Form of Stock Option Agreement


    Exhibit
      10.2

      DYNEX
        CAPITAL, INC.

      DIRECTOR
        STOCK OPTION AGREEMENT

      


      


      THIS
        AGREEMENT, dated as of the 17th
        day of
        June, 2005 between DYNEX CAPITAL, INC. (the “Corporation”), and _____________
        (the “Recipient”).

      


      WHEREAS,
        pursuant to the DYNEX CAPITAL, INC. 2004 Stock Incentive Plan (the “Plan”), and
        pursuant to that certain Action-in-Writing dated April 13, 2005, the Board
        wishes to enable the Recipient to participate in its future success and to
        associate their interests with those of the Corporation and its shareholders
        through the grant of an option to purchase Common Stock of the Corporation
        under
        the terms outlined below; and

      


      WHEREAS,
        the Recipient desires to accept said award in accordance with the terms and
        provisions of the Plan and this Agreement.

      


      NOW
        THEREFORE, in consideration of the premises and of the mutual covenants and
        agreements hereinafter set forth, the Corporation and the Recipient agree
        as
        follows:

      


      
        	
                1.

              	
                Grant
                  of Option.

              


      

      


      Subject
        to the terms and conditions of the Plan and subject further to the terms
        and
        conditions set forth herein, the Corporation granted to the Recipient on
        June
        17, 2005 (“Date of Grant”) the right and option to purchase from the Company all
        or any part of an aggregate of 5,000 shares of Common Stock at the option
        price
        of $8.46 per share which is 110% of Fair Market Value of Common Stock on
        the
        Date of Grant. This option is not intended to be an “Incentive Stock Option”
        under section 422 of the Code. Such option will be exercisable as hereafter
        provided. Capitalized terms not otherwise defined herein have the meanings
        given
        to them in the Plan.

      


      
        	
                2.

              	
                Exercise
                  of Option.

              


      

      


      This
        option shall be exercisable with respect to all of the shares subject to
        the
        option on the Date of Grant. Once this option has become exercisable in
        accordance with the previous sentence it shall continue to be exercisable
        until
        the termination of Recipient’s rights hereunder pursuant to paragraph 6. A
        partial exercise of this option shall not affect Recipient’s right to exercise
        this option with respect to the remaining shares, subject to the conditions
        of
        the Plan and this Agreement. 

      


      
        	
                3.

              	
                Method
                  of Exercising and Payment for Shares.

              


      

      


      This
        option shall be exercised by delivery of a written Notice of Exercise stating
        the number of shares the Recipient desires to exercise. The form of Notice
        of
        Exercise is attached to this Agreement as Exhibit A. The exercise date shall
        be
        the later of the date specified in the Notice of Exercise or the date such
        notice is received by the Corporation. Notices should be delivered to Dynex
        Capital, Inc., at its Corporate headquarters, Attention: Chief
        Financial


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      Officer.
        Such notice shall be accompanied by the payment of the option price in full,
        in
        cash or cash equivalent.

      


      
        	
                4.

              	
                Termination.

              


      

      


      This
        option shall terminate upon the earliest of the following events:

      


      (a) June
        17,
        2010.

      


      (b) The
        expiration of twelve (12) months after the date the Recipient ceases to be
        a
        member of the Board, provided, however, that if the Recipient continues to
        provide consulting or other material services to the Corporation, the expiration
        date will be twelve (12) months from the time that the Recipient no longer
        provides consulting or other material services to the Corporation.

      


      (c) The
        expiration of twelve (12) months after the date of death of the Recipient
        if
        death occurs while the Recipient is a member of the Board. During this period,
        the Recipient’s estate, personal representative or beneficiary shall have the
        right to exercise the option to the extent it is exercisable on the date
        of
        Recipient’s death.

      


      (d) The
        expiration of twelve (12) months after the date the Recipient is terminated
        from
        service on the Board due to disability. During this period, the Recipient
        shall
        have the right to exercise the option to the extent it is exercisable on
        the
        date of termination due to disability.

      


      (e) The
        expiration of twelve (12) months after the date of the Recipient’s Retirement.
        During this period, the Recipient shall have the right to exercise the option
        to
        the extent it is exercisable on the date of Retirement. For purposes of this
        Agreement, Retirement means termination from the Board in accordance with
        the
        Corporation’s Corporate Governance Guidelines. 

      


      The
        Board
        shall have absolute discretion to determine whether any termination of Recipient
        from the Board or authorized leave of absence or absence due to military
        or
        government service is to be considered as Retirement for purposes of this
        Agreement and whether an authorized leave of absence or absence due to military
        or government service shall constitute a termination of service from the
        Board
        for the purposes of this Agreement. Any determination made by the Board with
        respect to any matter referred to in this paragraph 6 shall be final and
        conclusive.

      


      
        	
                5.

              	
                Nontransferability.

              


      

      


      This
        option is nontransferable except by will or the laws of descent and
        distribution. This option is exercisable during the Recipient’s lifetime only by
        the Recipient.

      


      
        	
                6.

              	
                Rights
                  as a Shareholder.

              


      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


      The
        Recipient shall have no rights as a shareholder with respect to any Common
        Stock
        covered by the option prior to the exercise of the option and the issuance
        of
        shares of Common Stock.

      


      
        	
                7.

              	
                Recapitalization.

              


      

      


      If
        the
        Corporation shall effect a subdivision or consolidation of shares of Common
        Stock, or other capital readjustment, or the payment of a stock dividend,
        or
        other increase or decrease in the number of shares of Common Stock outstanding,
        without receiving compensation therefore, then (a) in the event of any increase
        in the number of shares of Common Stock outstanding, the number of shares
        of
        Common Stock then remaining hereunder shall be proportionately increased
        (except
        that any fractional share resulting from any such adjustment shall be excluded
        from the operation of this Agreement), and the exercise price per share shall
        be
        proportionately reduced) but not below the par value of such share), and
        (b) in
        the event of a reduction in the number of shares of Common Stock outstanding,
        the number of shares of Common Stock then remaining hereunder shall be
        proportionately reduced (except that any fractional share resulting from
        any
        such adjustments shall be excluded from the operation of this Agreement),
        and
        the exercise price per share shall be proportionately increased.

      


      
        	
                8.

              	
                No
                  Rights to Continued Service.

              


      

      


      Nothing
        in this Agreement or in the Plan shall confer any right to continued service
        on
        the Board nor restrict the termination of service of the Recipient at any
        time.

      


      
        	
                9.

              	
                 Recipient’s
                  Agreement.

              


      

      


      Notwithstanding
        any other provision of this Agreement, Recipient agrees that Recipient will
        not
        exercise this option and the Corporation shall not be obligated to issue
        any
        Common Stock hereunder, if counsel to the Corporation determines such exercise
        or issuance would violate any law or regulation of any governmental authority
        or
        agreement between the Corporation and any securities exchange upon which
        the
        Common Stock is listed.

      


      
        	
                10.

              	
                Resolution
                  of Disputes.

              


      

      


      Any
        dispute or disagreement which shall arise under, or as a result of, or pursuant
        to, this Agreement shall be determined by the Board in its absolute discretion,
        and any determination by the Board under or pursuant to this Agreement and
        any
        interpretation by the Board of the terms of this Agreement shall be final,
        binding and conclusive on all persons affected thereby.

      


      
        	
                11.

              	
                 Amendments.

              


      

      


      The
        Committee shall have the right, in its absolute discretion, to alter or amend
        this Agreement in any manner, and any alteration or amendment of the Agreement
        by the Committee shall, upon adoption thereof by the Committee, become and
        be
        binding and conclusive on all persons affected thereby without written notice
        to
        the Recipient of any alteration or amendment


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      of
        this
        Agreement by the Committee as promptly as practical after the adoption thereof.
        Notwithstanding the foregoing provisions of this paragraph 10, no alteration
        or
        amendment of this Agreement shall be made that would adversely affect the
        rights
        of the Recipient without the Recipient’s consent.

      


      
        	
                12.

              	
                 Construction.

              


      

      


      This
        Agreement has been entered into in accordance with the terms of the Plan,
        and
        wherever a conflict may arise between the terms of this Agreement and the
        terms
        of the Plan, the terms of the Plan shall control.

      


      
        	
                13.

              	
                 Governing
                  Law.

              


      

      This
        Agreement shall be governed by and construed and enforced in accordance with
        the
        laws of the Commonwealth of Virginia.

      


      IN
        WITNESS WHEREOF,
        the
        Corporation has caused this Agreement to be executed by its duly authorized
        officer, and the Recipient has hereunto set his hand and seal, all on the
        day
        and year first above written.

      


      If
        this
        Agreement is not signed and returned by the Recipient to the Chief Financial
        Officer of the Corporation (or other designated person) on or before ________,
        this Agreement shall become null and void.

      


      DYNEX
        CAPITAL, INC.

      


      


      By:
        

       Stephen
        J. Benedetti

      Executive
        Vice President

      


      THE
        RECIPIENT

      


      


      Date:
        

      



      DYNEX
        CAPITAL, INC.

      2004
        Stock Incentive Plan

      


      STOCK
        OPTION

      NOTICE
        OF EXERCISE

      


      


      


      


      


      


      Chief
        Financial Officer

      Dynex
        Capital, Inc.

      4551
        Cox
        Road

      Suite
        300

      Glen
        Allen, Virginia 23060

      Phone:
        (804) 217-5800

      Telecopy:
        (804) 217-5860

      


      I
        hereby
        exercise ________ options pursuant to the Option Agreement dated _____, ____,
        at
        an exercise price of $____ per share. Enclosed is a check for the exercise
        price


      of
        $______.

      


      Dated:
        

      Recipient’s
        Signature

      


      


      


      Recipient’s
        Name