UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549



                                  ------------




                                    FORM 8-K


                                 CURRENT REPORT



     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


                         Date of Report: April 29, 2002




                               DYNEX CAPITAL, INC.
               (Exact Name of Registrant as Specified in Charter)




             Virginia                   1-9819                   52-1549373
         (State or Other         (Commission File Number)      (IRS Employer
   Jurisdiction ofIncorporation)                             Identification No.)



       4551 Cox Road, Suite 300, Glen Allen, Virginia              23060
          (Address of Principal Executive Offices)              (Zip Code)



                                 (804) 217-5800
              (Registrant's telephone number, including area code)
<PAGE>
Item 5.       OTHER EVENTS.

         On April 17, 2002,  Leeward  Capital,  L.P.  filed a preliminary  proxy
statement with the Securities and Exchange  Commission for the  solicitation  of
proxies  from the  holders  of the  common  stock of Dynex  Capital,  Inc.  (the
"Company") to elect Eric P. Von der Porten and James M. Bogin as two of the four
directors to be elected by the Company's common  stockholders at the 2002 annual
meeting to be held on May 14, 2002.

     On April 26, 2002,  the Company  entered into a Settlement  Agreement  (the
"Settlement Agreement") with Leeward Capital L.P., Leeward Investments,  L.L.C.,
Mr.  Eric P. Von der Porten  and Mr.  James M.  Bogin  (the  "Leeward  Parties")
pursuant to which the Leeward Parties ended their  solicitation for directors to
the Company's Board of Directors at the 2002 annual meeting of stockholders.

         Under the  Settlement  Agreement,  Mr. Von der Porten has been added to
the Board's  slate of  nominees  for  election to a one-year  term at the annual
meeting,  increasing  the total  number of Board  nominees  for  election by the
Company's common  stockholders to five (including the four existing  nominees of
the Board,  who are all current  members of the Board).  The Board has agreed to
recommend the election of all five nominees.  The Leeward Parties have withdrawn
their  nomination  of Mr. Eric P. Von der Porten and James M. Bogin for election
to the Company's  Board of Directors and have agreed to discontinue  all efforts
(direct and indirect) to solicit votes for their nominees or otherwise to pursue
the nomination.

         The Settlement  Agreement  provides that the Leeward  Parties will vote
their shares of the Company's  common stock in favor of the Board's nominees and
against the removal of any director, and not pursue any unsolicited  acquisition
attempts or engage in any proxy  contest,  for a specified  period (the "Term").
The Leeward Parties have also agreed to certain restrictions on their activities
related to the Company until November 15, 2003, unless the Company's Board fails
to  nominate  Mr. Von der  Porten  for  election  at the 2003  annual  meting of
stockholders, in which case these restrictions shall expire upon such failure to
nominate.  In addition,  during the Term,  the Leeward  Parties must vote all of
their shares of Company  common stock on all matters  other than the election or
removal of directors either (as it chooses in its sole discretion) in accordance
with the recommendation of a majority of the Board.

         The Settlement  Agreement contains certain other provisions,  including
restrictions  on public  announcements,  mutual releases of claims in connection
with the proxy contest and related covenants not to sue, certain representations
and warranties,  and the Company's agreement to reimburse certain of the Leeward
Parties' actual documented out-of-pocket costs and expenses.

         The foregoing is qualified in its entirety by reference to the complete
text of the Settlement Agreement, which is filed as Exhibit 99.2 hereto.

         On April 29, 2002,  the Company also issued a press release  announcing
the settlement with the Leeward Parties, which is filed as Exhibit 99.1 hereto.


Item 7.  FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

         (c)  Exhibits

              99.1  Dynex Capital, Inc. Press Release, dated April 29, 2002.

              99.2  Settlement  Agreement, dated as of April 26, 2002, by and
                    among Dynex Capital, Inc., Eric P. Von der Porten, Leeward
                    Capital L.P., Leeward Investments, L.L.C. and James M.
                    Bogin.


                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned hereunto duly authorized.


Date:    April 29, 2002                    DYNEX CAPITAL, INC.


                                           By: /s/ Thomas H. Potts
                                               ---------------------------------
                                               Thomas H. Potts
                                               President
<PAGE>
                                  EXHIBIT INDEX
<TABLE>
<CAPTION>

Number           Description                                                            Method of Filing
------           -----------                                                            ----------------
  <S>                       <C>                                                                 <C>

  99.1           Dynex Capital, Inc. Press Release,                                     Filed herewith
                 dated April 29, 2002.

  99.2           Settlement Agreement, dated as of April 26, 2002,                      Filed herewith
                 by and among Dynex Capital, Inc., Eric P. Von der Porten,
                 Leeward Capital L.P., Leeward Investments, L.L.C. and
                 James M. Bogin.
</TABLE>
<PAGE>
                                                                    Exhibit 99.1

                                  PRESS RELEASE


FOR IMMEDIATE RELEASE                                        CONTACT: Kathy Fern
April 29, 2002                                                      804-217-5800


                        DYNEX CAPITAL AND LEEWARD CAPITAL

                           REACH SETTLEMENT AGREEMENT


         Dynex Capital,  Inc. (NYSE:  DX) and Leeward  Capital,  L.P.  announced
today a definitive  agreement which ends Leeward Capital's proxy solicitation to
replace two existing  directors elected by the common  shareholders with two new
directors  nominated by Leeward Capital.  Under the agreement,  Mr. Eric Von der
Porten will be added to the slate of candidates nominated by the Dynex Board for
election as directors at the 2002 annual meeting of  stockholders  to be held on
May 14, 2002. This will raise the number of Board candidates to seven, including
the six  current  Dynex Board  members  who are  standing  for  re-election.  If
elected,  Mr.  Von der  Porten as well as all other  directors  will serve for a
one-year term.

         The  addition  of Mr.  Von der Porten as a nominee to the Board will be
described in a supplement to the Dynex proxy  statement to be filed with the SEC
and  mailed  to Dynex  shareholders.  In  addition,  Dynex  will be  filing  the
settlement agreement with the SEC as part of a current report on Form 8-K.

         Thomas H. Potts,  President of Dynex,  stated, "We are pleased with the
resolution agreed to by all parties. We look forward to working with Mr. Von der
Porten in continuing to enhance shareholder value."

         Note: This document contains  "forward-looking  statements" (within the
meaning  of the  Private  Securities  Litigation  Act of 1995)  that  inherently
involve risks and  uncertainties.  Dynex actual results could differ  materially
from  those  anticipated  in these  forward-looking  statements  as a result  of
unforeseen  external factors.  As discussed in Dynex filings with the SEC, these
factors  may  include,  but are not  limited  to,  changes in  general  economic
conditions,  disruptions  in the  capital  markets,  the  ability  of  Dynex  to
successfully implement a new business direction, fluctuations in interest rates,
increases in costs and other general competitive factors.
<PAGE>
                                                                   Exhibit  99.2

                              SETTLEMENT AGREEMENT

     This Settlement  Agreement (this "Agreement") is made as of April 26, 2002,
by and among Dynex Capital,  Inc., a Virginia corporation (the "Company"),  Eric
P. Von der  Porten,  a citizen  of the United  States  ("Mr.  Von der  Porten"),
Leeward  Capital L.P., a California  limited  partnership  ("Leeward"),  Leeward
Investments,   L.L.C.,  a  California   limited   liability   company  ("Leeward
Investments,"  and,  together with Mr. Von der Porten and Leeward,  the "Leeward
Group"),  and Mr. James M. Bogin,  a citizen of the United  States ("Mr.  Bogin"
and, together with the Leeward Group, the "Leeward Parties").

                                    RECITALS:
                                    ---------

         WHEREAS,   the  Company  has  scheduled  its  2002  annual  meeting  of
stockholders  for May 14, 2002 (as the same may be adjourned  or postponed  from
time to time, the "2002 Annual Meeting");

     WHEREAS,  the Company  has issued a Proxy  Statement  nominating  J. Sidney
Davenport,  Thomas H. Potts,  Barry S. Shein and Donald B. Vaden for election to
the Company Board of Directors by the Company's common  stockholders at the 2002
Annual Meeting;

     WHEREAS,  Leeward has filed a preliminary  Proxy Statement in which Leeward
is nominating (the  "Nomination") Mr. Von der Porten and Mr. Bogin (the "Leeward
Nominees") in connection  with a proxy contest for election to the Company Board
of Directors by the Company's common stockholders at the 2002 Annual Meeting, in
place of J. Sidney Davenport and Donald B. Vaden (the "Proxy Contest"); and

         WHEREAS,  the parties to this Agreement (the  "Parties")  wish to avoid
the costs and expenses of a  protracted  proxy  contest,  and enter into certain
agreements  related  thereto,  upon the terms and  conditions  set forth in this
Agreement.

         NOW, THEREFORE,  in consideration of the mutual promises of the Parties
contained herein and for other good and valuable consideration,  the receipt and
sufficiency  of  which is  hereby  acknowledged,  the  Parties  hereby  agree as
follows:


1.       DEFINITIONS

         In  addition  to the  other  definitions  contained  elsewhere  in this
Agreement,  the following terms shall have the meanings  specified below for the
purposes hereof:

         "Affiliate" has the meaning set forth in the 1934 Act.

         "Associate"  has the meaning set forth in the 1934 Act,  except that no
person will be deemed to be an associate of another  person  solely  because the
first person is, directly or indirectly,  the beneficial owner of 10% or more of
any class of equity  securities of the other person unless such ownership causes
the first  person to be an affiliate  of the other  person  (provided  that such
beneficial  ownership resulted from the first person's ordinary course investing
activities).

         "Beneficially  own"  has  the  meaning  set  forth  in the  regulations
included in Rule 13d-3 of the 1934 Act; provided,  however, that for purposes of
this Agreement,  any option, warrant, right, conversion privilege or arrangement
to purchase,  acquire or vote Company Voting Securities,  regardless of the time
period  during or the time at which it may be exercised  and  regardless  of the
consideration  paid,  shall be  deemed  to give the  holder  thereof  beneficial
ownership  of the Company  Voting  Securities  to which it relates.  Any Company
Voting  Securities  which  are  subject  to  such  options,   warrants,  rights,
conversion  privileges or other  arrangements  shall be deemed to be outstanding
for purposes of computing the percentage of outstanding securities owned by such
Person but shall not be deemed to be  outstanding  for purposes of computing the
percentage of outstanding securities owned by any other Person.

         "Company Board" means the Board of Directors of the Company

         "Company Voting  Securities" means the Company's Common Stock, $.01 par
value,  and any securities  convertible  into or exchangeable or exercisable for
such  class of  capital  stock.  For  purposes  of  determining  the  amount  or
percentage of outstanding  Company  Voting  Securities  Beneficially  owned by a
Person,  and for purposes of calculating the aggregate  voting power relating to
such Company  Voting  Securities,  securities  that are deemed to be outstanding
shall be included  to the extent  provided in the  definition  of  "Beneficially
own."

         "1933  Act"  means the  Securities  Act of 1933,  as  amended,  and the
regulations promulgated under such statute.

         "1934 Act" means the Securities  Exchange Act of 1934, as amended,  and
the regulations promulgated under such statute.

         "Person"   means  a  natural   person  or  any  legal,   commercial  or
governmental entity, including, but not limited to, a corporation,  partnership,
joint venture,  trust, limited liability company, group acting in concert or any
person acting in a representative capacity.

         "Representatives"  of a  Party  means:  (a)  the  officers,  directors,
partners,  managers or other authorized  representatives  of such Party; (b) the
employees or agents of such Party but only to the extent that they act on behalf
of such Party; and (c) the outside professional  advisors of such Party but only
to the extent  that they act in concert  with such Party and not solely in their
capacities as professional advisors.

         "SEC" means the Securities and Exchange Commission.

         "Securities Acts" means the 1933 Act and the 1934 Act.

         "Term"  means  the  period  commencing  on the  date of this  Agreement
continuing until November 15, 2003.


2.       WITHDRAWAL OF THE NOMINATION

         2.1. Leeward hereby irrevocably withdraws the Nomination of the Leeward
Nominees.

         2.2.  The  Leeward  Parties  shall  forthwith  discontinue  all efforts
(direct  and  indirect)  to solicit  votes for the  Leeward  Nominees  as to the
Nomination and shall not engage in any further solicitation activity (whether by
press  release,  SEC  filings,  mailings  to the  stockholders  of the  Company,
communications  with individual  stockholders of the Company,  contacts with the
media or otherwise)  to solicit  votes for the Leeward  Nominees or otherwise to
pursue the Nomination in connection with the 2002 Annual Meeting.


3.       ADDITION OF MR. VON DER PORTEN AS A COMPANY BOARD NOMINEE

         3.1. The Company Board has taken all action  necessary to cause Mr. Von
der Porten to become a nominee of the Company  Board for election to the Company
Board at the 2002 Annual Meeting. If he is elected and chooses to serve, Mr. Von
der Porten will serve as a member of the Company  Board for the same term as all
other nominees  elected to the Company Board at the 2002 Annual  Meeting,  which
term shall expire when his successor is duly elected at the 2003 Annual  Meeting
and  qualified  or upon his death,  resignation  or removal,  all as provided in
Article  THREE of the Company's  Bylaws.  As a result of the addition of Mr. Von
der Porten as a nominee of the Company  Board for election to the Company  Board
at the 2002 Annual Meeting,  the total number of Board nominees presented to the
Company's  common  stockholders for election at the 2002 Annual Meeting shall be
five and the Company Board shall recommend to the Company's common  stockholders
the election of all five nominees. The Parties acknowledge and agree that for so
long as Mr. Von der Porten  serves as a member of the  Company  Board,  he shall
have all the same legal  rights and  obligations  as the other  directors of the
Company elected by the holders of common stock in respect of his service as such
under Virginia law; provided  however,  that Mr. Von der Porten hereby agrees to
waive  all  directors  fees  payable  to  him  (excluding  expenses  customarily
reimbursable  to the members of the Company  Board) prior to the Company's  2003
annual meeting of stockholders (the "2003 Annual Meeting").

         3.2. If, at any time,  whether before the vote is taken on the election
of  directors at the 2002 Annual  Meeting or  thereafter  (assuming  Mr. Von der
Porten is elected  thereat),  Mr. Von der Porten  becomes unable or unwilling to
serve  as a member  of the  Company  Board,  the  Company  Board  shall  have no
obligation to nominate,  elect or appoint a successor or  replacement to Mr. Von
der Porten.

         3.3. Mr. Von der Porten  hereby  confirms to the Company his consent to
stand for election as a nominee of the Company Board at the 2002 Annual Meeting.
In  addition  to the  information  that Mr. Von der Porten has  provided  to the
Company in connection with the negotiation and execution of this Agreement,  Mr.
Von der Porten shall provide to the Company such  additional  information as the
Company may from time to time  reasonably  request for inclusion in materials to
be disseminated in connection with the 2002 Annual Meeting or otherwise in order
for it to comply with the Company's disclosure requirements under the Securities
Acts.

         3.4. If Mr. Von der Porten is elected to the Company  Board at the 2002
Annual  Meeting  and is still a member of the  Company  Board at the  meeting at
which the Company Board votes on its nominees (the "2003 Nominees") for election
to the Company  Board at the 2003 Annual  Meeting  (the  "Nomination  Meeting"),
which shall be held, and the decision at which shall be  communicated to Mr. Von
der Porten,  no later than 60 days prior to the date of the 2003 Annual Meeting,
then, at the Nomination Meeting, the Company Board shall have the right (but not
the  obligation)  to vote to  include  Mr.  Von der  Porten  as one of the  2003
Nominees (provided, however, if Mr. Von der Porten is not nominated, the Leeward
Parties shall no longer be bound by Sections 5 and 6 of this  Agreement and none
of the Parties  shall any longer be bound by Section 4.2), in which case, if Mr.
Von der Porten consents to stand for election as a 2003 Nominee: (a) the Company
Board  shall  recommend  to the  Company's  common  stockholders  his  election,
together  with the  election  of all other  2003  Nominees,  at the 2003  Annual
Meeting;  and (b) the  provisions of the second  sentence of Section 3.1 and the
entirety of Section 3.2 shall apply as if references  therein to the 2002 Annual
Meeting were  references  to the 2003 Annual  Meeting,  and the reference in the
second sentence of Section 3.1 to the 2003 Annual Meeting was a reference to the
2004 annual meeting of stockholders of the Company.


4.       ANNOUNCEMENTS

         4.1. As soon as practicable  following the execution of this Agreement:
(a) the Company and Mr. Von der Porten shall issue a joint press  release in the
form of Exhibit 4.1 hereto (the "Joint Press  Release"),  which the Company (but
not the Leeward Parties) shall file with the SEC as additional  definitive proxy
materials  under the 1934 Act;  (b) the  Company  shall  file with the SEC,  and
disseminate to its  stockholders,  a letter to its stockholders and a supplement
to its Proxy  Statement  for the 2002  Annual  Meeting  disclosing,  in a manner
consistent with the Joint Press Release, the terms of this Agreement and Mr. Von
der Porten's  nomination  pursuant to Section 3.1, together with the information
provided by Mr. Von der Porten,  for inclusion in such supplement,  the contents
of such letter and  supplement  shall be subject to the  approval of Mr. Von der
Porten (not to be  unreasonably  withheld);  and (c) the Company shall file with
the SEC a Current  Report on Form 8-K to  disclose  this  Agreement  in a manner
consistent  with the Joint Press  Release,  the contents of such Current  Report
shall be subject to the  approval of Mr. Von der Porten (not to be  unreasonably
withheld).

         4.2.  From the date of this  Agreement  until  the  expiration  of this
Agreement's Term, none of the Parties shall make any public statement (including
any  statement  in any  filing  with the SEC or any other  governmental  agency)
regarding this Agreement or any event occurring prior to the date hereof that is
inconsistent  with, or otherwise contrary to, the Joint Press Release or that is
critical of any other Party or its prior actions.

         4.3. Any public  statement  (including any statement in any filing with
the SEC or any other governmental  agency) by any Party regarding this Agreement
or any  event  occurring  prior to the date  hereof  that is not  prohibited  by
Section 4.2 shall be made in  compliance  with  applicable  securities  laws and
consistent with such Party's fiduciary duties to the Company.


5.       STANDSTILL PROVISIONS

         5.1.  Provided  that the Company is not in material  default under this
Agreement,  the Leeward Parties agree, jointly and severally,  that prior to the
expiration of this Agreement's  Term,  unless such shall have been  specifically
invited in writing by the Company,  except as otherwise provided in Section 5.2,
none  of  the  Leeward  Parties  nor  any of  their  Affiliates,  Associates  or
Representatives shall in any manner, directly or indirectly:

     (a) effect or seek,  offer or propose  (whether  publicly or  otherwise) to
effect,  or cause or  participate  in or in any way assist  any other  person to
effect or seek,  offer or propose  (whether  publicly or otherwise) to effect or
participate  in (i) any  acquisition,  issuance or disposition of any securities
(or  beneficial  ownership  thereof)  or  assets  of the  Company  or any of its
subsidiaries  (except as otherwise  expressly provided by Section 6.4), (ii) any
tender or exchange  offer,  merger or other business  combination  involving the
Company or any of its subsidiaries,  (iii) any recapitalization,  restructuring,
liquidation,  dissolution or other extraordinary transaction with respect to the
Company or any of its  subsidiaries,  (iv) any  acquisition of the securities or
assets  of  any  other  business  enterprise  by  the  Company  or  any  of  its
subsidiaries,  or (v) any "solicitation" of "proxies" (as such terms are used in
the proxy rules of the SEC) or written consent of the stockholders;

     (b) form, join or in any way participate in a "group" (as defined under the
1934 Act) with respect to the Company;

     (c) otherwise act, alone or in concert with others,  to seek to control the
management, the Company Board or the policies of the Company, including, without
limitation,  by (i) initiating or instituting a stockholder solicitation for any
such  purpose,  or (ii)  nominating  or causing  others to nominate or otherwise
seeking to elect  directors  of the Company  other than those  nominated  by the
Board;

     (d)  take  any  action  which  might  force  the  Company  to make a public
announcement  regarding  any of the types of matters  set forth in this  Section
5.1;


     (e)  initiate  or  propose  or  otherwise  solicit  or  participate  in the
solicitation  of  stockholders  for  the  approval  of one or  more  stockholder
proposals relating to the Company (whether pursuant to Rule 14a-8 under the 1934
Act or otherwise);

     (f) initiate,  participate in or encourage the calling of a special meeting
of stockholders of the Company;

     (g) request the Company to amend,  waive or terminate any provision of this
Agreement (including this sentence); or

     (h)  knowingly  instigate or  encourage  any third party to take any of the
actions  enumerated in this Section 5 or announce an intention to, or enter into
any  discussion,  negotiations,  arrangements or  understandings  with any third
party with respect to any of the actions enumerated in this Section 5.

         5.2.  Notwithstanding  anything to the contrary in Section 5.1: (a) the
mere act of tendering or selling or (except as expressly  restricted  by Section
6) voting any Company Voting Securities Beneficially owned by any of the Leeward
Parties  shall not by itself be deemed to  constitute  the  participation  in or
assistance  by any of the Leeward  Parties with respect to any of the  foregoing
provided  such act is  consistent  with  Section  6.5;  (b) Mr. Von der Porten's
exercise of his rights,  or fulfillment of his  obligations,  as a member of the
Company  Board while he is serving  thereon  shall not be a violation of Section
5.1;  and (c) Mr. Von der Porten may make a  proposal  that would  otherwise  be
prohibited  by Section  5.1  provided it is made  confidentially  to the Company
Board.


6.       CERTAIN AGREEMENTS RELATING TO COMPANY VOTING SECURITIES

         Provided  that  the  Company  is not in  material  default  under  this
Agreement, the Leeward Parties agree, jointly and severally as follows:

         6.1. At any meeting of the stockholders of the Company held at any time
between the date of this Agreement and the expiration of this Agreement's  Term,
they  shall,  and  shall  cause  their  respective  Affiliates,   Associates  or
Representatives  to:  (a)  vote,  or  cause  to be  voted,  all  Company  Voting
Securities  Beneficially  owned by any of them as of the applicable  record date
for such  meeting in favor of the  election to the Company  Board of the Persons
nominated  by the  Company  Board  for  election  to the  Company  Board at such
meeting; and (b) except as otherwise instructed by a vote of at least a majority
of the members of the Company  Board,  not vote, or cause to be voted,  any such
Company Voting  Securities in favor of the removal from the Company Board of any
director or in favor of any candidate or slate of candidates for election to the
Company Board not nominated by the Company Board.

         6.2. At any meeting of the stockholders of the Company held at any time
between the date of this Agreement and the expiration of this Agreement's  Term,
the  Leeward  Parties  shall,  and  shall  cause  their  respective  Affiliates,
Associates or Representatives,  with respect to any proposal to be voted upon at
such meeting  other than the election of  candidates to the Company Board or the
removal of any member of the  Company  Board,  vote,  or cause to be voted,  all
Company Voting Securities Beneficially owned by any of them as of the applicable
record date for such meeting in accordance with the recommendation of at least a
majority of the Company Board with respect to such proposal.

         6.3. At any meeting of the stockholders of the Company held at any time
between the date of this Agreement and the expiration of this Agreement's  Term,
the Leeward Parties shall cause all Company Voting Securities Beneficially owned
by  any  of  them  or  any  of  their  respective   Affiliates,   Associates  or
Representatives  to be present,  in person or by proxy, so that all such Company
Voting  Securities can be counted for the purpose of determining the presence of
a quorum at each such meeting.

         6.4.  From the date of this  Agreement  until  the  expiration  of this
Agreement's  Term,  none of the Leeward  Parties,  nor any of their  Affiliates,
Associates or Representatives,  shall, directly or indirectly,  Beneficially own
any Company  Voting  Securities  exceeding,  in the  aggregate  among all of the
Leeward Parties and their respective Affiliates, Associates and Representatives,
the amount of Company Voting Securities set forth in Leeward's preliminary Proxy
Statement filed with the SEC on April 17, 2002; provided,  however, that nothing
in this  Agreement  shall  prevent  (i) the  Leeward  Group and its  Affiliates,
Associates  and  Representatives  from  acquiring  additional  shares of Company
Voting Securities so long as the total ownership of such parties does not exceed
4.9% of the Company  Voting  Securities,  or (ii) Mr. Bogin and his  Affiliates,
Associates or Representatives from acquiring additional shares of Company Voting
Securities  so long as the total  ownership of such parties does not exceed 2.5%
of the Company  Voting  Securities;  and,  further  provided that if the Leeward
Group and Mr.  Bogin  shall ever form a group (as  defined  in Rule  13d-5(b)(1)
promulgated under the 1934 Act), among such parties,  the aggregate ownership of
Company  Voting  Securities by such parties shall not exceed 4.9% if the Company
Voting  Securities.  Any acquisitions of Beneficial  ownership of Company Voting
Securities  by any of the  Leeward  Parties,  or  their  respective  Affiliates,
Associates or Representatives,  during the period referred to in the immediately
preceding sentence shall be made in a manner consistent with the then-applicable
policies of the Company Board regarding  compliance with the Securities Acts and
transactions  in Company  Voting  Securities by members of the Company Board and
their Affiliates  (collectively,  the "Company Policies") and in compliance with
all applicable laws.

         6.5.  From the date of this  Agreement  until  the  expiration  of this
Agreement's  Term,  none of the  Leeward  Parties  shall  dispose of any Company
Voting  Securities  they  currently  Beneficially  own unless the Company  Board
receives 2 business days prior written notice of the applicable  Leeward Party's
intention with respect to the disposition, including the details thereof (by way
of example only, the number of Company Voting  Securities to be disposed of, and
the proposed price and buyer or other transferee or a statement of its intention
to engage in open market sale);  provided,  however,  that the foregoing  notice
requirement  shall not apply to open-market sales by the Leeward Parties of less
than 1% of the  outstanding  Company  Voting  Securities in the aggregate in any
90-day period  provided  such sales are effected in accordance  with the Company
Policies.  Any disposition of beneficial  ownership of Company Voting Securities
by any of the Leeward  Parties during the period  referred to in the immediately
preceding  sentence shall be made in a manner  consistent with Company  Policies
and in compliance with all applicable laws.


7.       SPECIAL RELEASES AND COVENANTS NOT TO SUE

         7.1. The Company: (a) fully releases,  remises,  exonerates forever and
unconditionally  discharges  each of the Leeward  Parties  and their  respective
Affiliates, Associates, Representatives, employees, agents and advisors (each, a
"Leeward  Releasee") from any and all liability and  responsibility  for any and
all Company Claims (as hereinafter defined) and; (b) covenants and agrees not to
participate  in,  commence  or permit (to the extent  within  its  control)  the
assertion or commencement of any demand, allegation,  litigation,  proceeding or
action relating to any Company Claim, and not to encourage,  assist or cooperate
with any Person in pursuing or asserting any Company Claim,  against any Leeward
Releasee. As used in this agreement, "Company Claim" means any actual or alleged
liability, claim, action, suit, cause of action, obligation,  debt, controversy,
promise,  contract, lien, judgement,  account,  reckoning, bond, bill, covenant,
agreement, demand, of any kind or nature, loss, cost, damage, penalty or expense
(including, without limitation, reasonable attorneys' fees and expenses, and the
cost of  investigation  and  litigation),  whether in law or in equity,  whether
known  or  unknown,  whether  matured  or  unmatured  and  whether  foreseen  or
unforeseen, that the Company may or could have had or now or hereafter may have,
for,  upon, or by reason of, any matter,  cause or thing  whatsoever,  resulting
from  arising  out of,  relating  to,  connected  in any way with,  or  alleged,
suggested or mentioned in connection  with, (i) the Proxy Contest or any part or
aspect thereof, (ii) any action taken, or statement made, in connection with the
Proxy  Contest,  (iii) the  acquisition  or  ownership  of any shares of Company
Voting Securities by any of the Leeward Releasees,  or (iv) any action,  failure
to act, representation,  event, transaction,  occurrence or other subject matter
resulting  from,  arising out of,  relating to,  connected  in any way with,  or
alleged,  suggested or mentioned,  in connection  with the foregoing;  provided,
however,  that  Company  Claim shall not  include  any claim  arising out of the
performance of this Agreement.

         7.2. The Leeward  Parties  jointly and  severally:  (a) fully  release,
revise, exonerate and forever and unconditionally discharge the Company and each
of its Affiliates, Associates,  Representatives,  employees, agents and advisors
(each, a "Company  Releasee") from any and all liability and  responsibility for
any and all Leeward Claims (as hereinafter defined);  and (b) covenant and agree
not to participate  in,  commence or permit (to the extent within its respective
control) the assertion or  commencement of any demand,  allegation,  litigation,
proceeding or action relating to any Leeward Claim, and not to encourage, assist
or cooperate  with any Person in pursuing or asserting any Leeward Claim against
any Company  Releasee.  As used in this  Agreement,  "Leeward  Claim"  means any
actual or alleged liability,  claim, action, suit, cause of action,  obligation,
debt, controversy,  promise, contract, lien, judgment, account, reckoning, bond,
bill,  covenant,  agreement,  demand of any kind or nature,  loss, cost, damage,
penalty or expense (including,  without limitation,  reasonable  attorneys' fees
and expenses,  and the costs of investigation and litigation,  but excluding any
class action not instituted,  encouraged or facilitated, directly or indirectly,
by any of the Leeward  Parties and which includes the Leeward  Parties or any of
them as class  members  (provided  that, in order to  participate  in such class
action, none of the Leeward Parties shall have been members of the Company Board
for the  preceding  90 days)),  whether in law or in  equity,  whether  known or
unknown,  whether matured or unmatured and whether foreseen or unforeseen,  that
any Leeward Party may or could have had or now or hereafter may have, for, upon,
or by reason of, any matter, cause or thing whatsoever,  resulting from, arising
out of,  relating  to,  connected  in any way with,  or  alleged,  suggested  or
mentioned  in  connection  with,  (i) the  Proxy  Contest  or any part or aspect
thereof,  (ii) any action taken, or statement made, in connection with the Proxy
Contest,  or  (iii)  any  action,   failure  to  act,   representation,   event,
transaction,  occurrence or other subject matter resulting from, arising out of,
relating to,  connected in any way with,  or alleged,  suggested or mentioned in
connection  with the  foregoing or with the actions,  omissions,  decisions  and
conduct of the Company,  the Company Board or any of its committees or any other
Company  Releasee prior to the execution of this Agreement;  provided,  however,
that Leeward Claim shall not include any claim arising out of the performance of
this Agreement.

         7.3. The Company, in connection with the release and covenant contained
in Section 7.1, and each of the Leeward Parties,  in connection with the release
and covenant  contained in Section 7.2, each hereby waive the provisions of 1542
of the California Civil Code and any  corresponding  provision of the applicable
laws of any  other  jurisdiction  but only to the  extent  it  applies  to their
respective  releases  contained in the applicable such Section.  Section 1542 of
the California Civil Code provides as follows:

         A general  release does not extend the claims  which the creditor  does
not know or suspect to exist in his favor at the time of executing  the release,
which if known by him must have materially affected settlement with the debtor.

         7.4. The Company expressly acknowledges that each Leeward Releasee that
is not a Leeward Party is an intended third party beneficiary of the release and
covenant  contained in Section 7.1 and the Leeward Parties jointly and severally
acknowledge  that each  Company  Releasee  other than the Company is an intended
third party  beneficiary  of the release and covenant  contained in Section 7.2.
Each Party  acknowledges  that any claim  determined,  in a final  nonappealable
judgement  or order of a court of  competent  jurisdiction,  to have been  based
primarily on intentional fraud shall not be released under this Section 7.


8.       CERTAIN REPRESENTATIONS AND WARRANTIES

         8.1. The Company represents and warrants to each of the Leeward Parties
that: (a) this Agreement has been duly executed and delivered and its execution,
delivery and  performance  have been  approved by the Company Board and does not
violate its Articles of Incorporation,  Bylaws or any agreement to which it is a
party; and (b) this Agreement  constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
such  enforcement  may be  limited by  bankruptcy,  insolvency  or similar  laws
affecting the enforcement of creditors' rights generally.

         8.2. The Leeward Parties jointly and severally represent to the Company
that: (a) this Agreement has been duly executed and delivered and the execution,
delivery and  performance  of this  Agreement  by the Leeward  Parties have been
approved  by  their  respective  managers,  members,  administrators,  or  other
governing bodies or authorities,  as the case may be, and does not violate their
respective organizational or constituent document, (b) their execution, delivery
and performance of this Agreement does not violate any agreement to which any of
them is a party; (c) this Agreement  constitutes a valid and binding  obligation
of each of them,  enforceable against each of them in accordance with its terms,
except as such  enforcement may be limited by bankruptcy,  insolvency or similar
laws affecting the enforcement of creditors' rights generally; and (d) they have
consulted  with counsel of their  choice in  connection  with their  decision to
enter into and be bound by this Agreement.


9.       REMEDIES

         The Company and each the Leeward Parties acknowledge and agree that the
covenants and agreements set forth in this Agreement are an essential inducement
for the Company and the Leeward Parties to have entered into this Agreement, and
the restrictions imposed herein are not greater than are fair and reasonable and
necessary for the protection of the Company and the Leeward  Parties in light of
the substantial harm that the Company and the Leeward Parties will suffer in the
event of a breach of any of the provisions of said covenants or agreements.  The
Company and the Leeward Parties  further  acknowledge and agree that the parties
would not have an adequate remedy at law and would be irreparably  harmed in the
event  that  any of the  provisions  of this  Agreement  were not  performed  in
accordance  with  their  specific  terms  or  were  otherwise  breached.  It  is
accordingly  agreed that, in the event of an actual or threatened breach of this
Agreement by the Company,  or the Leeward  Parties (or any of their  Affiliates,
Associates  or  Representatives),   each  party  hereto  shall  be  entitled  to
injunctive or other  equitable  remedy or relief to enjoin,  restrain,  prohibit
and/or  prevent  breaches or  violations of this  Agreement and to  specifically
enforce  the  terms  and  provisions  hereof  (including,   without  limitation,
requiring the Leeward Parties and any nominee,  broker or other Person acting on
their behalf,  to dispose of shares of Common Stock in order to be in compliance
with the terms of this Agreement),  in addition to any other remedy at law or in
equity to which such party may be entitled.  Each of the Company and the Leeward
Parties  hereby   waives,   and  the  Company  agrees  to  cause  the  Company's
Representatives  to waive,  and Leeward Parties agree to cause their  respective
Affiliates,  Associates or  Representatives,  as the case may be, to waive,  any
requirement  for the  securing  or posting of any bond or the  proving of actual
damages in connection with such remedy or relief.


10.      MISCELLANEOUS

         10.1. This Agreement  constitutes  the entire  agreement of the parties
with  respect  to  its  subject   matter  and   supersedes  any  and  all  prior
representations,  agreements or understandings, whether written or oral, between
or among any of them with respect to such subject matter.  This Agreement may be
amended only by a written agreement duly executed by the parties.

         10.2.  This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Virginia without regard to its conflict of
law principles.  Exclusive  jurisdiction to resolve any dispute arising under or
in connection  with this  Agreement is hereby  conferred on the Circuit Court of
Fairfax  County,   Virginia  (or,  if  such  Court   determines  that  it  lacks
jurisdiction  over the particular  dispute,  any other  applicable  court of the
Commonwealth  of Virginia) or, if the dispute  involves issues of federal law or
over which the Circuit Court of Fairfax County, Virginia (or such other court of
the State of  Virginia)  lacks or declines  jurisdiction,  on the United  States
Federal District Court for the Eastern District of Virginia.  The Parties hereby
submit to the exclusive jurisdiction of each of such courts.

         10.3. This Agreement may not be assigned by any Party without the prior
written consent of the other Parties.  This Agreement shall be binding upon, and
inure to the benefit of, the respective  successors and permitted assigns of the
Parties.  Except as expressly  set forth in Section 7.4,  this  Agreement  shall
confer no rights or benefits upon any Person other than the Parties.

         10.4.  Any  waiver by any Party of a breach  of any  provision  of this
Agreement  shall  not be  deemed  to be a waiver  of any  other  breach  of such
provision or of any breach of any other provision of this Agreement.

         10.5.  This  Agreement may be executed in  counterparts,  each of which
shall constitute an original but all of which shall together constitute a single
instrument.

         10.6 The Company shall  reimburse the Leeward  Parties for their actual
documented  out-of-pocket  costs in respect of fees and expenses  not  exceeding
$60,000 paid and payable by them, in connection with the Proxy Contest..

         IN WITNESS  WHEREOF,  this  Agreement  has been executed by each of the
parties as of the date first above written.

Dynex Capital, Inc.                    Leeward Capital, L.P.



By:    /s/ Thomas H. Potts             By:    /s/ Eric P. Von der Porten
       ----------------------------           ----------------------------------
Name:  Thomas H. Potts                 Name:  Eric P. Von der Porten
Title: President                       Title: Manager, Leeward Investments,
                                                L.L.C, Its General Partner


                                       Leeward Investments, L.L.C.



                                       By:    /s/ Eric P. Von der Porten
                                              ----------------------------------
                                       Name:  Eric P. Von der Porten
                                       Title: Manager





                                       /s/ Eric P. Von der Porten
                                       -----------------------------------------
                                       Mr. Eric P. Von der Porten




                                       /s/ James M. Bogin
                                       -----------------------------------------
                                       Mr. James M. Bogin
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UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                  ------------

                                    FORM 8-K

                                 CURRENT REPORT

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

                         Date of Report: April 29, 2002

                               DYNEX CAPITAL, INC.
               (Exact Name of Registrant as Specified in Charter)

             Virginia                   1-9819                   52-1549373
         (State or Other         (Commission File Number)      (IRS Employer
   Jurisdiction ofIncorporation)                             Identification No.)

       4551 Cox Road, Suite 300, Glen Allen, Virginia              23060
          (Address of Principal Executive Offices)              (Zip Code)

                                 (804) 217-5800
              (Registrant's telephone number, including area code)
Item 5.       OTHER EVENTS.

         On April 17, 2002,  Leeward  Capital,  L.P.  filed a preliminary  proxy
statement with the Securities and Exchange  Commission for the  solicitation  of
proxies  from the  holders  of the  common  stock of Dynex  Capital,  Inc.  (the
"Company") to elect Eric P. Von der Porten and James M. Bogin as two of the four
directors to be elected by the Company's common  stockholders at the 2002 annual
meeting to be held on May 14, 2002.

     On April 26, 2002,  the Company  entered into a Settlement  Agreement  (the
"Settlement Agreement") with Leeward Capital L.P., Leeward Investments,  L.L.C.,
Mr.  Eric P. Von der Porten  and Mr.  James M.  Bogin  (the  "Leeward  Parties")
pursuant to which the Leeward Parties ended their  solicitation for directors to
the Company's Board of Directors at the 2002 annual meeting of stockholders.

         Under the  Settlement  Agreement,  Mr. Von der Porten has been added to
the Board's  slate of  nominees  for  election to a one-year  term at the annual
meeting,  increasing  the total  number of Board  nominees  for  election by the
Company's common  stockholders to five (including the four existing  nominees of
the Board,  who are all current  members of the Board).  The Board has agreed to
recommend the election of all five nominees.  The Leeward Parties have withdrawn
their  nomination  of Mr. Eric P. Von der Porten and James M. Bogin for election
to the Company's  Board of Directors and have agreed to discontinue  all efforts
(direct and indirect) to solicit votes for their nominees or otherwise to pursue
the nomination.

         The Settlement  Agreement  provides that the Leeward  Parties will vote
their shares of the Company's  common stock in favor of the Board's nominees and
against the removal of any director, and not pursue any unsolicited  acquisition
attempts or engage in any proxy  contest,  for a specified  period (the "Term").
The Leeward Parties have also agreed to certain restrictions on their activities
related to the Company until November 15, 2003, unless the Company's Board fails
to  nominate  Mr. Von der  Porten  for  election  at the 2003  annual  meting of
stockholders, in which case these restrictions shall expire upon such failure to
nominate.  In addition,  during the Term,  the Leeward  Parties must vote all of
their shares of Company  common stock on all matters  other than the election or
removal of directors either (as it chooses in its sole discretion) in accordance
with the recommendation of a majority of the Board.

         The Settlement  Agreement contains certain other provisions,  including
restrictions  on public  announcements,  mutual releases of claims in connection
with the proxy contest and related covenants not to sue, certain representations
and warranties,  and the Company's agreement to reimburse certain of the Leeward
Parties' actual documented out-of-pocket costs and expenses.

         The foregoing is qualified in its entirety by reference to the complete
text of the Settlement Agreement, which is filed as Exhibit 99.2 hereto.

         On April 29, 2002,  the Company also issued a press release  announcing
the settlement with the Leeward Parties, which is filed as Exhibit 99.1 hereto.

Item 7.  FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

         (c)  Exhibits

              99.1  Dynex Capital, Inc. Press Release, dated April 29, 2002.

              99.2  Settlement  Agreement, dated as of April 26, 2002, by and
                    among Dynex Capital, Inc., Eric P. Von der Porten, Leeward
                    Capital L.P., Leeward Investments, L.L.C. and James M.
                    Bogin.

                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Date:    April 29, 2002                    DYNEX CAPITAL, INC.

                                           By: /s/ Thomas H. Potts
                                               ---------------------------------
                                               Thomas H. Potts
                                               President
EXHIBIT INDEX
Number           Description                                                            Method of Filing
------           -----------                                                            ----------------
99.1           Dynex Capital, Inc. Press Release,                                     Filed herewith
                 dated April 29, 2002.

  99.2           Settlement Agreement, dated as of April 26, 2002,                      Filed herewith
                 by and among Dynex Capital, Inc., Eric P. Von der Porten,
                 Leeward Capital L.P., Leeward Investments, L.L.C. and
                 James M. Bogin.
Exhibit 99.1

                                  PRESS RELEASE

FOR IMMEDIATE RELEASE                                        CONTACT: Kathy Fern
April 29, 2002                                                      804-217-5800

                        DYNEX CAPITAL AND LEEWARD CAPITAL

                           REACH SETTLEMENT AGREEMENT

         Dynex Capital,  Inc. (NYSE:  DX) and Leeward  Capital,  L.P.  announced
today a definitive  agreement which ends Leeward Capital's proxy solicitation to
replace two existing  directors elected by the common  shareholders with two new
directors  nominated by Leeward Capital.  Under the agreement,  Mr. Eric Von der
Porten will be added to the slate of candidates nominated by the Dynex Board for
election as directors at the 2002 annual meeting of  stockholders  to be held on
May 14, 2002. This will raise the number of Board candidates to seven, including
the six  current  Dynex Board  members  who are  standing  for  re-election.  If
elected,  Mr.  Von der  Porten as well as all other  directors  will serve for a
one-year term.

         The  addition  of Mr.  Von der Porten as a nominee to the Board will be
described in a supplement to the Dynex proxy  statement to be filed with the SEC
and  mailed  to Dynex  shareholders.  In  addition,  Dynex  will be  filing  the
settlement agreement with the SEC as part of a current report on Form 8-K.

         Thomas H. Potts,  President of Dynex,  stated, "We are pleased with the
resolution agreed to by all parties. We look forward to working with Mr. Von der
Porten in continuing to enhance shareholder value."

         Note: This document contains  "forward-looking  statements" (within the
meaning  of the  Private  Securities  Litigation  Act of 1995)  that  inherently
involve risks and  uncertainties.  Dynex actual results could differ  materially
from  those  anticipated  in these  forward-looking  statements  as a result  of
unforeseen  external factors.  As discussed in Dynex filings with the SEC, these
factors  may  include,  but are not  limited  to,  changes in  general  economic
conditions,  disruptions  in the  capital  markets,  the  ability  of  Dynex  to
successfully implement a new business direction, fluctuations in interest rates,
increases in costs and other general competitive factors.
Exhibit  99.2

                              SETTLEMENT AGREEMENT

     This Settlement  Agreement (this "Agreement") is made as of April 26, 2002,
by and among Dynex Capital,  Inc., a Virginia corporation (the "Company"),  Eric
P. Von der  Porten,  a citizen  of the United  States  ("Mr.  Von der  Porten"),
Leeward  Capital L.P., a California  limited  partnership  ("Leeward"),  Leeward
Investments,   L.L.C.,  a  California   limited   liability   company  ("Leeward
Investments,"  and,  together with Mr. Von der Porten and Leeward,  the "Leeward
Group"),  and Mr. James M. Bogin,  a citizen of the United  States ("Mr.  Bogin"
and, together with the Leeward Group, the "Leeward Parties").

                                    RECITALS:
                                    ---------

         WHEREAS,   the  Company  has  scheduled  its  2002  annual  meeting  of
stockholders  for May 14, 2002 (as the same may be adjourned  or postponed  from
time to time, the "2002 Annual Meeting");

     WHEREAS,  the Company  has issued a Proxy  Statement  nominating  J. Sidney
Davenport,  Thomas H. Potts,  Barry S. Shein and Donald B. Vaden for election to
the Company Board of Directors by the Company's common  stockholders at the 2002
Annual Meeting;

     WHEREAS,  Leeward has filed a preliminary  Proxy Statement in which Leeward
is nominating (the  "Nomination") Mr. Von der Porten and Mr. Bogin (the "Leeward
Nominees") in connection  with a proxy contest for election to the Company Board
of Directors by the Company's common stockholders at the 2002 Annual Meeting, in
place of J. Sidney Davenport and Donald B. Vaden (the "Proxy Contest"); and

         WHEREAS,  the parties to this Agreement (the  "Parties")  wish to avoid
the costs and expenses of a  protracted  proxy  contest,  and enter into certain
agreements  related  thereto,  upon the terms and  conditions  set forth in this
Agreement.

         NOW, THEREFORE,  in consideration of the mutual promises of the Parties
contained herein and for other good and valuable consideration,  the receipt and
sufficiency  of  which is  hereby  acknowledged,  the  Parties  hereby  agree as
follows:

1.       DEFINITIONS

         In  addition  to the  other  definitions  contained  elsewhere  in this
Agreement,  the following terms shall have the meanings  specified below for the
purposes hereof:

         "Affiliate" has the meaning set forth in the 1934 Act.

         "Associate"  has the meaning set forth in the 1934 Act,  except that no
person will be deemed to be an associate of another  person  solely  because the
first person is, directly or indirectly,  the beneficial owner of 10% or more of
any class of equity  securities of the other person unless such ownership causes
the first  person to be an affiliate  of the other  person  (provided  that such
beneficial  ownership resulted from the first person's ordinary course investing
activities).

         "Beneficially  own"  has  the  meaning  set  forth  in the  regulations
included in Rule 13d-3 of the 1934 Act; provided,  however, that for purposes of
this Agreement,  any option, warrant, right, conversion privilege or arrangement
to purchase,  acquire or vote Company Voting Securities,  regardless of the time
period  during or the time at which it may be exercised  and  regardless  of the
consideration  paid,  shall be  deemed  to give the  holder  thereof  beneficial
ownership  of the Company  Voting  Securities  to which it relates.  Any Company
Voting  Securities  which  are  subject  to  such  options,   warrants,  rights,
conversion  privileges or other  arrangements  shall be deemed to be outstanding
for purposes of computing the percentage of outstanding securities owned by such
Person but shall not be deemed to be  outstanding  for purposes of computing the
percentage of outstanding securities owned by any other Person.

         "Company Board" means the Board of Directors of the Company

         "Company Voting  Securities" means the Company's Common Stock, $.01 par
value,  and any securities  convertible  into or exchangeable or exercisable for
such  class of  capital  stock.  For  purposes  of  determining  the  amount  or
percentage of outstanding  Company  Voting  Securities  Beneficially  owned by a
Person,  and for purposes of calculating the aggregate  voting power relating to
such Company  Voting  Securities,  securities  that are deemed to be outstanding
shall be included  to the extent  provided in the  definition  of  "Beneficially
own."

         "1933  Act"  means the  Securities  Act of 1933,  as  amended,  and the
regulations promulgated under such statute.

         "1934 Act" means the Securities  Exchange Act of 1934, as amended,  and
the regulations promulgated under such statute.

         "Person"   means  a  natural   person  or  any  legal,   commercial  or
governmental entity, including, but not limited to, a corporation,  partnership,
joint venture,  trust, limited liability company, group acting in concert or any
person acting in a representative capacity.

         "Representatives"  of a  Party  means:  (a)  the  officers,  directors,
partners,  managers or other authorized  representatives  of such Party; (b) the
employees or agents of such Party but only to the extent that they act on behalf
of such Party; and (c) the outside professional  advisors of such Party but only
to the extent  that they act in concert  with such Party and not solely in their
capacities as professional advisors.

         "SEC" means the Securities and Exchange Commission.

         "Securities Acts" means the 1933 Act and the 1934 Act.

         "Term"  means  the  period  commencing  on the  date of this  Agreement
continuing until November 15, 2003.

2.       WITHDRAWAL OF THE NOMINATION

         2.1. Leeward hereby irrevocably withdraws the Nomination of the Leeward
Nominees.

         2.2.  The  Leeward  Parties  shall  forthwith  discontinue  all efforts
(direct  and  indirect)  to solicit  votes for the  Leeward  Nominees  as to the
Nomination and shall not engage in any further solicitation activity (whether by
press  release,  SEC  filings,  mailings  to the  stockholders  of the  Company,
communications  with individual  stockholders of the Company,  contacts with the
media or otherwise)  to solicit  votes for the Leeward  Nominees or otherwise to
pursue the Nomination in connection with the 2002 Annual Meeting.

3.       ADDITION OF MR. VON DER PORTEN AS A COMPANY BOARD NOMINEE

         3.1. The Company Board has taken all action  necessary to cause Mr. Von
der Porten to become a nominee of the Company  Board for election to the Company
Board at the 2002 Annual Meeting. If he is elected and chooses to serve, Mr. Von
der Porten will serve as a member of the Company  Board for the same term as all
other nominees  elected to the Company Board at the 2002 Annual  Meeting,  which
term shall expire when his successor is duly elected at the 2003 Annual  Meeting
and  qualified  or upon his death,  resignation  or removal,  all as provided in
Article  THREE of the Company's  Bylaws.  As a result of the addition of Mr. Von
der Porten as a nominee of the Company  Board for election to the Company  Board
at the 2002 Annual Meeting,  the total number of Board nominees presented to the
Company's  common  stockholders for election at the 2002 Annual Meeting shall be
five and the Company Board shall recommend to the Company's common  stockholders
the election of all five nominees. The Parties acknowledge and agree that for so
long as Mr. Von der Porten  serves as a member of the  Company  Board,  he shall
have all the same legal  rights and  obligations  as the other  directors of the
Company elected by the holders of common stock in respect of his service as such
under Virginia law; provided  however,  that Mr. Von der Porten hereby agrees to
waive  all  directors  fees  payable  to  him  (excluding  expenses  customarily
reimbursable  to the members of the Company  Board) prior to the Company's  2003
annual meeting of stockholders (the "2003 Annual Meeting").

         3.2. If, at any time,  whether before the vote is taken on the election
of  directors at the 2002 Annual  Meeting or  thereafter  (assuming  Mr. Von der
Porten is elected  thereat),  Mr. Von der Porten  becomes unable or unwilling to
serve  as a member  of the  Company  Board,  the  Company  Board  shall  have no
obligation to nominate,  elect or appoint a successor or  replacement to Mr. Von
der Porten.

         3.3. Mr. Von der Porten  hereby  confirms to the Company his consent to
stand for election as a nominee of the Company Board at the 2002 Annual Meeting.
In  addition  to the  information  that Mr. Von der Porten has  provided  to the
Company in connection with the negotiation and execution of this Agreement,  Mr.
Von der Porten shall provide to the Company such  additional  information as the
Company may from time to time  reasonably  request for inclusion in materials to
be disseminated in connection with the 2002 Annual Meeting or otherwise in order
for it to comply with the Company's disclosure requirements under the Securities
Acts.

         3.4. If Mr. Von der Porten is elected to the Company  Board at the 2002
Annual  Meeting  and is still a member of the  Company  Board at the  meeting at
which the Company Board votes on its nominees (the "2003 Nominees") for election
to the Company  Board at the 2003 Annual  Meeting  (the  "Nomination  Meeting"),
which shall be held, and the decision at which shall be  communicated to Mr. Von
der Porten,  no later than 60 days prior to the date of the 2003 Annual Meeting,
then, at the Nomination Meeting, the Company Board shall have the right (but not
the  obligation)  to vote to  include  Mr.  Von der  Porten  as one of the  2003
Nominees (provided, however, if Mr. Von der Porten is not nominated, the Leeward
Parties shall no longer be bound by Sections 5 and 6 of this  Agreement and none
of the Parties  shall any longer be bound by Section 4.2), in which case, if Mr.
Von der Porten consents to stand for election as a 2003 Nominee: (a) the Company
Board  shall  recommend  to the  Company's  common  stockholders  his  election,
together  with the  election  of all other  2003  Nominees,  at the 2003  Annual
Meeting;  and (b) the  provisions of the second  sentence of Section 3.1 and the
entirety of Section 3.2 shall apply as if references  therein to the 2002 Annual
Meeting were  references  to the 2003 Annual  Meeting,  and the reference in the
second sentence of Section 3.1 to the 2003 Annual Meeting was a reference to the
2004 annual meeting of stockholders of the Company.

4.       ANNOUNCEMENTS

         4.1. As soon as practicable  following the execution of this Agreement:
(a) the Company and Mr. Von der Porten shall issue a joint press  release in the
form of Exhibit 4.1 hereto (the "Joint Press  Release"),  which the Company (but
not the Leeward Parties) shall file with the SEC as additional  definitive proxy
materials  under the 1934 Act;  (b) the  Company  shall  file with the SEC,  and
disseminate to its  stockholders,  a letter to its stockholders and a supplement
to its Proxy  Statement  for the 2002  Annual  Meeting  disclosing,  in a manner
consistent with the Joint Press Release, the terms of this Agreement and Mr. Von
der Porten's  nomination  pursuant to Section 3.1, together with the information
provided by Mr. Von der Porten,  for inclusion in such supplement,  the contents
of such letter and  supplement  shall be subject to the  approval of Mr. Von der
Porten (not to be  unreasonably  withheld);  and (c) the Company shall file with
the SEC a Current  Report on Form 8-K to  disclose  this  Agreement  in a manner
consistent  with the Joint Press  Release,  the contents of such Current  Report
shall be subject to the  approval of Mr. Von der Porten (not to be  unreasonably
withheld).

         4.2.  From the date of this  Agreement  until  the  expiration  of this
Agreement's Term, none of the Parties shall make any public statement (including
any  statement  in any  filing  with the SEC or any other  governmental  agency)
regarding this Agreement or any event occurring prior to the date hereof that is
inconsistent  with, or otherwise contrary to, the Joint Press Release or that is
critical of any other Party or its prior actions.

         4.3. Any public  statement  (including any statement in any filing with
the SEC or any other governmental  agency) by any Party regarding this Agreement
or any  event  occurring  prior to the date  hereof  that is not  prohibited  by
Section 4.2 shall be made in  compliance  with  applicable  securities  laws and
consistent with such Party's fiduciary duties to the Company.

5.       STANDSTILL PROVISIONS

         5.1.  Provided  that the Company is not in material  default under this
Agreement,  the Leeward Parties agree, jointly and severally,  that prior to the
expiration of this Agreement's  Term,  unless such shall have been  specifically
invited in writing by the Company,  except as otherwise provided in Section 5.2,
none  of  the  Leeward  Parties  nor  any of  their  Affiliates,  Associates  or
Representatives shall in any manner, directly or indirectly:

     (a) effect or seek,  offer or propose  (whether  publicly or  otherwise) to
effect,  or cause or  participate  in or in any way assist  any other  person to
effect or seek,  offer or propose  (whether  publicly or otherwise) to effect or
participate  in (i) any  acquisition,  issuance or disposition of any securities
(or  beneficial  ownership  thereof)  or  assets  of the  Company  or any of its
subsidiaries  (except as otherwise  expressly provided by Section 6.4), (ii) any
tender or exchange  offer,  merger or other business  combination  involving the
Company or any of its subsidiaries,  (iii) any recapitalization,  restructuring,
liquidation,  dissolution or other extraordinary transaction with respect to the
Company or any of its  subsidiaries,  (iv) any  acquisition of the securities or
assets  of  any  other  business  enterprise  by  the  Company  or  any  of  its
subsidiaries,  or (v) any "solicitation" of "proxies" (as such terms are used in
the proxy rules of the SEC) or written consent of the stockholders;

     (b) form, join or in any way participate in a "group" (as defined under the
1934 Act) with respect to the Company;

     (c) otherwise act, alone or in concert with others,  to seek to control the
management, the Company Board or the policies of the Company, including, without
limitation,  by (i) initiating or instituting a stockholder solicitation for any
such  purpose,  or (ii)  nominating  or causing  others to nominate or otherwise
seeking to elect  directors  of the Company  other than those  nominated  by the
Board;

     (d)  take  any  action  which  might  force  the  Company  to make a public
announcement  regarding  any of the types of matters  set forth in this  Section
5.1;

     (e)  initiate  or  propose  or  otherwise  solicit  or  participate  in the
solicitation  of  stockholders  for  the  approval  of one or  more  stockholder
proposals relating to the Company (whether pursuant to Rule 14a-8 under the 1934
Act or otherwise);

     (f) initiate,  participate in or encourage the calling of a special meeting
of stockholders of the Company;

     (g) request the Company to amend,  waive or terminate any provision of this
Agreement (including this sentence); or

     (h)  knowingly  instigate or  encourage  any third party to take any of the
actions  enumerated in this Section 5 or announce an intention to, or enter into
any  discussion,  negotiations,  arrangements or  understandings  with any third
party with respect to any of the actions enumerated in this Section 5.

         5.2.  Notwithstanding  anything to the contrary in Section 5.1: (a) the
mere act of tendering or selling or (except as expressly  restricted  by Section
6) voting any Company Voting Securities Beneficially owned by any of the Leeward
Parties  shall not by itself be deemed to  constitute  the  participation  in or
assistance  by any of the Leeward  Parties with respect to any of the  foregoing
provided  such act is  consistent  with  Section  6.5;  (b) Mr. Von der Porten's
exercise of his rights,  or fulfillment of his  obligations,  as a member of the
Company  Board while he is serving  thereon  shall not be a violation of Section
5.1;  and (c) Mr. Von der Porten may make a  proposal  that would  otherwise  be
prohibited  by Section  5.1  provided it is made  confidentially  to the Company
Board.

6.       CERTAIN AGREEMENTS RELATING TO COMPANY VOTING SECURITIES

         Provided  that  the  Company  is not in  material  default  under  this
Agreement, the Leeward Parties agree, jointly and severally as follows:

         6.1. At any meeting of the stockholders of the Company held at any time
between the date of this Agreement and the expiration of this Agreement's  Term,
they  shall,  and  shall  cause  their  respective  Affiliates,   Associates  or
Representatives  to:  (a)  vote,  or  cause  to be  voted,  all  Company  Voting
Securities  Beneficially  owned by any of them as of the applicable  record date
for such  meeting in favor of the  election to the Company  Board of the Persons
nominated  by the  Company  Board  for  election  to the  Company  Board at such
meeting; and (b) except as otherwise instructed by a vote of at least a majority
of the members of the Company  Board,  not vote, or cause to be voted,  any such
Company Voting  Securities in favor of the removal from the Company Board of any
director or in favor of any candidate or slate of candidates for election to the
Company Board not nominated by the Company Board.

         6.2. At any meeting of the stockholders of the Company held at any time
between the date of this Agreement and the expiration of this Agreement's  Term,
the  Leeward  Parties  shall,  and  shall  cause  their  respective  Affiliates,
Associates or Representatives,  with respect to any proposal to be voted upon at
such meeting  other than the election of  candidates to the Company Board or the
removal of any member of the  Company  Board,  vote,  or cause to be voted,  all
Company Voting Securities Beneficially owned by any of them as of the applicable
record date for such meeting in accordance with the recommendation of at least a
majority of the Company Board with respect to such proposal.

         6.3. At any meeting of the stockholders of the Company held at any time
between the date of this Agreement and the expiration of this Agreement's  Term,
the Leeward Parties shall cause all Company Voting Securities Beneficially owned
by  any  of  them  or  any  of  their  respective   Affiliates,   Associates  or
Representatives  to be present,  in person or by proxy, so that all such Company
Voting  Securities can be counted for the purpose of determining the presence of
a quorum at each such meeting.

         6.4.  From the date of this  Agreement  until  the  expiration  of this
Agreement's  Term,  none of the Leeward  Parties,  nor any of their  Affiliates,
Associates or Representatives,  shall, directly or indirectly,  Beneficially own
any Company  Voting  Securities  exceeding,  in the  aggregate  among all of the
Leeward Parties and their respective Affiliates, Associates and Representatives,
the amount of Company Voting Securities set forth in Leeward's preliminary Proxy
Statement filed with the SEC on April 17, 2002; provided,  however, that nothing
in this  Agreement  shall  prevent  (i) the  Leeward  Group and its  Affiliates,
Associates  and  Representatives  from  acquiring  additional  shares of Company
Voting Securities so long as the total ownership of such parties does not exceed
4.9% of the Company  Voting  Securities,  or (ii) Mr. Bogin and his  Affiliates,
Associates or Representatives from acquiring additional shares of Company Voting
Securities  so long as the total  ownership of such parties does not exceed 2.5%
of the Company  Voting  Securities;  and,  further  provided that if the Leeward
Group and Mr.  Bogin  shall ever form a group (as  defined  in Rule  13d-5(b)(1)
promulgated under the 1934 Act), among such parties,  the aggregate ownership of
Company  Voting  Securities by such parties shall not exceed 4.9% if the Company
Voting  Securities.  Any acquisitions of Beneficial  ownership of Company Voting
Securities  by any of the  Leeward  Parties,  or  their  respective  Affiliates,
Associates or Representatives,  during the period referred to in the immediately
preceding sentence shall be made in a manner consistent with the then-applicable
policies of the Company Board regarding  compliance with the Securities Acts and
transactions  in Company  Voting  Securities by members of the Company Board and
their Affiliates  (collectively,  the "Company Policies") and in compliance with
all applicable laws.

         6.5.  From the date of this  Agreement  until  the  expiration  of this
Agreement's  Term,  none of the  Leeward  Parties  shall  dispose of any Company
Voting  Securities  they  currently  Beneficially  own unless the Company  Board
receives 2 business days prior written notice of the applicable  Leeward Party's
intention with respect to the disposition, including the details thereof (by way
of example only, the number of Company Voting  Securities to be disposed of, and
the proposed price and buyer or other transferee or a statement of its intention
to engage in open market sale);  provided,  however,  that the foregoing  notice
requirement  shall not apply to open-market sales by the Leeward Parties of less
than 1% of the  outstanding  Company  Voting  Securities in the aggregate in any
90-day period  provided  such sales are effected in accordance  with the Company
Policies.  Any disposition of beneficial  ownership of Company Voting Securities
by any of the Leeward  Parties during the period  referred to in the immediately
preceding  sentence shall be made in a manner  consistent with Company  Policies
and in compliance with all applicable laws.

7.       SPECIAL RELEASES AND COVENANTS NOT TO SUE

         7.1. The Company: (a) fully releases,  remises,  exonerates forever and
unconditionally  discharges  each of the Leeward  Parties  and their  respective
Affiliates, Associates, Representatives, employees, agents and advisors (each, a
"Leeward  Releasee") from any and all liability and  responsibility  for any and
all Company Claims (as hereinafter defined) and; (b) covenants and agrees not to
participate  in,  commence  or permit (to the extent  within  its  control)  the
assertion or commencement of any demand, allegation,  litigation,  proceeding or
action relating to any Company Claim, and not to encourage,  assist or cooperate
with any Person in pursuing or asserting any Company Claim,  against any Leeward
Releasee. As used in this agreement, "Company Claim" means any actual or alleged
liability, claim, action, suit, cause of action, obligation,  debt, controversy,
promise,  contract, lien, judgement,  account,  reckoning, bond, bill, covenant,
agreement, demand, of any kind or nature, loss, cost, damage, penalty or expense
(including, without limitation, reasonable attorneys' fees and expenses, and the
cost of  investigation  and  litigation),  whether in law or in equity,  whether
known  or  unknown,  whether  matured  or  unmatured  and  whether  foreseen  or
unforeseen, that the Company may or could have had or now or hereafter may have,
for,  upon, or by reason of, any matter,  cause or thing  whatsoever,  resulting
from  arising  out of,  relating  to,  connected  in any way with,  or  alleged,
suggested or mentioned in connection  with, (i) the Proxy Contest or any part or
aspect thereof, (ii) any action taken, or statement made, in connection with the
Proxy  Contest,  (iii) the  acquisition  or  ownership  of any shares of Company
Voting Securities by any of the Leeward Releasees,  or (iv) any action,  failure
to act, representation,  event, transaction,  occurrence or other subject matter
resulting  from,  arising out of,  relating to,  connected  in any way with,  or
alleged,  suggested or mentioned,  in connection  with the foregoing;  provided,
however,  that  Company  Claim shall not  include  any claim  arising out of the
performance of this Agreement.

         7.2. The Leeward  Parties  jointly and  severally:  (a) fully  release,
revise, exonerate and forever and unconditionally discharge the Company and each
of its Affiliates, Associates,  Representatives,  employees, agents and advisors
(each, a "Company  Releasee") from any and all liability and  responsibility for
any and all Leeward Claims (as hereinafter defined);  and (b) covenant and agree
not to participate  in,  commence or permit (to the extent within its respective
control) the assertion or  commencement of any demand,  allegation,  litigation,
proceeding or action relating to any Leeward Claim, and not to encourage, assist
or cooperate  with any Person in pursuing or asserting any Leeward Claim against
any Company  Releasee.  As used in this  Agreement,  "Leeward  Claim"  means any
actual or alleged liability,  claim, action, suit, cause of action,  obligation,
debt, controversy,  promise, contract, lien, judgment, account, reckoning, bond,
bill,  covenant,  agreement,  demand of any kind or nature,  loss, cost, damage,
penalty or expense (including,  without limitation,  reasonable  attorneys' fees
and expenses,  and the costs of investigation and litigation,  but excluding any
class action not instituted,  encouraged or facilitated, directly or indirectly,
by any of the Leeward  Parties and which includes the Leeward  Parties or any of
them as class  members  (provided  that, in order to  participate  in such class
action, none of the Leeward Parties shall have been members of the Company Board
for the  preceding  90 days)),  whether in law or in  equity,  whether  known or
unknown,  whether matured or unmatured and whether foreseen or unforeseen,  that
any Leeward Party may or could have had or now or hereafter may have, for, upon,
or by reason of, any matter, cause or thing whatsoever,  resulting from, arising
out of,  relating  to,  connected  in any way with,  or  alleged,  suggested  or
mentioned  in  connection  with,  (i) the  Proxy  Contest  or any part or aspect
thereof,  (ii) any action taken, or statement made, in connection with the Proxy
Contest,  or  (iii)  any  action,   failure  to  act,   representation,   event,
transaction,  occurrence or other subject matter resulting from, arising out of,
relating to,  connected in any way with,  or alleged,  suggested or mentioned in
connection  with the  foregoing or with the actions,  omissions,  decisions  and
conduct of the Company,  the Company Board or any of its committees or any other
Company  Releasee prior to the execution of this Agreement;  provided,  however,
that Leeward Claim shall not include any claim arising out of the performance of
this Agreement.

         7.3. The Company, in connection with the release and covenant contained
in Section 7.1, and each of the Leeward Parties,  in connection with the release
and covenant  contained in Section 7.2, each hereby waive the provisions of 1542
of the California Civil Code and any  corresponding  provision of the applicable
laws of any  other  jurisdiction  but only to the  extent  it  applies  to their
respective  releases  contained in the applicable such Section.  Section 1542 of
the California Civil Code provides as follows:

         A general  release does not extend the claims  which the creditor  does
not know or suspect to exist in his favor at the time of executing  the release,
which if known by him must have materially affected settlement with the debtor.

         7.4. The Company expressly acknowledges that each Leeward Releasee that
is not a Leeward Party is an intended third party beneficiary of the release and
covenant  contained in Section 7.1 and the Leeward Parties jointly and severally
acknowledge  that each  Company  Releasee  other than the Company is an intended
third party  beneficiary  of the release and covenant  contained in Section 7.2.
Each Party  acknowledges  that any claim  determined,  in a final  nonappealable
judgement  or order of a court of  competent  jurisdiction,  to have been  based
primarily on intentional fraud shall not be released under this Section 7.

8.       CERTAIN REPRESENTATIONS AND WARRANTIES

         8.1. The Company represents and warrants to each of the Leeward Parties
that: (a) this Agreement has been duly executed and delivered and its execution,
delivery and  performance  have been  approved by the Company Board and does not
violate its Articles of Incorporation,  Bylaws or any agreement to which it is a
party; and (b) this Agreement  constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
such  enforcement  may be  limited by  bankruptcy,  insolvency  or similar  laws
affecting the enforcement of creditors' rights generally.

         8.2. The Leeward Parties jointly and severally represent to the Company
that: (a) this Agreement has been duly executed and delivered and the execution,
delivery and  performance  of this  Agreement  by the Leeward  Parties have been
approved  by  their  respective  managers,  members,  administrators,  or  other
governing bodies or authorities,  as the case may be, and does not violate their
respective organizational or constituent document, (b) their execution, delivery
and performance of this Agreement does not violate any agreement to which any of
them is a party; (c) this Agreement  constitutes a valid and binding  obligation
of each of them,  enforceable against each of them in accordance with its terms,
except as such  enforcement may be limited by bankruptcy,  insolvency or similar
laws affecting the enforcement of creditors' rights generally; and (d) they have
consulted  with counsel of their  choice in  connection  with their  decision to
enter into and be bound by this Agreement.

9.       REMEDIES

         The Company and each the Leeward Parties acknowledge and agree that the
covenants and agreements set forth in this Agreement are an essential inducement
for the Company and the Leeward Parties to have entered into this Agreement, and
the restrictions imposed herein are not greater than are fair and reasonable and
necessary for the protection of the Company and the Leeward  Parties in light of
the substantial harm that the Company and the Leeward Parties will suffer in the
event of a breach of any of the provisions of said covenants or agreements.  The
Company and the Leeward Parties  further  acknowledge and agree that the parties
would not have an adequate remedy at law and would be irreparably  harmed in the
event  that  any of the  provisions  of this  Agreement  were not  performed  in
accordance  with  their  specific  terms  or  were  otherwise  breached.  It  is
accordingly  agreed that, in the event of an actual or threatened breach of this
Agreement by the Company,  or the Leeward  Parties (or any of their  Affiliates,
Associates  or  Representatives),   each  party  hereto  shall  be  entitled  to
injunctive or other  equitable  remedy or relief to enjoin,  restrain,  prohibit
and/or  prevent  breaches or  violations of this  Agreement and to  specifically
enforce  the  terms  and  provisions  hereof  (including,   without  limitation,
requiring the Leeward Parties and any nominee,  broker or other Person acting on
their behalf,  to dispose of shares of Common Stock in order to be in compliance
with the terms of this Agreement),  in addition to any other remedy at law or in
equity to which such party may be entitled.  Each of the Company and the Leeward
Parties  hereby   waives,   and  the  Company  agrees  to  cause  the  Company's
Representatives  to waive,  and Leeward Parties agree to cause their  respective
Affiliates,  Associates or  Representatives,  as the case may be, to waive,  any
requirement  for the  securing  or posting of any bond or the  proving of actual
damages in connection with such remedy or relief.

10.      MISCELLANEOUS

         10.1. This Agreement  constitutes  the entire  agreement of the parties
with  respect  to  its  subject   matter  and   supersedes  any  and  all  prior
representations,  agreements or understandings, whether written or oral, between
or among any of them with respect to such subject matter.  This Agreement may be
amended only by a written agreement duly executed by the parties.

         10.2.  This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Virginia without regard to its conflict of
law principles.  Exclusive  jurisdiction to resolve any dispute arising under or
in connection  with this  Agreement is hereby  conferred on the Circuit Court of
Fairfax  County,   Virginia  (or,  if  such  Court   determines  that  it  lacks
jurisdiction  over the particular  dispute,  any other  applicable  court of the
Commonwealth  of Virginia) or, if the dispute  involves issues of federal law or
over which the Circuit Court of Fairfax County, Virginia (or such other court of
the State of  Virginia)  lacks or declines  jurisdiction,  on the United  States
Federal District Court for the Eastern District of Virginia.  The Parties hereby
submit to the exclusive jurisdiction of each of such courts.

         10.3. This Agreement may not be assigned by any Party without the prior
written consent of the other Parties.  This Agreement shall be binding upon, and
inure to the benefit of, the respective  successors and permitted assigns of the
Parties.  Except as expressly  set forth in Section 7.4,  this  Agreement  shall
confer no rights or benefits upon any Person other than the Parties.

         10.4.  Any  waiver by any Party of a breach  of any  provision  of this
Agreement  shall  not be  deemed  to be a waiver  of any  other  breach  of such
provision or of any breach of any other provision of this Agreement.

         10.5.  This  Agreement may be executed in  counterparts,  each of which
shall constitute an original but all of which shall together constitute a single
instrument.

         10.6 The Company shall  reimburse the Leeward  Parties for their actual
documented  out-of-pocket  costs in respect of fees and expenses  not  exceeding
$60,000 paid and payable by them, in connection with the Proxy Contest..

         IN WITNESS  WHEREOF,  this  Agreement  has been executed by each of the
parties as of the date first above written.

Dynex Capital, Inc.                    Leeward Capital, L.P.

By:    /s/ Thomas H. Potts             By:    /s/ Eric P. Von der Porten
       ----------------------------           ----------------------------------
Name:  Thomas H. Potts                 Name:  Eric P. Von der Porten
Title: President                       Title: Manager, Leeward Investments,
                                                L.L.C, Its General Partner

                                       Leeward Investments, L.L.C.

                                       By:    /s/ Eric P. Von der Porten
                                              ----------------------------------
                                       Name:  Eric P. Von der Porten
                                       Title: Manager

                                       /s/ Eric P. Von der Porten
                                       -----------------------------------------
                                       Mr. Eric P. Von der Porten

                                       /s/ James M. Bogin
                                       -----------------------------------------
                                       Mr. James M. Bogin