Form of Strategic Alliance Agreement

STRATEGIC ALLIANCE AGREEMENT


This Strategic Alliance Agreement (this "Agreement") is entered into as of the ____ day of _____________, 2004 (the "Effective Date"), by and between Desert Capital REIT, Inc., a Maryland corporation ("Desert Capital") and Consolidated Mortgage, Inc., a Nevada corporation ("Consolidated Mortgage").


WHEREAS, Consolidated Mortgage is regularly and actively engaged in the business of arranging for the financing of and servicing mortgage loans for the acquisition of, development of, and construction on real estate (collectively, "Mortgage Loans");


WHEREAS, Desert Capital is a real estate investment trust that intends to originate and invest in, among other things, Mortgage Loans; and


WHEREAS, Consolidated Mortgage and Desert Capital wish to enter into a strategic alliance regarding the origination and servicing of Mortgage Loans by Consolidated Mortgage and the funding of Mortgage Loans by Desert Capital.


NOW, THEREFORE, in consideration of the foregoing and of the mutual premises hereinafter expressed, the parties hereto do mutually agree as follows:


ARTICLE I. SCOPE OF STRATEGIC ALLIANCE.


A. Consolidated Mortgage shall continue arranging for the financing of Mortgage Loans in accordance with its historical practices. Commencing as of ________, 2004, on a weekly basis, Consolidated Mortgage shall send a written report (a "Mortgage Loan Report") to Desert Capital setting forth in reasonable detail all Mortgage Loans identified by Consolidated Mortgage for funding (including loan to value ratio, credit scores, interest rates and other criteria) applicable to Mortgage Loans. Desert Capital shall have a right of first refusal to fund all or a portion of such Mortgage Loans as set forth herein. No later than 15 Business Days following its receipt of a Mortgage Loan Report (the "Initial Election Period"), Desert Capital shall send written notice to Consolidated Mortgage specifying the Mortgage Loans set forth in the Mortgage Loan Report that Desert Capital is interested in funding all or an identified portion thereof (a "Preliminary Funding Notice"). The Preliminary Funding Notice shall constitute an offer by Desert Capital to fund all or a portion of the Mortgage Loans set forth therein on the terms and conditions set forth in the Mortgage Loan Report, with such changes thereto as Desert Capital shall deem appropriate for its funding thereof and upon the terms set forth herein. If Desert Capital fails to deliver a Preliminary Funding Notice to Consolidated Mortgage prior to the expiration of the Initial Election Period, then Consolidated Mortgage may arrange for the funding of the Mortgage Loans set forth in the applicable Mortgage Loan Report through one or more third parties without regard to this Agreement.


B. No later than five Business Days after its receipt of a Preliminary Funding Notice (the "Election Period"), Consolidated Mortgage shall elect to accept any changes made to the terms of the Mortgage Loans set forth in the Mortgage Loan Report, as set forth in the applicable Preliminary Funding Notice. If Consolidated Mortgage rejects any modified terms requested by Desert Capital, it may withdraw such Mortgage Loans from the Mortgage Loan Report and shall permit Desert Capital to fund all or the identified portion of the remaining Mortgage Loans. If Consolidated Mortgage agrees to the modified terms as specified by Desert Capital in its Preliminary Funding Notice, then Consolidated Mortgage shall permit Desert Capital to fund all or the identified portion of the Mortgage Loans set forth in the Mortgage Loan Report. For purposes hereof "Business Day" means any day other than Saturday or Sunday or other day on which national banks in Las Vegas, Nevada are required or permitted by applicable law to close.


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C. Consolidated Mortgage may freely arrange for the financing of any Mortgage Loans that were set forth in a Mortgage Loan Report that Desert Capital did not elect to fund in the applicable Preliminary Funding Notice or as to which any modified terms set forth in the Preliminary Funding Notice were not accepted.


D. No later than the Business Day immediately following the delivery of a Mortgage Loan Report, Consolidated Mortgage shall deliver to Desert Capital those due diligence materials, reports and documents relating to the Mortgage Loans to be participated in or purchased at such Closing further described in Attachment "C" hereto (the "Specified Materials"). In addition, Consolidated Mortgage shall provide Desert Capital with any additional documents and other information that Desert Capital may reasonably request with respect to any Mortgage Loans to be purchased by Desert Capital hereunder. It shall be a condition to the obligation of Desert Capital to fund any Mortgage Loan at a Closing that Consolidated Mortgage shall have timely provided to Desert Capital all of the Specified Materials (and any other documents and other information reasonably requested by Desert Capital).


E. Each closing of a funding of a Mortgage Loan by Desert Capital hereunder (each a "Closing") shall take place at the principal offices of Desert Capital, at the address specified in Article IX hereof, on the Business Day specified as the closing date for the applicable Mortgage Loan in the applicable Mortgage Loan Report. At the Closing, Consolidated Mortgage shall arrange for the execution and delivery to Desert Capital of a standard set of investment documents, in a form acceptable to Desert Capital (and shall provide Desert Capital with customary representations and warranties as well as adequate assurances that such Mortgage Loans are valid obligations of the respective borrowers and that no default, event of default, potential default or similar occurrence exists with respect to such Mortgage Loans). At the Closing, unless otherwise agreed upon by the parties, Desert Capital shall fund all or the identified portion of the applicable Mortgage Loan in the applicable amount payable in immediately available funds.


F. Desert Capital may, at its election, request periodic accounting and other financial records from Consolidated Mortgage that demonstrate its performance of this Agreement. Any proprietary information and associated products, copyrights, trademarks and logos developed by parties to this Agreement shall remain the property of the party which developed them.


G. Each party hereto shall, in a professional manner, take all steps necessary to perform its duties hereunder.


H. In addition to the other matters set forth in this Article I, the parties agree to the covenants and other matters set forth in Attachment "A" hereto, which are incorporated by reference as if fully set forth herein.


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ARTICLE II. PERIOD OF PERFORMANCE.


This Agreement shall be effective as of the Effective Date and shall expire on the later of (i) three years after the Effective Date, or (ii) with respect to any projects, commercial loans or open contracts and/or related residual income such date that all business has been completed. Thereafter, this Agreement shall be automatically renewed for successive one year periods unless any party gives written notice of termination to the other party at least 30 days prior to the scheduled date of expiration. Notwithstanding the foregoing, this Agreement shall be earlier terminated (x) at any time by mutual agreement of the parties, (y) by any party, if Desert Capital has not completed a public offering of its securities (an "IPO") on or before September 30, 2004, or (z) at any time by Desert Capital or Consolidated Mortgage upon 60 days' advance written notice after an event constituting "cause" has occurred to the other party. For purposes of this Agreement "cause" means a judgment by a com ...