Exhibit 10.5.1

Amendment to Severance Agreement

The Severance Agreement (the “Severance Agreement”) dated June 11, 2004 between
Dynex Capital, Inc. (the “Company”) and Stephen J. Benedetti (the “Executive”)
is hereby amended in the following respects in order to comply with Section 409A
of the Internal Revenue Code, as amended, and applicable guidance issued
thereunder (collectively, “Code Section 409A”):
 
1.           Section 5(a)(iii) of the Severance Agreement shall be replaced in
its entirety with the following:
 
(iii)           to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies in accordance with the terms of such plan,
program, policy or practice, or contract or agreement (including time and form
of payment if payable in a different form or time than provided in this Section
5(a)) (such other amounts and benefits shall be hereinafter referred to as the
“Other Benefits”).
 
2.           Section 5(c) of the Severance Agreement shall be amended by adding
the following to the end:
 
The Other Benefits and any payments that may be due Executive under the 2004
Stock Incentive Plan shall be paid in accordance with the timing of the
applicable governing documents.
 
3.           Section 5(d)(i) of the Severance Agreement shall be amended by
adding the following to the end:
 
Any such accrued salary and bonus shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination.  Any deferred compensation or
Other Benefits shall be paid in accordance with the terms of the applicable
governing documents.
 
4.           Section 8 of the Severance Agreement shall be amended by adding the
following to the end:
 
In the event any payments or benefits are to be reduced, the Company shall
reduce or eliminate the payments to the Executive by first reducing or
eliminating those payments or benefits which are payable in cash and then by
reducing or eliminating those payments which are not payable in cash, in each
case in reverse order beginning with payments or benefits which are to be paid
or provided the farthest in time from the date of determination.  Any reduction
pursuant to the preceding sentence shall take precedence over the provisions of
any other plan, arrangement or agreement governing the Executive’s rights and
entitlements to any benefits or compensation.
 

 
 

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5.           The Severance Agreement shall be amended by adding the following
new Section 11 to the end:
 
11.           Code Section 409A Compliance.
 
(a)                      The intent of the parties is that payments and benefits
under this Agreement comply with Code Section 409A or comply with an exemption
from the application of Code Section 409A and, accordingly, all provisions of
this Agreement shall be construed in a manner consistent with the requirements
for avoiding taxes or penalties under Code Section 409A.
 
(b)                      Neither the Executive nor the Company shall take any
action to accelerate or delay the payment of any monies and/or provision of any
benefits in any matter which would not be in compliance with Code Section 409A
(including any transition or grandfather rules thereunder).
 
(c)                      A termination of employment shall not be deemed to have
occurred for purposes of any provision of this Agreement providing for the form
or timing of payment of any amounts or benefits upon or following a termination
of employment unless such termination is also a “separation from service”
(within the meaning of Code Section 409A) and, for purposes of any such
provision of this Agreement under which (and to the extent) deferred
compensation subject to Code Section 409A is paid, references to a “termination”
or “termination of employment” or like references shall mean separation from
service.  If the Executive is deemed on the date of separation from service with
the Company to be a “specified employee”, within the meaning of that term under
Code Section 409A(a)(2)(B) and using the identification methodology selected by
the Company from time to time, or if none, the default methodology, then with
regard to any payment or benefit that is required to be delayed in compliance
with Code Section 409A(a)(2)(B), such payment or benefit shall not be made or
provided prior to the earlier of (i) the expiration of the six- month period
measured from the date of the Executive’s separation from service or (ii) the
date of the Executive’s death.  In the case of benefits required to be delayed
under Code Section 409A, however, the Executive may pay the cost of benefit
coverage, and thereby obtain benefits, during such six month delay period and
then be reimbursed by the Company thereafter when delayed payments are made
pursuant to the next sentence.  On the first day of the seventh month following
the date of the Executive’s separation from service or, if earlier, on the date
of the Executive’s death, all payments delayed pursuant to this Section 11(c)
(whether they would have otherwise been payable in a single sum or in
installments in the absence of such delay) shall be paid or reimbursed to the
Executive in a lump sum, and any remaining payments and benefits due under this
Agreement shall be paid or provided in accordance with the normal payment dates
specified for them herein.
 
(d)                      With regard to any provision herein that provides for
reimbursement of expenses or in-kind benefits subject to Code Section 409A,
except as permitted by Code Section 409A, (i) the right to reimbursement or
in-kind benefits is not subject to liquidation or exchange for another benefit,
and (ii) the amount of expenses eligible for reimbursement, or in-kind benefits,
provided during any taxable year shall not
 

 
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affect the expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other taxable year, provided that the foregoing clause (ii)
shall not be violated with regard to expenses reimbursed under any arrangement
covered by Code Section 105(b) solely because such expenses are subject to a
limit related to the period the arrangement is in effect. All reimbursements
shall be reimbursed in accordance with the Company’s reimbursement policies but
in no event later than the calendar year following the calendar year in which
the related expense is incurred.
 
(e)                      If under this Agreement, an amount is to be paid in two
or more installments, for purposes of Code Section 409A, each installment shall
be treated as a separate payment.
 
(f)                      When, if ever, a payment under this Agreement specifies
a payment period with reference to a number of days (e.g., “payment shall be
made within ten (10) days following the date of termination”), the actual date
of payment within the specified period shall be within the sole discretion of
the Company.”
 
(g)                      Notwithstanding any of the provisions of this
Agreement, the Company shall not be liable to the Executive if any payment or
benefit which is to be provided pursuant to this Agreement and which is
considered deferred compensation subject to Code Section 409A otherwise fails to
comply with, or be exempt from, the requirements of Code Section 409A.
 
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment to the
Employment Agreement on this 31st day of December, 2008 to be effective on
January 1, 2009.
 
/s/ Stephen J. Benedetti
Stephen J. Benedetti

DYNEX CAPITAL, INC.

By: /s/ Thomas B. Akin
Name:   Thomas B. Akin
Title:     Chairman and Chief Executive Officer

 
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