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                                                                 EXHIBIT 10.39

                          1997 CRESCENT OPERATING, INC.

                         MANAGEMENT STOCK INCENTIVE PLAN

                                    ARTICLE I
                                    THE PLAN


     1.1 NAME. This plan will be known as the "1997 Crescent Operating, Inc.
Management Stock Incentive Plan." Capitalized terms used herein are defined in
Article X hereof.


     1.2 PURPOSE. The purpose of the Plan is to promote the growth and general
prosperity of the Company by permitting the Company and its Subsidiaries to
grant Options to their Employees, Outside Directors and Advisors and Restricted
Stock to their Employees and Advisors. The Plan is designed to help the Company
and its Subsidiaries attract and retain superior personnel for positions of
substantial responsibility and to provide Employees (including officers),
Outside Directors and Advisors with an additional incentive to contribute to the
success of the Company and its Subsidiaries. The Company intends that Incentive
Stock Options granted pursuant to Article IV will qualify as "incentive stock
options" within the meaning of Section 422 of the Code. Subject to Article VII,
Outside Directors of the Company may elect to receive Common Stock in lieu of
Director's Fees. With respect to Reporting Participants, transactions under the
Plan are intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent that any provision of the Plan
or action by the Board or the Committee fails to so comply, it will be deemed
null and void to the extent permitted by law and deemed advisable by the
Committee.


     1.3 EFFECTIVE DATE. The Plan will become effective upon the Effective Date.


     1.4 ELIGIBILITY TO PARTICIPATE. Any Employee, Outside Director or Advisor
will be eligible to participate in the Plan; provided that Incentive Stock
Options may be granted only to persons who are Employees of the Company and its
Subsidiaries. The Board or the Committee may grant Options to Employees, Outside
Directors and Advisors in accordance with such determinations as the Board or
the Committee from time to time in its sole discretion may make.


     1.5 MAXIMUM NUMBER OF SHARES OF COMMON STOCK SUBJECT TO AWARDS. The shares
of Common Stock subject to Awards pursuant to the Plan may be either authorized
and unissued shares or shares issued and thereafter acquired by the Company.
Subject to adjustment pursuant to the provisions of Section 8.2, and subject to
any additional restrictions elsewhere in the Plan, the maximum aggregate number
of shares of Common Stock that may be issued from time to time pursuant to the
Plan shall be one million (1,000,000) shares. The maximum number of shares of
Common Stock with respect to which Awards may be granted to any Reporting
Participant during any calendar year shall be five hundred thousand (500,000)
shares. The maximum number of shares of Common Stock which may be subject to
Incentive Stock Options during the life of the Plan shall be fifty thousand
(50,000) shares. If shares of Restricted 



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Stock are reacquired by the Company pursuant to the provisions of Section 6.1 of
the Plan or if an Option expires or terminates for any reason without having
been exercised in full, the reacquired shares and/or the shares not purchased or
distributed will again be available for issuance under the Plan.

     1.6 CONDITIONS PRECEDENT. The Company will not issue or deliver any
certificate for Plan Shares pursuant to the Plan prior to fulfillment of all of
the following conditions:

                   (a) The admission of the Plan Shares to listing on all stock
         exchanges on which the Common Stock is then listed, unless the Board or
         the Committee determines in its sole discretion that such listing is
         neither necessary nor advisable;

                   (b) The completion of any registration or other qualification
         of the sale of the Plan Shares under any federal or state law or under
         the rulings or regulations of the Securities and Exchange Commission or
         any other governmental regulatory body that the Board or the Committee
         in its sole discretion deems necessary or advisable; and

                   (c) The obtaining of any approval or other clearance from any
         federal or state governmental agency that the Board or the Committee in
         its sole discretion determines to be necessary or advisable.

     1.7 RESERVATION OF SHARES OF COMMON STOCK. During the term of the Plan, the
Company will at all times reserve and keep available such number of shares of
Common Stock as may be necessary to satisfy the requirements of the Plan as to
the number of Plan Shares. In addition, the Company will from time to time, as
is necessary to accomplish the purposes of the Plan, use its best efforts to
obtain from any regulatory agency having jurisdiction any requisite authority
necessary to issue Plan Shares hereunder. The inability of the Company to obtain
from any regulatory agency having jurisdiction the authority deemed by the
Company's counsel to be necessary for the lawful issuance of any Plan Shares
will relieve the Company of any liability in respect of the nonissuance of Plan
Shares as to which the requisite authority has not been obtained.

     1.8 TAX WITHHOLDING.

                   (a) Condition Precedent. The issuances of Plan Shares
         pursuant to Awards under the Plan are subject to the condition that if
         at any time the Board or the Committee determines, in its discretion,
         that the satisfaction of withholding tax or other withholding
         liabilities under any federal, state or local law is necessary or
         desirable as a condition of, or in connection with such issuances, then
         the issuances will not be effective unless the withholding has been
         effected or obtained in a manner acceptable to the Board or the
         Committee. Each Option granted to a Reporting Participant shall contain
         a provision in the related Option Agreement making any required
         withholding tax or other withholding liability mandatory, and
         specifying that the Company withhold a portion of the Plan Shares as
         specified in clause (iv) of paragraph (b) below.


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                   (b) Manner of Satisfying Withholding Obligation. When a
         Participant is required to pay to the Company an amount required to be
         withheld under applicable income tax laws in connection with an Award,
         such payment may be made (i) in cash, (ii) by check, (iii) by delivery
         to the Company of shares of Common Stock already owned by the
         Participant having a Fair Market Value on the date the amount of tax to
         be withheld is to be determined (the "Tax Date") equal to the amount
         required to be withheld, (iv) with respect to Options, through the
         withholding by the Company ("Company Withholding") of a portion of the
         Plan Shares acquired upon the exercise of the Options (provided that,
         with respect to any Option held by a Reporting Participant, at least
         six months has elapsed between the grant of such Option and the
         exercise involving tax withholding) having a Fair Market Value on the
         Tax Date equal to the amount required to be withheld or (v) in any
         other form of valid consideration, as permitted by the Committee in its
         discretion.


                   (c) Notice of Disposition of Stock Acquired Pursuant to
         Incentive Stock Options. The Company may require as a condition to the
         issuance of Plan Shares covered by any Incentive Stock Option that the
         party exercising such Option give a written representation to the
         Company, which is satisfactory in form and substance to its counsel and
         upon which the Company may reasonably rely, that he will report to the
         Company any disposition of such shares prior to the expiration of the
         holding periods specified by Section 422(a)(1) of the Code. If and to
         the extent that the realization of income in such a disposition imposes
         upon the Company federal, state or local withholding tax requirements,
         or any such withholding is required to secure for the Company an
         otherwise available tax deduction, the Company will have the right to
         require that the recipient remit to the Company an amount sufficient to
         satisfy those requirements; and the Company may require as a condition
         to the issuance of Plan Shares covered by an Incentive Stock Option
         that the party exercising such Option give a satisfactory written
         representation promising to make such a remittance.


     1.9 ACCELERATION IN CERTAIN EVENTS. The Board or the Committee may
accelerate the exercisability of any Option or waive any restrictions with
respect to shares of Restricted Stock in whole or in part at any time.
Notwithstanding the provisions of any Option Agreement or Restricted Stock
Agreement, the following provisions will apply:


                   (a) Mergers and Reorganizations. If the Company or its
         shareholders enter into an agreement to dispose of all or substantially
         all of the assets of the Company by means of a sale, merger or other
         reorganization, liquidation or otherwise in a transaction in which the
         Company is not the surviving corporation, any Option will become
         immediately exercisable with respect to the full number of shares
         subject to that Option and all restrictions will lapse with respect to
         an Award of Restricted Stock during the period commencing as of the
         date of the agreement to dispose of all or substantially all of the
         assets of the Company and ending when the disposition of assets
         contemplated by that agreement is consummated or the Award is otherwise
         terminated in accordance with its provisions or the provisions of the
         Plan, whichever occurs first; provided that no Reporting Participant
         may exercise an Option and no restrictions will lapse with respect to
         an 



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         Award of Restricted Stock to a Reporting Participant unless at least
         six months have elapsed since the grant of such Option or Award;
         provided, further, that no Option will be immediately exercisable and
         no restrictions will lapse with respect to an Award of Restricted Stock
         under this Section on account of any agreement of merger or other
         reorganization when the shareholders of the Company immediately before
         the consummation of the transaction will own at least fifty percent of
         the total combined voting power of all classes of stock entitled to
         vote of the surviving entity immediately after the consummation of the
         transaction. An Option will not become immediately exercisable and no
         restrictions will lapse with respect to an Award of Restricted Stock if
         the transaction contemplated in the agreement is a merger or
         reorganization in which the Company will survive.

                   (b) Change in Control. In the event of a change in control or
         threatened change in control of the Company, all Options granted prior
         to the change in control or threatened change in control will become
         immediately exercisable, and all restrictions will lapse with respect
         to awards of Restricted Stock granted prior to the change in control or
         threatened change in control, provided that no Reporting Participant
         may exercise an Option and no restriction will lapse with respect to an
         Award of Restricted Stock to a Reporting Participant unless at least
         six months have elapsed since the grant of such Option or Award. The
         term "change in control" for purposes of this Section refers to the
         acquisition of 15% or more of the voting securities of the Company by
         any person or by persons acting as a group within the meaning of
         Section 13(d)(3) of the Exchange Act (other than an acquisition by (i)
         a person or group meeting the requirements of clauses (i) and (ii) of
         Rule 13d-l(b)(1) promulgated under the Exchange Act, (ii) or any
         employee pension benefit plan (within the meaning of Section 3(2) of
         ERISA) of the Company or of its Subsidiaries, including a trust
         established pursuant to such plan); provided that no change in control
         or threatened change in control will be deemed to have occurred (i) if
         prior to the acquisition of, or offer to acquire, 15% or more of the
         voting securities of the Company, the full Board has adopted by not
         less than two-thirds vote a resolution specifically approving such
         acquisition or offer or (ii) from (A) a transfer of the Company's
         voting securities by Richard E. Rainwater ("Rainwater") to (i) a member
         of Rainwater's immediate family (within the meaning of Rule 16a-1(e) of
         the Exchange Act) either during Rainwater's lifetime or by will or the
         laws of descent and distribution; (ii) any trust as to which Rainwater
         or a member (or members) of his immediate family (within the meaning of
         Rule 16a-1(e) of the Exchange Act) is the beneficiary; (iii) any trust
         as to which Rainwater is the settlor with sole power to revoke; (iv)
         any entity over which Rainwater has the power, directly or indirectly,
         to direct or cause the direction of the management and policies of the
         entity, whether through the ownership of voting securities, by contract
         or otherwise; or (v) any charitable trust, foundation or corporation
         under Section 501(c)(3) of the Code that is funded by Rainwater; or (B)
         the acquisition of voting securities of the Corporation by either (i)
         Rainwater or (ii) a person, trust or other entity described in the
         foregoing clauses (A)(i)-(v) of this subsection. The term "person" for
         purposes of this Section refers to an individual or a corporation,
         partnership, trust, association, joint venture, pool, syndicate, sole
         proprietorship, unincorporated organization 



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         or any other form of entity not specifically listed herein. Whether a
         change in control is threatened will be determined solely by the
         Committee.

     1.10 COMPLIANCE WITH SECURITIES LAWS. Plan Shares will not be issued with
respect to any Award unless the issuance and delivery of the Plan Shares (and
the exercise of an Option, if applicable) complies with all relevant provisions
of federal and state law, including without limitation the Securities Act, the
rules and regulations promulgated thereunder and the requirements of any stock
exchange upon which the Plan Shares may then be listed, and will be further
subject to the approval of counsel for the Company with respect to such
compliance. The Board or the Committee may also require a Participant to furnish
evidence satisfactory to the Company, including, without limitation, a written
and signed representation letter and consent to be bound by any transfer
restrictions imposed by law, legend, condition or otherwise, and a
representation that the Plan Shares are being acquired only for investment and
without any present intention to sell or distribute the shares in violation of
any federal or state law, rule or regulation. Further, each Participant will
consent to the imposition of a legend on the certificate representing the Plan
Shares issued pursuant to an Award restricting their transferability as required
by law or by this Section.

     1.11 EMPLOYMENT OF PARTICIPANT. Nothing in the Plan or in any Award granted
hereunder will confer upon any Participant any right to continued employment by
the Company or any of its Subsidiaries or to continued service as a Director or
Advisor or limit in any way the right of the Company or any Subsidiary at any
time to terminate or alter the terms of that employment or services as a
Director or Advisor.

     1.12 INFORMATION TO PARTICIPANTS. The Company will furnish to each
Participant copies of annual reports, proxy statements and all other reports
sent to the Company's shareholders. Upon written request, the Company will
furnish to each Participant a copy of its most recent Annual Report on Form 10-K
and each quarterly report to shareholders issued since the end of the Company's
most recent fiscal year.

                                   ARTICLE II
                                 ADMINISTRATION

     2.1 COMMITTEE. The Plan will be administered by the Board or by a
Committee of not fewer than two directors appointed by the Board. As used
herein, if the Company has any class of common equity securities required to be
registered under Section 12 of the Exchange Act, as to any Award to a Covered
Employee, "Committee" shall mean a committee consisting of two or more
Directors, each of whom shall be an "outside director" as defined in Section
162(m) of the Code. Subject to the provisions of the Plan, the Board or
Committee will have the sole discretion and authority to determine from time to
time the Employees and Advisors to whom Awards will be granted and the number of
Plan Shares subject to each Award, to interpret the Plan, to prescribe, amend
and rescind any rules and regulations necessary or appropriate for the
administration of the Plan, to determine and interpret the details and
provisions of each Option Agreement and Restricted Stock Agreement, to modify or
amend any Option Agreement or Restricted Stock Agreement or waive any conditions
or restrictions applicable to any Option (or 



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the exercise thereof) or to any shares of Restricted Stock, and to make all
other determinations or advisable for the administration of the Plan. The
Committee shall be solely responsible for the grant and administration of Awards
to Covered Employees. With respect to any provision of the Plan granting the
Board or the Committee the right to agree, in its sole discretion, to further
extend the term of any Award hereunder, the Board or the Committee may exercise
such right at the time of grant, in the Option Agreement relating to such Award,
or at any time or from time-to-time after the grant of any Award hereunder.


     2.2  MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. A majority of the members of
the Board or the Committee will constitute a quorum, and any action taken by a
majority present at a meeting at which a quorum is present or any action taken
without a meeting evidenced by a writing executed by all members of the Board or
the Committee will constitute the action of the Board or the Committee. Meetings
of the Committee may take place by telephone conference call.


     2.3 COMPANY ASSISTANCE. The Company will supply full and timely
information to the Board or the Committee on all matters relating to Employees,
Outside Directors and Advisors, their employment, death, Retirement, Disability
or other termination of employment, and such other pertinent facts as the Board
or the Committee may require. The Company will furnish the Board or the
Committee with such clerical and other assistance as is necessary to the
performance of its duties.


                                   ARTICLE III
                                     OPTIONS


     3.1 METHOD OF EXERCISE. Each Option will be exercisable at any time and
from time in whole or in part in accordance with the terms of the Option
Agreement pursuant to which the Option was granted. No Option may be exercised
for a fraction of a Plan Share.


     3.2 PAYMENT OF PURCHASE PRICE. The purchase price of any Plan Shares
purchased will be paid at the time of exercise of the Option either (i) in cash,
(ii) by certified or cashier's check, (iii) by shares of Common Stock, if
permitted by the Committee, (iv) as to Outside Directors, by cash or certified
or cashier's check for the par value of the Plan Shares plus a recourse
promissory note for the balance of the purchase price, such note to provide for
the right to repay the note partially or wholly with Common Stock and with an
interest rate based on the current dividend yield of the Common Stock, (v) as to
Employees and Advisors, by cash or certified or cashier's check for the par
value of the Plan Shares plus a promissory note for the balance of the purchase
price, which note will contain such terms and provisions as the Board or the
Committee may approve, including without limitation the right to repay the note
partially or wholly with Common Stock and to base the interest rate on the
current dividend yield of the Common Stock, (vi) by delivery of a copy of
irrevocable instructions from the Optionee to a broker or dealer, reasonably
acceptable to the Company, to sell certain of the Plan Shares upon exercise of
the Option or to pledge them as collateral for a loan and promptly deliver to
the Company the amount of sale or loan proceeds necessary to pay such purchase
price or (vii) as to Employees and Advisors, in any other form of valid
consideration, as permitted by the Board or the 





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Committee in its discretion. If any portion of the purchase price or a note
given at the time of exercise is paid in shares of Common Stock, those shares
will be valued at the then Fair Market Value.


     3.3 WRITTEN NOTICE REQUIRED. Any Option will be deemed to be exercised for
purposes of the Plan when written notice of exercise has been received by the
Company at its principal office from the person entitled to exercise the Option
and payment for the Plan Shares with respect to which the Option is exercised
has been received by the Company in accordance with Section 3.2.


     3.4 RIGHTS OF OPTIONEES UPON TERMINATION OF EMPLOYMENT OR SERVICE.

         (a) In the event an Optionee ceases to be an Employee and Advisor, and
does not continue to be a Director, for any reason other than death, Retirement,
Disability or for Cause, (i) the Board or the Committee shall have the ability
to accelerate the vesting of the Optionee's Option in its sole discretion, and
(ii) such Optionee's Option shall be exercisable (to the extent exercisable on
the date of termination of employment or service as an Employee or Advisor, or,
if the Committee, in its discretion, has accelerated the vesting of such Option,
to the extent exercisable following such acceleration) (a) if such Option is an
Incentive Stock Option, at any time within three months after the date of
termination of employment with the Company or any Subsidiary, unless by its
terms the Option expires earlier; or (b) if such Option is a Nonqualified Stock
Option, at any time within one year after the date of termination of employment
or service as an Employee or Advisor, unless by its terms the Option expires
earlier or unless the Committee agrees, in its sole discretion, to further
extend the term of such Nonqualified Stock Option; provided that the term of any
such Nonqualified Stock Option shall not be extended beyond its initial term. An
Employee or Advisor who continues to be a Director shall not be deemed to have
terminated employment or service as to any Nonqualified Stock Option

         (b) In addition, unless the Board or the Committee agrees, in its sole
discretion, to extend the term of a Nonqualified Stock Option granted to an
Employee or Advisor (provided that the term of any such Option shall not be
extended beyond its initial term), an Optionee's Option may be exercised as
follows in the event such Optionee ceases to serve as an Employee, Outside
Director or Advisor due to death, Disability, Retirement or for Cause:

                   (i) Death. If an Optionee dies while serving as an Employee,
         Outside Director or Advisor, or within three months after ceasing to be
         an Employee, Outside Director or Advisor, his option shall become fully
         exercisable on the date of his death and shall expire 12 months
         thereafter, unless by its terms it expires sooner. During such period,
         the Option may be fully exercised, to the extent that it remains
         unexercised on the date of death, by the Optionee's personal
         representative or by the distributees to whom the Optionee's rights
         under the Option shall pass by will or by the laws of descent and
         distribution.

                   (ii) Retirement. If an Optionee ceases to serve as an
         Employee, Outside Director or Advisor as a result of Retirement, his
         Option shall become fully exercisable on the date of his Retirement and
         (a) if such Option is an Incentive Stock Option, such Option 



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         will be exercisable at any time within three months after the effective
         date of such Retirement, unless by its terms the Option expires
         earlier, and (b) if such Option is a Nonqualified Stock Option, such
         Option will be exercisable at any time within one year after the
         effective date of such Retirement, unless by its terms the Option
         expires sooner.

                   (iii) Disability. If an Optionee ceases to serve as an
         Employee, Outside Director or Advisor as a result of Disability, the
         Optionee's Option shall become fully exercisable and shall expire 12
         months thereafter, unless by its terms it expires sooner.

                   (iv) Cause. If an Optionee ceases to serve as an Employee,
         Outside Director or Advisor, because the Optionee is terminated for
         Cause, the Optionee's Option shall automatically expire. If any facts
         that would constitute Cause for termination or removal of an Employee
         or Advisor are discovered after the Optionee's relationship with the
         Company has ended, any Options then held by the Optionee may be
         immediately terminated by the Committee. Notwithstanding the foregoing,
         if an Optionee is an Employee employed pursuant to a written employment
         agreement, or is an Advisor retained pursuant to a written agreement,
         the Optionee's relationship with the Company will be deemed terminated
         for 'Cause' for purposes of the Plan only if the Optionee is considered
         under the circumstances to have been terminated for cause for purposes
         of such written agreement.

     3.5 TRANSFERABILITY OF OPTIONS. Options shall not be transferable other
than pursuant to a qualified domestic relations order, by will or by the laws of
descent and distribution and, with respect to an Incentive Stock Option, may be
exercised during the lifetime of an Optionee only by that Optionee or by his
legally authorized representative.


     3.6 OPTIONS SUBJECT TO SHAREHOLDERS APPROVAL. Options granted to Covered
Employees and Incentive Stock Options granted prior to the date on which
shareholder approval of the Plan is obtained shall be subject to and conditioned
upon shareholder approval of the Plan in accordance with Section 162(m) and 422
of the Code.


                                   ARTICLE IV
                             INCENTIVE STOCK OPTIONS

     4.1 OPTION TERMS AND CONDITIONS. The terms and conditions of Options
granted under this Article may differ from one another as the Board or the
Committee may, in its discretion, determine, as long as all Options granted
under this Article satisfy the requirements of this Article.


     4.2 DURATION OF OPTIONS. Each Option granted under this Article will expire
on the date determined by the Board or Committee, but in no event will any
Option granted under this Article expire earlier than one year or later than ten
years after the date on which the Option is granted. In addition, each Option
will be subject to early termination as provided elsewhere in the Plan.



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     4.3 PURCHASE PRICE. The purchase price for Plan Shares acquired pursuant to
the exercise, in whole or in part, of any Option granted under this Article will
not be less than the Fair Market Value of the Plan Shares at the time of the
grant of the Option.

     4.4 MAXIMUM AMOUNT OF OPTIONS FIRST EXERCISABLE IN ANY CALENDAR YEAR. The
maximum aggregate Fair Market Value of Plan Shares (determined at the time the
Option is granted) with respect to which Options issued under this Article are
exercisable for the first time by any Employee during any calendar year under
all incentive stock option plans of the Company and its Subsidiaries and
affiliates may not exceed $100,000. Any portion of an Option granted under the
Plan and first exercisable in excess of the foregoing limitations will be
considered granted under Article V.

     4.5 REQUIREMENTS AS TO CERTAIN OPTIONS. In the event of the grant of any
Option to an individual who, at the time the Option is granted, owns shares of
stock possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or any of its Subsidiaries or affiliates within
the meaning of Section 422 of the Code, the purchase price for the Plan Shares
subject to that Option must be at least 110% of the Fair Market Value of those
Plan Shares at the time the Option is granted, and the Option must not be
exercisable after the expiration of five years from the date of its grant.

     4.6 INDIVIDUAL OPTION AGREEMENTS. Each Employee receiving Options under
this Article will be required to enter into a written Option Agreement with the
Company. In such Option Agreement, the Employee will agree to be bound by the
terms and conditions of the Plan and such other matters as the Committee deems
appropriate.

                                    ARTICLE V
                           NONQUALIFIED STOCK OPTIONS

     5.1 OPTION TERMS AND CONDITIONS. The terms and conditions of Options
granted under this Article may differ from one another as the Board or Committee
may, in its discretion, determine, as long as all Options granted under this
Article satisfy the requirements of this Article.

     5.2 DURATION OF OPTIONS. Each Option granted to an Employee, Outside
Director or Advisor under this Article and all rights thereunder will expire on
the date determined by the Board or Committee, but in no event will any Option
granted under this Article expire later than ten years after the date on which
the Option is granted. In addition, each Option will be subject to early
termination as provided elsewhere in the Plan.

     5.3 PURCHASE PRICE. The purchase price for Plan Shares acquired pursuant to
the exercise, in whole or in part, of any Option granted under this Article
shall be not less than the Fair Market Value of the Plan Shares at the time of
the grant of the Option.



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     5.4 INDIVIDUAL OPTION AGREEMENTS. Each Employee, Outside Director or
Advisor receiving Options under this Article will be required to enter into a
written Option Agreement with the Company. In such Option Agreement, the
Employee, Outside Director or Advisor will agree to be bound by the terms and
conditions of the Plan and such other matters as the Board or Committee deems
appropriate.

                                   ARTICLE VI
                                RESTRICTED STOCK

     6.1 TERMS AND CONDITIONS. Each Restricted Stock Grant confers upon the
recipient thereof the right to receive a specified number of shares of Common
Stock of the Company in accordance with the terms and conditions of each
Participant's individual written agreement as set forth in Section 6.2. The
general terms and conditions of the Restricted Stock awards shall be as follows:

                   (a) Any shares of Common Stock awarded hereunder to a
         Participant shall be restricted for a period of time to be determined
         by the Committee for each participant at the time of the Award, which
         period shall be not less than one year or more than ten years. The
         restrictions shall prohibit the sale, assignment, transfer, pledge or
         other encumbrance of such shares, and will provide for possible
         reversion thereof to the Company in accordance with subparagraph (b)
         during the period of restriction.

                   (b) All Restricted Stock awarded under this Plan to a
         Participant shall be forfeited and returned to the Company in the event
         the Participant ceases to be employed by, serve as a Director of, or
         serve as an Advisor to the Company, one of its Subsidiaries, or any
         Affiliated Company prior to the expiration of the period of
         restriction, unless the Participant's termination of employment is due
         to his or her death, Disability or Retirement. An Employee or Advisor
         who continues to be a Director shall not be deemed to have terminated
         employment or service.

                   (c) In the event of a Participant's death or Disability, the
         restrictions under subparagraph (a) will lapse with respect to all
         Restricted Stock awarded to the Participant under this Plan prior to
         any such event, and the shares of Common Stock involved shall cease to
         be Restricted Stock within the meaning of this Plan and shall no longer
         be subject to forfeiture to the Company pursuant to subparagraph (b).

                   (d) In the event of a Participant's Retirement, the
         restrictions under subparagraph (a) shall continue to apply unless the
         Board or the Committee in its discretion shall shorten the restriction
         period.

                   (e) Stock certificates issued with respect to awards of
         Restricted Stock made under this Plan shall be registered in the name
         of the Participant, but shall be delivered by him or her to the Company
         together with a stock power endorsed in blank. Each such certificate
         shall bear the following legend:



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                    "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
                    FORFEITURE, RESTRICTIONS ON TRANSFER AND CERTAIN OTHER TERMS
                    AND CONDITIONS SET FORTH IN THE 1997 CRESCENT OPERATING,
                    INC. MANAGEMENT STOCK INCENTIVE PLAN AND THE AGREEMENT
                    BETWEEN THE REGISTERED OWNER OF THE SHARES REPRESENTED BY
                    THIS CERTIFICATE AND CRESCENT OPERATING, INC. ENTERED INTO
                    PURSUANT TO SUCH PLAN."

                   (f) Upon the lapse of a restriction period as determined
         pursuant to subparagraph (a), the Company will return the stock
         certificates representing the shares with respect to which the
         restriction has lapsed to the Participant or his or her legal
         representative, and pursuant to the instruction of the Participant or
         his or her legal representative will issue a certificate for such
         shares which does not bear the legend set forth in subparagraph (e).

                   (g) Any other securities or assets (other than ordinary cash
         dividends) which are received by a Participant with respect to
         Restricted Stock awarded to him, which is still subject to restrictions
         provided for in subparagraph (a), will be subject to the same
         restrictions and shall be delivered by the Participant to the Company
         as provided in subparagraph (e).

                   (h) From the time of grant of the Restricted Stock Award, the
         Participant shall be entitled to exercise all rights attributable to
         the Restricted Stock, subject to forfeiture of such rights and the
         stock as provided in subparagraph (b).

     6.2 INDIVIDUAL AGREEMENTS. Each Participant receiving an Award of
Restricted Stock under this Article will be required to enter into a written
Restricted Stock Agreement with the Company. In such Restricted Stock Agreement,
the Participant will agree to be bound by the terms and conditions of the Plan
and such other matters as the Board or the Committee deems appropriate.

                                   ARTICLE VII
                    OUTSIDE DIRECTOR STOCK-FOR-FEES ELECTIONS

     7.1 OUTSIDE DIRECTOR STOCK-FOR-FEES ELECTION. Each Outside Director of the
Company shall be permitted to receive Director's Fees in the form of Common
Stock rather than cash in accordance with the following provisions:

                   (a) Each Outside Director shall have the right to elect to
         receive one-half or all of such Outside Director's Fees in the form of
         Common Stock rather than cash by tendering an irrevocable written
         election to the Secretary of the Company pursuant to which all
         Director's Fees otherwise payable to the Outside Director shall be paid
         in the form of 




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         Common Stock as provided in (b) below. Such election shall become
         effective six (6) months after its delivery to the Secretary of the
         Company by the Outside Director. Such election shall remain in effect
         until the earlier of (i) the date six (6) months after such Outside
         Director shall have delivered to the Secretary of the Company
         irrevocable written notice that his or her election to receive Common
         Stock shall cease as of the date six months following delivery of the
         notice, or (ii) the date on which such Outside Director terminates as a
         member of the Board of Directors by reason of resignation,
         non-reelection, death, or disability. Any Outside Director who having
         terminated an election to receive Common Stock or having failed to
         elect to receive Common Stock rather than cash may elect to receive
         Director's Fees in the form of Common Stock as of the date six (6)
         months following delivery of irrevocable written notice of such
         election to the Secretary of the Company. An Outside Director who does
         not elect to have Director's Fees paid in Common Stock shall receive
         his or her remuneration in cash at such times that such remuneration is
         otherwise due.

                   (b) If an Outside Director elects to receive payment of
         Director's Fees in the form of Common Stock, such Common Stock shall be
         issued as soon as practicable after the annual meeting of shareholders
         or meeting of the Board or Committee of the Board to which such
         remuneration relates. The number of shares of Common Stock to be issued
         to such Outside Director shall be determined by dividing:

                   (i)     the remuneration otherwise payable to the Outside 
         Director, by

                   (ii) ninety percent (90%) of the Fair Market Value of the
         Company's Common Stock on the determination date on the rounding up or
         down of any fractional share to the nearest whole share.

         The determination date shall be the date that the relevant payment of 
Director's Fees is payable.

                   (c) Shares of Common Stock issued under this Article VII
         shall be free of any restrictions except for restrictions applicable
         under the Exchange Act.

     7.2 INCOME TAX. Each Outside Director who elects to receive Director's Fees
in the form of Common Stock rather than cash shall be responsible for payment of
federal, state, and local income taxes on the Fair Market Value of such Common
Stock.

                                  ARTICLE VIII
                      TERMINATION, AMENDMENT AND ADJUSTMENT

     8.1 TERMINATION AND AMENDMENT. The Plan will terminate on October 15, 2007.
No Awards will be granted under the Plan after that date of termination,
although Awards granted prior to such date shall remain outstanding in
accordance with their terms. Subject to the limitations contained in this
Section 8.1, the Board or the Committee may at any time amend or revise the
terms of the Plan, including the form and substance of the Option Agreements and
Restricted Stock Agreements to be used in connection herewith; provided that,
without 


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<PAGE>   13

shareholder approval, no amendment or revision may (i) increase the maximum
aggregate number of Plan Shares, except as permitted Section 8.2, (ii) change
the minimum purchase price for shares under Article IV or Article V or (iii)
permit the granting of an Award to anyone other than as provided in the Plan. No
amendment, suspension or termination of the Plan may, without the consent of the
Optionee who has received an Award hereunder, alter or impair any of that
Participant's rights or obligations under any Award granted under the Plan prior
to that amendment, suspension or termination.


     8.2 ADJUSTMENT. If the outstanding Common Stock is increased, decreased,
changed into or exchanged for a different number or kind of shares or securities
through merger, consolidation, combination, exchange of shares, other
reorganization, recapitalization, reclassification, stock dividend, stock split
or reverse stock split, an appropriate and proportionate adjustment will be made
in the maximum number and kind of Plan Shares as to which Awards may be granted
under the Plan. A corresponding adjustment will be made in the number or kind of
shares allocated to and purchasable under unexercised Options or shares of
Restricted Stock with respect to which restrictions have not yet lapsed prior to
any such change. Any such adjustment in outstanding Options will be made without
change in the aggregate purchase price applicable to the unexercised portion of
the Option, but with a corresponding adjustment in the price for each share
purchasable under the Option. Any new or additional or different class of
securities that are distributed to a Participant in his capacity as the owner of
Restricted Stock as granted hereunder shall be considered to be Restricted Stock
and shall be subject to all of the conditions and restrictions provided herein
applicable to Restricted Stock. The foregoing adjustments and the manner of
application of the foregoing provisions will be determined solely by the Board
or the Committee, and any such adjustment may provide for the elimination of
fractional share interests.

                                   ARTICLE IX
                                  MISCELLANEOUS

     9.1 OTHER COMPENSATION PLANS. The adoption of the Plan will not affect any
other stock option or incentive or other compensation plans in effect for the
Company or any of its Subsidiaries, nor will the Plan preclude the Company or
any of its Subsidiaries, from establishing any other forms of incentive or other
compensation for Employees.

     9.2 PLAN BINDING ON SUCCESSORS. The Plan will be binding upon the
successors and assigns of the Company and any of its Subsidiaries that adopt the
Plan.

     9.3 NUMBER AND GENDER. Whenever used herein, nouns in the singular will
include the plural where appropriate, and the masculine pronoun will include the
feminine gender.

     9.4 HEADINGS. Headings of articles and sections hereof are inserted for
convenience of reference and constitute no part of the Plan.



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<PAGE>   14

                                    ARTICLE X
                                   DEFINITIONS

      As used herein with initial capital letters, the following terms have the
meanings set forth unless the context clearly indicates to the contrary:

    10.1 "Advisor" means any person performing advisory or consulting services
for the Company or Subsidiary of the Company, with or without compensation, to
whom the Company chooses to grant Options in accordance with the Plan, provided
that bona fide services must be rendered by such person and such services shall
not be rendered in connection with the offer or sale of securities in a capital
raising transaction.

    10.2 "Award" means a grant of Options under Articles IV and V of the Plan or
an Award of Restricted Stock under Article VI of the Plan.

    10.3 "Board" means the Board of Directors of the Company, provided that, if
the Board delegates all or any part of its authority to a committee composed of
one or more directors, then the term "Board" shall be deemed to refer to such
committee to the extent of such delegation.

    10.4 "Cause" will mean an act or acts involving a felony, fraud, willful
misconduct, commission of any act that causes or reasonably may be expected to
cause substantial injury to the Company or other good cause. The term "other
good cause" as used in this Section will include, but shall not be limited to,
habitual impertinence, a pattern of conduct that tends to hold the Company up to
ridicule in the community, conduct disloyal to the Company, conviction of any
crime of moral turpitude and substantial dependence, as judged by the Committee,
on alcohol or any controlled substance. "Controlled substance" means a drug,
immediate precursor or other substance listed in Schedules I-V of the Federal
Comprehensive Drug Abuse Prevention Control Act of 1970, as amended.

    10.5 "Code" means the Internal Revenue Code of 1986, as amended.

    10.6 "Committee" shall have the meaning set forth in Section 2.1.

    10.7 "Common Stock" means the Common Stock, par value $.01 per share, of the
Company or, in the event that the outstanding shares of such Common Stock are
hereafter changed into or exchanged for shares of a different stock or security
of the Company or some other corporation, such other stock or security.

    10.8 "Company" means Crescent Operating, Inc., a Delaware corporation.

    10.9 "Covered Employee" means any individual who is the chief executive
officer or is acting in such capacity, or is among the four highest compensated
officers (other than the chief executive officer) of the Company or of any
Subsidiary.

    10.10 "Director" means a member of the Board of Directors of the Company.


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    10.11 "Director's Fees" means the remuneration otherwise payable to an
Outside Director of the Company as an annual retainer and for attending meetings
of the Board and meetings of the committees of the Board.

    10.12 "Disability" of a Participant shall be deemed to occur whenever a
Participant is rendered unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected to last for a
continuing period of not less than 12 months.

    10.13 "Effective Date" means October 15, 1997.

    10.14 "Employee" means an employee (as defined under Section 3401(c) of the
Code and the regulations thereunder) of the Company (including an officer), or
an officer or other employee of any of the Subsidiaries of the Company.

    10.15 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

    10.16 "Exchange Act" means the Securities Exchange Act of 1934, as amended.

    10.17 "Fair Market Value" means such value as will be determined by the
Board or the Committee on the basis of such factors as it deems appropriate;
provided that if the Common Stock is traded on a national securities exchange,
such value will be determined by the Board or the Committee on the basis of the
closing price for the Common Stock on the date for which such determination is
relevant, as reported on the exchange and further provided that if there should
be no sales on such date, such value shall be deemed equal to the closing price
on the last preceding date on which sales of Common Stock were reported. If the
Common Stock is traded on more than one exchange, such value will be determined
on the basis of the exchange trading the greatest volume of shares on such date.
In no event shall "Fair Market Value" be less than the par value of the Common
Stock.

    10.18 "Incentive Stock Option" means an Option granted under Article IV.

    10.19 "Nonqualified Stock Option" means an Option granted under Article V.

    10.20 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option granted under the Plan.

    10.21 "Option Agreement" means an agreement between the Company and a
Participant with respect to one or more Options.

    10.22 "Outside Director" means a Director who is not an Employee of the
Company or of any Subsidiary.



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<PAGE>   16

    10.23 "Participant" means an Employee, Director or Advisor to whom an Award
has been granted hereunder.

    10.24 "Plan" means the 1997 Crescent Operating, Inc. Management Stock
Incentive Plan, as amended from time to time.

    10.25 "Plan Shares" means shares of Common Stock issuable pursuant to the
Plan.

    10.26 "Reporting Participant" means a Participant who is subject to the 
reporting requirements of Section 16 of the Exchange Act or who is a "covered
employee" within the meaning of Section 162(m) of the Code. 

    10.27 "Restricted Stock" means an Award of Common Stock granted under
Article VI.

    10.28 "Restricted Stock Agreement" means an agreement between the Company
and a Participant with respect to an Award of Restricted Stock.

    10.29 "Retirement" means termination of employment or service as a Director
on or after the date on which a Participant attains age 70.

    10.30 "Securities Act" means the Securities Act of 1933, as amended.

    10.31 "Subsidiary" means a subsidiary corporation of the Company, as defined
in Section 424(f) of the Code.




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