<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the quarterly period ended September 30, 2002

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                         Commission file number 0-22725

                            CRESCENT OPERATING, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                Delaware                                 75-2701931
----------------------------------------    ------------------------------------
     (State or other jurisdiction of        (I.R.S. Employer Identification No.)
     incorporation or organization)

      777 Taylor Street, Suite 1050
            Fort Worth, Texas                               76102
----------------------------------------    ------------------------------------
(Address of principal executive offices)                 (Zip Code)

        Registrant's telephone number, including area code (817) 339-2200


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 YES [X] NO [ ]

Number of shares of Common Stock, $0.01 par value, outstanding as of November
14, 2002: 10,828,497



<PAGE>

                            CRESCENT OPERATING, INC.
                                    FORM 10-Q
                                TABLE OF CONTENTS



<Table>
<Caption>
                                                                                                             Page
                                                                                                             ----
<S>                                                                                                          <C>

                                         PART I - FINANCIAL INFORMATION

Item 1.       Financial Statements:

              Consolidated Balance Sheets (Unaudited)..........................................................4

              Consolidated Statements of Operations (Unaudited)................................................5

              Consolidated Statement of Changes in Shareholders' Deficit (Unaudited)...........................6

              Consolidated Statements of Cash Flows (Unaudited)................................................7

              Notes to Consolidated Financial Statements (Unaudited)...........................................8

Item 2.       Management's Discussion and Analysis of Financial Condition and Results of Operations...........19

Item 3.       Quantitative and Qualitative Disclosures About Market Risk......................................33

Item 4.       Controls and Procedures.........................................................................33

                                           PART II - OTHER INFORMATION


Item 1.       Legal Proceedings...............................................................................33

Item 2.       Change in Securities and Use of Proceeds........................................................33

Item 3.       Defaults Upon Senior Securities.................................................................33

Item 4.       Submission of Matters to a Vote of Security Holders.............................................34

Item 5.       Other Information...............................................................................34

Item 6.       Exhibits and Reports on Form 8-K................................................................35
</Table>




                                       3
<PAGE>

                            CRESCENT OPERATING, INC.
                           CONSOLIDATED BALANCE SHEETS
                             (AMOUNTS IN THOUSANDS)

<Table>
<Caption>
                                                                               September 30, 2002  December 31, 2001
                                                                               ------------------  -----------------
                                                                                   (unaudited)       (See Note 1)
<S>                                                                            <C>                 <C>
                                                       ASSETS

CURRENT ASSETS
  Cash and cash equivalents                                                      $        4,849     $          492
  Accounts receivable, net                                                                8,434             14,581
  Inventories                                                                             6,045             18,965
  Notes receivable                                                                           54                 58
  Prepaid expenses and other current assets                                               1,487              1,875
  Current assets to be transferred pursuant to Settlement Agreement                          --             94,161
                                                                                 --------------     --------------
     Total current assets                                                                20,869            130,132
                                                                                 --------------     --------------

PROPERTY AND EQUIPMENT, NET                                                              31,746             70,094

INVESTMENTS                                                                                  --              4,833

OTHER ASSETS
  Deferred tax assets                                                                     8,706             24,715
  Other assets                                                                              227                636
  Long-term assets to be transferred pursuant to Settlement Agreement                        --            714,994
                                                                                 --------------     --------------
     Total other assets                                                                   8,933            740,345
                                                                                 --------------     --------------

TOTAL ASSETS                                                                     $       61,548     $      945,404
                                                                                 ==============     ==============

                                        LIABILITIES AND SHAREHOLDERS' DEFICIT

LIABILITIES NOT SUBJECT TO COMPROMISE
  CURRENT LIABILITIES
  Accounts payable and accrued expenses                                          $        4,984     $       15,525
  Accounts payable and accrued expenses - CEI                                            33,576             48,875
  Current portion of long-term debt - CEI                                                35,578             69,041
  Current portion of long-term debt                                                      15,000            101,870
  Deferred revenue                                                                           --                641
  Current liabilities to be transferred pursuant to Settlement Agreement                     --            553,805
                                                                                 --------------     --------------
     Total current liabilities                                                           89,138            789,757

 LONG-TERM DEBT, NET OF CURRENT PORTION                                                      --                790

 LONG-TERM LIABILITIES TO BE LIQUIDATED PURSUANT TO SETTLEMENT AGREEMENT                     --             89,356

LIABILITIES SUBJECT TO COMPROMISE                                                        52,432                 --
                                                                                 --------------     --------------


     Total liabilities                                                                  141,570            879,903

MINORITY INTERESTS TO BE TRANSFERRED PURSUANT TO SETTLEMENT AGREEMENT                        --            158,889

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' DEFICIT
Preferred stock, $.01 par value, 10,000 shares authorized,
      no shares issued or outstanding                                                        --                 --
Common stock, $.01 par value, 22,500 shares authorized,
      11,490 shares issued                                                                  115                115
Additional paid-in capital                                                               17,781             17,781
Accumulated other comprehensive loss                                                         --             (1,436)
Accumulated deficit                                                                     (95,334)          (105,542)
Treasury stock at cost, 662 and 1,103 shares, respectively                               (2,584)            (4,306)
                                                                                 --------------     --------------
     Total shareholders' deficit                                                        (80,022)           (93,388)
                                                                                 --------------     --------------

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT                                      $       61,548     $      945,404
                                                                                 ==============     ==============
</Table>


        See accompanying notes to the consolidated financial statements.


                                       4
<PAGE>

                                CRESCENT OPERATING, INC.
                          CONSOLIDATED STATEMENTS OF OPERATIONS
                (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)


<Table>
<Caption>
                                                           For the             For the             For the             For the
                                                      Three Months Ended  Three Months Ended  Nine Months Ended   Nine Months Ended
                                                      September 30, 2002  September 30, 2001  September 30, 2002  September 30, 2001
                                                      ------------------  ------------------  ------------------  ------------------
                                                                             (See Note 1)                            (See Note 1)
<S>                                                   <C>                 <C>                 <C>                 <C>

REVENUES
   Equipment sales & leasing                            $        7,757      $       19,001      $       25,992      $       50,884
                                                        --------------      --------------      --------------      --------------

   Total revenues                                                7,757              19,001              25,992              50,884
                                                        --------------      --------------      --------------      --------------

OPERATING EXPENSES
   Equipment sales & leasing                                     8,624              20,358              29,340              52,458
   Corporate general and administrative                            451                 503               2,677               1,461
   Impairment of assets                                             --               5,052                  34              16,902
                                                        --------------      --------------      --------------      --------------

        Total operating expenses                                 9,075              25,913              32,051              70,821
                                                        --------------      --------------      --------------      --------------

LOSS FROM OPERATIONS                                            (1,318)             (6,912)             (6,059)            (19,937)

INVESTMENT (LOSS) INCOME                                            --              (1,779)             (4,127)              6,035

EQUITY IN LOSS OF
UNCONSOLIDATED SUBSIDIARIES                                         --                  --              (2,142)             (4,417)

OTHER EXPENSE (INCOME)
   Interest expense                                              1,487               1,188               5,037               6,719
   Interest income                                                  (5)                 (6)                (12)                 10
   Other                                                            47                 723                 221                 999
                                                        --------------      --------------      --------------      --------------

        Total other expense                                      1,529               1,905               5,246               7,728
                                                        --------------      --------------      --------------      --------------

LOSS FROM OPERATIONS BEFORE REORGANIZATION COSTS                (2,847)            (10,596)            (17,574)            (26,047)

REORGANIZATION ITEMS
   Professional Fees                                               871                  --               2,015                  --
                                                        --------------      --------------      --------------      --------------

LOSS FROM OPERATIONS AFTER REORGANIZATION COSTS,
   BEFORE TAXES                                                 (3,718)            (10,596)            (19,589)            (26,047)

INCOME TAX BENEFIT                                                (707)             (1,183)             (2,710)             (4,371)
                                                        --------------      --------------      --------------      --------------

LOSS FROM CONTINUING OPERATIONS                                 (3,011)             (9,413)            (16,879)            (21,676)

DISCONTINUED OPERATIONS (NOTE 3)
   (LOSS) INCOME FROM OPERATIONS OF DISCONTINUED
   HOSPITALITY  AND LAND DEVELOPMENT SEGMENTS
   (LESS APPLICABLE INCOME TAX EXPENSE OF $0, $1,041,
   $2,502 AND $8,682 AND MINORITY INTERESTS OF $0,
   $(330), $1,897 AND $5,564)                                       --              (4,604)              3,272              (6,855)

   LOSS FROM OPERATIONS OF DISCONTINUED
   EQUIPMENT SALES AND LEASING BRANCHES
   (LESS APPLICABLE INCOME TAX BENEFIT OF $0, $(1,552)
   $0, $0)                                                        (553)             (3,080)             (2,998)             (5,399)

   GAIN ON  DISPOSAL OF HOSPITALITY AND LAND DEVELOPMENT
   SEGMENTS (LESS APPLICABLE INCOME TAX EXPENSE
   OF $0, $0, $17,876 and $0)                                       --                  --              26,813                  --
                                                        --------------      --------------      --------------      --------------

     (LOSS) INCOME FROM DISCONTINUED OPERATIONS                   (553)             (7,684)             27,087             (12,254)

(LOSS) INCOME BEFORE ACCOUNTING CHANGE                          (3,564)            (17,097)             10,208             (33,930)

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                 --                  --                  --              (9,509)
                                                        --------------      --------------      --------------      --------------

NET (LOSS) INCOME                                       $       (3,564)     $      (17,097)     $       10,208      $      (43,439)
                                                        ==============      ==============      ==============      ==============

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE

     Loss before discontinued operations and accounting
       change                                           $        (0.28)     $        (0.91)     $        (1.57)     $        (2.10)
     Discontinued operations                                     (0.05)              (0.74)               2.52               (1.18)
     Change in accounting principle                                 --                  --                  --               (0.92)
                                                        --------------      --------------      --------------      --------------

   Net (loss) earnings per share                        $        (0.33)     $        (1.65)     $         0.95      $        (4.20)
                                                        ==============      ==============      ==============      ==============
</Table>


         See accompanying notes to the consolidated financial statements.


                                       5
<PAGE>

                            CRESCENT OPERATING, INC.
           CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
                       (AMOUNTS IN THOUSANDS, UNAUDITED)


<Table>
<Caption>
                                                                                               Accumulated
                                      Common stock           Treasury stock       Additional      other
                                 ----------------------  -----------------------   paid-in    comprehensive  Accumulated
                                   Shares      Amount      Shares       Amount     capital    income (loss)    deficit      Total
                                 ----------  ----------  ----------   ----------  ----------  -------------  -----------  ----------
<S>                              <C>         <C>         <C>          <C>         <C>         <C>            <C>          <C>

BALANCE AT DECEMBER 31, 2001         11,490  $      115      (1,103)  $   (4,306)  $   17,781  $   (1,436)  $ (105,542)  $  (93,388)

Comprehensive income (loss):

     Net income                          --          --          --           --           --          --       10,208       10,208

Realized losses of
  comprehensive income                   --          --          --           --           --       1,436           --        1,436
                                                                                                                         ----------

Comprehensive income (loss)                                                                                                  11,644

Issuance of treasury stock               --          --         441        1,722           --          --           --        1,722
                                 ----------  ----------  ----------   ----------   ----------  ----------   ----------   ----------

BALANCE AT SEPTEMBER 30, 2002        11,490  $      115        (662)  $   (2,584)  $   17,781  $       --   $  (95,334)  $  (80,022)
                                 ==========  ==========  ==========   ==========   ==========  ==========   ==========   ==========
</Table>


        See accompanying notes to the consolidated financial statements.


                                       6
<PAGE>

                            CRESCENT OPERATING, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (AMOUNTS IN THOUSANDS, UNAUDITED)

<Table>
<Caption>
                                                                                    For the             For the
                                                                               Nine Months Ended   Nine Months Ended
                                                                               September 30, 2002  September 30, 2001
                                                                               ------------------  ------------------
                                                                                                      (See Note 1)
<S>                                                                            <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                             $       10,208     $      (43,439)
   Adjustments to reconcile net income (loss)
     to net cash provided by (used in) operating activities:
       Depreciation                                                                       8,149             14,180
       Amortization                                                                          --                363
       Provision for deferred income taxes                                               17,154             (8,596)
       Equity in loss of unconsolidated subsidiaries                                      2,142              4,417
       Investment loss (income) of Magellan warrants                                      4,127             (6,035)
       Impairment of assets                                                                  38             16,902
       Cumulative effect of change in accounting principle                                   --              9,509
       Minority interests                                                                 1,897              5,564
       Gain on sale of property and equipment                                              (570)            (1,134)
       Gain on discontinued operations                                                  (44,689)                --
       Deferred compensation                                                                 --                177
       Net current assets (liabilities) of discontinued operations                       (4,217)          (175,445)
       Changes in assets and liabilities, net of effects from transfers:
           Accounts receivable                                                            6,126              5,361
           Inventories                                                                    3,998             12,031
           Prepaid expenses and current assets                                             (758)            (2,267)
           Other assets                                                                     397                (62)
           Accounts payable and accrued expenses                                         (1,371)               167
           Accounts payable and accrued expenses - CEI                                    3,209              2,253
           Deferred revenue, current and noncurrent                                        (269)               (67)
           Other liabilities                                                                 --               (108)
                                                                                 --------------     --------------
                Net cash provided by (used in) operating activities                       5,571           (166,229)
                                                                                 --------------     --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Disposition of business interests, net of cash surrendered                            (15,793)                --
  Purchases of property and equipment                                                        (8)           (17,609)
  Proceeds from sale of property and equipment                                            4,802             14,274
  Net investing activities of discontinued operations                                       (80)             9,628
                                                                                 --------------     --------------
                Net cash (used in) provided by investing activities                     (11,079)             6,293
                                                                                 --------------     --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds of long-term debt                                                                 --             29,836
  Payments on long-term debt                                                             (7,050)           (61,960)
  Proceeds of long-term debt - CEI                                                        3,631                 --
  Net financing activities of discontinued operations                                       (87)           165,405
                                                                                 --------------     --------------
                Net cash (used in) provided by financing activities                      (3,506)           133,281
                                                                                 --------------     --------------


NET DECREASE  IN CASH AND CASH EQUIVALENTS                                               (9,014)           (26,655)

CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD                                                                    13,863             62,078
                                                                                 --------------     --------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                         $        4,849     $       35,423
                                                                                 ==============     ==============

SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING
AND FINANCING ACTIVITIES
  Reduction in notes payable for property and equipment returned
  to vendors                                                                     $       35,121     $           --
                                                                                 ==============     ==============
</Table>


        See accompanying notes to the consolidated financial statements.



                                       7
<PAGE>

                            CRESCENT OPERATING, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1. ORGANIZATION AND BASIS OF PRESENTATION:

Crescent Operating, Inc. was formed on April 1, 1997 by Crescent Real Estate
Equities Company ("CEI", "Crescent Real Estate" or "Crescent Equities") and its
subsidiary Crescent Real Estate Equities Limited Partnership ("Crescent
Partnership"). Effective June 12, 1997, CEI distributed shares of Crescent
Operating, Inc. common stock to shareholders of CEI and unit holders of Crescent
Partnership of record on May 30, 1997.

Crescent Operating, Inc. ("Crescent Operating" or the "Company") is a
diversified management company that, through various subsidiaries and affiliates
(collectively with Crescent Operating), operates primarily in two business
segments: Equipment Sales and Leasing and Temperature Controlled Logistics.
Prior to February 14, 2002 the Company operated two other business segments:
Hospitality, and Land Development. Crescent Operating's segments either do or
have done business throughout the United States.

The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
(GAAP) for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements.
These financial statements should be read in conjunction with the audited
consolidated financial statements and related footnotes of the Company for the
fiscal year ended December 31, 2001 included in the Company's Form 10-K, as well
as, in conjunction with the Company's previously filed Form 10-Qs. The Company's
consolidated financial statements included in its 2001 Annual Report on Form
10-K included an auditors report which expressed substantial doubt about the
Company's ability to continue to operate as a going concern. In management's
opinion, all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation of the consolidated unaudited interim
financial statements have been included and all significant intercompany
balances and transactions have been eliminated. Certain prior period information
has been reclassified to conform to current period presentation. Due to seasonal
fluctuations, operating results for interim periods are not necessarily
indicative of the results that may be expected for a full fiscal year.

The financial results of the Company primarily include the following (see Note
2):

     o    Subsidiaries which are wholly owned and consolidated:

          -    Crescent Machinery Company ("Crescent Machinery") (in
               bankruptcy);

          -    Rosestar Management LLC ("Rosestar") through February 14, 2002;
               and

          -    COI Hotel Group, Inc. ("COI Hotel") through February 14, 2002.

     o    Subsidiaries which are not wholly owned but the Company controlled
          through February 14, 2002 and therefore consolidated ("Controlled
          Subsidiaries"):

          -    A 5% economic interest, representing 100% of the voting common
               stock, in:

               -    The Woodlands Land Company, Inc. ("LandCo") which has a
                    52.5% general partner interest (49.5% through November 2001)
                    in The Woodlands Land Development Company, L.P.
                    ("Landevco");

               -    Desert Mountain Development Corporation ("Desert Mountain
                    Development") which consolidates its 93% general partner
                    interest in Desert Mountain Properties Limited Partnership
                    ("DMPLP"); and

               -    CRL Investments, Inc. ("CRL"), which beneficially owns 65%
                    of CR Las Vegas, LLC ("CR Las Vegas") and 30% of CR License,
                    LLC ("CR License").


                                       8
<PAGE>

          -    A 60% general partner interest in COPI Colorado, L.P. ("COPI
               Colorado") which owns 10% of Crescent Resort Development, Inc.
               ("CRDI"), formerly Crescent Development Management Corp.
               ("CDMC"). The 10% interest in CRDI represents 100% of the voting
               stock, and therefore, CRDI was consolidated into COPI Colorado.

     o    Subsidiaries which the Company reports on the equity method of
          accounting:

          -    A 52.5% interest in The Woodlands Operating Company, L.P.
               ("Woodlands Operating" or "TWOC") which is controlled by a four
               member committee of which the Company controls two positions,
               through March 22, 2002;

          -    A 40% interest in Vornado Crescent Logistics Operating
               Partnership ("AmeriCold Logistics")

The December 31, 2001 and September 30, 2001 financial statements have been
restated to show discontinued operations pursuant to the Settlement Agreement
described below.

2. RECENT DEVELOPMENTS:

SETTLEMENT AGREEMENT

On February 14, 2002, Crescent Operating and Crescent Real Estate entered into
a Settlement Agreement, which was amended effective as of October 1, 2002 (as
amended, the "Settlement Agreement"). The Settlement Agreement provided the
basis for Crescent Operating to file a prepackaged bankruptcy plan that the
Company believes will provide for a limited recovery to its stockholders.
Pursuant to the Settlement Agreement, Crescent Operating has transferred the
following assets (and related indebtedness) to Crescent Real Estate:

     o    all of its hotel operations, in lieu of foreclosure, on February 14,
          2002 in exchange for a $23.6 million reduction in its rent obligations
          to Crescent Real Estate; and

     o    all of its land development interests, through a strict foreclosure,
          on February 14, 2002, and March 22, 2002, in exchange for a $40.1
          million reduction of its debt obligations to Crescent Real Estate.

In addition, the Settlement Agreement provides as follows:

     o    Crescent Real Estate will make sufficient funds available to Crescent
          Operating to pay in full or otherwise resolve the claims of the
          creditors that Crescent Operating identified in the original
          Settlement Agreement, other than the Crescent Real Estate claims, and
          to cover the budgeted expenses of implementing the Settlement
          Agreement and seeking to confirm the bankruptcy plan. To facilitate
          Crescent Operating's repayment of $15.0 million, plus interest, that
          it owes to Bank of America, Crescent Real Estate has allowed Crescent
          Operating to secure the Bank of America debt with a pledge of Crescent
          Operating's interest in AmeriCold Logistics, LLC. The Settlement
          Agreement and the bankruptcy plan contemplate that a Crescent Real
          Estate affiliate will purchase Crescent Operating's interest in
          AmeriCold Logistics for between $15.0 to $15.5 million.

     o    If Crescent Operating's stockholders accept the bankruptcy plan by the
          requisite vote and the bankruptcy court confirms the bankruptcy plan,
          then Crescent Real Estate will issue common shares of Crescent Real
          Estate to the Crescent Operating stockholders pursuant to the formula
          contained in the bankruptcy plan. If so issued, the value of the
          common shares of Crescent Real Estate to be issued is currently
          estimated to be $0.20 to $0.50 per share of Crescent Operating common
          stock. If the stockholders of Crescent Operating do not accept the
          bankruptcy plan, they will not receive a distribution of common shares
          of Crescent Real Estate.

     o    Crescent Operating stockholders receiving Crescent Real Estate shares,
          regardless of the value of the shares they receive, will be deemed to
          have released all claims they may have against Crescent Operating and
          Crescent Real Estate and those acting on their behalf that arose
          before the effective date of the bankruptcy plan. The release of
          Crescent Operating stockholder claims will apply to Crescent Operating
          stockholders only in their capacity as Crescent Operating
          stockholders, and will not affect their rights as shareholders of
          Crescent Real Estate.

     o    Crescent Operating will cancel all outstanding shares of its common
          stock.

     o    Crescent Operating and Crescent Real Estate exchanged mutual releases.
          Pursuant to the Settlement Agreement, Crescent Operating and Crescent
          Real Estate and the directors, officers, agents and employees of each
          will be released from all liabilities and claims arising prior to the
          effective date of the bankruptcy plan.

     o    Pursuant to both the Settlement Agreement and the bankruptcy plan,
          Crescent Operating will transfer the remaining assets of Crescent
          Operating at the direction of Crescent Real Estate.

     o    If Crescent Real Estate, in its sole discretion, offers to settle or
          assume unsecured claims that were not identified by Crescent Operating
          in the original Settlement Agreement and that are asserted by third
          parties, and Crescent Operating accepts the offer, then the total
          value of the Crescent Real Estate common shares paid to Crescent
          Operating stockholders will be reduced (but not below a value of $0.20
          per share of Crescent Operating common stock) by the amount agreed to
          by Crescent Real Estate and Crescent Operating, and approved by the
          bankruptcy court, as compensation to Crescent Real Estate for assuming
          the claims. If Crescent Real Estate and Crescent Operating are not
          able to agree to Crescent Real Estate's assumption of any such
          unresolved third party claims that were not identified by Crescent
          Operating in the original Settlement Agreement and that are an
          obstacle to confirmation of the Crescent Operating bankruptcy plan,
          then it is possible that the bankruptcy plan will not be confirmed.









                                       9
<PAGE>

ADDITIONAL RECENT DEVELOPMENTS

Effective December 31, 2001, the Company, in connection with extending the
maturity of its $15.0 million loan from Bank of America from December 31, 2001
to August 15, 2002, agreed to modify the loan from an unsecured to a secured
credit facility. The Company, with the consent of Crescent Partnership which
agreed to subordinate its security interest in the Company's 40% interest in
AmeriCold Logistics, pledged all of its interest in AmeriCold Logistics to Bank
of America to secure the loan. On August 14, 2002, the Company further extended
the maturity of this loan to January 15, 2003 and prepaid the interest for that
time period in the amount of $0.3 million.

3. DISCONTINUED OPERATIONS:

Pursuant to the Settlement Agreement discussed in Note 2, Crescent Operating has
transferred the following assets to Crescent Real Estate:

     o    all of its hotel operations, in lieu of foreclosure, on February 14,
          2002 in exchange for a $23.6 million reduction in its rent obligations
          to Crescent Real Estate; and

     o    all of its land development interests, through a strict foreclosure,
          on February 14, 2002, and March 22, 2002, in exchange for a $40.1
          million reduction of its debt obligations to Crescent Real Estate.

As a result of these transfers, the Company recognized Income from Discontinued
Operations for the nine months ended September 30, 2002 of $3.3 million, after
minority interest of $1.9 million and a $2.5 million income tax expense, related
to its Hospitality and Land Development segments. The gain associated with the
discontinuance of the operations from these segments and the reduction of the
Company's rent and debt obligations is $26.8 million, net of a $17.9 million
income tax expense.



                                       10
<PAGE>

The carrying amounts of the major classes of asset and liabilities for the
Hospitality and Land Development segments as of the transfer date, February 14,
2002, were (in thousands):

<Table>
<Caption>
                                              Hospitality  Land Development     Total
                                              -----------  ----------------  -----------
<S>                                           <C>          <C>               <C>

         Current Assets ..................    $    38,466    $    60,744     $    99,210
         Long-Term Assets ................         12,607        663,030         675,637

         Current Liabilities .............         43,978        483,562         527,540
         Long-Term Liabilities ...........          4,750         70,549          75,299
</Table>

In December 2001, the Company adopted Statements of Financial Accounting
Standards SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (See Note 12). SFAS No. 144 broadens the definition of what constitutes a
discontinued operation and how the results of a discontinued operation are to be
measured and presented. During the second and third quarters of 2002, Crescent
Machinery closed down six branch locations and is currently in the process of
closing one additional branch location. The results from these branch operations
are reflected in discontinued operations, net of tax. Accordingly, the
September 30, 2001 financial statements have been restated to show discontinued
operations for these branch locations.

4. INVESTMENTS:

Investments consisted of the following (in thousands):

<Table>
<Caption>
                                                                   September 30, 2002  December 31, 2001
                                                                   ------------------  -----------------
<S>                                                                  <C>                <C>

 Investment in Landevco .........................................    $           --     $       43,577
 Investment in Magellan warrants ................................                --              4,127
 Investment in CRDI projects ....................................                --              8,124
 Investment in CR License .......................................                --              5,012
 Investment in CR Las Vegas .....................................                --                450
 Investment in AmeriCold Logistics ..............................                --                706
                                                                     --------------     --------------
                                                                     $           --     $       61,996
 Less assets to be transferred pursuant to the
 Settlement Agreement ...........................................                --            (57,163)
                                                                     --------------     --------------
                                                                     $           --     $        4,833
                                                                     ==============     ==============
</Table>

Investment loss consisted of the following (in thousands):

<Table>
<Caption>
                                                                   Three months ended  Nine months ended
                                                                   September 30, 2002  September 30, 2002
                                                                   ------------------  ------------------
<S>                                                                <C>                 <C>
 Change in fair value of Magellan warrants ......................    $          (--)    $       (4,127)
</Table>

Equity in loss of unconsolidated subsidiaries consisted of the following (in
thousands):

<Table>
<Caption>
                                                                   Three months ended  Nine months ended
                                                                   September 30, 2002  September 30, 2002
                                                                   ------------------  ------------------
<S>                                                                <C>                 <C>
 Equity in loss of AmeriCold Logistics ..........................    $          (--)    $       (2,142)
 Less equity in loss of entities to be transferred pursuant to
 Settlement Agreement ...........................................                --             (2,046)
                                                                     --------------     --------------
                                                                     $          (--)    $       (4,188)
                                                                     ==============     ==============
</Table>



                                       11
<PAGE>

5. LONG-TERM DEBT:

The Company's long-term debt facilities are composed of (i) corporate and wholly
owned debt, and (ii) non wholly owned debt. Corporate and wholly owned debt
relates to debt facilities at the Crescent Operating level or owed by entities
which are owned 100% by Crescent Operating. Non wholly owned debt represents
non-recourse debt owed by entities which are consolidated in the Company's
financial statements but are not 100% owned by the Company; the Company's
economic investment in these entities is 6% or less. The non wholly owned debt
is secured by the operations of each individual subsidiary and is not guaranteed
by Crescent Operating. Following is a summary of the Company's debt financing
(in thousands):

<Table>
<Caption>
                                                                              September 30, 2002  December 31, 2001
                                                                              ------------------  -----------------
<S>                                                                           <C>                 <C>

LONG-TERM DEBT - CORPORATE AND WHOLLY OWNED SUBSIDIARIES

Equipment notes payable to finance companies, bear interest from 4.5%
to 9.5%, due 2001 through 2011 (Crescent Machinery) (in default) ............    $       42,862    $       80,683

Floor plan debt payable, three to twelve month terms at 0% interest
(Crescent Machinery) (in default) ...........................................                --             4,190

Line of credit in the amount of $15.0 million payable to Bank of
America, interest at the banks prime rate, 4.75% at September 30, 2002,
due January 2003 (COPI) .....................................................            15,000            15,000

Line of credit payable to Crescent Partnership, interest at 9%, due May
2002 (COPI)(in default) .....................................................             9,552            22,025

Line of credit payable to Crescent Partnership, interest at 12%, due
May 2002 or five years after the last draw (COPI)(in default) ...............             8,495            20,205

Note payable to Crescent Partnership, interest at 12%, due through May
2002 (COPI)(in default) .....................................................             6,827            16,238

Note payable to Crescent Partnership, interest at 12%, due May 2002
(COPI)(in default) ..........................................................             4,445            10,572

Notes payable to Crescent Partnership (previously the sellers of equipment
companies), weighted average interest of 12.0% and 7.6% at September 30,
2002 and December 31, 2001, due 2002 through 2003 (COPI) (in default) .......             2,628             2,787

Notes payable to Crescent Partnership, interest at 2.75%, due February
2003 (COPI) .................................................................             3,631                --

Notes payable to Crescent Partnership, weighted average interest of
10.2% at December 31, 2001, due 2003 through 2006 (Rosestar) ................                --             1,143
                                                                                 --------------    --------------

       Total debt - corporate and wholly owned subsidiaries .................            93,440           172,843
                                                                                 --------------    --------------

LONG-TERM DEBT - NON WHOLLY OWNED SUBSIDIARIES

Construction loans for various East West Resort Development projects,
interest at 4.4% to 11.3%, due through 2003 (CRDI) ..........................                --           136,620


Line of credit in the amount of $100.0 million payable to Crescent
Partnership, interest at 11.5%, due September 2008 (CRDI) ...................                --            72,250
</Table>



                                       12
<PAGE>

<Table>
<S>                                                                              <C>               <C>
Junior note payable to Crescent Partnership, interest at 14%, due
December 2010 (DMPLP) .......................................................                --            59,000

Line of credit in the amount of $56.2 million payable to Crescent
Partnership, interest at 11.5%, due August 2004 (CRDI) ......................                --            48,354

Line of credit in the amount of $70.0 million payable to Crescent
Partnership, interest at 11.5%, due December 2006 (CRDI) ....................                --            36,571

Line of credit in the amount of $50.0 million payable to National Bank of
Arizona, interest at prime to prime plus 1%, due November 2003
(DMPLP) .....................................................................                --            29,910

Line of credit in the amount of $40.0 million payable to Crescent
Partnership, interest at 11.5%, due December 2006 (DMPLP) ...................                --            23,396

Line of credit in the amount of $7.0 million payable to Crescent
Partnership, interest at 12%, due August 2003 (CRL) .........................                --             7,000

Note payable to Crescent Partnership maturing December 2002, interest
at 10% (DMPLP) ..............................................................                --             1,000

Term note in the amount of $0.2 million payable to Crescent
Partnership, interest at 12%, due August 2003 (CRL) .........................                --               166
                                                                                 --------------    --------------

          Total debt - non wholly owned subsidiaries ........................                --           414,267
                                                                                 --------------    --------------

          Total long-term debt ..............................................    $       93,440    $      587,110
                                                                                 ==============    ==============

Current portion of long-term debt - CEI .....................................    $       35,578    $       69,634

Current portion of long-term debt ...........................................            15,000           101,870

Current debt subject to compromise ..........................................            42,862                --

Long-term debt - CEI, net of current portion ................................                --               549

Long-term debt, net of current portion ......................................                --               790

Current and Long-term debt of assets to be disposed of pursuant to the
Settlement Agreement ........................................................                --           414,267
                                                                                 --------------    --------------

          Total debt ........................................................    $       93,440    $      587,110
                                                                                 ==============    ==============
</Table>

On February 6, 2002, Crescent Machinery Company filed a voluntary petition under
Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court in Fort
Worth, Texas. Outstanding principal amounts under default by Crescent Machinery
totaled $42.9 million at September 30, 2002.

On February 13, 2002, the Company received notice from Crescent Partnership that
the Company was in default on the 1997 Term Loan, the 1997 Revolving Loan, the
AmeriCold Loan and the COPI Colorado Loan. On February 14, 2002, pursuant to the
Settlement Agreement, Crescent Partnership foreclosed on certain collateral
securing such loans, which had the effect of reducing the aggregate indebtedness
from $76.2 million to $36.1 million.

As a part of the acquisitions of E.L. Lester and Company ("Lester") and Harvey
Equipment Center, Inc. ("Harvey"), Crescent Operating issued notes payable in
the amount of $6.0 million and $1.2 million, respectively (the "Equipment
Acquisition Notes"). On February 15, 2002, Crescent Partnership purchased the
Equipment



                                       13
<PAGE>

Acquisition Notes from the note holders. As of July 1, 2002 and July 31, 2002,
Crescent Operating defaulted on payment of principal and interest on these
notes.

6. SUMMARY OF LIABILITIES SUBJECT TO COMPROMISE:

Liabilities subject to compromise consisted of the following (in thousands):

<Table>
<Caption>
                                                        September 30, 2002
                                                        ------------------

<S>                                                     <C>
         Secured Debt - Notes Payable ...............     $       39,862
         Secured Debt - Other .......................              2,413
         Priority Debt ..............................              1,427
         Unsecured Debt - Notes Payable .............              3,000
         Unsecured Debt - Other .....................              5,730
                                                          --------------
              Total .................................     $       52,432
                                                          ==============
</Table>

Additional intercompany liabilities that are subject to compromise in the amount
of $10.5 million are not included as they are eliminated for consolidated
financial purposes.

7. COMPANY SUBSIDIARIES IN REORGANIZATION:

On February 6, 2002, Crescent Machinery filed a voluntary petition under Chapter
11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Northern
District of Texas in Fort Worth, Texas. The carrying amounts of the major
classes of asset and liabilities and shareholders' deficit for Crescent
Machinery as of September 30, 2002 were as follows (in thousands):

<Table>
<Caption>
                                                          September 30, 2002
                                                          ------------------
<S>                                                       <C>
     CURRENT ASSETS
         Cash and cash equivalents ....................     $        3,981
         Accounts receivable ..........................              7,399
         Inventories ..................................              6,045
         Other current assets .........................              1,644
                                                            --------------
             Total current assets .....................             19,069

     PROPERTY AND EQUIPMENT, NET ......................             31,705

     OTHER ASSETS .....................................                227
                                                            --------------

     TOTAL ASSETS .....................................     $       51,001
                                                            ==============

     LIABILITIES
         Accounts payable and accrued expenses ........     $       13,402
         Debt .........................................             42,862
         Other ........................................              5,011
                                                            --------------
             Total Liabilities ........................             61,275

     SHAREHOLDERS' DEFICIT
         Common stock .................................              6,007
         Additional paid-in capital ...................             63,770
         Accumulated deficit ..........................            (80,051)
                                                            --------------
             Total shareholder's deficit ..............            (10,274)
                                                            --------------

     TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT ......     $       51,001
                                                            ==============
</Table>



                                       14
<PAGE>

8. EARNINGS PER SHARE:

Earnings per share ("EPS") is calculated as follows (in thousands, except per
share data):

<Table>
<Caption>
                                                       Three months ended                         Nine months ended
                                            ----------------------------------------    --------------------------------------
                                            September 30, 2002    September 30, 2001    September 30, 2002  September 30, 2001
                                            ------------------    ------------------    -----------------   ------------------
<S>                                         <C>                   <C>                   <C>                 <C>

Weighted average shares (basic) ........             10,828                 10,340             10,757                10,340

Effect of Dilutive Securities:
Stock Options ..........................                 --                     --                 --                    --
                                               ------------           ------------       ------------          ------------

Weighted average shares (diluted) ......             10,828                 10,340             10,757                10,340
                                               ============           ============       ============          ============

Loss from Continuing Operations ........       $     (3,011)          $     (9,413)      $    (16,879)         $    (21,676)
                                               ============           ============       ============          ============

Basic and diluted EPS before
discontinued operations and
accounting change ......................              (0.28)                 (0.91)             (1.57)                (2.10)
                                               ============           ============       ============          ============

Income (loss) from Discontinued
Operations .............................               (553)                (7,684)            27,087               (12,254)

Basic and diluted EPS from
Discontinued Operations ................              (0.05)                 (0.74)              2.52                 (1.18)
                                               ============           ============       ============          ============

Accounting Change ......................                 --                     --                 --                (9,509)

Basic and diluted EPS from
Accounting Change ......................                 --                     --                 --                 (0.92)
                                               ============           ============       ============          ============

Net loss (income) ......................             (3,564)               (17,097)            10,208               (43,439)
                                               ============           ============       ============          ============

Diluted EPS ............................       $      (0.33)          $      (1.65)      $       0.95          $      (4.20)
                                               ============           ============       ============          ============
</Table>

The Company had 1,270,624 options for its common stock outstanding for each of
the three and nine months ended September 30, 2002 and 2001, which were not
included in the calculation of diluted EPS as they were anti-dilutive.

9. INCOME TAXES:

The table below shows the reconciliation of the federal statutory income tax
rate to the effective tax rate for income from continuing operations.

<Table>
<Caption>
                                                          Three months ended   Nine months ended
                                                          September 30, 2002   September 30, 2002
                                                          ------------------   ------------------
<S>                                                       <C>                  <C>

Federal statutory income tax rate .....................               35.0%                35.0%
State income taxes, net of federal tax benefit ........                5.0                  5.0
Minority interests ....................................                 --                 (3.3)
Change in valuation allowance .........................              (23.4)                21.4
Other, net ............................................                 --                  1.3
                                                            --------------       --------------
    Effective tax rate ................................               16.6%                59.4%
                                                            ==============       ==============
</Table>



                                       15
<PAGE>

Provision (benefit) for income taxes is comprised of the following (in
thousands):

<Table>
<Caption>
                                                          Three months ended   Nine months ended
                                                          September 30, 2002   September 30, 2002
                                                          ------------------   ------------------
<S>                                                       <C>                  <C>

Income from continuing operations
     Deferred .........................................     $         (707)      $       (2,710)

Discontinued operations
   From Operations
     Deferred .........................................     $          (--)      $        2,502

   Gain on disposal of discontinued operations
     Current ..........................................     $           --       $          176
     Deferred .........................................                 --               17,700
                                                            --------------       --------------
     Total ............................................     $         (707)      $       17,668
                                                            ==============       ==============
</Table>

The Company generally provides for taxes using a 40% effective rate on the
Company's share of income or loss. The Company increased its valuation allowance
related to its consolidated tax group by $1.0 million in the third quarter of
2002 to offset a portion of the deferred tax assets for which the ultimate
realization in future years is uncertain. Management believes that the remaining
deferred tax asset will be realized due to tax planning strategies associated
with the Settlement Agreement (see Note 2).

10. BUSINESS SEGMENT INFORMATION:

Crescent Operating's assets and operations are located entirely within the
United States and are comprised primarily of two business segments: (i)
Equipment Sales and Leasing and (ii) Temperature Controlled Logistics. The
Company also previously operated in the Hospitality and Land Development
segments. Pursuant to the Settlement Agreement, the Company transferred all of
its interests in the Hospitality and Land Development segments to Crescent
Equities in February and March 2002 (see Note 2). In addition to these two
business segments, the Company has grouped its investment in Magellan warrants,
interest expense on corporate debt and general corporate overhead costs such as
legal and accounting costs, insurance costs and corporate salaries as "Other"
for segment reporting purposes. The Company uses net income as the measure of
segment profit or loss. Business segment information is summarized as follows
(in thousands):

<Table>
<Caption>
                                                         Three months ended                           Nine months ended
                                              -----------------------------------------  -------------------------------------------
                                              September 30, 2002     September 30, 2001  September 30, 2002      September 30,  2001
                                              ------------------     ------------------  ------------------      -------------------
<S>                                           <C>                    <C>                 <C>               <C>
Revenues:
   Equipment Sales and Leasing ..........        $      7,757           $     19,001         $     25,992            $     50,884
                                                 ------------           ------------         ------------            ------------
   Total revenues .......................        $      7,757           $     19,001         $     25,992            $     50,884
                                                 ============           ============         ============            ============

Net loss from continuing operations:
   Equipment Sales and Leasing ..........        $     (1,950)          $     (6,882)        $     (6,651)           $    (18,664)
   Temperature Controlled Logistics .....                  --                     --               (1,859)                 (4,438)
   Other ................................              (1,061)                (2,531)              (8,369)                  1,426
                                                 ------------           ------------         ------------            ------------
   Total net (loss) from continuing
     operations .........................        $     (3,011)          $     (9,413)        $    (16,879)           $    (21,676)
                                                 ============           ============         ============            ============
</Table>

<Table>
<Caption>
                                                          September 30, 2002   December 31, 2001
                                                          ------------------   -----------------
<S>                                                       <C>                  <C>
Identifiable assets:
   Equipment Sales and Leasing ........................     $       51,001       $       93,647
   Temperature Controlled Logistics ...................              5,591                6,015
   Hospitality ........................................                 --               40,416
   Land Development ...................................                 --              761,984
   Other ..............................................              4,956               43,342
                                                            --------------       --------------
   Total identifiable assets ..........................     $       61,548       $      945,404
                                                            ==============       ==============
</Table>



                                       16
<PAGE>

11. LITIGATION:

Charter Behavioral Health Systems, LLC ("CBHS") became the subject of Chapter 11
bankruptcy proceedings by filing a voluntary petition on February 16, 2000, in
United States Bankruptcy Court for the District of Delaware. Although CBHS is
not a subsidiary of Crescent Operating, Crescent Operating did own a majority
(90%) economic interest in CBHS, until December 29, 2000.

As a result of the liquidation of CBHS through bankruptcy, the equity investment
in CBHS became worthless. On December 29, 2000, as part of Crescent Operating's
tax planning, Crescent Operating sold its 25% common interest and its 100%
preferred membership interest in CBHS, and COPI CBHS Holdings sold its 65%
common interest in CBHS to The Rockwood Financial Group, Inc. for a nominal sum.

Crescent Operating held no funded or liquidated claims against the estate of
CBHS. Crescent Operating filed proofs of claim against CBHS as a protective
matter for potential indemnification or contribution for third party lawsuits
and claims where Crescent Operating is a named defendant with CBHS, such as
lawsuits based upon alleged WARN Act violations purported to have been committed
by CBHS and/or its subsidiaries in closing behavioral health care facilities in
1999 and 2000. The only such lawsuits that have been brought against Crescent
Operating arise from WARN Act claims. In connection with a settlement entered
into among Crescent Operating, CBHS, the WARN Act plaintiffs, and others,
Crescent Operating's indemnification and contribution claims against CBHS based
on such lawsuits have been resolved.

To date, several lawsuits, seeking class action certification, have been filed
against CBHS alleging violations of the WARN Act in the closing of certain
healthcare facilities in 1999 and 2000. Of those lawsuits, three also named
Crescent Operating as a defendant, but all three of those suits have since been
dismissed. An additional suit seeking similar relief was also filed against
Crescent Operating and Crescent Partnership, as well as CBHS.

A global Stipulation of Settlement of all WARN matters was reached and
filed with the United States District Court and Bankruptcy Court for the
District of Delaware by the WARN Act claimants, CBHS, Crescent Operating,
Crescent Partnership and the Creditors Committee in the CBHS case. The
settlement was approved by the District Court by order dated March 18, 2002. As
it applies to Crescent Operating, the settlement provides that either Crescent
Operating or Crescent Partnership was required to deposit into escrow $500,000
for the benefit of the WARN Act claimants and, upon the settlement becoming
final, Crescent Operating received a complete release for all WARN Act
claims and any other claims in the CBHS case other than potential claims from
those CBHS employees who have opted out of the settlement. It appears that a
maximum of three such employees have opted out and none have made claims against
Crescent Operating to date. Crescent Partnership has paid the $500,000 into
escrow. This payment will not be included as an expense for the purposes of
calculating the aggregate value of the Crescent Real Estate shares to be
distributed to the Crescent Operating shareholders.

In accordance with an agreement between Gerald Haddock and Crescent Operating,
COPI Colorado redeemed the limited partnership interest of Mr. Haddock, Crescent
Operating's former Chief Executive Officer and President, in January 2000. COPI
Colorado paid Mr. Haddock approximately $2.6 million for his approximate 16.67%
limited partner interest (determined from an independent appraisal of the value
of COPI Colorado). Mr. Haddock challenged the valuation performed by the
independent appraiser and the procedures followed by Crescent Operating with
respect to the redemption and valuation process. On February 7, 2001, Crescent
Operating filed a lawsuit in the 141st Judicial Court of Tarrant County, Texas
seeking a declaratory judgment to assist in resolution of Crescent Operating's
dispute with Mr. Haddock. The parties settled their dispute, and the lawsuit was
dismissed effective as of January 2, 2002.



                                       17
<PAGE>

On June 10, 2002, the attorneys for the Official Unsecured Creditors Committee
of Crescent Machinery Company delivered a letter to Crescent Operating and to
certain of its current and former officers and directors. In the letter, the
creditors committee alleges that Crescent Operating and others have substantial
liability for certain actions and failures to act by Crescent Operating and
certain of its officers and directors that caused damage to Crescent Machinery.
If a lawsuit is filed by the creditors committee, Crescent Operating intends to
vigorously defend any claims asserted. Crescent Operating does not believe the
claims asserted in the creditors committee's letter have any merit. However,
there is a risk that substantial delays could result from the process whereby
the creditors committee's claim is adjudicated and there is further risk that if
the creditors committee were ultimately successful in the prosecution of its
claim, Crescent Operating may be unable to make any distribution to its
stockholders.

The Company is a party to legal actions related to certain of its investments.
Material losses related to such cases have not been deemed probable by
management after consultation with outside counsel, and no financial statement
accruals have been made. Based on the status of the cases, the Company is unable
to determine a range of possible losses, if any, that might be incurred in
connection with this litigation. The Company believes it is not probable that
the ultimate resolution of this litigation will have a material adverse effect
on its financial position and results of operations.

12. RECENT ACCOUNTING PRONOUNCEMENTS:

In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives. The Company applied the new
rules on accounting for goodwill and other intangible assets beginning in the
first quarter 2002.

In August 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. It
also supersedes the accounting and reporting provisions of APB Opinion No. 30,
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions. SFAS No. 144 retains
the fundamental provisions of SFAS No. 121 for recognition and measurement of
the impairment of long-lived assets to be held and used and measurement of the
long-lived assets to be disposed of by sale, but broadens the definition of what
constitutes a discontinued operation and how the results of a discontinued
operation are to be measured and presented. SFAS No. 144 is effective for fiscal
years beginning after December 15, 2001. The Company adopted SFAS No. 144 on
January 1, 2002 and it did not have a material impact on their results of
operations or financial position; however, due to the Settlement Agreement
discussed in this Item 1, the Hospitality and Land Development segments are
presented as discontinued operations. In addition, during the nine months ended
September 30, 2002, Crescent Machinery closed six branch locations and is
currently in the process of closing one additional branch location. The results
from these branch operations are reflected in discontinued operations, net of
tax.

In April 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections. In
general, SFAS 145 will require gains and losses on extinguishments of debt to be
classified as income or loss from continuing operations rather than as
extraordinary items as previously required under Statement 4. While gains or
losses from extinguishments of debt for fiscal years beginning after May 15,
2002 shall not be reported as extraordinary items unless the extinguishment
qualifies as an extraordinary item under the provisions of APB Opinion No. 30,
Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, management has elected to adopt SFAS No. 145 early. The
impact of adopting SFAS No. 145 resulted in a gain on disposal of discontinued
operations of $26.8 million, net of applicable income tax expense of $17.9
million.



                                       18
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The financial statements include all adjustments which management believes are
necessary to reflect a fair statement of the financial results for the interim
periods presented. All such adjustments are of a normal and recurring nature.
The information contained in this Item 2 should also be read in conjunction with
the more detailed information included in the Company's Form 10-K for the year
ended December 31, 2001. Capitalized terms used but not otherwise defined in
this Item 2 have the meanings given to them in the notes to the financial
statements included in Item 1.

Although Crescent Operating believes that the expectations reflected in such
forward-looking statements are based upon reasonable assumptions, the Company's
actual results could differ materially from those the Company expects to
achieve. The financial results of the business segments for the three and nine
months ended September 30, 2002 should not affect the ultimate distribution of
Crescent Real Estate shares pursuant to the Settlement Agreement. The Company's
consolidated financial statements included in the Annual Report on Form 10-K for
the year ended December 31, 2001, included an auditors report which expressed
substantial doubt about the Company's ability to continue to operate as a going
concern. Some of the other factors that might cause material variation from the
expectations reflected in the forward-looking statements include:

     o    the ability of Crescent Operating to generate income from the assets
          remaining after the transfers of its hospitality and land development
          businesses pursuant to the Settlement Agreement;

     o    the Company's inability to complete the transactions contemplated by
          the February 14, 2002 Settlement Agreement with Crescent Partnership,
          including but not limited to, holding a shareholders' meeting to
          approve the prepackaged bankruptcy plan contemplated by the Settlement
          Agreement; obtaining shareholder approval for that plan; or filing
          that plan in the form contemplated;

     o    failure of Crescent Equities to provide assistance and funding to the
          Company of substantially all the costs of performing the steps
          required under the Settlement Agreement for implementation of the
          prepackaged bankruptcy plan, which funding is expected to provide for
          the preparation of a proxy statement for a shareholders' meeting to
          approve the prepackaged bankruptcy plan, the solicitation of proxies
          for that meeting, and all other expenses associated therewith; the
          expenses of operating the Company from the date of the Settlement
          Agreement through the commencement of the prepackaged bankruptcy; and
          the settlement or satisfaction of all of the Company's known
          creditors;

     o    the Company's inability, after the commencement of bankruptcy
          proceedings, to control the course or outcome of the proceedings or
          its business operations, as federal bankruptcy law places the ultimate
          control over the bankrupt debtor into the discretion of the bankruptcy
          court;

     o    the unpredictable nature of course or outcome of Crescent Machinery
          Company's bankruptcy proceedings;

     o    even if the prepackaged bankruptcy plan is confirmed as contemplated,
          the Company will not have the ability to control the issuance of CEI
          common shares to Crescent Operating stockholders, following
          confirmation of the prepackaged bankruptcy plan;

     o    the Company's inability to make any forecast regarding shareholders'
          recovery in bankruptcy if the prepackaged bankruptcy plan is not
          approved by the shareholders prior to the Company's filing for
          bankruptcy protection, as the Company's debts far exceed its assets,
          and its creditors, including CEI, may not be paid in full, and,
          consequently, it is probable that if the stockholders do not approve
          the prepackaged bankruptcy plan, the stockholders would receive no
          distributions with respect to their share ownership in the Company;



                                       19
<PAGE>

     o    the Company's inability to sell its interest in the tenant of the
          AmeriCold temperature controlled logistics properties to a new entity
          that will be owned by the CEI shareholders, proceeds of which sale
          would be applied by the Company to the repayment of the Company's
          $15.0 million obligation to Bank of America;

     o    the high levels of debt that the Company maintains and the Company's
          current inability to generate revenue sufficient to meet debt service
          payments, other obligations and operating expenses;

     o    the availability of the financing that likely will be necessary to
          maintain the Company's operations and investments;

     o    the current and continuing underperformance or non-performance of the
          Company's existing business investments;

     o    the Company's inability to reach an agreement with its creditors which
          may result in the Company losing control of its remaining assets or
          operations or both either through foreclosure or bankruptcy;

     o    the impact of changes in the industries in which the Company's
          businesses and investments operate (including equipment sales and
          leasing and temperature controlled logistics) and the economic,
          demographic and other competitive conditions affecting those
          industries, the Company's cash flows and the value of the Company's
          investments, and

     o    the impact of terrorism acts on the industries in which the Company's
          businesses and investments operate.

Given these uncertainties, readers are cautioned not to place undue reliance on
such forward-looking statements. The Company is not obligated to update these
forward-looking statements to reflect any future events or circumstances.

                                    OVERVIEW

Crescent Operating is a diversified management company that, through various
subsidiaries and affiliates, currently operates primarily in two business
segments: Equipment Sales and Leasing and Temperature Controlled Logistics.
Prior to February 14, 2002, the Company operated in two other business segments:
Land Development and Hospitality. As Crescent Operating only operated these two
segments for one and one-half months in 2002 there is no detail regarding their
operations. At September 30, 2002, the Company owns or owned the following:

o    THE EQUIPMENT SALES AND LEASING SEGMENT consisting of a wholly owned
     interest in Crescent Machinery Company and its subsidiary ("Crescent
     Machinery"), a construction equipment sales, leasing and service company
     with nine locations in three states.

o    THE TEMPERATURE CONTROLLED LOGISTICS SEGMENT consisting of a 40% interest
     in the operations of Vornado Crescent Logistics Operating Partnership
     ("AmeriCold Logistics"), which currently operates 101 refrigerated storage
     properties with an aggregate storage capacity of approximately 538 million
     cubic feet.

BACKGROUND OF SETTLEMENT AGREEMENT

On February 6, 2002, Crescent Machinery Company - comprising the Company's
Equipment Sales and Leasing segment - filed a voluntary petition under Chapter
11 of the U.S. Bankruptcy Code. On February 14, 2002, Crescent Operating entered
into the Settlement Agreement with Crescent Real Estate, pursuant to which the
Company's interests in the Land Development and Hospitality segments were
transferred to Crescent Partnership in partial satisfaction of the indebtedness
owing from Crescent Operating. The Company agreed to transfer the assets of its
Temperature Controlled Logistics segment in the future in connection with the
satisfaction of its indebtedness



                                       20
<PAGE>

to Bank of America. The Settlement Agreement also requires the filing of a
prepackaged bankruptcy plan for Crescent Operating. This bankruptcy plan effects
the orderly termination of Crescent Operating's business. Substantially all of
Crescent Operating's assets are encumbered by liens in favor of Crescent
Partnership. Crescent Operating is in default in its obligations to Crescent
Partnership. The Settlement Agreement also provides Crescent Operating with
funds to satisfy its creditors' claims and gives Crescent Operating stockholders
the opportunity to receive common shares of Crescent Real Estate.

SETTLEMENT AGREEMENT

On February 14, 2002, Crescent Operating and Crescent Real Estate, entered into
a Settlement Agreement, which was amended effective as of October 1, 2002 (as
amended the "Settlement Agreement"). The amendment provides for, among other
things, a minimum value of Crescent Real Estate common shares to be issued in
connection with the bankruptcy plan if the bankruptcy plan is accepted by the
requisite vote of Crescent Operating stockholders and confirmed by the
bankruptcy court. The Settlement Agreement provided the basis for Crescent
Operating to file a prepackaged bankruptcy plan that the Company believes will
provide for a limited recovery to its stockholders. Pursuant to the Settlement
Agreement, Crescent Operating has transferred the following assets (and related
indebtedness) to Crescent Real Estate:

     o    all of its hotel operations, in lieu of foreclosure, on February 14,
          2002 in exchange for a $23.6 million reduction in its rent obligations
          to Crescent Real Estate; and

     o    all of its land development interests, through a strict foreclosure,
          on February 14, 2002, and March 22, 2002, in exchange for a $40.1
          million reduction of its debt obligations to Crescent Real Estate.

In addition, the Settlement Agreement provides as follows:

     o    Crescent Real Estate will make sufficient funds available to Crescent
          Operating to pay in full or otherwise resolve the claims of the
          creditors that Crescent Operating identified in the original
          Settlement Agreement, other than the Crescent Real Estate claims, and
          to cover the budgeted expenses of implementing the Settlement
          Agreement and seeking to confirm the bankruptcy plan. To facilitate
          Crescent Operating's repayment of $15.0 million, plus interest, that
          it owes to Bank of America, Crescent Real Estate has allowed Crescent
          Operating to secure the Bank of America debt with a pledge of Crescent
          Operating's interest in AmeriCold Logistics, LLC. The Settlement
          Agreement and the bankruptcy plan contemplate that a Crescent Real
          Estate affiliate will purchase Crescent Operating's interest in
          AmeriCold Logistics for between $15.0 to $15.5 million.

     o    If Crescent Operating's stockholders accept the bankruptcy plan by the
          requisite vote and the bankruptcy court confirms the bankruptcy plan,
          then Crescent Real Estate will issue common shares of Crescent Real
          Estate with a value of $0.20 or more per share of Crescent Operating
          common stock as determined pursuant to the formula contained in the
          bankruptcy plan. If so issued, the value of the common shares of
          Crescent Real Estate to be issued is currently estimated to be $0.20
          to $0.50 per share of Crescent Operating common stock. If the
          stockholders of Crescent Operating do not accept the bankruptcy plan,
          they will not receive a distribution of common shares of Crescent Real
          Estate.

     o    Crescent Operating stockholders receiving Crescent Real Estate shares,
          regardless of the value of the shares they receive, will be deemed to
          have released all claims they may have against Crescent Operating and
          Crescent Real Estate and those acting on their behalf that arose
          before the effective date of the bankruptcy plan. The release of
          Crescent Operating stockholder claims will apply to Crescent Operating
          stockholders only in their capacity as Crescent Operating
          stockholders, and will not affect their rights as shareholders of
          Crescent Real Estate.


     o    Crescent Operating will cancel all outstanding shares of its common
          stock.

     o    Crescent Operating and Crescent Real Estate exchanged mutual releases.
          Pursuant to the Settlement Agreement, Crescent Operating and Crescent
          Real Estate and the directors, officers, agents and employees of each
          will be released from all liabilities and claims arising prior to the
          effective date of the bankruptcy plan.

     o    Pursuant to both the Settlement Agreement and the bankruptcy plan,
          Crescent Operating will transfer the remaining assets of Crescent
          Operating at the direction of Crescent Real Estate.

     o    If Crescent Real Estate, in its sole discretion, offers to settle or
          assume unsecured claims that were not identified by Crescent Operating
          in the original Settlement Agreement and that are asserted by third
          parties, and Crescent Operating accepts the offer, then the total
          value of the Crescent Real Estate common shares paid to Crescent
          Operating stockholders will be reduced (but not below a value of $0.20
          per share of Crescent Operating common stock) by the amount agreed to
          by Crescent Real Estate and Crescent Operating, and approved by the
          bankruptcy court, as compensation to Crescent Real Estate for assuming
          the claims. If Crescent Real Estate and Crescent Operating are not
          able to agree to Crescent Real Estate's assumption of any such
          unresolved third party claims that were not identified by Crescent
          Operating in the original Settlement Agreement and that are an
          obstacle to confirmation of the Crescent Operating bankruptcy plan,
          then it is possible that the bankruptcy plan will not be confirmed.


                                       21
<PAGE>
A copy of the Settlement Agreement was attached as Exhibit 2.1 to the Company's
Current Report on Form 8-K filed March 1, 2002, with the Securities and Exchange
Commission ("SEC"); that report is available at the SEC's website at
www.sec.gov. The Settlement Agreement and the mutual releases executed in
connection with the Settlement Agreement, including Crescent Operating's release
of all claims it may have against Crescent Real Estate, are enforceable
regardless of whether the plan is approved by Crescent Operating's stockholders
or confirmed by the bankruptcy court.

                       EQUIPMENT SALES AND LEASING SEGMENT

OVERVIEW

Crescent Machinery is engaged in the sale, leasing and service of construction
equipment and accessories to the construction industry located in three states
as of September 30, 2002. All of the Crescent Machinery locations represent
major lines of equipment and offer new and used equipment for sale and rent,
have factory trained service personnel, and provide parts and warranty service.

Like many companies serving the construction industries, Crescent Machinery was
affected in 2001 by multiple factors impacting the industry. These factors
include excess inventories of machines available for sale or rental, severe
price competition, a slowdown in many construction markets, the reduction in the
number of new projects, the general recessionary economy, and the continued
negative effects following the terrorist attacks of September 11, 2001.

Beginning in the second quarter of 2001, Crescent Machinery's business plan
focused on right-sizing the business and creating liquidity. This plan included
the reduction of operating costs and excess or underutilized assets. As of
September 30, 2002, Crescent Machinery's net book value of its inventory and
rental fleet was reduced by approximately $48.1 million and operating expenses
have been reduced by $16.4 million since December 31, 2001. Crescent Machinery
also closed its branches in Beaumont, Texas, Van Wert, Ohio and Franklin,
Indiana in 2001 and its branches in Honolulu, Hawaii, Santa Rosa, California,
Sacramento, California, Sparks, Nevada, Union City, California and Fresno,
California as of September 30, 2002. Subsequent to September 30, 2002, Crescent
Machinery closed its final west coast location leaving it with eight branches in
two states.



                                       22
<PAGE>
Essential to Crescent Machinery's plan in 2001 was the restructuring of its
existing lines of credit to provide debt service relief. Crescent Machinery
defaulted on certain major loans from commercial institutions due to Crescent
Machinery's decision not to pay the principal portion of payment installments
due from September through December 2001 in the total amount of approximately
$6.4 million. Crescent Machinery's lenders did not exercise remedies available
for Crescent Machinery's payment default. Outstanding principal amounts under
default by Crescent Machinery totaled $42.9 million at September 30, 2002.

In 2001 and early 2002, Crescent Machinery was unable to reach satisfactory
agreements with its lenders, and on February 6, 2002, Crescent Machinery Company
filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code with the
U.S. Bankruptcy Court for the Northern District of Texas in Fort Worth, Texas.
Crescent Machinery continues its normal operations in the sale, rental and
servicing of construction equipment, while attempting to reorganize and
restructure its debt to emerge a financially stronger and more competitive
business. During the bankruptcy process certain locations have been and will be
sold or closed to improve efficiency. Crescent Machinery did reach an agreement
with certain lenders to take back the financed equipment and limit Crescent
Machinery's exposure to shortfall on the sale of the equipment.

In addition to its equity claim as the sole shareholder of Crescent Machinery,
Crescent Operating is a creditor of Crescent Machinery, holding a $10.0 million
principal amount note receivable from Crescent Machinery. Crescent Operating
does not anticipate receiving a significant repayment for this note receivable
in the Crescent Machinery bankruptcy case, if any.

The Company is unable to predict as of the date of the filing of this Quarterly
Report whether Crescent Machinery will be able to successfully reorganize its
debt and operations. The payment rights and other entitlements of pre-petition
creditors of Crescent Machinery (including the Company) and the Company, as
Crescent Machinery's sole shareholder, may be substantially altered as proposed
in the current plan of reorganization if confirmed by the Court. Under the
current plan, pre-petition creditors will receive less than 100% of the face
value of their claims, and the ownership interest of the Company in Crescent
Machinery will be cancelled. Crescent Operating does not anticipate receiving
any distribution in the Crescent Machinery bankruptcy case. Crescent Machinery's
bankruptcy schedules reflect that the value of Crescent Machinery's assets is
less than the amount of debt. As a result, it is likely that if Crescent
Machinery is reorganized, the equity in reorganized Crescent Machinery will be
distributed to its creditors and potential new investors rather than Crescent
Operating.

There can be no assurance given that a plan of reorganization of Crescent
Machinery will be approved by the creditors, or that the Bankruptcy Court will
confirm any such plan. If a plan of reorganization is not confirmed by the
Bankruptcy Court, there can be no assurance that Crescent Machinery will have
sufficient funds to continue as a going concern, to restructure its debt on
acceptable terms or continue its operations. If such a plan is not confirmed by
the Bankruptcy Court, Crescent Machinery may be forced to liquidate its assets
under Chapter 7 of the U.S. Bankruptcy Code and to cease operations, in which
case it is unlikely that the Company would realize any significant value for its
ownership interest in Crescent Machinery.



                                       23
<PAGE>

OPERATIONAL STATISTICS

<Table>
<Caption>
                                                 Three months ended September 30,      Nine months ended September 30,
                                                 --------------------------------      -------------------------------
                                                     2002               2001               2002               2001
                                                 ------------       ------------       ------------       ------------
<S>                                              <C>                <C>                <C>                <C>

Revenue:
   New and used equipment ..................               30%                51%                37%                43%
   Rental equipment ........................               43%                32%                40%                37%
   Parts, service and supplies .............               27%                17%                23%                20%
                                                 ------------       ------------       ------------       ------------
Total revenue ..............................              100%               100%               100%               100%

Expenses:
   Cost of sales:
        New and used equipment .............               91%                96%                89%                92%
        Rental equipment ...................               59%                67%                68%                67%
        Parts, service and supplies ........               60%                64%                61%                65%
                                                 ------------       ------------       ------------       ------------
   Total cost of sales .....................               69%                81%                74%                78%

   Gross profit ............................               31%                19%                26%                22%

   Operating expenses ......................               53%                26%                47%                26%
                                                 ------------       ------------       ------------       ------------

Loss from operations .......................              (22%)               (7%)              (21%)               (3%)
                                                 ============       ============       ============       ============
</Table>

Equipment sales and leasing revenue decreased $24.9 million, or 48.9%, to $26.0
million for the nine months ended September 30, 2002, compared with $50.9
million for the nine months ended September 30, 2001. Net operating loss for the
nine months September 30, 2002 was $5.4 million as compared with net operating
loss of $1.6 million for the nine months ended September 30, 2001. The Company
believes that the results for the nine months ended September 30, 2002 are not
necessarily indicative of the operating results expected for the full year, due
to the closing of its West Coast branches in 2002 and to the seasonality of the
business.

                    TEMPERATURE CONTROLLED LOGISTICS SEGMENT

RECENT DEVELOPMENTS

During the first, second and third quarters of 2002, AmeriCold Logistics
exercised its right, pursuant to the terms of its leases, to defer payment of
rent. As of September 30, 2002, AmeriCold Logistics had deferred $20.6 million
of rent for 2002, bringing total deferred rent to $30.7 million.

On January 23, 2002, the leases with Temperature Controlled Logistics
Partnerships were restructured to consolidate four of the non-encumbered leases
into one non-encumbered lease. The restructuring did not affect total
contractual rent due under the combined leases.

Effective December 31, 2001, the Company, in connection with extending the
maturity of its $15.0 million loan from Bank of America from December 31, 2001
to August 15, 2002, agreed to modify the loan from an unsecured to a secured
credit facility. On August 14, 2002, the Company further extended the maturity
of this loan to January 15, 2003 and prepaid interest for that time period in
the amount of $0.3 million. The Company, with the consent of Crescent
Partnership which agreed to subordinate its security interest in the Company's
40% interest in AmeriCold Logistics, pledged all of its interest in AmeriCold
Logistics to Bank of America to secure the loan.



                                       24
<PAGE>

OPERATIONAL INFORMATION

The following table shows the location and size of facility for each of the
properties operated by AmeriCold Logistics as of September 30, 2002:

<Table>
<Caption>
                                          Total Cubic                                                 Total Cubic
                         Number of          Footage                                 Number of           Footage
      State              Properties      (in millions)                State         Properties       (in millions)
      -----              ----------      -------------                -----         ----------       -------------
<S>                      <C>             <C>                    <C>                <C>                <C>

Alabama                      5                  10.8            Missouri(1)                2                  46.8
Arizona                      1                   2.9            Nebraska                   2                   4.4
Arkansas                     6                  33.1            New York                   1                  11.8
California                   11                 47.1            North Carolina             3                  10.0
Colorado                     1                   2.8            Ohio                       1                   5.5
Florida                      5                   6.5            Oklahoma                   2                   2.1
Georgia                      8                  49.5            Oregon                     6                  40.4
Idaho                        2                  18.7            Pennsylvania               4                  50.8
Illinois                     2                  11.6            South Carolina             1                   1.6
Indiana                      1                   9.1            South Dakota               2                   6.3
Iowa                         2                  12.5            Tennessee                  3                  10.6
Kansas                       2                   5.0            Texas                      5                  39.1
Kentucky                     1                   2.7            Utah                       1                   8.6
Maine                        1                   1.8            Virginia                   3                  13.8
Massachusetts                5                  10.5            Washington                 6                  28.7
Minnesota                    1                   5.9            Wisconsin                  3                  17.4
Mississippi                  1                   4.7            Canada                     1                   4.8
                                                                                  ----------             ---------
                                                                Total                    101                 537.9
                                                                                  ==========             =========
</Table>

(1) Includes one underground facility of approximately 33.1 million cubic feet.

                                OTHER INVESTMENTS

MAGELLAN WARRANTS

In connection with the transaction in which the Company acquired its interest
in CBHS in 1997, the Company purchased, for $12.5 million, warrants to acquire
1,283,311 shares of common stock of Magellan Health Services, Inc. for an
exercise price of $30.00 per share. The Magellan warrants are exercisable in
varying increments beginning on May 31, 1998 and ending on May 31, 2009. As of
December 31, 2002, the aggregate value of the Magellan warrants was $4.1
million, calculated using the Black-Scholes method. As of January 1, 2001, the
Company was required to adopt SFAS No. 133, as amended by SFAS No. 138. SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, provides
that all derivative instruments be recognized as either assets or liabilities
depending on the rights or obligations under the contract and that all
derivative instruments be measured at fair value. Upon adoption, the Company
was required to record the net accumulated comprehensive loss related to its
investment in Magellan warrants as a charge in the statement of operations.
Based on the value of the warrants on December 31, 2000, the Company expensed
$9.5 million on January 1, 2001 as a cumulative effect of change in accounting
principle. From January 1, 2001 forward, the Company records changes in the
fair value of these warrants in the statement of operations as investment
income (loss).

The Company transferred the Magellan warrants to Crescent Machinery in 1999 as
a contribution to capital. On February 6, 2002, Crescent Machinery filed for
protection under the federal bankruptcy laws. With the commencement of
Crescent Machinery's bankruptcy proceedings, the Magellan warrants became part
of Crescent Machinery's estate, subject to the claims of creditors. The
Magellan warrants are not proposed to be treated in any manner in connection
with the Company's bankruptcy plan, and, instead, will be part of the
resolution of the Crescent Machinery bankruptcy.

For the six months ended June 30, 2002, the Company recorded changes in the
fair market value of the warrants as an investment loss of $4.1 million in the
Company's statement of operations. As of June 30, 2002, the value of the
warrants was zero. The Company does not anticipate any future recognition of
value relating to the warrants.


                                       25
<PAGE>

For additional financial information related to the Company's business segments,
see the Company's notes to the consolidated financial statements.




                                       26
<PAGE>


                     SEGMENT FINANCIAL INFORMATION
                   (Amounts in thousands, unaudited)

The following is a summary of Crescent Operating's financial information
reported by segment for the three months ended September 30, 2002:

<Table>
<Caption>
                                                             EQUIPMENT        TEMPERATURE
                                                               SALES          CONTROLLED
                                                            AND LEASING        LOGISTICS          OTHER             TOTAL
                                                            ------------      ------------     ------------      ------------
<S>                                                         <C>               <C>              <C>               <C>
Revenues ..............................................     $      7,757      $         --     $         --      $      7,757

Operating expenses ....................................            8,624                --              451             9,075
                                                            ------------      ------------     ------------      ------------
Loss from operations ..................................             (867)               --             (451)           (1,318)
Investment loss .......................................               --                --               --                --
Equity in losses of unconsolidated subsidiaries .......               --                --               --                --
Other (income) expense
      Interest expense ................................              166                --            1,321             1,487
      Interest income .................................               (2)               --               (3)               (5)
      Other ...........................................               48                --               (1)               47
                                                            ------------      ------------     ------------      ------------
Total other expense ...................................              212                --            1,317             1,529
                                                            ------------      ------------     ------------      ------------
Loss from operations before reorganization costs ......           (1,079)               --           (1,768)           (2,847)
Reorganization costs
      Professional fees ...............................              871                --               --               871
                                                            ------------      ------------     ------------      ------------
Loss from operations before income taxes ..............           (1,950)               --           (1,768)           (3,718)
Income tax benefit ....................................               --                --             (707)             (707)
                                                            ------------      ------------     ------------      ------------
Loss from continuing operations .......................     $     (1,950)     $         --     $     (1,061)     $     (3,011)
                                                            ============      ============     ============      ============
</Table>



                                       27
<PAGE>


                     SEGMENT FINANCIAL INFORMATION
                   (Amounts in thousands, unaudited)

The following is a summary of Crescent Operating's financial information
reported by segment for the nine months ended September 30, 2002:

<Table>
<Caption>
                                                             EQUIPMENT        TEMPERATURE
                                                               SALES          CONTROLLED
                                                            AND LEASING        LOGISTICS           OTHER             TOTAL
                                                            ------------      ------------      ------------      ------------
<S>                                                         <C>               <C>               <C>               <C>
Revenues ..............................................     $     25,992      $         --      $         --      $     25,992

Operating expenses ....................................           29,340                --             2,711            32,051
                                                            ------------      ------------      ------------      ------------
Loss from operations ..................................           (3,348)               --            (2,711)           (6,059)
Investment loss .......................................               --                --            (4,127)           (4,127)
Equity in losses of unconsolidated subsidiaries .......               --            (2,142)               --            (2,142)
Other (income) expense
      Interest expense ................................            1,074                --             3,963             5,037
      Interest income .................................               (3)               --                (9)              (12)
      Other ...........................................              217                --                 4               221
                                                            ------------      ------------      ------------      ------------
Total other expense ...................................            1,288                --             3,958             5,246
                                                            ------------      ------------      ------------      ------------
Loss from operations before reorganization costs ......           (4,636)           (2,142)          (10,796)          (17,574)
Reorganization costs
      Professional fees ...............................            2,015                --                --             2,015
                                                            ------------      ------------      ------------      ------------
Loss from operations before income taxes ..............           (6,651)           (2,142)          (10,796)          (19,589)
Income tax provision (benefit)  .......................               --              (283)           (2,427)           (2,710)
                                                            ------------      ------------      ------------      ------------
Loss from continuing operations .......................     $     (6,651)     $     (1,859)     $     (8,369)     $    (16,879)
                                                            ============      ============      ============      ============
</Table>



                                       28
<PAGE>

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002,
COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001

REVENUES

Total revenue, which consists of Equipment sales and leasing revenue, decreased
$11.2 million, or 58.9%, to $7.8 million for the three months ended September
30, 2002, compared with $19.0 million for the three months ended September 30,
2001. Total revenue decreased $24.9 million, or 48.9%, to $26.0 million for the
nine months ended September 30, 2002, compared with $50.9 million for the nine
months ended September 30, 2001. Significant components of the decreases were:

o    a net decrease of $7.3 million and $13.2 million in new and used equipment
     sales for the three and nine months ended September 30, 2002 as compared to
     the corresponding periods in 2001 primarily due to the slowing economy and
     the impact of the Chapter 11 bankruptcy process on the Company's business;

o    a decrease of $0.9 million and $3.3 million in parts, service and supplies
     revenue for the three and nine months ended September 30, 2002 as compared
     to the corresponding periods in 2001 primarily due to decreased demand for
     maintenance and repair work and the impact of the Chapter 11 bankruptcy
     process on the Company's business; and

o    a decrease of $3.0 million and $8.4 million in rental revenue for the three
     and nine months ended September 30, 2002 as compared to the corresponding
     periods in 2001 primarily due to the slowing economy and the impact of the
     Chapter 11 bankruptcy process on the Company's business.

OPERATING EXPENSES

Total operating expenses decreased $16.8 million, or 64.9%, to $9.1 million for
the three months ended September 30, 2002, compared with $25.9 million for the
three months ended September 30, 2001. Total operating expenses decreased $38.7
million, or 54.7%, to $32.1 for the nine months ended September 30, 2002,
compared with $70.8 million for the nine months ended September 30, 2001. The
decreases in total operating expenses are attributable to the factors discussed
in the following paragraphs.

Equipment Sales and Leasing Segment

Equipment sales and leasing expenses decreased $11.7 million, or 57.6%, to $8.6
million for the three months ended September 30, 2002, compared with $20.3
million for the three months ended September 30, 2001. Equipment sales and
leasing expenses decreased $23.1 million, or 44.1%, to $29.3 million for the
nine months ended September 30, 2002, compared with $52.4 million for the nine
months ended September 30, 2001. Significant components of the decreases were:

o    a decrease of $7.2 million and $12.3 million in new and used equipment
     expenses for the three and nine months ended September 30, 2002 as compared
     to the corresponding periods in 2001 directly related to the decrease in
     new and used equipment revenue;

o    a decrease of $0.6 million and $2.5 million in parts, service and supplies
     expenses for the three and nine months ended September 30, 2002 as compared
     to the corresponding periods in 2001 primarily as a result of the decrease
     in parts, service and supplies revenues for the same periods;

o    a $2.3 million and a $5.5 million decrease in rental expenses for the three
     and nine months ended September 30, 2002 as compared to the corresponding
     periods in 2001 primarily due to the decrease in rental revenue for the
     three and nine months ended September 30, 2002; and

o    a decrease of $1.6 million and $2.8 million in general and administrative
     expenses for the three and nine months ended September 30, 2002 as compared
     to the corresponding periods in 2001 primarily due to cost reduction
     measures put into place.


                                       29
<PAGE>
Corporate General and Administrative Expenses

Corporate general and administrative expenses totaled $0.5 million and $2.7
million for the three and nine months ended September 30, 2002, respectively, as
compared to $0.5 million and $1.5 million for the three and nine months ended
September 30, 2001. The increase for the nine months ended September 30, 2002 is
primarily related to an increase in general corporate overhead costs, such as
legal and accounting costs, related to the Settlement Agreement and the proposed
prepackaged bankruptcy.

INVESTMENT INCOME (LOSS)

There was no investment income (loss) for the three months ended September 30,
2002. Investment income (loss) decreased $10.1 million or 168%, to a $4.1
million loss for the nine months ended September 30, 2002, compared with income
of $6.0 million for the nine months ended September 30, 2001. The decrease is
attributable to the decrease in the fair value of the Company's Magellan
warrants resulting in investment losses as compared with income for the
corresponding period in 2001. As of June 30, 2002, the value of the warrants was
zero. The Company does not anticipate any future recognition of value as it
relates to the warrants.

EQUITY IN EARNINGS (LOSS) OF UNCONSOLIDATED SUBSIDIARIES

There was no equity in earnings (loss) of unconsolidated subsidiaries for the
three months ended September 30, 2002 due to the Company not recording any
additional losses related to its investment in AmeriCold Logistics for the
three months ended September 30, 2002 due to the Company's share of historical
losses being in excess of its investment balance.

Equity in earnings (loss) of unconsolidated subsidiaries decreased $2.3 million
or 52.3%, to a loss of $2.1 million for the nine months ended September 30,
2002, compared with a loss of $4.4 million for the nine months ended September
30, 2001. The nine month decrease was primarily due to equity in loss of
AmeriCold Logistics which was stopped at the amount of ($0.7) million due to the
Company's share of historical losses being in excess of its investment balance
and to realization of other comprehensive income (loss) of ($1.4) million.

OTHER (INCOME) EXPENSE

Other (income) expense decreased $0.4 million, or 21.1%, to $1.5 million for the
three months ended September 30, 2002, compared with $1.9 million for the three
months ended September 30, 2001. For the nine months ended September 30, 2002,
other (income) expenses decreased $2.5 million, or 32.5%, to $5.2 million,
compared with $7.7 million for the nine months ended September 30, 2001.
Significant components of the decreases were primarily attributable to a net
decrease in interest expense of $1.7 million for the nine months ended September
30, 2002.

REORGANIZATION ITEMS

The Company incurred $0.9 million and a $2.0 million in professional fees for
the three and nine months ended September 30, 2002 due to Crescent Machinery
Company's reorganization through bankruptcy that were not incurred during the
corresponding periods in 2001.

INCOME TAX PROVISION (BENEFIT)

Income tax benefit of $0.7 million for the three months ended September 30, 2002
represents a decrease of $0.5 million from the $1.2 million benefit provided for
the three months ended September 30, 2001. Income tax benefit of $2.7 million
for the nine months ended September 30, 2002 represents a decrease of $1.7
million from the $4.4 million benefit provided for the nine months ended
September 30, 2001. Income tax provision attributable to discontinued operations
for the nine months ended September 30, 2002 was comprised of a $2.2 million
expense for the Hospitality segment and a $0.3 million expense for the Land
Development segment. Income tax provision for the nine months ended September
30, 2002 of $17.9 was attributable to the gain from the disposal of discontinued



                                       30
<PAGE>
operations resulting primarily from the cancellation of corporate level
indebtedness pursuant to the Settlement Agreement.

The Company generally provides for taxes using a 40% effective rate on the
Company's share of income or loss. Management continues to evaluate its ability
to realize the deferred tax assets quarterly by assessing the need for a
valuation allowance. An inability of the Company to execute business plans for
certain of the company's segments could affect the ultimate realization of the
deferred tax assets.

MINORITY INTERESTS

Minority interests were eliminated as a result of the assignment of the Land
Development and Hospitality segments to Crescent Equities pursuant to the
Settlement Agreement.

DISCONTINUED OPERATIONS

Pursuant to the Settlement Agreement, the Company's transferred its interests in
the Hospitality and Land Development segments as of February 14, 2002 and March
22, 2002. The Company had a de minimus loss from discontinued operations related
to the Hospitality and Land Development segments for the three months ended
September 30, 2002. The Company realized income from discontinued operations of
$3.3 million after minority interest of $1.9 million and a $2.5 million income
tax expense, related to the Hospitality and Land Development segments for the
nine months ended September 30, 2002. The gain on disposal of discontinued
operations was zero for the three months ended September 30, 2002 and $26.8
million, net of a $17.9 million income tax expense, for the nine months ended
September 30, 2002.

In December 2001, the Company adopted Statements of Financial Accounting
Standards SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets (See Note 12). SFAS No. 144 broadens the definition of what constitutes a
discontinued operation and how the results of a discontinued operation are to be
measured and presented. During the second and third quarters of 2002, Crescent
Machinery closed down six branch locations and is currently in the process of
closing one additional branch location. The Company realized a $2.5 million
decrease in loss from discontinued operations related to the Equipment Sales and
Leasing segment for the three months ended September 30, 2002 as compared to the
corresponding period in 2001. The Company realized a $2.4 million decrease in
loss from discontinued operations related to the Equipment Sales and Leasing
segment for the nine months ended September 30, 2002 as compared to the
corresponding period in 2001. The decreases for the three and nine months ended
September 30, 2002 as compared to the three and nine months ended September 30,
2001 are primarily attributable to the timing of the closings of the
discontinued branch locations.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

Cumulative effect of change in accounting principle decreased $9.5 million, or
100%, for the nine months ended September 30, 2002 as compared to the
corresponding period in 2001. The change from the prior period was due to the
prior year's adoption of SFAS No. 133 on January 1, 2001, whereby the Company
realized a $9.5 million loss related to its investment in Magellan warrants,
calculated as the difference between the original cost of the Magellan warrants
of $12.5 million and their estimated fair value at December 31, 2001, $3.0
million, as calculated using the Black-Scholes pricing model.

CRITICAL ACCOUNTING POLICIES

The Company's discussion and analysis of financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, and contingencies as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. The Company evaluates its assumptions and estimates on an
on-going basis. The Company bases its estimates on historical experience and on
various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The Company believes the following critical
accounting policies affect the more significant judgments and estimates used in
the preparation of our consolidated financial statements.

INVENTORIES

Inventories consist of new and used equipment held for sale and equipment parts,
all of which are stated at the lower of cost or market using the first-in,
first-out (FIFO) or specific identification methods.

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. The Company uses the straight-line
method of depreciation for financial statement purposes. The estimated useful
lives used in computing depreciation are as follows:

<Table>
<S>                                                               <C>
        Rental equipment................................            2-10 years
        Transportation equipment........................             3-5 years
        Furniture, fixtures, and other equipment........            5-10 years
</Table>

From time-to-time, Crescent Machinery offers its rental customers the
opportunity to purchase rented equipment for a stated value at a future point in
time. In such instances, Crescent Machinery depreciates the specific rental item
in accordance with the contract. Expenditures for maintenance and repairs are
charged to expense as incurred. Expenditures for renewals or betterments are
capitalized. The cost of property replaced, retired, or otherwise disposed of is
removed from the asset account along with the related accumulated depreciation.
Long-lived assets are evaluated when indications of impairment are present, and
provisions for possible losses are recorded when undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
value.


LIQUIDITY AND CAPITAL RESOURCES

In February 2002, Crescent Operating was notified by Crescent Real Estate that
the Company's obligations to Crescent Real Estate were in default. Moreover,
Crescent Real Estate announced that it would seek to enforce collection by
foreclosure or otherwise of its claims against Crescent Operating and its
operating units as quickly as possible. Crescent Operating was unable to repay
the debts to Crescent Real Estate as to which a default had been declared.
Crescent Operating did not have sufficient liquidity to pay its liabilities on a
current basis. In light of these factors, Crescent Operating entered into a
Settlement Agreement with Crescent Real Estate. See - Note 2 - Recent
Developments - Settlement Agreement.



                                       31
<PAGE>
The Settlement Agreement significantly restricts Crescent Operating's ability to
access capital resources. Among other things, the Settlement Agreement limits
Crescent Operating's ability to incur additional indebtedness, incur liens, pay
dividends or make certain other restrictive payments. Based on these
restrictions in the Settlement Agreement and Crescent Operating's current
financial condition, it is unlikely that Crescent Operating would have access to
any third-party financing. In connection with the Settlement Agreement, Crescent
Real Estate did provide Crescent Operating with a $8.6 million facility to
provide liquidity and payment of specific expenditures during the pendency of
the bankruptcy case. This facility was amended effective October 2002 to
decrease the availability of funds to $6.3 million. A second facility was
entered into effective October 2002 to provide $2.9 million of additional funds
to Crescent Operating through the pendency of the bankruptcy which is expected
to occur in the first quarter of 2003. Pursuant to this facility, Crescent Real
Estate will fund only Crescent Operating's out-of-pocket operating expenses
through the bankruptcy. The Company is in the process of responding to the
Securities and Exchange Commission's comments on its proposed proxy statement.
The Company anticipates filing its proxy statement in the fourth quarter of
2002, obtaining shareholder approval in the first quarter of 2003 and filing for
bankruptcy in the first quarter of 2003.

Interest payments and rent payments due to Crescent Real Estate, accrued but
deferred as of September 30, 2002, totaled approximately $9.2 million and $23.7
million, respectively.

CASH FLOWS

Cash and cash equivalents include amounts from all consolidated subsidiaries,
including subsidiaries not wholly owned. Changes, therefore, do not necessarily
represent increases or decreases in cash directly available to the Company.

Cash and cash equivalents were $4.8 million and $13.9 million at September 30,
2002 and December 31, 2001, respectively (see Note 1). The 65% decrease is
attributable to $11.1 million and $3.5 million of cash used in investing and
financing activities, respectively, partially offset by $5.6 million of cash
provided by operating activities.

OPERATING ACTIVITIES

Net cash flows provided by operating activities for the nine months ended
September 30, 2002 were $5.6 million compared with net cash used in operating
activities of $166.2 million for the nine months ended September 30, 2001. The
Company's inflow of cash provided by operating activities of $5.6 million was
primarily attributable to inflows from:

o    net income of $10.2 million;

o    a decrease in accounts receivable of $6.1 million;

o    a decrease in inventories of $4.0 million; and

o    an increase in accounts payable and accrued expenses - CEI of $3.2 million.

The inflow of cash provided by operating activities was partially offset by
outflows from:

o    an increase in prepaid expenses and current assets of $0.8 million; and

o    an decrease in accounts payable of $1.5 million

INVESTING ACTIVITIES

Net cash flows used in investing activities for the nine months ended September
30, 2002 were $11.1 million compared with net cash provided by investing
activities of $6.3 million for nine months ended September 30, 2001. The
Company's outflow of cash used in investing activities of $11.1 million was
primarily attributable to outflows from:

o    disposition of business interests, net of cash transferred of $15.8
     million.

The outflow of cash used in investing activities was partially offset by inflows
from:



                                       32
<PAGE>

o    net proceeds from the sale of property and equipment of $4.8 million.

FINANCING ACTIVITIES

Net cash flows used in financing activities for the nine months ended September
30, 2002 were $3.5 million compared with net cash provided by financing
activities of $133.3 million for the nine months ended September 30, 2001. The
Company's outflow of cash used in financing activities of $3.5 million was
primarily attributable to outflow from:

o    payments of all long-term debt of $7.1 million.

The outflow of cash provided by financing activities was partially offset by
inflows from:

o    proceeds of all long-term debt of $3.6 million.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Since December 31, 2001, there have been no material changes to the information
regarding market risk as set forth in the Company's Form 10-K for the year ended
December 31, 2001.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. The term "disclosure
controls and procedures" is defined in Rule 13a-14(c) of the Securities Exchange
Act of 1934, or the Exchange Act. This term refers to the controls and
procedures of a company that are designed to ensure that information required to
be disclosed by a company in the reports that it files under the Exchange Act is
recorded, processed, summarized and reported within required time periods. Our
Chief Executive Officer and Chief Financial and Accounting Officer has evaluated
the effectiveness of our disclosure controls and procedures as of a date within
90 days before the filing of this quarterly report, and he has concluded that as
of that date, our disclosure controls and procedures were effective at ensuring
that required information will be disclosed on a timely basis in our reports
filed under the Exchange Act.

(b) Changes in Internal Controls. There were no significant changes to our
internal controls or in other factors that could significantly affect our
internal controls subsequent to the date of their evaluation by our Chief
Executive Officer and Chief Financial and Accounting Officer, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On June 10, 2002, the attorneys for the Official Unsecured Creditors Committee
of Crescent Machinery Company delivered a letter to Crescent Operating and to
certain of its current and former officers and directors. In the letter, the
creditors committee alleges that Crescent Operating and others have substantial
liability for certain actions and failures to act by Crescent Operating and
certain of its officers and directors that caused damage to Crescent Machinery.
If a lawsuit is filed by the creditors committee, Crescent Operating intends to
vigorously defend any claims asserted. Crescent Operating does not believe the
claims asserted in the creditors committee's letter have any merit. However,
there is a risk that substantial delays could result from the process whereby
the creditors committee's claim is adjudicated and there is further risk that if
the creditors committee were ultimately successful in the prosecution of its
claim, Crescent Operating may be unable to make any distribution to its
stockholders.

ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS

Not Applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Prior to filing a voluntary petition in bankruptcy on February 6, 2002, Crescent
Machinery was in default on certain major loans from commercial institutions due
to Crescent Machinery's decision not to pay the principal portion of payment
installments due since September 2001. Outstanding principal amounts under
payment default by Crescent Machinery totaled $42.9 million at September 30,
2002. Prior to the commencement of bankruptcy proceedings, Crescent Machinery's
lenders did not exercise remedies available for Crescent Machinery's payment
default, and Crescent Machinery and those lenders engaged in negotiations about
the defaults and about modifying certain terms, including payment obligations,
of the existing credit lines. Crescent Machinery did reach an agreement with
certain lenders to take back the financed equipment and limit Crescent
Machinery's exposure to shortfall on the sale of the equipment.



                                       33
<PAGE>
Crescent Machinery was unable to reach satisfactory agreements with other
lenders, however, and on February 6, 2002, Crescent Machinery Company filed a
voluntary petition under Chapter 11 of the U.S. Bankruptcy Code with the U.S.
Bankruptcy Court for the Northern District of Texas in Fort Worth, Texas.

Effective October 31, 2001, Crescent Operating amended its four loan agreements
with Crescent Partnership - the 1997 Term Loan, the 1997 Revolving Loan, the
AmeriCold Loan, and the COPI Colorado Loan - to further extend payment of
interest and principal payments otherwise due in 2000 and 2001 to the earlier of
December 31, 2002 and the closing of the transactions contemplated by the
agreement for the purchase and sale of assets and stock dated June 28, 2001,
between the Company and Crescent Partnership (the "Sale Agreement"). The
transactions contemplated by the Sale Agreement did not close in 2001 and
Crescent Partnership terminated the Sale Agreement on January 23, 2002. Crescent
Operating made no payments on the loans. Crescent Operating was in payment
default on all four loans. On February 13, 2002, Crescent Partnership delivered
default notices to Crescent Operating relating to approximately $76.2 million of
principal and accrued interest due to Crescent Partnership under the four loans.

In addition, until February 2002, Crescent Operating's subsidiaries in the
hospitality business segment leased from Crescent Partnership or its affiliates,
hotel and resort properties. With the consent of Crescent Partnership, the
lessees had accrued but deferred payment of rent on the leases for those
properties, the payment of which was guaranteed by Crescent Operating to the
extent of cash generated by the hospitality business segment. Following the
termination of the Sale Agreement on January 23, 2002, Crescent Partnership on
February 13, 2002, delivered default notices to the Company relating to
approximately $49.0 million of unpaid rent.

On February 14, 2002, Crescent Operating entered into the Settlement Agreement
with Crescent Real Estate, pursuant to which the Company's interests in the Land
Development and Hospitality segments were transferred to Crescent Partnership in
partial satisfaction of the indebtedness owing from Crescent Operating (see Note
2).

Pursuant to the Settlement Agreement, Crescent Operating has transferred the
following assets to Crescent Real Estate:

     o    all of its hotel operations, in lieu of foreclosure, on February 14,
          2002 in exchange for a $23.6 million reduction in its rent obligations
          to Crescent Real Estate; and

     o    all of its land development interests, through a strict foreclosure,
          on February 14, 2002, and March 22, 2002, in exchange for a $40.1
          million reduction of its debt obligations to Crescent Real Estate.

As a part of the acquisitions of E.L. Lester and Company ("Lester") and Harvey
Equipment Center, Inc. ("Harvey"), Crescent Operating issued notes payable in
the amount of $6.0 million and $1.2 million, respectively. These notes are
called the "Equipment Acquisition Notes." All principal and unpaid interest on
these notes are due July 2002 and July 2003, respectively. On February 15, 2002,
Crescent Partnership purchased Equipment Acquisition Notes from the note
holders. As of July 2, 2002 and August 1, 2002, Crescent Operating was in
default on payment of principal and interest on these notes.

The aggregate outstanding amounts under default by the Company owed to Crescent
Real Estate as of September 30, 2002 totaled $68.5 million, comprised of $23.7
million of deferred rent obligations and $44.8 million of accrued interest and
principal. The aggregate outstanding amounts under default by the Company owed
to Crescent Real Estate as of November 14, 2002 totaled $69.0 million,
comprised of $23.7 million of deferred rent obligations and $45.3 million of
accrued interest and principal.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable

ITEM 5. OTHER INFORMATION

Not Applicable



                                       34
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

        Exhibit
        Number                  DESCRIPTION OF EXHIBITS

             3.1        First Amended and Restated Certificate of Incorporation
                        (filed as Exhibit 3.3 to the Company's registration
                        statement on Form S-1 dated July 12, 1997 ("Form S-1")
                        and incorporated by reference herein)

             3.2        First Amended and Restated Bylaws (filed as Exhibit 3.4
                        to Form S-1 and incorporated by reference herein)

             3.3        Amendment of Article V of First Amended and Restated
                        Bylaws (filed as Exhibit 3.3 to the Company's June 30,
                        1998 Form 10-Q ("June 30, 1998 Form 10-Q") and
                        incorporated by reference herein)

             3.4        Repeal of Amendment of Article V of First Amended and
                        Restated Bylaws (filed as Exhibit 3.4 to the Company's
                        September 30, 1998 Form 10-Q ("September 30, 1998 Form
                        10-Q") and incorporated by reference herein)

             4.1        Specimen stock certificate (filed as Exhibit 4.1 to Form
                        S-1 and incorporated by reference herein)

             4.2        Preferred Share Purchase Rights Plan (filed as Exhibit
                        4.2 to Form S-1 and incorporated by reference herein)

             4.3        First Amendment to Preferred Share Purchase Rights
                        Agreement dated as of September 25, 1998, between
                        Crescent Operating, Inc. and Bank Boston, N.A., as
                        Rights Agent (filed as Exhibit 4.3 to September 30, 1998
                        Form 10-Q and incorporated by reference herein)

             4.4        Second Amendment to Preferred Share Purchase Rights
                        Agreement dated as of March 4, 1999, between Crescent
                        Operating, Inc. and Bank Boston, N.A., as Rights Agent
                        (filed as Exhibit 4.4 to March 31, 1999 Form 10-Q
                        ("March 31, 1999 Form 10-Q") and incorporated by
                        reference herein)

             10.1       Amended Stock Incentive Plan (filed as Exhibit 10.1 to
                        Form S-1 and incorporated by reference herein)

             10.2       Intercompany Agreement between Crescent Operating, Inc.
                        and Crescent Real Estate Equities Limited Partnership
                        (filed as Exhibit 10.2 to the Company's Quarterly Report
                        on Form 10-Q for the Quarter Ended June 30, 1997 ("June
                        30, 1997 Form 10-Q") and incorporated by reference
                        herein)

             10.3       Amended and Restated Operating Agreement of Charter
                        Behavioral Health Systems, LLC (filed as Exhibit 10.3 to
                        June 30, 1997 Form 10-Q and incorporated by reference
                        herein)

             10.5       Amended and Restated Credit and Security Agreement,
                        dated as of May 30, 1997, between Crescent Real Estate
                        Equities Limited Partnership and Crescent Operating,
                        Inc., together with related Note (filed as Exhibit 10.5
                        to the Company's September 30, 1997 Form 10-Q
                        ("September 30, 1997 Form 10-Q") and incorporated by
                        reference herein)



                                       35
<PAGE>

             10.6       Line of Credit and Security Agreement, dated as of May
                        21, 1997, between Crescent Real Estate Equities Limited
                        Partnership and Crescent Operating, Inc., together with
                        related Line of Credit Note (filed as Exhibit 10.6 to
                        September 30, 1997 Form 10-Q and incorporated by
                        reference herein)

             10.7       Acquisition Agreement, dated as of February 10, 1997,
                        between Crescent Real Estate Equities Limited
                        Partnership and Carter-Crowley Properties, Inc. (filed
                        as Exhibit 10.7 to Form S-1 and incorporated by
                        reference herein)

             10.10      Security Agreement dated September 22, 1997 between COI
                        Hotel Group, Inc., as debtor, and Crescent Real Estate
                        Equities Limited Partnership, as lender, together with
                        related $1 million promissory note (filed as Exhibit
                        10.10 to September 30, 1997 Form 10-Q and incorporated
                        by reference herein)

             10.11      Security Agreement dated September 22, 1997 between COI
                        Hotel Group, Inc., as debtor, and Crescent Real Estate
                        Equities Limited Partnership, as lender, together with
                        related $800,000 promissory note (filed as Exhibit 10.11
                        to September 30, 1997 Form 10-Q and incorporated by
                        reference herein)

             10.12      Amended and Restated Asset Management dated August 31,
                        1997, to be effective July 31, 1997, between Wine
                        Country Hotel, LLC and The Varma Group, Inc. (filed as
                        Exhibit 10.12 to September 30, 1997 Form 10-Q and
                        incorporated by reference herein)

             10.13      Amended and Restated Asset Management Agreement dated
                        August 31, 1997, to be effective July 31, 1997, between
                        RoseStar Southwest, LLC and The Varma Group, Inc. (filed
                        as Exhibit 10.13 to September 30, 1997 Form 10-Q and
                        incorporated by reference herein)

             10.14      Amended and Restated Asset Management Agreement dated
                        August 31, 1997, to be effective July 31, 1997, between
                        RoseStar Management LLC and The Varma Group, Inc. (filed
                        as Exhibit 10.14 to September 30, 1997 Form 10-Q and
                        incorporated by reference herein)

             10.15      Agreement for Financial Services dated July 1, 1997,
                        between Crescent Real Estate Equities Company and
                        Petroleum Financial, Inc. (filed as Exhibit 10.15 to
                        September 30, 1997 Form 10-Q and incorporated by
                        reference herein)

             10.16      Credit Agreement dated August 27, 1997, between Crescent
                        Operating, Inc. and NationsBank of Texas, N.A. together
                        with related $15.0 million promissory note (filed as
                        Exhibit 10.16 to September 30, 1997 Form 10-Q and
                        incorporated by reference herein)

             10.17      Support Agreement dated August 27, 1997, between Richard
                        E. Rainwater, John Goff and Gerald Haddock in favor of
                        Crescent Real Estate Equities Company and NationsBank of
                        Texas, N.A. (filed as Exhibit 10.17 to September 30,
                        1997 Form 10-Q and incorporated by reference herein)

             10.18      1997 Crescent Operating, Inc. Management Stock Incentive
                        Plan (filed as Exhibit 10.18 to the Company's Annual
                        Report on Form 10-K for the year ended December 31, 1997
                        ("December 31, 1997 Form 10-K") and incorporated by
                        reference herein)

             10.19      Memorandum of Agreement executed November 16, 1997,
                        among Charter Behavioral Health Systems, LLC, Charter
                        Behavioral Health Systems, Inc. and Crescent Operating,
                        Inc. (filed as Exhibit 10.19 to December 31, 1997 Form
                        10-K and incorporated by reference herein)



                                       36
<PAGE>

             10.20      Purchase Agreement dated August 31, 1997, by and among
                        Crescent Operating, Inc., RoseStar Management LLC,
                        Gerald W. Haddock, John C. Goff and Sanjay Varma (filed
                        as Exhibit 10.20 to December 31, 1997 Form 10-K and
                        incorporated by reference herein)

             10.21      Stock Purchase Agreement dated August 31, 1997, by and
                        among Crescent Operating, Inc., Gerald W. Haddock, John
                        C. Goff and Sanjay Varma (filed as Exhibit 10.21 to
                        December 31, 1997 Form 10-K and incorporated by
                        reference herein)

             10.22      Amended and Restated Lease Agreement, dated June 30,
                        1995 between Crescent Real Estate Equities Limited
                        Partnership and RoseStar Management LLC, relating to the
                        Denver Marriott City Center (filed as Exhibit 10.17 to
                        the Annual Report on Form 10-K of Crescent Real Estate
                        Equities Company for the Fiscal Year Ended December 31,
                        1995 (the "1995 CEI 10-K") and incorporated by reference
                        herein)

             10.23      Lease Agreement, dated December 19, 1995 between
                        Crescent Real Estate Equities Limited Partnership and
                        RoseStar Management LLC, relating to the Hyatt Regency
                        Albuquerque (filed as Exhibit 10.16 to the 1995 CEI 10-K
                        and incorporated by reference herein)

             10.24      Form of Amended and Restated Lease Agreement, dated
                        January 1, 1996, among Crescent Real Estate Equities
                        Limited Partnership, Mogul Management, LLC and RoseStar
                        Management LLC, relating to the Hyatt Regency Beaver
                        Creek (filed as Exhibit 10.12 to the 1995 CEI 10-K and
                        incorporated by reference herein)

             10.25      Lease Agreement, dated July 26, 1996, between Canyon
                        Ranch, Inc. and Canyon Ranch Leasing, L.L.C., assigned
                        by Canyon Ranch, Inc. to Crescent Real Estate Equities
                        Limited Partnership pursuant to the Assignment and
                        Assumption Agreement of Master Lease, dated July 26,
                        1996 (filed as Exhibit 10.24 to the Quarterly Report on
                        Form 10-Q/A of Crescent Real Estate Equities Company for
                        the Quarter Ended June 30, 1997 (the "1997 CEI 10-Q")
                        and incorporated by reference herein)

             10.26      Lease Agreement, dated November 18, 1996 between
                        Crescent Real Estate Equities Limited Partnership and
                        Wine Country Hotel, LLC (filed as Exhibit 10.25 to the
                        Annual Report on Form 10-K of Crescent Real Estate
                        Equities Company for the Fiscal Year Ended December 31,
                        1996 and incorporated by reference herein)

             10.27      Lease Agreement, dated December 11, 1996, between Canyon
                        Ranch-Bellefontaine Associates, L.P. and Vintage
                        Resorts, L.L.C., as assigned by Canyon
                        Ranch-Bellefontaine Associates, L.P. to Crescent Real
                        Estate Funding VI, L.P. pursuant to the Assignment and
                        Assumption Agreement of Master Lease, dated December 11,
                        1996 (filed as Exhibit 10.26 to the 1997 CEI 10-Q and
                        incorporated by reference herein)

             10.28      Master Lease Agreement, dated June 16, 1997, between
                        Crescent Real Estate Funding VII, L.P. and Charter
                        Behavioral Health Systems, LLC and its subsidiaries,
                        relating to the Facilities (filed as Exhibit 10.27 to
                        the 1997 CEI 10-Q and incorporated by reference herein)

             10.29      Form of Indemnification Agreement (filed as Exhibit
                        10.29 to December 31, 1997 Form 10-K and incorporated by
                        reference herein)

             10.30      Purchase Agreement, dated as of September 29, 1997,
                        between Crescent Operating, Inc. and Crescent Real
                        Estate Equities Limited Partnership, relating to the
                        purchase of Desert Mountain Development Corporation
                        (filed as Exhibit 10.30 to December 31, 1997 Form 10-K
                        and incorporated by reference herein)

             10.31      Lease Agreement dated December 19, 1997, between
                        Crescent Real Estate Equities Limited Partnership, as
                        Lessor, and Wine Country Hotel, as Lessee, for lease of
                        Ventana Inn (filed as Exhibit 10.31 to the Company's
                        March 31, 1998 Form 10-Q ("March 31, 1998 Form 10-Q")
                        and incorporated by reference herein)



                                       37
<PAGE>

             10.32      Lease Agreement dated September 22, 1997, between
                        Crescent Real Estate Equities Limited Partnership, as
                        Lessor, and COI Hotel Group, Inc., as lessee, for lease
                        of Four Seasons Hotel, Houston (filed as Exhibit 10.32
                        to March 31, 1998 Form 10-Q and incorporated by
                        reference herein)

             10.33      Asset Purchase Agreement dated December 19, 1997, among
                        Crescent Operating, Inc., Preco Machinery Sales, Inc.,
                        and certain individual Preco shareholders (filed as
                        Exhibit 10.33 to March 31, 1998 Form 10-Q and
                        incorporated by reference herein)

             10.34      Asset Purchase Agreement dated April 30, 1998, among
                        Crescent Operating, Inc., Central Texas Equipment
                        Company, and certain individual Central Texas
                        shareholders (filed as Exhibit 10.34 to March 31, 1998
                        Form 10-Q and incorporated by reference herein)

             10.35      Credit Agreement dated August 29, 1997 between Crescent
                        Real Estate Equities Limited Partnership, as lender, and
                        Desert Mountain Properties Limited Partnership, as
                        borrower, together with related Senior Note, Junior Note
                        and deed of trust (filed as Exhibit 10.35 to March 31,
                        1998 Form 10-Q and incorporated by reference herein)

             10.36      Buy-Out Agreement dated April 24, 1998, between Crescent
                        Operating, Inc. and Crescent Real Estate Equities
                        Limited Partnership (filed as Exhibit 10.36 to March 31,
                        1998 Form 10-Q and incorporated by reference herein)

             10.37      Stock Acquisition Agreement and Plan of Merger dated
                        June 4, 1998, among Machinery, Inc., Oklahoma Machinery,
                        Inc., Crescent Machinery Company, Crescent Operating,
                        Inc. and certain individual Machinery shareholders
                        (filed as Exhibit 10.37 to June 30, 1998 Form 10-Q and
                        incorporated by reference herein)

             10.38      Master Revolving Line of Credit Loan Agreement
                        (Borrowing Base and Warehouse) dated May 14, 1998,
                        between Desert Mountain Properties Limited Partnership
                        and National Bank of Arizona (filed as Exhibit 10.38 to
                        June 30, 1998 Form 10-Q and incorporated by reference
                        herein)

             10.39      1997 Management Stock Incentive Plan (filed as Exhibit
                        10.39 to June 30, 1998 Form 10-Q and incorporated by
                        reference herein)

             10.40      Credit and Security Agreement, dated as of September 21,
                        1998, between Crescent Real Estate Equities Limited
                        Partnership and Crescent Operating, Inc., together with
                        related Note (filed as Exhibit 10.40 to September 30,
                        1998 Form 10-Q and incorporated by reference herein)

             10.41      First Amendment to Amended and Restated Pledge
                        Agreement, dated as of September 21, 1998, between
                        Crescent Real Estate Equities Limited Partnership and
                        Crescent Operating, Inc. (filed as Exhibit 10.41 to
                        September 30, 1998 Form 10-Q and incorporated by
                        reference herein)

             10.42      First Amendment to Line of Credit and Security
                        Agreement, dated as of August 11, 1998, between Crescent
                        Real Estate Equities Limited Partnership and Crescent
                        Operating, Inc., together with related Note (filed as
                        Exhibit 10.42 to September 30, 1998 Form 10-Q and
                        incorporated by reference herein)

             10.43      First Amendment to Amended and Restated Credit and
                        Security Agreement, dated as of August 11, 1998, between
                        Crescent Real Estate Equities Limited Partnership and
                        Crescent Operating, Inc. (filed as Exhibit 10.43 to
                        September 30, 1998 Form 10-Q and incorporated by
                        reference herein)



                                       38
<PAGE>

             10.44      Second Amendment to Amended and Restated Credit and
                        Security Agreement, dated as of September 21, 1998,
                        between Crescent Real Estate Equities Limited
                        Partnership and Crescent Operating, Inc. (filed as
                        Exhibit 10.44 to September 30, 1998 Form 10-Q and
                        incorporated by reference herein)

             10.45      Second Amendment to Line of Credit and Security
                        Agreement, dated as of September 21, 1998, between
                        Crescent Real Estate Equities Limited Partnership and
                        Crescent Operating, Inc. (filed as Exhibit 10.45 to
                        September 30, 1998 Form 10-Q and incorporated by
                        reference herein)

             10.46      Agreement of Limited Partnership of COPI Colorado, L.P.
                        (filed as Exhibit 10.1 to that Schedule 13D Statement
                        dated September 28, 1998, filed by COPI Colorado, L.P.,
                        Crescent Operating, Inc., Gerald W. Haddock, John C.
                        Goff and Harry H. Frampton, III, and incorporated by
                        reference herein)

             10.47      Contribution Agreement effective as of September 11,
                        1998, by and among Crescent Operating, Inc., Gerald W.
                        Haddock, John C. Goff and Harry H. Frampton, III (filed
                        as Exhibit 10.2 to that Schedule 13D Statement dated
                        September 28, 1998, filed by COPI Colorado, L.P.,
                        Crescent Operating, Inc., Gerald W. Haddock, John C.
                        Goff and Harry H. Frampton, III, and incorporated by
                        reference herein)

             10.48      Agreement Regarding Schedules and Other Matters made as
                        of September 11, 1998, by and among Crescent Operating,
                        Inc., Gerald W. Haddock, John C. Goff and Harry H.
                        Frampton, III (filed as Exhibit 10.3 to that Schedule
                        13D Statement dated September 28, 1998, filed by COPI
                        Colorado, L.P., Crescent Operating Inc., Gerald W.
                        Haddock, John C. Goff and Harry H. Frampton, III, and
                        incorporated by reference herein)

             10.49      Stock Purchase Agreement dated as of August 7, 1998 by
                        and among Western Traction Company, The Carlston Family
                        Trust, Ronald D. Carlston and Crescent Operating, Inc.
                        (filed as Exhibit 10.49 to September 30, 1998 Form 10-Q
                        and incorporated by reference herein)

             10.50      Stock Purchase Agreement dated as of July 31, 1998 by
                        and among Harvey Equipment Center, Inc., L and H Leasing
                        Company, William J. Harvey, Roy E. Harvey, Jr., Betty J.
                        Harvey and Crescent Operating, Inc. (filed as Exhibit
                        10.50 to September 30, 1998 Form 10-Q and incorporated
                        by reference herein)

             10.51      Credit Agreement dated as of July 28, 1998, between
                        Crescent Real Estate Equities Limited Partnership and
                        CRL Investments, Inc., together with the related Note
                        (filed as Exhibit 10.51 to September 30, 1998 Form 10-Q
                        and incorporated by reference herein)

             10.52      Security Agreement dated as of July 28, 1998, between
                        Crescent Real Estate Equities Limited Partnership and
                        CRL Investments, Inc. (filed as Exhibit 10.52 to
                        September 30, 1998 Form 10-Q and incorporated by
                        reference herein)

             10.53      First Amendment to Credit Agreement effective as of
                        August 27, 1998, among Crescent Operating, Inc.,
                        NationsBank, N. A., and the Support Parties identified
                        therein (filed as Exhibit 10.53 to September 30, 1998
                        Form 10-Q and incorporated by reference herein)

             10.54      Lease Agreement dated as of October 13, 1998, between
                        Crescent Real Estate Equities Limited Partnership and
                        Wine Country Golf Club, Inc., relating to Sonoma Golf
                        Club (filed as Exhibit 10.54 to September 30, 1998 Form
                        10-Q and incorporated by reference herein)

             10.55      First Amendment to Lease Agreement effective December
                        31, 1998, between Canyon Ranch Leasing, L.L.C., and
                        Crescent Real Estate Equities Limited Partnership,
                        relating to Canyon Ranch - Tucson (filed as Exhibit
                        10.55 to the Company's Annual Report on Form 10-K for
                        the year ended December 31, 1998 ("December 31, 1998
                        Form 10-K") and incorporated by reference herein)



                                       39
<PAGE>

             10.56      First Amendment to Lease Agreement effective April 1,
                        1996; Second Amendment to Lease Agreement effective
                        November 22, 1996; Third Amendment to Lease Agreement
                        effective August 12, 1998; and Fourth Amendment to Lease
                        Agreement effective December 31, 1998 between RoseStar
                        Southwest, LLC, and Crescent Real Estate Funding II
                        L.P., relating to Hyatt Regency Albuquerque (filed as
                        Exhibit 10.56 to December 31, 1998 Form 10-K and
                        incorporated by reference herein)

             10.57      First Amendment to Lease Agreement effective December
                        31, 1998, between Wine Country Hotel, LLC, and Crescent
                        Real Estate Equities Limited Partnership, relating to
                        Sonoma Mission Inn & Spa (filed as Exhibit 10.57 to
                        December 31, 1998 Form 10-K and incorporated by
                        reference herein)

             10.58      First Amendment to Amended and Restated Lease Agreement
                        effective December 31, 1998, between RoseStar
                        Management, LLC, and Crescent Real Estate Equities
                        Limited Partnership, relating to Marriott City Center,
                        Denver (filed as Exhibit 10.58 to December 31, 1998 Form
                        10-K and incorporated by reference herein)

             10.59      First Amendment to Lease Agreement effective December
                        31, 1998, between Wine Country Hotel, LLC, and Crescent
                        Real Estate Equities Limited Partnership, relating to
                        Ventana Inn (filed as Exhibit 10.59 to December 31, 1998
                        Form 10-K and incorporated by reference herein)

             10.60      First Amendment to Amended and Restated Lease Agreement
                        effective April 1, 1996 and Second Amendment to Amended
                        and Restated Lease Agreement effective December 31,
                        1998, between RoseStar Southwest, LLC, and Crescent Real
                        Estate Funding II, L.P., relating to Hyatt Regency
                        Beaver Creek (filed as Exhibit 10.60 to December 31,
                        1998 Form 10-K and incorporated by reference herein)

             10.61      First Amendment to Lease Agreement effective December
                        31, 1998, between COI Hotel Group, Inc. and Crescent
                        Real Estate Equities Limited Partnership, relating to
                        Four Seasons - Houston (filed as Exhibit 10.61 to
                        December 31, 1998 Form 10-K and incorporated by
                        reference herein)

             10.62      First Amendment to Lease Agreement effective December
                        31, 1998, between Wine Country Hotel, LLC and Crescent
                        Real Estate Funding VI, L.P., relating to Canyon Ranch -
                        Lenox (filed as Exhibit 10.62 to March 31, 1999 Form
                        10-Q and incorporated by reference herein)

             10.63      Master Guaranty effective December 31, 1998, by Crescent
                        Operating, Inc. for the benefit of Crescent Real Estate
                        Equities Limited Partnership, Crescent Real Estate
                        Funding II, L.P., and Crescent Real Estate Funding VI,
                        L.P., relating to leases for Hyatt Regency Albuquerque,
                        Hyatt Regency Beaver Creek, Canyon Ranch-Lenox, Sonoma
                        Mission Inn & Spa, Canyon Ranch - Tucson, and Marriott
                        City Center Denver (filed as Exhibit 10.63 to December
                        31, 1998 Form 10-K and incorporated by reference herein)

             10.64      Guaranty of Lease effective December 19, 1997, by
                        Crescent Operating, Inc. for the benefit of Crescent
                        Real Estate Equities Limited Partnership, relating to
                        Ventana Inn (filed as Exhibit 10.64 to December 31, 1998
                        Form 10-K and incorporated by reference herein)

             10.65      Amended and Restated Guaranty of Lease effective
                        December 31, 1998, by Crescent Operating, Inc. for the
                        benefit of Crescent Real Estate Equities Limited
                        Partnership, relating to Four Seasons Hotel - Houston
                        (filed as Exhibit 10.65 to December 31, 1998 Form 10-K
                        and incorporated by reference herein)

             10.66      Amended and Restated Guaranty of Lease effective
                        December 31, 1998, by Crescent Operating, Inc. for the
                        benefit of Crescent Real Estate Equities Limited
                        Partnership, relating to Sonoma Golf Club (filed as
                        Exhibit 10.66 to December 31, 1998 Form 10-K and
                        incorporated by reference herein)

             10.67      Credit Agreement dated August 11, 1995, between Crescent
                        Development Management



                                       40
<PAGE>

                        Corp., as borrower, and Crescent Real Estate Equities
                        Limited Partnership, as lender; First Amendment to
                        Credit Agreement dated as of April 15, 1997; Second
                        Amendment to Credit Agreement dated as of May 8, 1998;
                        and related Note and Security Agreement (filed as
                        Exhibit 10.67 to December 31, 1998 Form 10-K and
                        incorporated by reference herein)

             10.68      Credit Agreement dated January 1, 1998, between Crescent
                        Development Management Corp., as borrower, and Crescent
                        Real Estate Equities Limited Partnership, as lender, and
                        related Note and Security Agreement (filed as Exhibit
                        10.68 to December 31, 1998 Form 10-K and incorporated by
                        reference herein)

             10.69      $3,100,000 Note dated February 29, 1996, made by
                        Crescent Development Management Corp. payable to
                        Crescent Real Estate Equities Limited Partnership (filed
                        as Exhibit 10.69 to December 31, 1998 Form 10-K and
                        incorporated by reference herein)

             10.70      Credit Agreement dated January 1, 1999, between Crescent
                        Development Management Corp., as borrower, and Crescent
                        Real Estate Equities Limited Partnership, as lender, and
                        related Line of Credit Note and Security Agreement
                        (filed as Exhibit 10.70 to March 31, 1999 Form 10-Q and
                        incorporated by reference herein)

             10.71      Amended and Restated Credit Agreement dated January 1,
                        1999, between Crescent Development Management Corp., as
                        borrower, and Crescent Real Estate Equities Limited
                        Partnership, as lender, and related Line of Credit Note
                        and Amended and Restated Security Agreement (filed as
                        Exhibit 10.71 to March 31, 1999 Form 10-Q and
                        incorporated by reference herein)

             10.72      Purchase Agreement dated March 12, 1999, between
                        Crescent Operating, Inc. and Crescent Real Estate
                        Equities Limited Partnership, relating to sale of
                        interests in Crescent CS Holdings Corp., and Crescent CS
                        Holdings II Corp., and related Put Agreement of same
                        date (filed as Exhibit 10.72 to March 31, 1999 Form 10-Q
                        and incorporated by reference herein)

             10.73      Second Amendment to Lease Agreement effective April 1,
                        1999, between Wine Country Hotel, LLC, and Crescent Real
                        Estate Funding VI, L.P., relating to Canyon Ranch-Lenox
                        (filed as Exhibit 10.73 to March 31, 1999 Form 10-Q and
                        incorporated by reference herein)

             10.74      Master Revolving Line of Credit Loan Agreement
                        (Borrowing Base and Warehouse) dated May 14, 1998,
                        between Desert Mountain Properties Limited Partnership,
                        as borrower, and National Bank of Arizona, as lender;
                        Modification Agreement dated December 30, 1998; second
                        Modification Agreement dated March 31, 1999; and related
                        Promissory Note (Borrowing Base), Promissory Note
                        (Warehouse), Pledge Agreement, Deed of Trust, and
                        Amendment to Deed of Trust (filed as Exhibit 10.74 to
                        March 31, 1999 Form 10-Q and incorporated by reference
                        herein)

             10.75      Lease Agreement dated as of June 15, 1999, between
                        Crescent Real Estate Funding III, L.P. and COI Hotel
                        Group, Inc., relating to the Renaissance Houston Hotel
                        (filed as Exhibit 10.75 to June 30, 1999 Form 10-Q and
                        incorporated by reference herein)

             10.76      Guaranty of Lease dated June 15, 1999, by Crescent
                        Operating, Inc. for the benefit of Crescent Real Estate
                        Funding III, L.P., relating to Renaissance Houston Hotel
                        (filed as Exhibit 10.76 to June 30, 1999 Form 10-Q and
                        incorporated by reference herein)

             10.77      Asset Management Agreement dated as of January 1, 1999,
                        between Crescent Real Estate Equities Limited
                        Partnership and COI Hotel Group, Inc., relating to the
                        Omni Austin Hotel (filed as Exhibit 10.77 to June 30,
                        1999 Form 10-Q and incorporated by reference herein)

             10.78      Agreement dated June 11, 1999, by and between Gerald W.
                        Haddock and Crescent Operating, Inc. and its
                        subsidiaries and affiliates (filed as Exhibit 10.78 to
                        June 30, 1999 Form 10-Q and incorporated by reference
                        herein)



                                       41
<PAGE>

             10.79      Stock Purchase Agreement dated as of July 15, 1999, by
                        and among E. L. Lester & Company, Incorporated, E. L.
                        Lester, Jr., Howard T. Tellepsen II, Karen Tellepsen,
                        Tom Tellepsen II, Linda Lester Griffen, Crescent
                        Operating, Inc. and Crescent Machinery Company (filed as
                        Exhibit 10.79 to the Company's September 30, 1999 Form
                        10-Q ("September 30, 1999 Form 10-Q") and incorporated
                        by reference herein)

             10.80      Stock Purchase Agreement dated as of July 8, 1999, by
                        and among Solveson Crane Rental, Inc., Solveson Family
                        Revocable Trust, and Crescent Machinery Company (filed
                        as Exhibit 10.80 to September 30, 1999 Form 10-Q and
                        incorporated by reference herein)

             10.81      Second Amendment to Credit Agreement effective as of
                        August 27, 1999, among Crescent Operating, Inc., Bank of
                        America, N. A. (formerly NationsBank, N. A.), and the
                        Support Parties identified therein (filed as Exhibit
                        10.81 to September 30, 1999 Form 10-Q and incorporated
                        by reference herein)

             10.82      First Amendment to 1997 Crescent Operating, Inc.
                        Management Stock Incentive Plan (filed as Exhibit 10.82
                        to the Company's December 31, 1999 Form 10-K ("December
                        31, 1999 Form 10-K") and incorporated by reference
                        herein)

             10.83      Form of Sales and Service Agreement between BLAW KNOX
                        Construction Equipment Corporation and certain of
                        Crescent Machinery Company and its subsidiaries (filed
                        as Exhibit 10.83 to December 31, 1999 Form 10-K and
                        incorporated by reference herein)

             10.84      Form of Heavy Equipment Distributor Agreement between
                        Compaction America, Inc. and certain of Crescent
                        Machinery Company and its subsidiaries (filed as Exhibit
                        10.84 to December 31, 1999 Form 10-K and incorporated by
                        reference herein)

             10.85      Form of Gradall Equipment Distributor Agreement between
                        The Gradall Company and certain of Crescent Machinery
                        Company and its subsidiaries (filed as Exhibit 10.85 to
                        December 31, 1999 Form 10-K and incorporated by
                        reference herein)

             10.86      Form of Distributor Selling Agreement between
                        Ingersoll-Rand Company and certain of Crescent Machinery
                        Company and its subsidiaries (filed as Exhibit 10.86 to
                        December 31, 1999 Form 10-K and incorporated by
                        reference herein)

             10.87      Form of JCB Dealership Agreement between JCB Inc. and
                        certain of Crescent Machinery Company and its
                        subsidiaries (filed as Exhibit 10.87 to December 31,
                        1999 Form 10-K and incorporated by reference herein)

             10.88      Form of Distributor Agreement between LBX Company, LLC,
                        and certain of Crescent Machinery Company and its
                        subsidiaries (filed as Exhibit 10.88 to December 31,
                        1999 Form 10-K and incorporated by reference herein)

             10.89      Form of Distributor Agreement between Liebherr
                        Construction Equipment Co. and certain of Crescent
                        Machinery Company and its subsidiaries (filed as Exhibit
                        10.89 to December 31, 1999 Form 10-K and incorporated by
                        reference herein)

             10.90      Form of Distributor Agreement between Link-Belt
                        Construction Equipment Company and certain of Crescent
                        Machinery Company and its subsidiaries (filed as Exhibit
                        10.90 to December 31, 1999 Form 10-K and incorporated by
                        reference herein)

             10.91      Form of Dealer Floor Plan Financing and Security
                        Agreement between General Electric Capital Corporation
                        and certain of Crescent Machinery Company and its
                        subsidiaries (filed as Exhibit 10.91 to December 31,
                        1999 Form 10-K and incorporated by reference herein)

             10.92      Taxable REIT Subsidiary Election Agreement dated
                        December 17, 1999, among Crescent Real Estate Equities
                        Company, Crescent Real Estate Equities Limited
                        Partnership, Crescent



                                       42
<PAGE>

                        Operating, Inc. and Crescent Development Management
                        Corp. (filed as Exhibit 10.92 to December 31, 1999 Form
                        10-K and incorporated by reference herein)

             10.93      Taxable REIT Subsidiary Election Agreement dated
                        December 17, 1999, among Crescent Real Estate Equities
                        Company, Crescent Real Estate Equities Limited
                        Partnership, Crescent Operating, Inc. and Crescent CS
                        Holdings II Corp. (filed as Exhibit 10.93 to December
                        31, 1999 Form 10-K and incorporated by reference herein)

             10.94      Taxable REIT Subsidiary Election Agreement dated
                        December 17, 1999, among Crescent Real Estate Equities
                        Company, Crescent Real Estate Equities Limited
                        Partnership, Crescent Operating, Inc. and Crescent CS
                        Holdings Corp. (filed as Exhibit 10.94 to December 31,
                        1999 Form 10-K and incorporated by reference herein)

             10.95      Taxable REIT Subsidiary Election Agreement dated
                        December 17, 1999, among Crescent Real Estate Equities
                        Company, Crescent Real Estate Equities Limited
                        Partnership, Crescent Operating, Inc. and Desert
                        Mountain Development Corp. (filed as Exhibit 10.95 to
                        December 31, 1999 Form 10-K and incorporated by
                        reference herein)

             10.96      Taxable REIT Subsidiary Election Agreement dated
                        December 17, 1999, among Crescent Real Estate Equities
                        Company, Crescent Real Estate Equities Limited
                        Partnership, Crescent Operating, Inc. and The Woodlands
                        Land Company, Inc. (filed as Exhibit 10.96 to December
                        31, 1999 Form 10-K and incorporated by reference herein)

             10.97      $19.5 Million Credit and Security Agreement affective as
                        of March 11, 1999, between Crescent Real Estate Equities
                        Limited Partnership and Crescent Operating, Inc. with
                        related Promissory Note (filed as Exhibit 10.97 to
                        December 31, 1999 Form 10-K and incorporated by
                        reference herein)

             10.98      First Amendment to Credit and Security Agreement
                        effective as of March 11, 1999, between Crescent Real
                        Estate Equities Limited Partnership and Crescent
                        Operating, Inc. (filed as Exhibit 10.98 to December 31,
                        1999 Form 10-K and incorporated by reference herein)

             10.99      Third Amendment to Amended and Restated Credit and
                        Security Agreement effective as of March 11, 1999,
                        between Crescent Real Estate Equities Limited
                        Partnership and Crescent Operating, Inc. (filed as
                        Exhibit 10.99 to December 31, 1999 Form 10-K and
                        incorporated by reference herein)

             10.100     Third Amendment to Line of Credit Credit and Security
                        Agreement effective as of March 11, 1999, between
                        Crescent Real Estate Equities Limited Partnership and
                        Crescent Operating, Inc. (filed as Exhibit 10.100 to
                        December 31, 1999 Form 10-K and incorporated by
                        reference herein)

             10.101     Agreements for Wholesale Financing (with Addendum)
                        between Deutsche Financial Services Corporation and,
                        respectively, Western Traction Company, Machinery Inc.,
                        Solveson Crane Rentals Inc., Harvey Equipment Center
                        Inc., and Crescent Machinery Company, with Guarantees
                        (filed as Exhibit 10.101 to December 31, 1999 Form 10-K
                        and incorporated by reference herein)

             10.102     Master Security Agreements between Associates Commercial
                        Corporation and, respectively, Crescent Machinery
                        Company and Western Traction Company; Security Agreement
                        between Associates Commercial Corporation and Western
                        Traction Company; Addendum; and Continuing Guaranty by
                        Crescent Machinery Company (filed as Exhibit 10.102 to
                        December 31, 1999 Form 10-K and incorporated by
                        reference herein)

             10.103     First Amendment to Amended and Restated Credit Agreement
                        dated as of December 20, 1999, between Crescent Real
                        Estate Equities Limited Partnership and Crescent
                        Development Management Corp. with related Line of Credit
                        Note and letter amendment to related security agreement
                        (filed as Exhibit 10.103 to December 31, 1999 Form 10-K
                        and incorporated by reference herein)



                                       43
<PAGE>

             10.104     $5,600,000 Promissory Note dated February 28, 2000, made
                        by East West Resorts, LLC payable to Crescent Real
                        Estate Equities Limited Partnership (filed as Exhibit
                        10.104 to the Company's March 31, 2000 Form 10-Q ("March
                        31, 2000 Form 10-Q") and incorporated by reference
                        herein)

             10.105     Mutual Termination of Asset Management Agreement for
                        Omni Austin Hotel, Austin, Texas, effective January 31,
                        2000, between Crescent Real Estate Equities Limited
                        Partnership and COI Hotel Group, Inc. (filed as Exhibit
                        10.105 to March 31, 2000 Form 10-Q and incorporated by
                        reference herein)

             10.106     Master Asset Management and Administrative Services
                        Agreement dated February 1, 2000, by and among Sonoma
                        Management Corp. I, Crescent Operating, Inc. and each of
                        its subsidiaries identified therein (filed as Exhibit
                        10.106 to March 31, 2000 Form 10-Q and incorporated by
                        reference herein)

             10.107     Management Agreement effective February 1, 2000, between
                        Sonoma Management Corp. I, as Manager, and Crescent Real
                        Estate Funding VIII, L.P., as Owner and assignor to the
                        Company, relating to Ventana Inn & Spa (filed as Exhibit
                        10.107 to March 31, 2000 Form 10-Q and incorporated by
                        reference herein)

             10.108     Management Agreement effective February 1, 2000, between
                        Sonoma Management Corp. I, as Manager, and Crescent Real
                        Estate Funding VIII, L.P., as Owner and assignor to the
                        Company, relating to Sonoma Mission Inn Golf and Country
                        Club (filed as Exhibit 10.108 to March 31, 2000 Form
                        10-Q and incorporated by reference herein)

             10.109     Management Agreement effective February 1, 2000, between
                        Sonoma Management Corp. I, as Manager, and Crescent Real
                        Estate funding VIII, L.P., as Owner and assignor to the
                        Company, relating to Sonoma Mission Inn and Spa (filed
                        as Exhibit 10.109 to March 31, 2000 Form 10-Q and
                        incorporated by reference herein)

             10.110     Termination of Lease Agreement for The Four Seasons
                        Hotel, Houston, effective November 3, 2000, between COI
                        Hotel Group, Inc. and Crescent Real Estate Funding IX,
                        L.P. (filed as Exhibit 10.110 to the Company's September
                        30, 2000 Form 10-Q ("September 30, 2000 Form 10-Q") and
                        incorporated by reference herein)

             10.111     First Amendment to Credit and Security agreement
                        effective February 1, 2000, between Crescent Realty
                        Estate Equities Limited Partnership and Crescent
                        Operating, Inc. relating to $19.5 Million Credit and
                        Security Agreement effective March 11, 1999 (filed as
                        Exhibit 10.111 to September 30, 2000 Form 10-Q and
                        incorporated by reference herein)

             10.112     Second Amendment to Credit and Security Agreement
                        effective February 1, 2000, between Crescent Real Estate
                        Equities Limited Partnership and Crescent Operating,
                        Inc. relating to $9 Million Credit and Security
                        Agreement effective September 21, 1998 (filed as Exhibit
                        10.112 to September 30, 2000 Form 10-Q and incorporated
                        by reference herein)

             10.113     Fourth Amendment to Amended and Restated Credit and
                        Security Agreement effective February 1, 2000, between
                        Crescent Real Estate Equities Limited Partnership and
                        Crescent Operating, Inc. relating to Amended and
                        Restated Credit and Security Agreement effective May 21,
                        1997 (filed as Exhibit 10.113 to September 30, 2000 Form
                        10-Q and incorporated by reference herein)

             10.114     Fourth Amendment to Line of Credit Credit and Security
                        Agreement effective February 1, 2000, between Crescent
                        Real Estate Equities Limited Partnership and Crescent
                        Operating, Inc. relating to Line of Credit Credit and
                        Security Agreement effective May 21, 1997 (filed as
                        Exhibit 10.114 to September 30, 2000 Form 10-Q and
                        incorporated by reference herein)

             10.115     Credit Agreement dated September 21, 2000, between
                        Crescent Development Management



                                       44
<PAGE>

                        Corp., as borrower, and Crescent Real Estate Equities
                        Limited Partnership, as lender, and related Line of
                        Credit Note and Security Agreement (filed as Exhibit
                        10.115 to December 31, 2000 Form 10-K and incorporated
                        by reference herein)

             10.116     Assignment of Interest in East West Resorts, LLC (CDMC
                        to COPI); Assignment of Interest in East West Resorts,
                        LLC (COPI to CDMC); and Assignment, Assumption and
                        Consent Agreement dated December 31, 2000, among
                        Crescent Development Management Corp., Crescent
                        Development Management Corp. II, and Crescent Real
                        Estate Equities Limited Partnership (filed as Exhibit
                        10.116 to December 31, 2000 Form 10-K and incorporated
                        by reference herein)

             10.117     Assignment of Membership Interest dated December 29,
                        2000 between Crescent Operating, Inc. and Rockwood
                        Financial Group, Inc.; Assignment of Membership Interest
                        dated December 29, 2000 between COPI CBHS Holdings, L.P.
                        and Rockwood Financial Group, Inc.; and related
                        Indemnification Agreement dated December 29, 2000 among
                        COPI CBHS Holdings, L.P., Crescent Operating, Inc. and
                        Rockwood Financial Group, Inc. (filed as Exhibit 10.117
                        to December 31, 2000 Form 10-K and incorporated by
                        reference herein)

             10.118     Severance Agreement dated February 5, 2001, between
                        Richard P. Knight and Crescent Operating, Inc. and
                        Crescent Machinery Company (filed as Exhibit 10.118 to
                        March 31, 2001 Form 10-Q and incorporated by reference
                        herein)

             10.119     Second Amendment to Credit and Security Agreement
                        effective January 31, 2001, between Crescent Real Estate
                        Equities Limited Partnership and Crescent Operating,
                        Inc. relating to $19.5 million Credit and Security
                        Agreement effective March 11, 1999 (filed as Exhibit
                        10.119 to March 31, 2001 Form 10-Q and incorporated by
                        reference herein)

             10.120     Third Amendment to Credit and Security Agreement
                        effective January 31, 2001, between Crescent Real Estate
                        Equities Limited Partnership and Crescent Operating,
                        Inc. relating to $9.0 million Credit and Security
                        Agreement effective September 21, 1998 (filed as Exhibit
                        10.120 to March 31, 2001 Form 10-Q and incorporated by
                        reference herein)

             10.121     Fifth Amendment to Line of Credit Credit and Security
                        Agreement effective January 31, 2001, between Crescent
                        Real Estate Equities Limited Partnership and Crescent
                        Operating, Inc. relating to Line of Credit Credit and
                        Security Agreement effective May 21, 1997 (filed as
                        Exhibit 10.121 to March 31, 2001 Form 10-Q and
                        incorporated by reference herein)

             10.122     Fifth Amendment to Amended and Restated Credit and
                        Security Agreement effective January 31, 2001, between
                        Crescent Real Estate Equities Limited Partnership and
                        Crescent Operating, Inc. relating to Amended and
                        Restated Credit and Security Agreement effective May 21,
                        1997 (filed as Exhibit 10.122 to March 31, 2001 Form
                        10-Q and incorporated by reference herein)

             10.123     Third Amendment to Credit and Security Agreement
                        effective February 15, 2001, between Crescent Real
                        Estate Equities Limited Partnership and Crescent
                        Operating, Inc. relating to $19.5 million Credit and
                        Security Agreement effective March 11, 1999 (filed as
                        Exhibit 10.123 to March 31, 2001 Form 10-Q and
                        incorporated by reference herein)

             10.124     Fourth Amendment to Credit and Security Agreement
                        effective February 15, 2001, between Crescent Real
                        Estate Equities Limited Partnership and Crescent
                        Operating, Inc. relating to $9.0 million Credit and
                        Security Agreement effective September 21, 1998 (filed
                        as Exhibit 10.124 to March 31, 2001 Form 10-Q and
                        incorporated by reference herein)

             10.125     Sixth Amendment to Line of Credit Credit and Security
                        Agreement effective February 15, 2001, between Crescent
                        Real Estate Equities Limited Partnership and Crescent
                        Operating, Inc. relating to Line of Credit Credit and
                        Security Agreement effective May 21, 1997 (filed as
                        Exhibit 10.125 to March 31, 2001 Form 10-Q and
                        incorporated by reference herein)

             10.126     Sixth Amendment to Amended and Restated Credit and
                        Security Agreement effective February 15, 2001, between
                        Crescent Real Estate Equities Limited Partnership and



                                       45
<PAGE>

                        Crescent Operating, Inc. relating to Amended and
                        Restated Credit and Security Agreement effective May 21,
                        1997 (filed as Exhibit 10.126 to March 31, 2001 Form
                        10-Q and incorporated by reference herein)

             10.127     Fourth Amendment to Credit and Security Agreement
                        effective March 5, 2001, between Crescent Real Estate
                        Equities Limited Partnership and Crescent Operating,
                        Inc. relating to $19.5 million Credit and Security
                        Agreement effective March 11, 1999 (filed as Exhibit
                        10.127 to March 31, 2001 Form 10-Q and incorporated by
                        reference herein)

             10.128     Fifth Amendment to Credit and Security Agreement
                        effective March 5, 2001, between Crescent Real Estate
                        Equities Limited Partnership and Crescent Operating,
                        Inc. relating to $9.0 million Credit and Security
                        Agreement effective September 21, 1998 (filed as Exhibit
                        10.128 to March 31, 2001 Form 10-Q and incorporated by
                        reference herein)

             10.129     Seventh Amendment to Line of Credit Credit and Security
                        Agreement effective March 5, 2001, between Crescent Real
                        Estate Equities Limited Partnership and Crescent
                        Operating, Inc. relating to Line of Credit Credit and
                        Security Agreement effective May 21, 1997 (filed as
                        Exhibit 10.129 to March 31, 2001 Form 10-Q and
                        incorporated by reference herein)

             10.130     Seventh Amendment to Amended and Restated Credit and
                        Security Agreement effective March 5, 2001, between
                        Crescent Real Estate Equities Limited Partnership and
                        Crescent Operating, Inc. relating to Amended and
                        Restated Credit and Security Agreement effective May 21,
                        1997 (filed as Exhibit 10.130 to March 31, 2001 Form
                        10-Q and incorporated by reference herein)

             10.131     Management Rights Agreement dated as of February 6,
                        2001, by and among Crescent Operating, Inc., Crescent
                        Machinery Company, Crescent Machinery Company, LP, and
                        SunTX Capital Management Corp. (filed as Exhibit 10.131
                        to June 30, 2001 Form 10-Q and incorporated by reference
                        herein)

             10.132     Fifth Amendment to Credit and Security Agreement
                        effective June 28, 2001, between Crescent Real Estate
                        Equities Limited Partnership and Crescent Operating,
                        Inc. relating to $19.5 million Credit and Security
                        Agreement effective March 11, 1999 (filed as Exhibit
                        10.132 to December 31, 2001 Form 10-K and incorporated
                        by reference herein)

             10.133     Sixth Amendment to Credit and Security Agreement
                        effective June 28, 2001, between Crescent Real Estate
                        Equities Limited Partnership and Crescent Operating,
                        Inc. relating to $9.0 million Credit and Security
                        Agreement effective September 21, 1998 (filed as Exhibit
                        10.133 to December 31, 2001 Form 10-K and incorporated
                        by reference herein)

             10.134     Eighth Amendment to Line of Credit Credit and Security
                        Agreement effective June 28, 2001, between Crescent Real
                        Estate Equities Limited Partnership and Crescent
                        Operating, Inc. relating to Line of Credit Credit and
                        Security Agreement effective May 21, 1997 (filed as
                        Exhibit 10.134 to December 31, 2001 Form 10-K and
                        incorporated by reference herein)

             10.135     Eighth Amendment to Amended and Restated Credit and
                        Security Agreement effective June 28, 2001, between
                        Crescent Real Estate Equities Limited Partnership and
                        Crescent Operating, Inc. relating to Amended and
                        Restated Credit and Security Agreement effective May 21,
                        1997 (filed as Exhibit 10.135 to December 31, 2001 Form
                        10-K and incorporated by reference herein)

             10.136     Sixth Amendment to Credit and Security Agreement
                        effective October 31, 2001, between Crescent Real Estate
                        Equities Limited Partnership and Crescent Operating,
                        Inc. relating to $19.5 million Credit and Security
                        Agreement effective March 11, 1999 (filed as Exhibit
                        10.136 to December 31, 2001 Form 10-K and incorporated
                        by reference herein)

             10.137     Seventh Amendment to Credit and Security Agreement
                        effective October 31, 2001, between Crescent Real Estate
                        Equities Limited Partnership and Crescent Operating,
                        Inc. relating to $9.0 million Credit and Security
                        Agreement effective September 21, 1998 (filed as Exhibit
                        10.137 to December 31, 2001 Form 10-K and incorporated
                        by reference herein)



                                       46
<PAGE>

             10.138     Ninth Amendment to Line of Credit Credit and Security
                        Agreement effective October 31, 2001, between Crescent
                        Real Estate Equities Limited Partnership and Crescent
                        Operating, Inc. relating to Line of Credit Credit and
                        Security Agreement effective May 21, 1997 (filed filed
                        as Exhibit 10.138 to December 31, 2001 Form 10-K and
                        incorporated by reference herein)

             10.139     Ninth Amendment to Amended and Restated Credit and
                        Security Agreement effective October 31, 2001, between
                        Crescent Real Estate Equities Limited Partnership and
                        Crescent Operating, Inc. relating to Amended and
                        Restated Credit and Security Agreement effective May 21,
                        1997 (filed as Exhibit 10.139 to December 31, 2001 Form
                        10-K and incorporated by reference herein)

             10.140     Agreement for the Purchase and Sale of Assets and Stock
                        dated June 28, 2001 by and among Crescent Real Estate
                        Equities Limited Partnership and Crescent Operating,
                        Inc., Rosestar Management LLC, Canyon Ranch Leasing,
                        L.L.C., Wine Country Hotel, LLC, Rosestar Southwest,
                        LLC, COI Hotel Group, Inc. and COPI Colorado, LP (filed
                        as Annex A to Proxy Statement for 2001 Annual Meeting of
                        Shareholders and incorporated by reference herein)

             10.141     Amended and Restated Securities Purchase Agreement, made
                        and entered into as of June 28, 2001, amended and
                        restated as of October 31, 2001 by and among Crescent
                        Machinery Company, L.P., Crescent Machinery Holdings,
                        L.P., CMC GP, LLC, Crescent Machinery Company, Crescent
                        Operating, Inc., COPI Colorado, LP, CRE Equipment
                        Holdings, LLC, Crescent Real Estate Equities Limited
                        Partnership, and SunTX CMLP, Inc. (filed as Annex E to
                        Proxy Statement for 2001 Annual Meeting of Shareholders
                        and incorporated by reference herein)

             10.142     Third Amendment to Credit Agreement effective as of
                        August 27, 2001, among Crescent Operating, Inc., Bank of
                        America, N.A. (formerly NationsBank, N.A.), and the
                        Support Parties identified therein (filed as Exhibit
                        10.142 to December 31, 2001 Form 10-K and incorporated
                        by reference herein)

             10.143     Fourth Amendment to Credit Agreement effective as of
                        November 27, 2001, among Crescent Operating, Inc., Bank
                        of America, N.A. (formerly NationsBank, N.A.), and the
                        Support Parties identified therein, together with
                        related $15.0 million promissory note (filed as Exhibit
                        10.143 to December 31, 2001 Form 10-K and incorporated
                        by reference herein)

             10.144     Fifth Amendment to Credit Agreement effective as of
                        December 31, 2001, among Crescent Operating, Inc., Bank
                        of America, N.A. (formerly NationsBank, N.A.), and the
                        Support Parties identified therein, together with
                        related $15.0 million promissory note, modified and
                        extended as of December 31, 2001 (filed as Exhibit
                        10.144 to December 31, 2001 Form 10-K and incorporated
                        by reference herein)

             10.145     Assignment/Pledge (Security Agreement) effective as of
                        December 31, 2001 by Crescent Operating to Bank of
                        America, N.A. (formerly NationsBank, N.A.) (filed as
                        Exhibit 10.145 to December 31, 2001 Form 10-K and
                        incorporated by reference herein)

             10.146     Settlement Agreement dated as of February 14, 2002, by
                        and among Crescent Real Estate Equities Limited
                        Partnership, Crescent Real Estate Equities Company and
                        Crescent Operating, Inc., Rosestar Management LLC,
                        Canyon Ranch Leasing, L.L.C., Wine Country Hotel, LLC,
                        Rosestar Southwest, LLC and COI Hotel Group, Inc. (filed
                        as Exhibit 2.1 to the Company's Current Report on Form
                        8-K filed March 31, 2002, and incorporated by reference
                        herein)

             10.147     Promissory Note, dated as of February 14, 2002, executed
                        by Crescent Operating, Inc. and payable to Crescent Real
                        Estate Equities Limited Partnership in the amount of
                        $8,575,000.00 (filed as Exhibit 2.2 to the Company's
                        Current Report on Form 8-K filed March 1, 2002, and
                        incorporated by reference herein)



                                       47
<PAGE>

             10.148     Amended Promissory Note, dated as of August 14, 2002,
                        executed by Crescent Operating, Inc. and payable to Bank
                        of America, N.A. in the amount of $15,000,000 along with
                        related Confirmation of Subordination Agreement and
                        Sixth Amendment to Credit Agreement (filed herewith.)

     (b) Reports on Form 8-K

     On August 22, 2002, Crescent Operating filed a Current Report on Form 8-K
     dated August 22, 2002, with the Securities and Exchange Commission to
     report certification pursuant to Section 906 of the Sarbanes-Oxley Act of
     2002, by Crescent Operating's President, Chief Executive Officer and Chief
     Financial and Accounting Officer, of the financial statements included in
     the Company's Form 10-Q for the quarterly period ended June 30, 2002.




                                       48
<PAGE>

                                   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 thereunto duly authorized, on the 14th day of November, 2002.

                                    CRESCENT OPERATING, INC.
                                    (Registrant)




                                    By /s/ Jeffrey L. Stevens
                                       -----------------------------------------
                                       Jeffrey L. Stevens
                                       President, Chief Executive Officer,
                                       Chief Financial and Accounting Officer






                                       49
<PAGE>
                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002



I, Jeffrey L. Stevens, President, Chief Executive Officer and Chief Financial
and Accounting Officer of Crescent Operating, Inc. certify that:

(1)      I have reviewed this quarterly report on Form 10-Q of Crescent
         Operating, Inc.;

(2)      Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

(3)      Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operation and
         cash flows of the registrant as of, and for, the periods represented in
         this quarterly report;

(4)      The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         (a)      designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this quarterly report is being prepared;

         (b)      evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this quarterly report (the "Evaluation
                  Date"); and

         (c)      presented in this quarterly report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

(5)      The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         (a)      all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls; and

         (b)      any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

(6)      The registrant's other certifying officers and I have indicated in this
         quarterly report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.

Date: November 14, 2002
                                      By  /s/ Jeffrey L. Stevens
                                         --------------------------------------
                                         Jeffrey L. Stevens
                                         President, Chief Executive Officer and
                                         Chief Financial and Accounting Officer


                                       50
<PAGE>


                               INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBIT
NUMBER                   DESCRIPTION
-------                  -----------
<S>                      <C>

   10.148                Amended Promissory Note, dated as of August 14, 2002,
                         executed by Crescent Operating, Inc. and payable to
                         Bank of America, N.A. in the amount of $15,000,000
                         along with related Confirmation of Subordination
                         Agreement and Sixth Amendment to Credit Agreement
                         (filed herewith.)

</Table>