

When the Company acquires a majority interest in a Therapy Practice, those Acquisitions occur in a series of steps as described in numbers 1 through 10 of footnote 5 – Mandatorily Redeemable Non-Controlling Interests. For the Acquisitions that occurred after the first quarter of 2017, and for the acquisitions that occurred during and prior to the first quarter of 2017 but for which the partnership agreements were amended, the applicable Partnership Agreement contains provisions for the redemption of the Seller Entity Interest, either at the option of the Company (the “Call Right”) or at the option of the Seller Entity (the “Put Right”) as follows:

Put Right

In the event that any Selling Shareholder’s employment is terminated involuntarily by the Company without “Cause” pursuant to Section 7(d) of such Employed Selling Shareholder’s Employment Agreement prior to the fifth anniversary of the Closing Date, the Seller Entity thereafter shall have an irrevocable right to cause the Company to purchase from Seller Entity the Allocable Portion at the purchase price described in “3” below.

In the event that any Employed Selling Shareholder is not employed by NewCo as of the fifth anniversary of the Closing Date and the Company has not exercised its Call Right with respect to the such Employed Selling Shareholder’s Allocable Portion, Seller Entity thereafter shall have the Put Right to cause the Company to purchase from Seller Entity the Allocable Portion at the purchase price described in “3” below.

In the event that any Employed Selling Shareholder’s employment with NewCo is terminated for any reason on or after the fifth anniversary of the Closing Date, the Seller Entity shall have the Put Right, and upon the exercise of the Put Right, such Employed Selling Shareholder’s Allocable Portion shall be redeemed by the Company at the purchase price described in “3” below.

Call Right

If any Selling Shareholder’s employment by NewCo is terminated (i) pursuant to a voluntary termination by the Employed Selling Shareholder or (ii) by NewCo with “Cause” (as defined in the Employed Selling Shareholder’s Employment Agreement), prior to the fifth anniversary of the Closing Date, the Company thereafter shall have an irrevocable right to purchase from Seller Entity such Employed Selling Shareholder’s AllocablePortion, in each case at the purchase price described in “3” below.

In the event that any Employed Selling Shareholder’s employment with NewCo is terminated for any reason on or after the fifth anniversary of the Closing Date, the Company shall have the Call Right, and upon the exercise of the Call Right, such Employed Selling Shareholder’s Allocable Portion shall be redeemed by the Company at the purchase price described in “3” below.

For the Put Right and the Call Right, the purchase price is derived from a formula based on a specified multiple of NewCo’s trailing twelve months of earnings before interest, taxes, depreciation, amortization, and the Company’s internal management fee, plus the Allocable Portion of any undistributed earnings of NewCo (the “Redemption Amount”). NewCo’s earnings are distributed monthly based on available cash within NewCo; therefore, the undistributed earnings amount is small, if any.

The Purchase Price for the initial equity interest purchased by the Company is also based on the same specified multiple of the trailing twelve-month earnings that is used in the Put Right and the Call Right noted above.

The Put Right and the Call Right do not have an expiration date, but the Seller Entity Interest is not required to be purchased by the Company or sold by the Seller Entity.

The Put Right and the Call Right never apply to Selling Shareholders who do not become employed by NewCo, since the Company requires that such Selling Shareholders sell their entire ownership interest in the Seller Entity at the closing of the Acquisition.

An Employed Selling Shareholder’s ownership of his or her equity interest in the Seller Entity predates the Acquisition and the Company’s purchase of its partnership interest in NewCo. The Employment Agreement and the Non-Compete Agreement do not contain any provision to escrow or “claw back” the equity interest in the Seller Entity held by such Employed Selling Shareholder, nor the Seller Entity Interest in NewCo, in the event of a breach of the employment or non-compete terms. More specifically, even if the Employed Selling Shareholder is terminated for “cause” by NewCo, such Employed Selling Shareholder does not forfeit his or her right to his or her full equity interest in the Seller Entity and the Seller Entity does not forfeit its right to any portion of the Seller Entity Interest. The Company’s only recourse against the Employed Selling Shareholder for breach of either the Employment Agreement or the Non-Compete Agreement is to seek damages and other legal remedies under such agreements. There are no conditions in any of the arrangements with an Employed Selling Shareholder that would result in a forfeiture of the equity interest held in the Seller Entity or of the Seller Entity Interest.

For the six months ended June 30, 2018, the following table details the changes in the carrying amount of redeemable non-controlling interest (in thousands):

	Three Months Ended June 30, 2018			Six Months Ended June 30, 2018

Beginning balance	$	108,085		$	102,572
Operating results allocated to redeemable non-controlling interest partners		2,610			4,346
Distributions to redeemable non-controlling interest partners		(2,720	)		(4,079	)
Changes in the fair value of redeemable non-controlling interest		4,344			9,425
Purchase of new business		4,863			4,863
Other		(155	)		(100	)
Ending balance	$	117,027		$	117,027

The following table categorizes the carrying amount (fair value) of the redeemable non-controlling interests (in thousands):

	June 30, 2018

Contractual time period has lapsed but holder's employment has not been terminated	$	34,144
Contractual time period has not lapsed and holder's employment has not been terminated		82,883
Fair value	$	117,027