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                                                                 EXHIBIT 10.42


                               FIRST AMENDMENT TO
                                 LINE OF CREDIT
                         CREDIT AND SECURITY AGREEMENT


     THIS FIRST AMENDMENT TO LINE OF CREDIT CREDIT AND SECURITY AGREEMENT 
(this  "Amendment") is made and entered into effective as of August 11, 1998 
between CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a Delaware limited 
partnership (the "Lender"), and CRESCENT OPERATING, INC., a Delaware 
corporation (the "Borrower").


                                R E C I T A L S:


     A.   The parties executed that certain Line of Credit Credit and Security 
Agreement dated as of May 21, 1997 (the "Original Agreement"). All capitalized 
items not otherwise defined in this Amendment will have the same meaning as 
described in the Original Agreement.

     B.   The parties desire to amend the Original Agreement to increase the 
maximum aggregate principal amount of the Loan to $30,400,000 and to modify 
certain of the terms and provisions thereof.

     C.   The Lender is willing to modify the Loan for such purpose on the 
terms and conditions set forth herein.

     In consideration of the mutual covenants set forth herein, and for other 
good and valuable consideration, the receipt and sufficiency of which are 
hereby acknowledged, the parties hereto hereby agree as follows:

     1.   Section 1.1. The definitions of "Note" and "Term Loan Credit and 
Security Agreement" in Section 1.1 of the Original Agreement are hereby amended 
in their entirety to read as follows:

          "Note" means the amended and restated promissory note of the Borrower 
     payable to the order of the Lender under the terms of this Agreement, as
     the same may be modified, supplemented, or amended from time to time, and
     any note or notes issued in substitution or replacement therefor or in
     addition thereto, substantially in the form of Exhibit B hereto, in the
     maximum principal amount from time to time outstanding of up to Thirty
     Million Four Hundred Thousand Dollars ($30,400,000), evidencing the
     obligation of the Borrower to repay the Loan, as modified, supplemented or
     amended from time to time.

          "Term Loan Credit and Security Agreement" means the Amended and 
     Restated Credit and Security Agreement dated as of May 21, 1997 between the
     Borrower and the Lender, as amended by the First Amendment to Amended and
     Restated Credit and Security Agreement dated as of August 11, 1998, as such
     agreement may be further amended, supplemented or otherwise modified from
     time to time.






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         2. Section 2.1. Section 2.1(a) of the Original Agreement is hereby 
amended by deleting the phrase "Twenty Million Four Hundred Thousand Dollars
($20,400,000)" and inserting the phrase "Thirty Million Four Hundred Thousand
Dollars ($30,400,000)" in lieu thereof.

         3. Exhibit B. Exhibit B of the Original Agreement is hereby amended and
restated in its entirety by Exhibit B attached to this Amendment.

         4. Remainder of Original Agreement. Except as amended hereby, the
Original Agreement shall continue in full force and effect in the form that was
effective immediately before the execution of this Amendment.

         5. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
document.

         6. Binding Effect. This Amendment shall be binding upon and inure to 
the benefit of the respective successors and assigns of the parties hereto.

         7. Governing Law and Severability. This Amendment shall be governed by
and construed in accordance with the laws of the State of Texas. Whenever
possible, each provision hereof shall be interpreted to such manner as to be
effective and valid under applicable law.

         IN WITNESS WHEREOF, the parties below have executed this Amendment
effective as of the date first written above.

                                      CRESCENT OPERATING, INC.


                                      By:
                                         -------------------------------------
                                         Name: Jeffrey L. Stevens
                                         Title: Chief Financial Officer


                                      CRESCENT REAL ESTATE EQUITIES 
                                      LIMITED PARTNERSHIP

                  
                                      By: Crescent Real Estate Equities, Ltd.,
                                          its general partner


                                          By:
                                             --------------------------------- 
                                              Name: Bruce A. Picker
                                              Title: Vice President, Treasurer