Exhibit 10.3

AMENDMENT NO. 2
TO THE
EMPLOYMENT AGREEMENT
 
 AMENDMENT NO. 2 (the “Second Amendment”) by and between Chimera Investment
Corporation (the “Company”) and Mohit Marria (“Executive”), effective as of
March 31, 2016.
 
  WHEREAS, the Company and Executive are parties to that certain Employment
Agreement dated August 5, 2015, as amended by that certain Amendment No. 1
effective January 20, 2016 (as so amended, the “Agreement”); and
 
WHEREAS, the Board of Directors desires to amend the Agreement to set the
performance targets and target bonuses for the Executive’s compensation in 2016,
2017 and 2018 to align with similar performance and bonus targets for executive
officers in peer companies.
 
 NOW, THEREFORE, BE IT RESOLVED, that the Agreement is hereby amended by the
Second Amendment as follows:
 

 
1.
 
Amendment to Agreement.

The Agreement is amended by deleting Exhibit A attached thereto in its entirety
and replacing it with Exhibit A attached hereto.
 

 
2.
 
Effective Date of Amendment; Ratification and Confirmation.

The Second Amendment shall become effective upon approval by the Board of
Directors. In all other respects, the Agreement is hereby ratified and
confirmed.
 

 
3.
 
Governing Law.

 
THE SECOND AMENDMENT SHALL BE GOVERNED BY NEW YORK LAW WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS THEREOF, EXCEPT TO THE EXTENT SUCH LAW IS
PREEMPTED BY FEDERAL LAW.
 
        4.       Counterparts
 
This Second Amendment may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment as of
the date first above written.
 

 

 
CHIMERA INVESTMENT CORPORATION
         
 
By:
/s/ Matthew Lambiase     Name: Matthew Lambiase     Title: President and Chief
Executive Officer          

 
MOHIT MARRIA
         
 
By:
/s/ Mohit Marria     Name: Mohit Marria  

 

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Exhibit A
 
Annual Performance Bonus
 
The following summarizes the material terms of the annual bonus (“Annual Bonus”)
set forth in Section 3(b)(ii) of the Agreement to which this Exhibit A is
attached. Unless otherwise specified in this Exhibit A, all defined terms have
the meanings set forth in the Agreement.
 
1.     Performance Period. The Annual Bonus will be payable for each of the
following performance periods (each, a “Performance Period”).
 
January 1, 2016 through December 31, 2016

 
January 1, 2017 through December 31, 2017

 
January 1, 2018 through December 31, 2018

 
Except as otherwise provided in the Agreement, Executive will be eligible to
receive the Annual Bonus only if Executive remains employed by the Company
through the last day of the applicable Performance Period. For the avoidance of
doubt, Executive will not be entitled to an Annual Bonus for any Performance
Period beginning on or after Executive’s termination of employment for any
reason.
 
Any Annual Bonus will be subject to achievement of the performance goals
described herein. In no event will Executive receive any unpaid Annual Bonus in
the event Executive’s employment is terminated by the Company for Cause or by
Executive (other than for Good Reason as described above).
 
2.     Target Bonus. For each Performance Period, Executive’s target annual
bonus (the “Target Bonus”) will be equal to $1,600,000, which Target Bonus may
be adjusted by the Compensation Committee to account for the consummation of
strategic initiatives, such as capital raises and M&A transactions. Executive is
eligible to receive an Annual Bonus from 0% to 150% of the Target Bonus for each
Performance Period, based on performance as described below.
 
3.     Performance Components. The Annual Bonus will consist of three
components:
 
50%
 of the Annual Bonus will be payable based on the Company’s return on average
equity (“ROAE” and such portion of the Annual Bonus, the “ROAE Bonus”).

 
25%
 of the Annual Bonus will be payable based on the Company’s three-year total
shareholder return (“TSR” and such portion of the Annual Bonus, the “TSR Bonus”)
for the three year period beginning on the first day of the applicable
Performance Period (the “TSR Measurement Period”). TSR is measured by the
increase in the share price of the Company’s common stock during the relevant
TSR Measurement Period by comparing the price at the end of the current period
to the price at the end of the prior period, and assuming reinvestment of
dividends paid, if any, on common stock during the period. Share price shall be
calculated as the average of the NYSE closing prices of the Company’s common
stock on the last 20 trading days of each relevant TSR Measurement Period. TSR
shall be compared to that of the constituents of the NAREIT FTSE Mortgage Home
Financing index, which are calculated using a 20 trading day average price. The
Company’s stock price, and any companies that are not in the index at the
beginning and end of the relevant TSR Measurement Period, shall be excluded from
the TSR calculation for the index, provided that a company that ceases to be
included in the index due to its bankruptcy, insolvency, or voluntary
liquidation will continue to be included in the TSR calculation for the index
and will automatically be included as the lowest performing company in the
index.

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25%
 of the Annual Bonus will be payable at the discretion of the Committee (such
portion of the Annual Bonus, the “Discretionary Bonus”).

 
4.     Definition of ROAE.
 
For purposes of the ROAE Bonus: “ROAE” means (i) Company Return, divided by (ii)
Company Average Equity, for the 12 month Performance Period.
 
“Company Return” means net income as determined in accordance with GAAP, but
excluding non-cash, non-operating expense items such as depreciation expense,
amortization of goodwill and other non-cash, non-operating expense items as
determined by the Compensation Committee in its sole discretion for the
applicable Performance Period. If, for any portion of any Performance Period,
(i) the Company does not use hedge accounting or (ii) its derivative hedging
instruments or any portion thereof are otherwise deemed ineffective, which in
either case, results in changes in the value of such hedging instruments being
recorded in the Company’s GAAP income statement, then any gains or losses from
such hedging instruments will also be excluded from the calculation of Company
Return.
 
“Company Average Equity” means the stockholders’ equity of the Company as
determined in accordance with GAAP, but excluding accumulated other
comprehensive income or loss (which, among other things, reflects unrealized
gains or losses in the Company’s residential mortgage-backed securities
portfolio), stockholders’ equity attributable to preferred stock and other items
as determined by the Compensation Committee in its sole discretion for the
applicable Performance Period. For purposes of calculating ROAE, Company Average
Equity will be determined based on the average of the Company’s stockholders’
equity calculated as described in the preceding sentence as of the last day of
each month during the applicable Performance Period.
 
5.     ROAE Bonus
 
For each Performance Period, the target amount of the ROAE Bonus will be equal
to 50% of the Target Bonus, and Executive will be eligible to receive from 0% to
150% of such target amount of ROAE Bonus.
 
For purposes of the ROAE Bonus:
 
The
 “ROAE Target” will be the greater of (x) the 2 Year Treasury Rate + 400 basis
points or (y) 14%; provided that the ROAE Target will not exceed 16%.

 
The
 “2 Year Treasury Rate” will be calculated as the average of the weekly 2 year
Treasury note rates published in the U.S. Federal Reserve H.15 Report for the 52
weeks in the Performance Period.

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The following table sets forth the percentage of the ROAE Target payable based
on ROAE achieved for the ·January 1, 2016 through December 31, 2016 Performance
Period:
 
ROAE Achieved
Percentage of ROAE Target
Payable
 
0% to 10%
0% to 50% by linear
interpolation
 
12%
75%
 
14%
100%
 
16%
125%
 
18%
150%
 

 
For ROAE achieved between 10% and 18% but that is not set forth in the above
table, between 50% and 150% of the ROAE Target will be payable, determined by
linear interpolation. The percentage of the ROAE Target payable based on ROAE
achieved for each subsequent Performance Period shall be set by the Compensation
Committee based on the performance of the Company’s investment portfolio,
expected market conditions, and other factors as determined in the discretion of
the Compensation Committee.
 
100% of the ROAE Bonus will be paid in cash between January 1 and March 15 of
the year following the last day of the applicable Performance Period.
 
6.     TSR Bonus
 
For each Performance Period, Executive will be granted a target number of PSUs
under the Equity Bonus Plan having an aggregate value on the first day of the
Performance Period equal to 25% of the Target Bonus (the “Target PSUs”). Subject
to Executive’s continuing employment through the last day of the TSR Measurement
Period, between 0% and 150% of the Target PSUs will vest and be paid in common
stock of the Company between January 1 and March 15 of the year following the
last day of the applicable TSR Measurement Period, based on the performance of
our TSR compared to that of the constituents of the NAREIT FTSE Mortgage Home
Financing index (measured as a percentile), as follows:
 
Three-Year TSR
Percentage of Target PSUs
Vesting and Payable
 
Less than 25th Percentile
0%
 
25th Percentile
50%
 
50th Percentile
100%
 
75th Percentile
150%
 

 

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For any TSR achieved between 25th and 75th percentile and not specified in the
above table, between 50% and 150%, the percentage of the Target PSUs that will
vest for the applicable TSR Measurement Period will be determined by linear
interpolation.
 
Notwithstanding anything herein to the contrary, upon the consummation of a
Change in Control, (i) the percentage of the Target PSUs that would have vested
in accordance with the preceding table based on the Company’s actual average TSR
from the grant date through the date of such Change in Control will be eligible
to vest on the last day of the applicable TSR Measurement Period, subject only
to Executive’s continuing employment with the Company (except as otherwise
provided in Sections 5(a), 5(b) or 5(e) of the Agreement), and (ii) any portion
of the Target PSUs that would not have vested in accordance with the preceding
table based on the Company’s actual average TSR from the grant date through the
date of such Change in Control will be forfeited as of such Change in Control
with no compensation due therefor.
 
7.     Discretionary Bonus.
 
For each Performance Period, the target amount of the Discretionary Bonus will
be equal to 25% of the Target Bonus, and Executive will be eligible to receive
from 0% and 150% of the target amount of such Discretionary Bonus. The amount of
the Discretionary Bonus will be determined by the Compensation Committee based
upon any factors deemed relevant and appropriate by the Compensation Committee
in its sole discretion, as determined within 90 days after commencement of the
Performance Period and communicated to Executive, including without limitation,
the Company’s relevant stock price and/or TSR relative to its peers, the
Company’s leverage strategy relative to business plan and peers, the Company’s
other asset management activities and Executive’s individual performance. The
achievement of such factors will be considered in evaluating Executive’s
performance in respect of any such Discretionary Bonus; provided, however, that
the final determination of such Discretionary Bonus, including the amount
thereof to be awarded, will be in the sole discretion of the Compensation
Committee.
 
For the 2016 Performance Period, the Discretionary Bonus will be paid 66.7% in
cash and 33.3% in restricted stock or RSUs. For the 2017 and 2018 Performance
Periods, 100% of the Discretionary Bonus will be paid in restricted stock or
RSUs. The restricted stock or RSUs will vest in equal annual installments on the
first three anniversaries of the grant date, subject to Executive’s continuing
employment with the Company (except as otherwise provided in Sections 5(a), 5(b)
or 5(e) of the Agreement) and the terms and conditions of the Equity
Compensation Plan and the applicable award agreement. Such amounts will be paid
and restricted stock or RSUs granted between January 1 and March 15 of the year
following the year to which the Discretionary Bonus relates.
 
8.     Dividend Equivalents.
 
Dividend equivalents will accrue on RSUs and PSUs that become vested hereunder
as and when dividends are paid to the Company’s shareholders and will be paid to
Executive in cash, shares or a combination thereof, as determined by the
Committee in its sole discretion, at the time such RSUs or PSUs are settled.
 
9. Committee Determinations
 
All determinations with respect to the Annual Bonus, including, without
limitation, the amount, if any, that is payable to Executive for each
Performance Period, will be made by the Compensation Committee, in good faith
and in compliance with this Exhibit A. All such determinations will be final and
binding on Executive and the Company.