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.







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




2


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


3