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                                                                    EXHIBIT 10.0


                               ADVISORY AGREEMENT

                                     BETWEEN

                      CONTINENTAL MORTGAGE AND EQUITY TRUST

                                       AND

                         BASIC CAPITAL MANAGEMENT, INC.

         THIS AGREEMENT dated as of October 15, 1998, between Continental
Mortgage and Equity Trust, a California real estate investment trust (the
"Trust"), and Basic Capital Management, Inc., a Nevada corporation (the
"Advisor")

                              W I T N E S S E T H:

         WHEREAS:
         1. The Company owns a complex, diversified portfolio of real estate,
mortgages and other assets, including many non-performing or troubled assets.

         2. The Company is an active real estate investment trust with funds
available for investment primarily in the acquisition of income-producing real
estate and to a lesser extent in short and medium term mortgages.

         3. The Advisor and its employees have extensive experience in the
administration of real estate assets and the origination, structuring and
evaluation of real estate and mortgage investments.



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         NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties agree as follows:

         1. DUTIES OF THE ADVISOR. Subject to the supervision of the Board of
Trustees, the Advisor will be responsible for the day-to-day operations of the
Trust and, subject to Section 17 hereof, shall provide such services and
activities relating to the assets, operations and business plan of the Trust as
may be appropriate, including:

                  (a) preparing and submitting an annual budget and business
plan for approval by the Board of the Trust (the "Business Plan");

                  (b) using its best efforts to present to the Trust a
continuing and suitable investment program consistent with the investment
policies and objectives of the Trust as set forth in the Business Plan;

                  (c) using its best efforts to present to the Trust investment
opportunities consistent with the Business Plan and such investment program as
the Trustees may adopt from time to time;

                  (d) furnishing or obtaining and supervising the performance of
the ministerial functions in connection with the administration of the
day-to-day operations of the Trust, including

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the investment of reserve funds and surplus cash in short-term
money market investments;

                  (e) serving as the Trust's investment and financial advisor
and providing research, economic, and statistical data in connection with the
Trust's investments and investment and financial policies;

                  (f) on behalf of the Trust, investigating, selecting and
conducting relations with borrowers, lenders, mortgagors, brokers, investors,
builders, developers and others; provided however, that the Advisor shall not
retain on the Trust's behalf any consultants or third party professionals, other
than legal counsel, without prior Board approval;

                  (g) consulting with the Trustees and furnishing the Trustees
with advice and recommendations with respect to the making, acquiring (by
purchase, investment, exchange, or otherwise), holding, and disposition (through
sale, exchange, or otherwise) of investments consistent with the Business Plan
of the Trust;

                  (h) obtaining for the Trustees such services as may be
required in acquiring and disposing of investments, disbursing and collecting
the funds of the Trust, paying the debts and fulfilling the obligations of the
Trust, and handling, prosecuting, and

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settling any claims of the Trust, including foreclosing and
otherwise enforcing mortgage and other liens securing investments;

                  (i) obtaining for and at the expense of the Trust such
services as may be required for property management, loan disbursements, and
other activities relating to the investments of the Trust, provided, however,
the compensation for such services shall be agreed to by the Trust and the
service provider;

                  (j) advising the Trust in connection with public or private
sales of shares or other securities of the Trust, or loans to the Trust, but in
no event in such a way that the Advisor could be deemed to be acting as a broker
dealer or underwriter;

                  (k) quarterly and at any other time requested by the Trustees,
making reports to the Trustees regarding the Trust's performance to date in
relation to the Trust's approved Business Plan and its various components, as
well as the Advisor's performance of the foregoing services;

                  (l) making or providing appraisal reports, where appropriate,
on investments or contemplated investments of the Trust;

                  (m) assisting in preparation of reports and other documents
necessary to satisfy the reporting and other requirements

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of any governmental bodies or agencies and to maintain effective
communications with shareholders of the  Trust; and

                  (n) doing all things necessary to ensure its ability to render
the services contemplated herein, including providing office space and office
furnishings and personnel necessary for the performance of the foregoing
services as Advisor, all at its own expense, except as otherwise expressly
provided for herein.

         2. NO PARTNERSHIP OR JOINT VENTURE. The Trust and the Advisor are not
partners or joint venturers with each other, and nothing herein shall be
construed so as to make them such partners or joint venturers or impose any
liability as such on either of them.

         3. RECORDS. At all times, the Advisor shall keep proper books of
account and records of the Trust's affairs which shall be accessible for
inspection by the Trust at any time during ordinary business hours.

         4. ADDITIONAL OBLIGATIONS OF THE ADVISOR. The Advisor shall refrain
from any action (including, without limitation, furnishing or rendering services
to tenants of property or managing or operating real property) that would (a)
adversely affect the status of the Trust as a real estate investment trust, as
defined and limited in Sections 856-860 of the Internal Revenue Code, (b)

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violate any law, rule, regulation, or statement of policy of any governmental
body or agency having jurisdiction over the Trust or over its securities, (c)
cause the Trust to be required to register as an investment company under the
Investment Company Act of 1940, or (d) otherwise not be permitted by the
Declaration of Trust of the Trust.

         5. BANK ACCOUNTS. The Advisor may establish and maintain one or more
bank accounts in its own name, and may collect and deposit into any such account
or accounts, and disburse from any such account or accounts, any money on behalf
of the Trust, under such terms and conditions as the Trustees may approve,
provided that no funds in any such account shall be commingled with funds of the
Advisor; and the Advisor shall from time to time render appropriate accounting
of such collections and payments to the Trustees and to the auditors of the
Trust.

         6. BOND. The Advisor shall maintain a fidelity bond with a responsible
surety company in such amount as may be required by the Trustees from time to
time, covering all directors, officers, employees, and agents of the Advisor
handling funds of the Trust and any investment documents or records pertaining
to investments of the Trust. Such bond shall inure to the benefit of the Trust
in

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respect to losses of any such property from acts of such directors, officers,
employees, and agents through theft, embezzlement, fraud, negligence, error, or
omission or otherwise, the premium for said bond to be at the expense of the
Trust.

         7. INFORMATION FURNISHED ADVISOR. The Trustees shall have the right to
change the Business Plan at any time, effective upon receipt by the Advisor of
notice of such change. The Trust shall furnish the Advisor with a certified copy
of all financial statements, a signed copy of each report prepared by
independent certified public accountants, and such other information with regard
to the Trust's affairs as the Advisor may from time to time reasonably request.

         8. CONSULTATION AND ADVICE. In addition to the services described
above, the Advisor shall consult with the Trustees, and shall, at the request of
the Trustees or the officers of the Trust, furnish advice and recommendations
with respect to any aspect of the business and affairs of the Trust, including
any factors that in the Advisor's best judgment should influence the policies of
the Trust.

         9. ANNUAL BUSINESS PLAN AND BUDGET. No later than January 15th of each
year, the Advisor shall submit to the Trustees a

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written Business Plan for the current Fiscal Year of the Trust. Such Business
Plan shall include a twelve-month forecast of operations and cash flow with
explicit assumptions and a general plan for asset sales or acquisitions,
lending, foreclosure and borrowing activity, other investments or ventures and
proposed securities offerings or repurchases or any proposed restructuring of
the Trust. To the extent possible, the Business Plan shall set forth the
Advisor's recommendations and the basis therefor with respect to all material
investments of the Trust. Upon approval by the Board of Trustees, the Advisor
shall be authorized to conduct the business of the Trust in accordance with the
explicit provisions of the Business Plan, specifically including the borrowing,
leasing, maintenance, capital improvements, renovations and sale of investments
set forth in the Business Plan. Any transaction or investment not explicitly
provided for in the approved Business Plan shall require the prior approval of
the Board of Trustees unless made pursuant to authority expressly delegated to
the Advisor. Within sixty (60) days of the end of each calendar quarter, the
Advisor shall provide the Board of Trustees with a report comparing the Trust's
actual performance for such quarter against the Business Plan.

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         10. DEFINITIONS. As used herein, the following terms shall have the
meanings set forth below:

                  (a) "Affiliate" shall mean, as to any Person, any other Person
who owns beneficially, directly, or indirectly, 1% or more of the outstanding
capital stock, shares or equity interests of such Person or of any other Person
which controls, is controlled by, or is under common control with such Person or
is an officer, retired officer, director, employee, partner, or trustee
(excluding non-interested trustees not otherwise affiliated with the entity) of
such Person or of any other Person which controls, is controlled by, or is under
common control with, such Person.

                  (b) "Appraised Value" shall mean the value of a Real Property
according to an appraisal made by an independent qualified appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers and
is duly licensed to perform such services in accordance with the applicable
state law, or, when pertaining to Mortgage Loans, the value of the underlying
property as determined by the Advisor.

                  (c) "Book Value" of an asset or assets shall mean the value of
such asset or assets on the books of the Trust, before provision for
amortization, depreciation, depletion or valuation reserves and before deducting
any indebtedness or other liability

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in respect thereof, except that no asset shall be valued at more than its fair
market value as determined by the Trustees.

                  (d) "Book Value of Invested Assets" shall mean the Book Value
of the Trust's total assets (without deduction of any liabilities), but
excluding (i) goodwill and other intangible assets, (ii) cash, and (iii) cash
equivalent investments with terms which mature in one year or less.

                  (e) "Business Plan" shall mean the Trust's investment policies
and objectives and the capital and operating budget based thereon, approved by
the Board as thereafter modified or amended.

                  (f) "Fiscal Year" shall mean any period for which an income
tax return is submitted to the Internal Revenue Service and which is treated by
the Internal Revenue Service as a reporting period.

                  (g) "Gross Asset Value" shall mean the total assets of the
Trust after deduction of allowance for amortization, depreciation or depletion
and valuation reserves.

                  (h) "Mortgage Loans" shall mean notes, debentures, bonds, and
other evidences of indebtedness or obligations, whether negotiable or
non-negotiable, and which are secured or collateralized by mortgages, including
first, wraparound, construction and development, and junior mortgages.

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                  (i) "Net Asset Value" shall mean the Book Value of all the
assets of the Trust minus all the liabilities of the Trust.

                  (j) "Net Income" for any period shall mean the Net Income of
the Trust for such period computed in accordance with generally accepted
accounting principles after deduction of the Gross Asset Fee, but before
deduction of the Net Income Fee, as set forth in Sections 11 (a) and 11(b),
respectively, herein, and inclusive of gain or loss of the sale of assets.

                  (k) "Net Operating Income" shall mean rental income less
property operating expenses.

                  (l) "Person" shall mean and include individuals, corporations,
limited partnerships, general partnerships, joint stock companies or
associations, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other entities and governments and
agencies and political subdivisions thereof.

                  (m) "Real Property" shall mean and include land, rights in
land, leasehold interests (including but not limited to interests of a lessor or
lessee therein), and any buildings, structures, improvements, fixtures, and
equipment located on or used in connection with land, leasehold interests, and
rights in land or interests therein.

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         All calculations made pursuant to this Agreement shall be based on
statements (which may be unaudited, except as provided herein) prepared on an
accrual basis consistent with generally accepted accounting principles,
regardless of whether the Trust may also prepare statements on a different
basis. All other terms shall have the same meaning as set forth in the Trust's
Declaration of Trust and Trustees' Regulations.

         11. ADVISORY COMPENSATION.

             (a) Gross Asset Fee. On or before the twenty-eighth day of each 
month during the term hereof, the Trust shall pay to the Advisor, as
compensation for the basic management and advisory services rendered to the
Trust hereunder, a fee at the rate of .0625% per month of the average of the
Gross Asset Value of the Trust at the beginning and at the end of the next
preceding calendar month. Without negating the provisions of Sections 18, 19,
22 and 23 hereof, the annual rate of the Gross Asset Fee shall be .75% per
annum.

             (b) Net Income Fee. As an incentive for successful investment and
management of the Trust's assets, the Advisor will be entitled to receive a fee
equal to 7.5% per annum of the Trust's Net Income for each Fiscal Year or
portion thereof for which the Advisor provides services. To the extent the Trust
has Net Income in a

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quarter, the 7.5% Net Income Fee is to be paid quarterly on or after the third
business day following the filing of the report on Form 10-Q with the Securities
and Exchange Commission, except for the payment for the fourth quarter, ended
December 31, which is to be paid on or after the third business day following
the filing of the report on Form 10-K with the Securities and Exchange
Commission. The 7.5% Net Income Fee is to be cumulative within any Fiscal Year,
such that if the Trust has a loss in any quarter during the Fiscal Year, each
subsequent quarter's payment during such Fiscal Year shall be adjusted to
maintain the 7.5% per annum rate, with final settlement being made with the
fourth quarter payment and in accordance with audited results for the Fiscal
Year. The 7.5% Net Income Fee is not cumulative from year to year.

                  (c) Acquisition Commission. For supervising the acquisition,
purchase or long term lease of Real Property for the Trust, the Advisor is to
receive an Acquisition Commission equal to the lesser of (i) up to 1% of the
cost of acquisition, inclusive of commissions, if any, paid to nonaffiliated
brokers; or (ii) the compensation customarily charged in arm's-length
transactions by others rendering similar property acquisition services as an
ongoing public activity in the same geographical location and for comparable
property. The aggregate of each purchase price of each

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property (including the Acquisition Commissions and all real estate brokerage
fees) may not exceed such property's Appraised Value at acquisition.

                  (d) Incentive Sales Compensation. To encourage periodic sales
of appreciated Real Property at optimum value and to reward the Advisor for
improved performance of the Trust's Real Property, the Trust shall pay the
Advisor, on or before the 45th day after the close of each Fiscal Year, an
incentive fee equal to 10% of the amount, if any, by which the aggregate sales
consideration for all Real Property sold by the Trust during such Fiscal Year
exceeds the sum of: (i) the cost of each such Real Property as originally
recorded in the Trust's books for tax purposes (without deduction for
depreciation, amortization or reserve for losses), (ii) capital improvements
made to such assets during the period owned by the Trust and (iii) all closing
costs (including real estate commissions) incurred in the sale of such Real
Property; provided, however, no incentive fee shall be paid unless (a) such Real
Property sold in such Fiscal Year, in the aggregate, has produced an 8% simple
annual return on the Trust's net investment including capital improvements,
calculated over the Trust's holding period, before depreciation and inclusive of
operating income and sales consideration and (b) the aggregate Net Operating
Income from all

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Real Property owned by the Trust for all of the prior Fiscal Year and the
current Fiscal Year shall be at least 5% higher in the current Fiscal Year than
in the prior Fiscal Year.

                  (e) Mortgage or Loan Acquisition Fees. For the acquisition or
purchase from an unaffiliated party of any existing mortgage or loan by the
Trust, the Advisor or an Affiliate is to receive a Mortgage or Loan Acquisition
Fee equal to the lesser of (a) 1% of the amount of the mortgage or loan
purchased by the Trust or (b) a brokerage or commitment fee which is reasonable
and fair under the circumstances. Such fee will not be paid in connection with
the origination or funding by the Trust of any mortgage loan.

                  (f) Mortgage Brokerage and Equity Refinancing Fees. For
obtaining loans to the Trust or refinancing on Trust properties, the Advisor or
an Affiliate is to receive a Mortgage Brokerage and Equity Refinancing Fee equal
to the lesser of (a) 1% of the amount of the loan or the amount refinanced or
(b) a brokerage or refinancing fee which is reasonable and fair under the
circumstances; provided, however that no such fee shall be paid on loans from
the Advisor or an Affiliate without the approval of the Board of Trustees. No
fee shall be paid on loan extensions.

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         12. LIMITATION ON THIRD PARTY MORTGAGE PLACEMENT FEES. The Advisor or
any of its Affiliates shall pay to the Trust, one-half of any compensation
received by the Advisor or any such Affiliate from third parties with respect to
the origination, placement or brokerage of any loan made by the Trust, provided,
however, the compensation retained by the Advisor or Affiliate shall not exceed
the lesser of (a) 2% of the amount of the loan committed by the Trust or (b) a
loan brokerage and commitment fee which is reasonable and fair under the
circumstances.

         13. STATEMENTS. The Advisor shall furnish to the Trust not later than
the tenth day of each calendar month, beginning with the second calendar month
of the term of this Agreement, a statement showing the computation of the fees,
if any, payable in respect to the next preceding calendar month (or, in the case
of incentive compensation, for the preceding Fiscal Year, as appropriate) under
the Agreement. The final settlement of incentive compensation for each Fiscal
Year shall be subject to adjustment in accordance with, and upon completion of,
the annual audit of the Trust's financial statements; any payment by the Trust
or repayment by the Advisor that shall be indicated to be necessary in
accordance therewith shall be made promptly after the completion of such audit
and shall

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be reflected in the audited statements to be published by the
Trust.

         14. COMPENSATION FOR ADDITIONAL SERVICES. If and to the extent that the
Trust shall request the Advisor or any director, officer, partner, or employee
of the Advisor to render services for the Trust other than those required to be
rendered by the Advisor hereunder, such additional services, if performed, will
be compensated separately on terms to be agreed upon between such party and the
Trust from time to time. In particular, but without limitation, if the Trust
shall request that the Advisor perform property management, leasing, loan
disbursement or similar functions, the Trust and the Advisor shall enter into a
separate agreement specifying the obligations of the parties and providing for
reasonable additional compensation to the Advisor for performing such services.

         15. EXPENSES OF THE ADVISOR. Without regard to the amount of
compensation or reimbursement received hereunder by the Advisor, the Advisor
shall bear the following expenses:

                  (a) employment expenses of the personnel employed by the
Advisor (including Trustees, officers, and employees of the Trust who are
directors, officers, or employees of the Advisor or of any

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company that controls, is controlled by, or is under common control with the
Advisor), including, but not limited to, fees, salaries, wages, payroll taxes,
travel expenses, and the cost of employee benefit plans and temporary help
expenses except for those personnel expenses described in Sections 16(e) and
(p);

                  (b) advertising and promotional expenses incurred in
seeking investments for the Trust;

                  (c) rent, telephone, utilities, office furniture and
furnishings, and other office expenses of the Advisor and the Trust, except as
any of such expenses relates to an office maintained by the Trust separate from
the office of the Advisor; and

                  (d) miscellaneous administrative expenses relating to
performance by the Advisor of its functions hereunder.

         16. EXPENSES OF THE TRUST. The Trust shall pay all of its expenses not
assumed by the Advisor and, without limiting the generality of the foregoing, it
is specifically agreed that the following expenses of the Trust shall be paid by
the Trust and shall not be paid by the Advisor:

                  (a) the cost of money borrowed by the Trust;

                  (b) income taxes, taxes and assessments on real property, and
all other taxes applicable to the Trust;

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                  (c) legal, auditing, accounting, underwriting, brokerage,
listing, registration and other fees, printing, and engraving and other
expenses, and taxes incurred in connection with the issuance, distribution,
transfer, registration, and stock exchange listing of the Trust's securities;

                  (d) fees, salaries, and expenses paid to officers, and
employees of the Trust who are not directors, officers or employees of the
Advisor, or of any company that controls, is controlled by, or is under common
control with the Advisor;

                  (e) expenses directly connected with the origination or
purchase of Mortgage Loans and with the acquisition, disposition, and ownership
of real estate equity interests or other property (including the costs of
foreclosure, insurance, legal, protective, brokerage, maintenance, repair, and
property improvement services) and including all compensation, traveling
expenses, and other direct costs associated with the Advisor's employees or
other personnel engaged in (i) real estate transaction legal services, (ii)
internal auditing, (iii) foreclosure and other mortgage finance services, (iv)
sale or solicitation for sale of mortgages, (v) engineering and appraisal
services, and (vi) transfer agent services;

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                  (f) expenses of maintaining and managing real estate
equity interests;

                  (g) insurance, as required by the Trustees (including
Trustees' liability insurance);

                  (h) the expenses of organizing, revising, amending,
converting, modifying, or terminating the Trust;

                  (i) expenses connected with payments of dividends or interest
or distributions in cash or any other form made or caused to be made by the
Trustees to holders of securities of the Trust;

                  (j) all expenses connected with communications to holders of
securities of the Trust and the other bookkeeping and clerical work necessary in
maintaining relations with holders of securities, including the cost of printing
and mailing certificates for securities and proxy solicitation materials and
reports to holders of the Trust's securities;

                  (k) the cost of any accounting, statistical, bookkeeping or
computer equipment or computer time necessary for maintaining the books and
records of the Trust and for preparing and filing Federal, State and Local tax
returns;

                  (l) transfer agent's, registrar's, and indenture
trustee's fees and charges;

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                  (m) legal, accounting, investment banking, and auditing fees
and expenses charged by independent parties performing these services not
otherwise included in clauses (c) and (e) of this Section 16;

                  (n) expenses incurred by the Advisor, arising from the sales
of Trust properties, including those expenses related to carrying out
foreclosure proceedings;

                  (o) commercially reasonable fees paid to the Advisor for
efforts to liquidate mortgages before maturity, such as the solicitation of
offers and negotiation of terms of sale;

                  (p) costs and expenses connected with computer services,
including but not limited to employee or other personnel compensation, hardware
and software costs, and related development and installation costs associated
therewith;

                  (q) costs and expenses associated with risk management
(i.e. insurance relating to the Trust's assets);

                  (r) loan refinancing compensation; and

                  (s) expenses associated with special services requested
by the Trustees pursuant to Section 14 hereof.

         17. OTHER ACTIVITIES OF ADVISOR. The Advisor, its officers, directors,
or employees or any of its Affiliates may engage in other business activities
related to real estate investments or act

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as advisor to any other person or entity (including another real estate
investment trust), including those with investment policies similar to the
Trust, and the Advisor and its officers, directors, or employees and any of its
Affiliates shall be free from any obligation to present to the Trust any
particular investment opportunity that comes to the Advisor or such persons,
regardless of whether such opportunity is in accordance with the Trust's
Business Plan. However, to minimize any possible conflict, the Advisor shall
consider the respective investment objectives of, and the appropriateness of a
particular investment to each such entity in determining to which entity a
particular investment opportunity should be presented. If appropriate to more
than one entity, the Advisor shall present the investment opportunity to the
entity that has had sufficient uninvested funds for the longest period of time.

         18. LIMITATION ON OPERATING EXPENSES. To the extent that the Operating
Expenses of the Trust for any Fiscal Year exceeds the limitation set forth in
the Trust's Declaration of Trust as amended from time to time, or any similar
limitation (if contained) in a successor Declaration of Trust or Certificate of
Incorporation, the Advisor shall refund to the Trust such portion of its fees
payable hereunder as may be required by such Section.

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         19. TERM; TERMINATION OF AGREEMENT. This Agreement shall continue in
force until the next Annual Meeting of Shareholders of the Trust, and,
thereafter, it may be renewed from year to year, subject to any required
approval of the Shareholders of the Trust and, if any Trustee is an Affiliate of
the Advisor, the approval of a majority of the Trustees who are not so
affiliated. Notice of renewal shall be given in writing by the Trustees to the
Advisor not less than 60 days before the expiration of this Agreement or of any
extension thereof. This Agreement may be terminated for any reason without
penalty upon 60 days' written notice by the Trust to the Advisor or 120 days'
written notice by the Advisor to the Trust, in the former case by the vote of a
majority of the Trustees who are not Affiliates of the Advisor or by the vote of
holders of a majority of the outstanding shares of the Trust. Notwithstanding
the foregoing, however, in the event of any material change in the ownership,
control, or management of the Advisor, the Trust may terminate this Agreement
without penalty and without advance notice to the Advisor.

         20. AMENDMENTS. This Agreement shall not be changed, modified,
terminated or discharged in whole or in part except by an

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instrument in writing signed by both parties hereto, or their respective
successors or assigns, or otherwise as provided herein.

         21. ASSIGNMENT. This Agreement shall not be assigned by the Advisor
without the prior consent of the Trust. The Trust may terminate this Agreement
in the event of its assignment by the Advisor without the prior consent of the
Trust. Such an assignment or any other assignment of this Agreement shall bind
the assignee hereunder in the same manner as the Advisor is bound hereunder.
This Agreement shall not be assignable by the Trust without the consent of the
Advisor, except in the case of assignment by the Trust to a corporation,
association, trust, or other organization that is a successor to the Trust. Such
successor shall be bound hereunder and by the terms of said assignment in the
same manner as the Trust is bound hereunder.

         22. DEFAULT, BANKRUPTCY, ETC. At the option solely of the Trustees,
this Agreement shall be and become terminated immediately upon written notice of
termination from the Trustees to the Advisor if any of the following events
shall occur:

                  (a) If the Advisor shall violate any provision of this
Agreement, and after notice of such violation shall not cure such default within
30 days; or

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                  (b) If the Advisor shall be adjudged bankrupt or insolvent by
a court of competent jurisdiction, or an order shall be made by a court of
competent jurisdiction for the appointment of a receiver, liquidator, or trustee
of the Advisor or of all or substantially all of its property by reason of the
foregoing, or approving any petition filed against the Advisor for its
reorganization, and such adjudication or order shall remain in force or unstayed
for a period of 30 days; or

                  (c) If the Advisor shall institute proceedings for voluntary
bankruptcy or shall file a petition seeking reorganization under the Federal
bankruptcy laws, or for relief under any law for the relief of debtors, or shall
consent to the appointment of a receiver of itself or of all or substantially
all its property, or shall make a general assignment for the benefit of its
creditors, or shall admit in writing its inability to pay its debts generally,
as they become due.

         The Advisor agrees that if any of the events specified in subsections
(b) and (c) of this Section 22 shall occur, it will give written notice thereof
to the Trustees within seven days after the occurrence of such event.

         23. ACTION UPON TERMINATION. From and after the effective date of
termination of this Agreement, pursuant to Sections 19, 21 or 22

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hereof, the Advisor shall not be entitled to compensation for further services
hereunder but shall be paid all compensation accruing to the date of
termination. The Advisor shall forthwith upon such termination:

                  (a) pay over to the Trust all monies collected and held for
the account of the Trust pursuant to this Agreement;

                  (b) deliver to the Trustees a full accounting, including a
statement showing all payments collected by it and a statement of any monies
held by it, covering the period following the date of the last accounting
furnished to the Trustees; and

                  (c) deliver to the Trustees all property and documents of the
Trust then in the custody of the Advisor.

         24. MISCELLANEOUS. The Advisor shall be deemed to be in a fiduciary
relationship to the shareholders of the Trust. The Advisor assumes no
responsibility under this Agreement other than to render the services called for
hereunder in good faith, and shall not be responsible for any action of the
Trustees in following or declining to follow any advice or recommendations of
the Advisor. Neither the Advisor nor any of its shareholders, directors,
officers, or employees shall be liable to the Trust, the Trustees, the holders
of securities of the Trust or to any successor or assign of the Trust for any
losses arising from the

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operation of the Trust if the Advisor had determined, in good faith, that the
course of conduct which caused the loss or liability was in the best interests
of the Trust and the liability or loss was not the result of negligence or
misconduct by the Advisor. However, in no event will the directors, officers or
employees of the Advisor be personally liable for any act or failure to act
unless it was the result of such person's willful misfeasance, bad faith, gross
negligence or reckless disregard of duty.

         25. NOTICES. Any notice, report, or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report, or other communication is accepted by the party to
whom it is given, and shall be given by being delivered at the following
addresses of the parties hereto:

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<PAGE>   28




The Trustees and/or the Trust:

    Continental Mortgage and Equity Trust
    10670 North Central Expressway
    Suite 600
    Dallas, Texas 75231
    Attention: President

The Advisor:

    Basic Capital Management, Inc.
    10670 North Central Expressway
    Suite 600
    Dallas, Texas 75231
    Attention: Executive Vice President and
               Chief Financial Officer

         Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 25.

         26. HEADINGS. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction, or effect of this Agreement.

         27. GOVERNING LAW. This Agreement has been prepared, negotiated and
executed in the State of Texas. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of Texas
applicable to agreements made and to be performed entirely in the State of
Texas.

         28. EXECUTION. This instrument is executed and made on behalf of the
Trust by an officer of the Trust, not individually but solely as an officer, and
the obligations under this Agreement are

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<PAGE>   29




not binding upon, nor shall resort be had to the private property of, any of the
Trustees, shareholders, officers, employees, or agents of the Trust personally,
but bind only the Trust property.

         IN WITNESS WHEREOF, CONTINENTAL MORTGAGE AND EQUITY TRUST and BASIC
CAPITAL MANAGEMENT, INC., by their duly authorized officers, have signed these
presents all as of the day and year first above written.

                                       CONTINENTAL MORTGAGE AND EQUITY TRUST



                                       By: /s/ Randall M. Paulson
                                          --------------------------------
                                          Randall M. Paulson
                                          President



                                       BASIC CAPITAL MANAGEMENT, INC.



                                       By: /s/ Thomas A. Holland
                                          --------------------------------
                                          Thomas A. Holland
                                          Executive Vice President
                                          and Chief Financial Officer


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