Commitments and Contingencies

Mandatory Clean-Up Call and Letter of Credit Reimbursement Obligation

Historically, the Company was obligated to exercise the mandatory clean-up call obligations assumed as part of a prior agreement to acquire the rights to service the loans in the Non-Residual Trusts. The Company was required to call these securitizations when the principal amount of each loan pool fell to 10% or below of the original principal amount. On October 10, 2017, the Company entered into a Clean-up Call Agreement with a counterparty, pursuant to which the Company paid an inducement fee in the amount of $36.5 million to the counterparty. The Clean-up Call Agreement inducement fee, which was deferred and is being amortized as the counterparty executes the clean-up calls per the agreement, had a balance of $11.0 million at December 31, 2018 and is recorded within other assets on the consolidated balance sheets. With the execution of the Clean-Up Call Agreement, the counterparty assumed the Company’s mandatory obligation to exercise the clean-up calls for the remaining securitization trusts. In connection with the exercise of each clean-up call, the counterparty agreed to reimburse the Company for certain outstanding advances previously made by the Company with respect to the related trusts, up to an aggregate amount of approximately $6.4 million for the eight remaining trusts. At December 31, 2018, the outstanding advances available for the remaining trusts to be called totaled $2.7 million.

As part of an agreement to service the loans in the original eleven securitization trusts and as a result of the Clean-up Call Agreement, the Company has an obligation to reimburse a third party for amounts drawn on the LOCs in excess of $17.0 million in the aggregate related to the two remaining consolidated securitization trusts from July 1, 2017 through each individual call date. The total draws on the LOCs were $11.9 million at December 31, 2018.

Unfunded Commitments

Reverse Mortgage Loans

At December 31, 2018, the Company had floating-rate reverse loans in which the borrowers have additional borrowing capacity of $894.2 million and similar commitments on fixed-rate reverse loans of $57.6 million primarily in the form of undrawn lines-of-credit. The borrowing capacity of $1.0 billion was available to be drawn by borrowers at December 31, 2018. In addition, the Company has other commitments of $22.4 million to fund taxes and insurance on borrowers’ properties to the extent these amounts were set aside for such purpose upon the origination of the related reverse loan. There is no termination date for these drawings so long as the loan remains performing.

Mortgage Loans

The Company has short-term commitments to lend $1.3 billion and commitments to purchase loans totaling $3.1 million at December 31, 2018. In addition, the Company had commitments to sell $2.3 billion and purchase $677.5 million in mortgage-backed securities at December 31, 2018.

HMBS Issuer Obligations

As an HMBS issuer, the Company assumes certain obligations related to each security issued. The most significant obligation is the requirement to purchase loans out of the Ginnie Mae securitization pools once the outstanding principal balance of the related HECM is equal to or greater than 98% of the maximum claim amount. Performing repurchased loans are conveyed to HUD and payment is received from HUD typically within a short timeframe of repurchase. HUD reimburses the Company for the outstanding principal balance on the loan up to the maximum claim amount. The Company bears the risk of exposure if the amount of the outstanding principal balance on a loan exceeds the maximum claim amount. Recent regulatory changes introduced by HUD increased the requirements for completing an assignment to HUD. These new requirements have increased the time interval between when a loan is repurchased and when the assignment claim is filed with HUD, and inability to meet such requirements could preclude assignment. During this period, accruals for interest, HUD-required mortgage insurance payments, and borrower draws may cause the unpaid balance on the loan to increase and ultimately exceed the maximum claim amount. Nonperforming repurchased loans are generally liquidated through foreclosure and subsequent sale of real estate owned.

The Company currently relies upon certain master repurchase agreements and operating cash flows, to the extent necessary, to repurchase these Ginnie Mae loans. The timing and amount of the Company's obligation to repurchase HECMs is uncertain as repurchase is predicated on certain factors such as whether a borrower event of default occurs prior to the HECM reaching the mandatory repurchase threshold under which the Company is obligated to repurchase the loan. The Company repurchased $1.6 billion, $257.1 million and $1.3 billion, respectively, in reverse loans and real estate owned from securitization pools during the period from February 10, 2018 through December 31, 2018, the period from January 1, 2018 through February 9, 2018 and the year ended December 31, 2017, respectively. As of December 31, 2018, the Company had reverse loans and real estate owned that it had repurchased totaling $1.1 billion with a fair value of $1.0 billion, and had unfunded commitments to repurchase reverse loans and real estate owned of $165.1 million. Repurchases of reverse loans and real estate owned have increased significantly as compared to prior periods due to the increased flow of HECMs and real estate owned that are reaching 98% of their maximum claim amount and are expected to peak during 2019. The Company's repurchases of reverse loans and real estate owned are projected to be approximately $2.0 billion, $1.2 billion and $643.7 million during the years ending December 31, 2019, 2020 and 2021, respectively.

Mortgage Origination Contingencies

The Company sells substantially all of its originated or purchased mortgage loans into the secondary market for securitization or to private investors as whole loans. The Company sells conventional-conforming and government-backed mortgage loans through GSE and agency-sponsored securitizations in which mortgage-backed securities are created and sold to third-party investors. The Company also sells non-conforming mortgage loans to private investors. In doing so, representations and warranties regarding certain attributes of the loans are made to the third-party investor. Subsequent to the sale, if it is determined that a loan sold is in breach of these representations or warranties, the Company generally has an obligation to cure the breach. In general, if the Company is unable to cure such breach, the purchaser of the loan may require the Company to repurchase such loan for the unpaid principal balance, accrued interest, and related advances, and in any event, the Company must indemnify such purchaser for certain losses and expenses incurred by such purchaser in connection with such breach. The Company’s credit loss may be reduced by any recourse it has to correspondent lenders that, in turn, have sold such residential loans to the Company and breached similar or other representations and warranties.

The Company's representations and warranties are generally not subject to stated limits of exposure with the exception of certain loans originated under HARP, which limited exposure based on payment history of the loan. At December 31, 2018, the Company’s maximum exposure to repurchases due to potential breaches of representations and warranties was $67.8 billion and was based on the original unpaid principal balance of loans sold from the beginning of 2013 through December 31, 2018, adjusted for voluntary payments made by the borrower on loans for which the Company performs servicing. A majority of the Company's loan sales were servicing retained.

The Company’s obligations vary based upon the nature of the repurchase demand and the current status of the mortgage loan. The following table summarizes the activity for the Company's liability associated with representations and warranties (in thousands):



	Successor			Predecessor
	For the Period From February 10, 2018 Through December 31, 2018			For the Period From January 1, 2018 Through February 9, 2018			For the Year Ended December 31, 2017
Balance at beginning of the period	$	16,487		$	16,792		$	22,094
Provision for new sales	5,522			729			6,991
Change in estimate of existing reserves	(6,919		)	(1,001		)	(10,596		)
Net realized losses on repurchases	(2,343		)	(33		)	(1,697		)
Balance at end of the period	$	12,747		$	16,487		$	16,792

The Company's estimate of the liability associated with the representations and warranties exposure is included in originations liability as part of payables and accrued liabilities on the consolidated balance sheets.

Servicing Contingencies

The Company’s servicing obligations are set forth in industry regulations established by HUD, the FHA, the VA, and other government agencies and in servicing and subservicing agreements with the applicable counterparties, such as Fannie Mae, Freddie Mac and other credit owners. Both the regulations and the servicing agreements provide that the servicer may be liable for failure to perform its servicing obligations and further provide remedies for certain servicer breaches.

Reverse Mortgage Loans

FHA regulations provide that servicers meet a series of event-specific timeframes during the default, foreclosure, conveyance, and mortgage insurance claim cycles. Failure to timely meet any processing deadline may stop the accrual of debenture interest otherwise payable in satisfaction of a claim under the FHA mortgage insurance contract and the servicer may be responsible to HUD for debenture interest that is not self-curtailed by the servicer, or for making the credit owner whole for any interest curtailed by FHA due to not meeting the required event-specific timeframes. The Company had a curtailment obligation liability of $68.7 million at December 31, 2018 related to the foregoing, which reflects management’s best estimate of the probable incurred claim. The curtailment liability is recorded in payables and accrued liabilities on the consolidated balance sheets. The Company recorded a provision (benefit), net of expected third-party recoveries, related to the curtailment liability of $(7.4) million and $0.4 million during the period from February 10, 2018 through December 31, 2018 and the period from January 1, 2018 through February 9, 2018, respectively. The Company has potential estimated maximum financial statement exposure for an additional $61.8 million related to similar claims, which are reasonably possible, but which the Company believes are the responsibility of third parties (e.g., prior servicers and/or credit owners).

Mortgage Loans

The Company had a curtailment obligation liability of $31.1 million at December 31, 2018 related to sales of servicing rights, advance curtailment exposure and mortgage loan servicing that it primarily assumed through an acquisition of servicing rights. The Company is obligated to service the related mortgage loans in accordance with Ginnie Mae requirements, including repayment to credit owners for corporate advances and interest curtailment. The curtailment liability is recorded in payables and accrued liabilities on the consolidated balance sheets.

Lease Obligations

The Company leases office space and office equipment under various operating lease agreements with terms expiring through 2026, exclusive of renewal option periods. Rent expense was $16.0 million, $1.7 million and $18.6 million for the period from February 10, 2018 through December 31, 2018, the period from January 1, 2018 through February 9, 2018 and the year ended December 31, 2017, respectively. Estimated future minimum rental payments under operating leases at December 31, 2018 are as follows (in thousands):



	Successor
	Amount
2019	$	13,425
2020	10,801
2021	10,602
2022	10,887
2023	9,535
Thereafter	12,693
Total	$	67,943

In February 2019, the Company filed the DHCP Bankruptcy Petitions and therefore, the above estimated future minimum rental payments under operating leases will be subject to the outcome of the Company's emergence from the DHCP Chapter 11 Cases, since certain lease obligations may be rejected or disallowed under bankruptcy law. Refer to Note 31 for additional information regarding the DHCP Chapter 11 Cases.

Litigation and Regulatory Matters

In the ordinary course of business, the Company and its subsidiaries are defendants in, or parties to, pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants. Many of these actions and proceedings are based on alleged violations of consumer protection laws governing the Company's servicing and origination activities. In some of these actions and proceedings, claims for substantial monetary damages are asserted against the Company.

The Company, in the ordinary course of business, is also subject to regulatory and governmental examinations, information requests and subpoenas, inquiries, investigations and threatened legal actions and proceedings. In connection with formal and informal inquiries, the Company receives numerous requests, subpoenas and orders for documents, testimony and information in connection with various aspects of the Company’s activities.

In view of the inherent difficulty of predicting outcomes of such litigation, regulatory and governmental matters, particularly where the claimants seek very large or indeterminate restitution, penalties or damages, or where the matters present novel legal theories or involve a large number of parties, the Company generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties related to each pending matter may be.

Reserves are established for pending or threatened litigation, regulatory and governmental matters when it is probable that a loss has been incurred and the amount of such loss can be reasonably estimated. In light of the inherent uncertainties involved in litigation and other legal proceedings, it is not always possible to determine a reasonable estimate of the amount of a probable loss, and the Company may estimate a range of possible loss for consideration in its estimated accruals. The estimates are based upon currently available information, including advice of counsel, and involve significant judgment taking into account the varying stages and inherent uncertainties of such matters. Accordingly, the Company’s estimates may change from time to time and such changes may be material to the consolidated financial results.

At December 31, 2018, the Company’s recorded reserves associated with legal and regulatory contingencies for which a loss is probable and can be reasonably estimated were approximately $19 million. There can be no assurance that the ultimate resolution of the Company’s pending or threatened litigation, claims or assessments will not result in losses in excess of the Company’s recorded reserves. As a result, the ultimate resolution of any particular legal matter, or matters, could be material to the Company’s results of operations or cash flows for the period in which such matter is resolved.

For matters involving a probable loss where the Company can estimate the range but not a specific loss amount, the aggregate estimated amount of reasonably possible losses in excess of the recorded liability was $0 to approximately $12 million at December 31, 2018. Given the inherent uncertainties and status of the Company’s outstanding legal and regulatory matters, the range of reasonably possible losses cannot be estimated for all matters; therefore, this estimated range does not represent the Company’s maximum loss exposure. As new information becomes available, the matters for which the Company is able to estimate, as well as the estimates themselves, will be adjusted accordingly.

The following is a description of certain litigation and regulatory matters:

The Company has received various subpoenas for testimony and documents, motions for examinations pursuant to Federal Rule of Bankruptcy Procedure 2004, and other information requests from certain Offices of the U.S. Trustees, acting through trial counsel in various federal judicial districts, seeking information regarding an array of the Company's policies, procedures and practices in servicing loans to borrowers who are in bankruptcy and the Company's compliance with bankruptcy laws and rules. The Company has provided information in response to these subpoenas and requests and has met with representatives of certain Offices of the U.S. Trustees to discuss various issues that have arisen in the course of these inquiries, including the Company's compliance with bankruptcy laws and rules. The Company cannot predict the outcome of the aforementioned proceedings and investigations, which could result in requests for damages, fines, sanctions, or other remediation. The Company could face further legal proceedings in connection with these matters. The Company may seek to enter into one or more agreements to resolve these matters. Any such agreement may require the Company to pay fines or other amounts for alleged breaches of law and to change or otherwise remediate the Company's business practices. Legal proceedings relating to these matters and the terms of any settlement agreement could have a material adverse effect on the Company's reputation, business, prospects, results of operations, liquidity and financial condition.

A federal securities fraud complaint was filed against the Company, George M. Awad, Denmar J. Dixon, Anthony N. Renzi, and Gary L. Tillett on March 16, 2017. The case, captioned Courtney Elkin, et al. vs. Walter Investment Management Corp., et al., Case No. 2:17-cv-02025-JCJ, is pending in the Eastern District of Pennsylvania. The court has appointed a lead plaintiff in the action who filed an amended complaint on September 15, 2017. The amended complaint seeks monetary damages and asserts claims under Sections 10(b) and 20(a) of the Exchange Act during a class period alleged to begin on August 9, 2016 and conclude on August 1, 2017. The amended complaint alleges that: (i) defendants made material misstatements about the value of the Company's deferred tax assets; (ii) the material misstatement about the value of the Company's deferred tax assets required the Company to restate certain financials in the Quarterly Reports on Form 10-Q for the periods ended June 30, 2016, September 30, 2016 and March 31, 2017 and the Annual Report on Form 10-K for the year ended December 31, 2016, and caused the Company to violate the financial covenants and obligations in agreements with the Company's lenders and GSEs; and (iii) defendants made material misstatements concerning the Company's initiatives to deleverage the Company's capital structure. On November 3, 2017, the lead plaintiff voluntarily dismissed defendant Denmar J. Dixon from the action. On November 14, 2017, the remaining defendants moved to dismiss the amended complaint. From December 1, 2017 to February 9, 2018, the action was stayed pursuant to section 362 of the Bankruptcy Code. On July 13, 2018, the parties entered into a formal settlement agreement to settle the action for $2.95 million subject to notice to the alleged class and court approval. On December 18, 2018, the court approved the settlement, which was paid by the Company's directors’ and officers’ insurance carrier. On January 18, 2019, the time to appeal the court's approval of the settlement expired.

A stockholder derivative complaint purporting to assert claims on behalf of the Company was filed against certain current and former members of the Board of Directors on June 22, 2017. The case, captioned Michael E. Vacek, Jr., et al. vs. George M. Awad, et al., Case No. 2:17-cv-02820-JCJ, is pending in the Eastern District of Pennsylvania. The plaintiff filed an amended complaint in the action on September 13, 2017. The amended complaint seeks monetary damages for the Company and equitable relief and asserts a claim for breach of fiduciary duty arising out of: (i) a material weakness in the Company's internal controls over financial reporting related to operational processes associated with Ditech Financial default servicing activities, including identifying foreclosure tax liens and resolving such liens efficiently, foreclosure related advances, and the processing and oversight of loans in bankruptcy status, which resulted in several adjustments to reserves during the fourth quarter of 2016; (ii) an accounting error that caused an overstatement of the value of the Company's deferred tax assets; and (iii) subpoenas seeking documents relating to RMS’s origination and underwriting of reverse mortgages and loans. The Company and the defendants moved to dismiss the amended complaint on October 5, 2017. From December 1, 2017 to February 9, 2018, the action was stayed pursuant to section 362 of the Bankruptcy Code. On April 26, 2018, the court denied the motion to dismiss. On May 9, 2018, the Company and the defendants moved for reconsideration or certification of the court’s denial of the motion to dismiss. On October 17, 2018, the parties entered into a formal settlement agreement to settle the action based on the Company's adoption of certain corporate governance measures. The Company's directors' and officers' insurance carrier agreed to pay $0.258 million in attorneys’ fees to plaintiff's counsel. On February 1, 2019, the court approved the settlement. On February 11, 2019, the action was stayed pursuant to section 362 of the Bankruptcy Code.

From time to time, federal and state authorities investigate or examine aspects of the Company's business activities, such as its mortgage origination, servicing, collection and bankruptcy practices, among other things. It is the Company's general policy to cooperate with such investigations, and the Company has been responding to information requests and otherwise cooperating with various ongoing investigations and examinations by such authorities. The Company cannot predict the outcome of any of the ongoing proceedings and cannot provide assurances that investigations and examinations will not have a material adverse effect on the Company.

Walter Energy Matters

The Company may become liable for U.S. federal income taxes allegedly owed by the Walter Energy consolidated group for the 2009 and prior tax years. Under federal law, each member of a consolidated group for U.S. federal income tax purposes is severally liable for the federal income tax liability of each other member of the consolidated group for any year in which it was a member of the consolidated group at any time during such year. Certain former subsidiaries of the Company (which were subsequently merged or otherwise consolidated with certain current subsidiaries of the Company) were members of the Walter Energy consolidated tax group prior to the Company's spin-off from Walter Energy on April 17, 2009. As a result, to the extent the Walter Energy consolidated group’s federal income taxes (including penalties and interest) for such tax years are not favorably resolved on the merits or otherwise paid, the Company could be liable for such amounts.

Walter Energy Tax Matters. According to Walter Energy’s Form 10-Q, or the Walter Energy Form 10-Q, for the quarter ended September 30, 2015 (filed with the SEC on November 5, 2015) and certain other public filings made by Walter Energy in its bankruptcy proceedings currently pending in Alabama, described below, as of the date of such filing, certain tax matters with respect to certain tax years prior to and including the year of the Company's spin-off from Walter Energy remained unresolved, including certain tax matters relating to: (i) a “proof of claim” for a substantial amount of taxes, interest and penalties with respect to Walter Energy’s fiscal years ended August 31, 1983 through May 31, 1994, which was filed by the IRS in connection with Walter Energy’s bankruptcy filing on December 27, 1989 in the U.S. Bankruptcy Court for the Middle District of Florida, Tampa Division; (ii) an IRS audit of Walter Energy’s federal income tax returns for the years ended May 31, 2000 through December 31, 2008; and (iii) an IRS audit of Walter Energy’s federal income tax returns for the 2009 through 2013 tax years.

Walter Energy 2015 Bankruptcy Filing. On July 15, 2015, Walter Energy filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Northern District of Alabama. On August 18, 2015, Walter Energy filed a motion with the Florida Bankruptcy Court requesting that the court transfer venue of its disputes with the IRS to the Alabama Bankruptcy Court. In that motion, Walter Energy asserted that it believed the liability for the years at issue "will be materially, if not completely, offset by the [r]efunds" asserted by Walter Energy against the IRS. The Florida Bankruptcy Court transferred venue of the matter to the Alabama Bankruptcy Court, where it remains pending.

On November 5, 2015, Walter Energy, together with certain of its subsidiaries, entered into the Walter Energy Asset Purchase Agreement with Coal Acquisition, a Delaware limited liability company formed by members of Walter Energy’s senior lender group, pursuant to which, among other things, Coal Acquisition agreed to acquire substantially all of Walter Energy’s assets and assume certain liabilities, subject to, among other things, a number of closing conditions set forth therein. On January 8, 2016, after conducting a hearing, the Alabama Bankruptcy Court entered an order approving the sale of Walter Energy's assets to Coal Acquisition free and clear of all liens, claims, interests and encumbrances of the debtors. The sale of such assets pursuant to the Walter Energy Asset Purchase Agreement was completed on March 31, 2016 and was conducted under the provisions of Sections 105, 363 and 365 of the Bankruptcy Code. Based on developments in the Alabama bankruptcy proceedings following completion of this asset sale, such asset sale appears to have resulted in (i) limited value remaining in Walter Energy’s bankruptcy estate and (ii) to date, limited recovery for certain of Walter Energy’s unsecured creditors, including the IRS.

On January 9, 2017, Walter Energy filed with the Alabama Bankruptcy Court a motion to convert its Chapter 11 bankruptcy case to a Chapter 7 liquidation. In that motion, Walter Energy stated that, other than with respect to 1% of the equity of the acquirer of Walter Energy's core assets, no prospect of payment of unsecured claims exists. On January 23, 2017, the IRS filed an objection to Walter Energy's motion to convert, in which the IRS requested that a judgment be entered against Walter Energy in connection with the tax matters described above. The IRS further asserted that entry of a final judgment was necessary so that it could pursue collection of tax liabilities from former members of Walter Energy's consolidated group that are not debtors.

On January 30, 2017, the Alabama Bankruptcy Court held a hearing at which it denied the IRS's request for entry of a judgment and announced its intent to grant Walter Energy's motion to convert. The Alabama Bankruptcy Court entered an order on February 2, 2017 converting Walter Energy's Chapter 11 bankruptcy to a Chapter 7 liquidation. During February 2017, Andre Toffel was appointed Chapter 7 trustee of Walter Energy's bankruptcy estate.

The Company cannot predict whether or to what extent it may become liable for federal income taxes of the Walter Energy consolidated tax group during the tax years in which the Company was a part of such group, in part because the Company believes, based on publicly available information, that: (i) the amount of taxes owed by the Walter Energy consolidated tax group for the periods from 1983 through 2009 remains unresolved; and (ii) in light of Walter Energy’s conversion from a Chapter 11 bankruptcy to a Chapter 7 bankruptcy, it is unclear whether the IRS will seek to make a direct claim against the Company for such taxes. Further, because the Company cannot currently estimate its liability, if any, relating to the federal income tax liability of Walter Energy’s consolidated tax group during the tax years in which it was a part of such group, the Company cannot determine whether such liabilities, if any, could have a material adverse effect on the Company's business, financial condition, liquidity and/or results of operations.

Tax Separation Agreement. In connection with the Company's spin-off from Walter Energy, the Company and Walter Energy entered into a Tax Separation Agreement, dated April 17, 2009. Notwithstanding any several liability the Company may have under federal tax law described above, under the Tax Separation Agreement, Walter Energy agreed to retain full liability for all U.S. federal income or state combined income taxes of the Walter Energy consolidated group for 2009 and prior tax years (including any interest, additional taxes or penalties applicable thereto), subject to limited exceptions. The Company therefore filed proofs of claim in the Alabama bankruptcy proceedings asserting claims for any such amounts to the extent the Company is ultimately held liable for the same. However, the Company expects to receive little or no recovery from Walter Energy for any filed proofs of claim for indemnification.

It is unclear whether claims made by the Company under the Tax Separation Agreement would be enforceable against Walter Energy in connection with, or following the conclusion of, the various Walter Energy bankruptcy proceedings described above, or if such claims would be rejected or disallowed under bankruptcy law. It is also unclear whether the Company would be able to recover some or all of any such claims given Walter Energy's limited assets and limited recoveries for unsecured creditors in the Walter Energy bankruptcy proceedings described above.

Furthermore, the Tax Separation Agreement provides that Walter Energy has, in its sole discretion, the exclusive right to represent the interests of the consolidated group in any audit, court proceeding or settlement of a claim with the IRS for the tax years in which certain of the Company’s former subsidiaries were members of the Walter Energy consolidated tax group. However, in light of the conversion of Walter Energy’s bankruptcy proceeding from a Chapter 11 proceeding to a Chapter 7 proceeding, the Company may choose to take a direct role in proceedings involving the IRS’s claim for tax years in which the Company was a member of the Walter Energy consolidated tax group. Moreover, the Tax Separation Agreement obligates the Company to take certain tax positions that are consistent with those taken historically by Walter Energy. In the event the Company does not take such positions, it could be liable to Walter Energy to the extent the Company's failure to do so results in an increased tax liability or the reduction of any tax asset of Walter Energy. These arrangements may result in conflicts of interests between the Company and Walter Energy, particularly with regard to the Walter Energy bankruptcy proceedings described above.

Lastly, according to its public filings, Walter Energy’s 2009 tax year is currently under audit. Accordingly, if it is determined that certain distribution taxes and other amounts are owed related to the Company's spin-off from Walter Energy in 2009, the Company may be liable under the Tax Separation Agreement for all or a portion of such amounts.

The Company is unable to estimate reasonably possible losses for the matter described above.

Key Employee Retention Plan and Severance Benefits

In September 2017, the Company entered into retention agreements with certain key officers of the Company. These agreements set forth retention bonuses to be earned by the key officers through dates as defined in each agreement. The total original retention bonuses to be paid for key officers that met the related party definition and met the qualifications of the agreement was $2.8 million, which was earned over the retention period. On February 20, 2018, Anthony N. Renzi resigned from his position as Chief Executive Officer and President of the Company, and therefore forfeited his right to payment of $1.3 million of his original retention bonus, which is included in the total amount above.

In October 2018, the Company entered into retention agreements with certain officers and other employees of the Company. For the Company’s executive officers, terms of the retention agreements include that retention payments would be (i) in lieu of any 2018 annual cash bonus that may have otherwise been payable to such officers under the Company’s 2018 incentive compensation program, and/or under any applicable employment agreement between such officer and the Company, (ii) in lieu of certain other outstanding bonus and/or incentive compensation payments that may be earned by certain officers under existing agreements between such officers and the Company and (iii) subject to repayment under certain circumstances as set forth in such agreements. The total amount paid to the Company’s executive officers in October 2018 under their respective retention agreements was $5.9 million in aggregate.

Ritesh Chaturbedi, the Company's Chief Operating Officer, entered into a termination letter agreement with the Company on January 14, 2019, pursuant to which Mr. Chaturbedi's employment was terminated as of January 11, 2019. Mr. Chaturbedi is entitled to receive a severance benefit equal to one-times Mr. Chaturbedi’s current base salary, payable in installments over a period of 12 months, subject to Mr. Chaturbedi executing and not revoking a release of claims against the Company.

In June 2018, the Company adopted a KEIP, which was designed to provide a transaction incentive bonus to certain key employees, to the extent a successful transaction is executed and ultimately consummated in connection with the Company's previously announced evaluation of strategic alternatives. The KEIP is payable in two equal installments, with the first installment totaling $2.5 million paid during February 2019 upon execution of the DHCP RSA on February 8, 2019. The second installment is payable upon consummation of a transaction, subject to meeting certain performance targets and the Bankruptcy Court’s approval.