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                                                                   EXHIBIT 4.07


                            STATEMENT OF DESIGNATION
                                       OF
           6-3/4% SERIES A CONVERTIBLE CUMULATIVE PREFERRED SHARES
                                       OF
                     CRESCENT REAL ESTATE EQUITIES COMPANY



       The undersigned, the President and Chief Executive Officer  of Crescent
Real Estate Equities Company, a real estate investment trust organized and
existing under the Texas Real Estate Investment Trust Act, as amended (the
"Company"), certifies that pursuant to the authority granted to and vested in
the Board of Trust Managers of the Company by the provisions of the Restated
Declaration of Trust of the Company, the Board of Trust Managers, acting
through an authorized committee thereof, has adopted the following resolution
designating a new series of preferred shares of beneficial interest of the
Company.

       RESOLVED, that pursuant to the authority expressly granted to and vested
in the Board of Trust Managers of the Company by the provisions of the Restated
Declaration of Trust of the Company, the Board of Trust Managers, acting
through an authorized committee thereof, hereby designates 9,200,000 6- 3/4%
Series A Convertible Cumulative Preferred Shares of beneficial interest, $.01
par value per share (Liquidation Preference $25.00 Per Share) (the "Series A
Preferred Shares"), and authorizes the issuance thereof, and hereby fixes the
designation and number thereof and the voting powers, preferences and relative,
participating, optional and other special rights of such shares, and the
qualifications, limitations or restrictions thereto as follows:

       A.     Certain Definitions.

              Unless the context otherwise requires, the terms defined in this
Paragraph A shall have, for all purposes of this Statement of Designation, the
meanings herein specified (with terms defined in the singular having comparable
meanings when used in the plural).

              "Board of Trust Managers" shall mean the Board of Trust Managers
of the Company or any committee authorized by such Board of Trust Managers to
perform any of its responsibilities with respect to the Series A Preferred
Shares.

              "Business Day" shall mean any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
in New York City, New York or Dallas, Texas are authorized or required by law,
regulation or executive order to close.

              "Code" shall mean the Internal Revenue Code of 1986, as amended,
from time to time.

              "Common Shares" shall mean the common shares of beneficial
interest, $.01 par value per share, of the Company.
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              "Constituent Person" shall have the meaning set forth in
subsection (e) of subparagraph (7) of paragraph B.

              "Conversion Price" shall mean the conversion price per Common
Share for which the Series A Preferred Shares are convertible, as such
Conversion Price may be adjusted pursuant to subsection (d) of subparagraph (7)
hereof.  The initial conversion price per Common Share shall be $40.86
(equivalent to a conversion rate of .6119 Common Shares for each Series A
Preferred Share).

              "Current Market Price" of publicly traded common shares or any
other class of shares of beneficial interest or other security of the Company
or any other issuer for any day shall mean the last reported sales price,
regular way, on such day or, if no sale takes place on such day, the average of
the reported closing bid and asked prices on such day, regular way, in either
case as reported on the New York Stock Exchange ("NYSE") or, if such security
is not listed or admitted for trading on the NYSE, on the principal national
securities exchange on which such security is listed or admitted for trading
or, if not listed or admitted for trading on any national securities exchange,
on the Nasdaq National Market or, if such security is not quoted on such Nasdaq
National Market, the average of the closing bid and asked prices on such day in
the over-the-counter market as reported by Nasdaq or, if bid and asked prices
for such security on such day shall not have been reported through Nasdaq, the
average of the bid and asked prices on such day as furnished by any NYSE member
firm regularly making a market in such security and selected for such purpose
by the Chief Executive Officer of the Company or the Board of Trust Managers.

              "Declaration of Trust" shall mean the Company's Restated
Declaration of Trust, as the same may be amended from time to time.

              "Distribution Payment Date" shall have the meaning set forth in
subparagraph (3) of paragraph B.

              "Distribution Period" shall have the meaning set forth in
subparagraph (3) of paragraph B.

              "Fair Market Value" shall mean the average of the daily Current
Market Prices of a Common Share during the five (5) consecutive Trading Days
selected by the Company commencing not more than 20 Trading Days before, and
ending not later than, the earlier of the day in question and the day before
the "ex date" with respect to the issuance or distribution requiring such
computation.  The term "ex date" when used with respect to any issuance or
distribution, means the first day on which the Common Shares trade regular way,
without the right to receive such issuance or distribution, on the exchange or
in the market, as the case may be, used to determine that day's Current Market
Price.

              "Issue Date" shall mean the first date on which Series A
Preferred Shares are issued and sold.




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              "Junior Shares" shall have the meaning set forth in subparagraph
(2) of paragraph B.

              "Non-Electing Share" shall have the meaning set forth in
subsection (e) of subparagraph (7) of paragraph B.

              "Parity Shares" shall have the meaning set forth in subparagraph
(2) of paragraph B.

              "Person" shall mean an individual, corporation, partnership,
estate, trust (including a trust qualified under Section 401(a) or 501(c)(17)
of the Code), a portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity, and also includes a group as that
term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended; but does not include an underwriter which participates in a
public offering of the Series A Preferred Shares provided that the ownership of
Series A Preferred Shares by such Underwriter would not result in the Company
being "closely held" within the meaning of Section 856(h) of the Code, or would
otherwise result in the Company failing to qualify as a REIT.

              "Preferred Shares" shall mean preferred shares of beneficial
interest, $.01 par value per share, of the Company.

              "Record Date" shall have the meaning set forth in subparagraph
(3) of paragraph B.

              "REIT" shall mean a real estate investment trust under Section
856 of the Code.

              "Securities" shall have the meaning set forth in subsection
(d)(iii) of subparagraph (7) of paragraph B.

              "Series A Preferred Shares" shall mean the Company's 6- 3/4%
Series A Convertible Cumulative Preferred Shares of beneficial interest, $.01
par value per share, liquidation value $25.00 per share.

              "Series A Preferred Shares Redemption Date" shall have the
meaning set forth in subsection (d) of subparagraph (5) of paragraph B hereof.

              "set apart for payment" shall be deemed to include, without any
action other than the following, the recording by the Company in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of distributions by the Board of Trust Managers, the allocation of
funds to be so paid on any series or class of shares of beneficial interest;
provided, however, that if any funds for any class or series of Junior Shares
or any class or series of shares of beneficial interest ranking on a parity
with the Series A Preferred Shares as to the payment of distributions are
placed in a separate account of the Company





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or delivered to a disbursing, paying or other similar agent, then "set apart
for payment" with respect to the Series A Preferred Shares shall mean placing
such funds in a separate account or delivering such funds to a disbursing,
paying or other similar agent.

              "Trading Day" shall mean any day on which the securities in
question are traded on the NYSE, or if such securities are not listed or
admitted for trading on the NYSE, on the principal national securities exchange
on which such securities are listed or admitted, or if not listed or admitted
for trading on any national securities exchange, on the Nasdaq National Market,
or if such securities are not quoted on such Nasdaq National Market, in the
applicable securities market in which the securities are traded.

              "Transaction" shall have the meaning set forth in subsection (e)
of subparagraph (7) of paragraph B hereof.

              "Transfer Agent" means BankBoston, N.A. or such other agent or
agents of the Company as may be designated by the Board of Trust Managers or
their designee as the transfer agent for the Series A Preferred Shares.

       B.     Series A Preferred Shares.

              (1)    Number.  The maximum number of Series A Preferred Shares
shall be 9,200,000.

              (2)    Relative Seniority.  In respect of rights to receive
distributions and to participate in distributions or payments in the event of
any liquidation, dissolution or winding up of the Company, the Series A
Preferred Shares shall rank pari passu with any other preferred shares of
beneficial interest of the Company (the "Parity Shares"), and will rank senior
to the Common Shares and any other class or series of shares of beneficial
interest of the Company ranking, as to distributions and upon liquidation,
junior (collectively, the "Junior Shares") to the Parity Shares.

              (3)    Distributions.  The holders of the then outstanding Series
A Preferred Shares shall be entitled to receive, when and as declared by the
Board of Trust Managers out of any funds legally available therefor, cumulative
cash distributions at the rate of $1.6875 per share per year, payable in equal
amounts of $.421875 per share quarterly in cash on the 15th day, or if not a
Business Day, the next succeeding Business Day, of February, May, August and
November in each year, beginning May 15, 1998 (each such day being hereinafter
called a "Distribution Payment Date" and each period ending on a Distribution
Payment Date being hereinafter called a "Distribution Period"), with respect to
each Distribution Period, to shareholders of record at the close of business on
such date as shall be fixed by the Board of Trust Managers at the time of
declaration of the distribution (the "Record Date"), which shall not be less
than 10 nor more than 30 days preceding the Distribution Payment Date.  The
amount of any distribution payable for the initial Distribution Period and for
any other Distribution Period shorter than a full Distribution Period shall be
prorated and computed on the basis of a





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360-day year of twelve 30-day months.  Distributions on each Series A Preferred
Share shall accrue and be cumulative from and including the date of original
issue thereof, whether or not (i) distributions on such shares are earned or
declared or (ii) on any Distribution Payment Date there shall be funds legally
available for the payment of distributions.  Distributions paid on the Series A
Preferred Shares in an amount less than the total amount of such distributions
at the time accrued and payable on such shares shall be allocated pro rata on a
per share basis among all such shares at the time outstanding.  Distributions
on account of arrears for any past distribution periods may be declared and
paid at such time, if any, as may be fixed by the Board of Trust Managers, and
shall first be credited against the earliest accrued but unpaid distributions
due and payable with respect to such Series A Preferred Shares.

              The amount of any distributions accrued on any Series A Preferred
Shares at any Distribution Payment Date shall be the amount of any unpaid
distributions accumulated thereon through and during such Distribution Period,
to and including such Distribution Payment Date, whether or not earned or
declared, and the amount of distributions accrued on any Series A Preferred
Shares at any date other than a Distribution Payment Date shall be equal to the
sum of the amount of any unpaid distributions accumulated thereon, to and
including the last preceding Distribution Payment Date, whether or not earned
or declared, plus an amount calculated on the basis of the annual distribution
rate of $1.6875 for the period after such last preceding Distribution Payment
Date to and including the date as of which the calculation is made, based on a
360-day year of twelve 30-day months.

              If any Series A Preferred Shares are outstanding, no full
distributions shall be declared or paid or set apart for payment on any other
series of Parity Shares or any other class or series of Junior Shares for any
period unless full cumulative distributions have been declared and paid or
declared and a sum sufficient for the payment thereof has been set apart for
such payment on the Series A Preferred Shares for all past distribution periods
and the then current distribution period.  If distributions are not paid in
full, or not declared in full and a sum sufficient for such full payment is not
set apart for the payment thereof, upon the Series A Preferred Shares and any
class or series of Parity Shares, all distributions declared upon Series A
Preferred Shares and upon any other class or series of Parity Shares shall be
paid or declared pro rata so that in all cases the amount of distributions paid
or declared per share on the Series A Preferred Shares and Parity Shares shall
bear to each other the same ratio that accumulated distributions per share,
including distributions accrued or in arrears, if any, on the Series A
Preferred Shares and Parity Shares bear to each other.  Except as provided in
the preceding sentence, unless full cumulative distributions on the Series A
Preferred Shares have been paid or declared and a sum sufficient for such full
payment set apart for payment for all past Distribution Periods and the then
current Distribution Period, no distributions (other than distributions in
shares of Common Shares or in any other Junior Shares) shall be declared or
paid or set apart for payment or other distribution upon the Company's Common
Shares, or, except as provided above, on any other Junior Shares or Parity
Shares, nor shall any Common Shares or any other Junior Shares or Parity Shares
be redeemed, purchased or otherwise acquired for any consideration (or any
payment made to or available for a sinking fund for the redemption of any such
shares) by the Company or any subsidiary of the





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Company (except by conversion into or exchange for Junior Shares).  Holders of
the Series A Preferred Shares shall not be entitled to any distributions,
whether payable in cash, property or shares of beneficial interest, in excess
of full accrued and cumulative distributions as herein provided.  No interest
or sum of money in lieu of interest shall be payable in respect of any
distribution payment or payments on the Series A Preferred Shares that may be
in arrears.

              Except as provided in this Statement of Designation, the Series A
Preferred Shares shall not be entitled to participate in the earnings or assets
of the Company.

              (4)    Liquidation Preference.

                     (a)    Upon the voluntary or involuntary dissolution,
                            liquidation or winding up of the Company, the
                            holders of the Series A Preferred Shares then
                            outstanding shall be entitled to receive and to be
                            paid out of the assets of the Company legally
                            available for distribution to its shareholders,
                            before any payment or distribution shall be made on
                            any Junior Shares, the amount of $25.00 per Series
                            A Preferred Share, plus an amount equal to
                            distributions accrued and unpaid thereon to the
                            date fixed for such dissolution, liquidation or
                            winding up of the Company.

                     (b)    After the payment to the holders of the Series A
                            Preferred Shares of the full preferential amounts
                            provided for in this subparagraph (4), the holders
                            of the Series A Preferred Shares as such shall have
                            no right or claim to any of the remaining assets of
                            the Company.

                     (c)    If, upon any voluntary or involuntary dissolution,
                            liquidation, or winding up of the Company, the
                            amounts payable with respect to the preference
                            value of the Series A Preferred Shares and any
                            Parity Shares are not paid in full, the holders of
                            the Series A Preferred Shares and of such Parity
                            Shares will share ratably in any such distribution
                            of assets of the Company in proportion to the full
                            respective preferential amounts provided for in
                            this subparagraph (4) to which they are entitled.

                     (d)    Neither the sale of all or substantially all the
                            property or business of the Company, nor the merger
                            or consolidation of the Company into or with any
                            other entity or the merger or consolidation of any
                            other entity into or with the Company, shall be
                            deemed to be a dissolution, liquidation or winding
                            up, voluntary or involuntary, of the Company for
                            the purposes of this subparagraph (4).





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              (5)    Redemption at the Option of the Company.

                     (a)    Subject to subsections (b) and (h) of this
                            subparagraph (5), the Series A Preferred Shares
                            shall not be redeemable by the Company prior to
                            February 18, 2003.  On and after February 18, 2003,
                            the Company, at its option, may redeem the Series A
                            Preferred Shares, in whole or from time to time in
                            part, as set forth herein, at a redemption price of
                            $25.00 per Series A Preferred Share, subject to the
                            provisions below.

                     (b)    Prior to February 18, 2003, the Series A Preferred
                            Shares may be redeemed at the option of the
                            Company, in whole or from time to time in part, at
                            a redemption price of $25.00 per Series A Preferred
                            Share, if the Board of Trust Managers determines
                            that such a redemption is necessary or advisable to
                            preserve the status of the Company as a REIT for
                            federal income tax purposes, subject to the
                            provisions below.

                     (c)    If fewer than all of the outstanding Series A
                            Preferred Shares are to be redeemed, the shares to
                            be redeemed will be determined pro rata or by lot
                            as may be determined by the Board of Trust Managers
                            or in such other manner as prescribed by the
                            Company's Board of Trust Managers in its sole
                            discretion to be equitable, provided that such
                            method satisfies any applicable requirements of any
                            securities exchange on which the Series A Preferred
                            Shares are listed.  In the event that such
                            redemption is to be by lot, if as a result of such
                            redemption any holder of Series A Preferred Shares
                            would own, or be deemed to own by virtue of certain
                            attribution provisions of the Code, as specified in
                            the Declaration of Trust, in excess of 9.9% of the
                            Series A Preferred Shares issued and outstanding
                            because such holder's Series A Preferred Shares
                            were not redeemed, or were only redeemed in part,
                            then the Company will redeem the requisite number
                            of Series A Preferred Shares of such shareholder
                            such that he will not own, or be deemed to own by
                            virtue of certain attribution provisions of the
                            Code, as specified in the Declaration of Trust in
                            excess of 9.9% of Series A Preferred Shares issued
                            and outstanding subsequent to such redemption.  A
                            new certificate shall be issued representing any
                            unredeemed Series A Preferred Shares without cost
                            to the holder thereof.

                     (d)    Notice of redemption will be mailed, not less than
                            30 nor more than 60 days prior to the date fixed
                            for redemption, to each holder of record of Series
                            A Preferred Shares to be redeemed, notifying





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                            such holder of the Company's election to redeem
                            such shares, stating the date fixed for redemption
                            thereof (the "Series A Preferred Shares Redemption
                            Date"), the redemption price, the number of shares
                            to be redeemed (and, if fewer than all the Series A
                            Preferred Shares are to be redeemed, the number of
                            shares to be redeemed from such holder), the
                            place(s) where the Series A Preferred Share
                            certificates are to be surrendered for payment, the
                            date on which such holder's conversion rights as to
                            the Series A Preferred Shares shall terminate, and
                            that distributions on the Series A Preferred Shares
                            will cease to accrue on the specified redemption
                            date.

                     (e)    On or after the Series A Preferred Shares
                            Redemption Date, each holder of Series A Preferred
                            Shares to be redeemed must present and surrender
                            his Series A Preferred Share certificates to the
                            Company at the place designated in such notice and
                            thereupon the redemption price of such shares will
                            be paid to or on the order of the Person whose name
                            appears on such Series A Preferred Share
                            certificates as the owner thereof and each such
                            Series A Preferred Share certificate surrendered
                            will be canceled.  From and after the Series A
                            Preferred Shares Redemption Date (unless the
                            Company defaults in payment of the redemption
                            price), all distributions on the Series A Preferred
                            Shares designated for redemption in such notice
                            will cease to accrue and all rights of the holders
                            thereof (including conversion rights), except the
                            right to receive the redemption price thereof
                            (including all accrued and unpaid distributions up
                            to the Series A Preferred Shares Redemption Date),
                            will cease and terminate and such shares will not
                            thereafter be transferred (except with the consent
                            of the Company) on the Company's books, and such
                            shares shall not be deemed to be outstanding for
                            any purpose whatsoever.  At its election, the
                            Company, prior to the Series A Preferred Shares
                            Redemption Date, may irrevocably deposit the
                            redemption price (including accrued and unpaid
                            distributions) of the Series A Preferred Shares so
                            called for redemption in trust for the holders
                            thereof with a bank or trust company, in which case
                            such notice to holders of the Series A Preferred
                            Shares to be redeemed will (i) state the date of
                            such deposit, (ii) specify the office of such bank
                            or trust company as the place of payment of the
                            redemption price and (iii) call upon such holders
                            to surrender the Series A Preferred Share
                            certificates representing such shares at such place
                            on or about the date fixed in such redemption
                            notice (which may not be later than the Series A
                            Preferred Shares Redemption Date) against payment
                            of the redemption price (including all accrued





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                            and unpaid distributions up to the Series A
                            Preferred Shares Redemption Date).  Any moneys so
                            deposited which remain unclaimed by the holders of
                            the Series A Preferred Shares at the end of two
                            years after the Series A Preferred Shares
                            Redemption Date will be returned by such bank or
                            trust company to the Company.

                     (f)    Notwithstanding the foregoing, unless full
                            cumulative distributions on all outstanding Series
                            A Preferred Shares for all past Distribution
                            Periods and the then current Distribution Period
                            have been paid, or declared and a sum sufficient
                            for the payment thereof set apart for payment, no
                            Series A Preferred Shares shall be redeemed unless
                            (i) all outstanding Series A Preferred Shares are
                            simultaneously redeemed or (ii) the Board of Trust
                            Managers determines that such redemption is
                            necessary or advisable to preserve the status of
                            the Company as a REIT for federal income tax
                            purposes; provided, however, that the foregoing
                            shall not prevent the purchase or acquisition of
                            Series A Preferred Shares pursuant to a purchase or
                            exchange offer made on the same terms to holders of
                            all outstanding Series A Preferred Shares.

                     (g)    The holders of Series A Preferred Shares at the
                            close of business on a Distribution Record Date
                            will be entitled to receive the distribution
                            payable with respect to such Series A Preferred
                            Shares on the corresponding Distribution Payment
                            Date notwithstanding the redemption thereof between
                            such Distribution Record Date and the corresponding
                            Distribution Payment Date or the Company's default
                            in the payment of the distribution due.  Except as
                            provided above, the Company will make no payment or
                            allowance for unpaid distributions, whether or not
                            in arrears, on Series A Preferred Shares which have
                            been called for redemption.

                     (h)    If at any time, whether or not prior to February
                            18, 2003, the Company is subject to the
                            jurisdiction of an agency or other authority of any
                            state, county, city or other political subdivision
                            with respect to any activities of the Company or
                            any of its subsidiaries related to gaming (a
                            "Gaming Authority"), and such Gaming Authority
                            requires a record or beneficial owner to be found
                            suitable, then notwithstanding any other provision
                            of this Statement of Designation, the Company shall
                            have the right, by written notice to such record or
                            beneficial owner, (i) to require such record or
                            beneficial owner of Series A Preferred Shares to
                            apply, at such owner's sole cost and expense as to
                            the application and related investigation, for a
                            finding of suitability by such





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                            Gaming Authority and (ii) as to any record or 
                            beneficial owner that is required to be, but is
                            not, found suitable by such Gaming Authority, (A)
                            to require such record or beneficial owner to
                            dispose of such owner's Series A Preferred Shares
                            within 30 days or within the time prescribed by
                            such Gaming Authority, whichever is earlier, and
                            (B) if such disposition is not made in
                            accordance with clause (A), to redeem each Series
                            A Preferred Share of such owner at a redemption
                            price of $25.00 per Series A Preferred Share, on
                            the terms set forth above (other than subsection
                            (f) of this subparagraph (5), which subsection
                            shall not apply to any such redemption).
                            
                     (i)    The Series A Preferred Shares have no stated
                            maturity date and will not be subject to any
                            sinking fund or mandatory redemption.

              (6)    Shares to be Retired.

              All Series A Preferred Shares which shall have been issued and
reacquired in any manner by the Company shall be restored to the status of
authorized but unissued Preferred Shares, without designation as to series.

              (7)    Conversion.

              Holders of Series A Preferred Shares shall have the right to
convert all or a portion of such shares into Common Shares, as follows:

                     (a)    Subject to and upon compliance with the provisions
                            of this subparagraph (7), a holder of Series A
                            Preferred Shares shall have the right, at his
                            option, at any time to convert such shares into the
                            number of fully paid and nonassessable Common
                            Shares obtained by dividing the aggregate
                            liquidation preference of such shares by the
                            Conversion Price (as in effect at the time and on
                            the date provided for in the last paragraph of
                            subsection (b) of this subparagraph (7)) by
                            surrendering such shares to be converted, such
                            surrender to be made in the manner provided in
                            subsection (b) of this subparagraph (7); provided,
                            however, that the right to convert shares called
                            for redemption pursuant to subparagraph (5) hereof
                            shall terminate at the close of business on the
                            Series A Preferred Shares Redemption Date fixed for
                            such redemption, unless the Company shall default
                            in making payment of any amounts payable upon such
                            redemption under subparagraph (5).





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                     (b)    In order to exercise the conversion right, the
                            holder of each Series A Preferred Share to be
                            converted shall surrender the certificate
                            representing such share, duly endorsed or assigned
                            to the Company or in blank, at the office of the
                            Transfer Agent, accompanied by written notice to
                            the Company that the holder thereof elects to
                            convert such Series A Preferred Share.  Unless the
                            share issuable on conversion is to be issued in the
                            same name as the name in which such Series A
                            Preferred Share is registered, each share
                            surrendered for conversion shall be accompanied by
                            instruments of transfer, in form satisfactory to
                            the Company, duly executed by the holder or such
                            holder's duly authorized attorney and an amount
                            sufficient to pay any transfer or similar tax (or
                            evidence reasonably satisfactory to the Company
                            demonstrating that such taxes have been paid).

                            Holders of Series A Preferred Shares at the close
                            of business on a distribution payment Record Date
                            shall be entitled to receive the distribution
                            payable on such shares on the corresponding
                            Distribution Payment Date notwithstanding the
                            conversion thereof following such distribution
                            payment Record Date and prior to such Distribution
                            Payment Date.  However, Series A Preferred Shares
                            surrendered for conversion during the period
                            between the close of business on any distribution
                            payment Record Date and the opening of business on
                            the corresponding Distribution Payment Date (except
                            shares converted after the issuance of notice of
                            redemption with respect to a Series A Preferred
                            Shares Redemption Date during such period or
                            coinciding with such Distribution Payment Date,
                            such Series A Preferred Shares being entitled to
                            such distribution on the Distribution Payment Date)
                            must be accompanied by payment of an amount equal
                            to the distribution payable on such shares on such
                            Distribution Payment Date.  A holder of Series A
                            Preferred Shares on a distribution payment Record
                            Date who (or whose transferee) tenders any such
                            shares for conversion into Common Shares on such
                            Distribution Payment Date will receive the
                            distribution payable by the Company on such Series
                            A Preferred Shares on such date, and the converting
                            holder need not include payment of the amount of
                            such distribution upon surrender of Series A
                            Preferred Shares for conversion.  Except as
                            provided above, the Company shall make no payment
                            or allowance for unpaid distributions, whether or
                            not in arrears, on converted shares or for
                            distributions on the Common Shares issued upon such
                            conversion.





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                            As promptly as practicable after the surrender of
                            certificates for Series A Preferred Shares as
                            aforesaid, the Company shall issue and shall
                            deliver at the office of the Transfer Agent to such
                            holder, or on his written order, a certificate or
                            certificates for the number of full Common Shares
                            issuable upon the conversion of such shares in
                            accordance with the provisions of this subparagraph
                            (7), and any fractional interest in respect of a
                            Common Share arising upon such conversion shall be
                            settled as provided in subsection (c) of this
                            subparagraph (7).

                            Each conversion shall be deemed to have been
                            effected immediately prior to the close of business
                            on the date on which the certificates for Series A
                            Preferred Shares shall have been surrendered and
                            such notice (and if applicable, payment of an
                            amount equal to the distribution payable on such
                            shares) received by the Company as aforesaid, and
                            the Person or Persons in whose name or names any
                            certificate or certificates for Common Shares shall
                            be issuable upon such conversion shall be deemed to
                            have become the holder or holders of record of the
                            shares represented thereby at such time on such
                            date, and such conversion shall be at the
                            Conversion Price in effect at such time and on such
                            date unless the share transfer books of the Company
                            shall be closed on that date, in which event such
                            Person or Persons shall be deemed to have become
                            such holder or holders of record at the close of
                            business on the next succeeding day on which such
                            share transfer books are open, but such conversion
                            shall be at the Conversion Price in effect on the
                            date on which such shares have been surrendered and
                            such notice received by the Company.

                     (c)    No fractional shares of scrip representing
                            fractions of Common Shares shall be issued upon
                            conversion of Series A Preferred Shares.  Instead
                            of any fractional interest in a Common Share that
                            would otherwise be deliverable upon the conversion
                            of a Series A Preferred Share, the Company shall
                            pay to the holder of such share an amount in cash
                            based upon the Current Market Price of Common
                            Shares on the Trading Day immediately preceding the
                            date of conversion.  If more than one Series A
                            Preferred Share shall be surrendered for conversion
                            at one time by the same holder, the number of full
                            Common Shares issuable upon conversion thereof
                            shall be computed on the basis of the aggregate
                            number of Series A Preferred Shares so surrendered.





                                      -12-
<PAGE>   13
                     (d)    The Conversion Price shall be adjusted from time to
                            time as follows:

                            (i)    If the Company shall after the Issue Date
                                   (A) pay or make a distribution on its Common
                                   Shares in Common Shares, (B) subdivide its
                                   outstanding Common Shares into a greater
                                   number of shares, (C) combine its
                                   outstanding Common Shares into a smaller
                                   number of shares or (D) issue any shares of
                                   beneficial interest by reclassification of
                                   its Common Shares, then in each such case
                                   the Conversion Price in effect at the
                                   opening of business on the day following the
                                   date fixed for the determination of
                                   shareholders entitled to receive such
                                   distribution or at the opening of business
                                   on the day following the day on which such
                                   subdivision, combination or reclassification
                                   becomes effective, as the case may be, shall
                                   be adjusted so that the holder of any Series
                                   A Preferred Shares thereafter surrendered
                                   for conversion shall be entitled to receive
                                   the number of Common Shares that such holder
                                   would have owned or have been entitled to
                                   receive after the happening of any of the
                                   events described above had such shares been
                                   converted immediately prior to the record
                                   date in the case of a distribution or the
                                   effective date in the case of a subdivision,
                                   combination or reclassification.  An
                                   adjustment made pursuant to this subsection
                                   (i) shall become effective immediately after
                                   the opening of business on the day next
                                   following the record date (except as
                                   provided in paragraph (h) below) in the case
                                   of a distribution and shall become effective
                                   immediately after the opening of business on
                                   the day next following the effective date in
                                   the case of a subdivision, combination or
                                   reclassification.  Such adjustment(s) shall
                                   be made successively whenever any of the
                                   events listed above shall occur.

                            (ii)   If the Company shall issue after the Issue
                                   Date rights, options or warrants to all
                                   holders of Common Shares entitling them (for
                                   a period expiring within 45 days after the
                                   record date mentioned below) to subscribe
                                   for or purchase Common Shares at a price per
                                   share less than the Fair Market Value per
                                   Common Share on the record date for the
                                   determination of shareholders entitled to
                                   receive such rights, options or warrants,
                                   then the Conversion Price in effect at the
                                   opening of business on the day next
                                   following such record date shall be adjusted
                                   to equal the





                                      -13-
<PAGE>   14
                                   price determined by multiplying (I) the
                                   Conversion Price in effect immediately prior
                                   to the opening of business on the day
                                   following the date fixed for such
                                   determination by (II) a fraction, the
                                   numerator of which shall be the sum of (A)
                                   the number of Common Shares outstanding on
                                   the close of business on the date fixed for
                                   such determination and (B) the number of
                                   Common Shares that the aggregate proceeds to
                                   the Company from the exercise of such
                                   rights, options or warrants for Common
                                   Shares would purchase at such Fair Market
                                   Value, and the denominator of which shall be
                                   the sum of (A) the number of Common Shares
                                   outstanding on the close of business on the
                                   date fixed for such determination and (B)
                                   the number of additional Common Shares
                                   offered for subscription or purchase
                                   pursuant to such rights, options or
                                   warrants.  Such adjustments shall be made
                                   successively whenever any such rights,
                                   options or warrants are issued, and shall
                                   become effective immediately after the
                                   opening of business on the day next
                                   following such record date (except as
                                   provided in subsection (h) below).  In
                                   determining whether any rights, options or
                                   warrants entitle the holders of Common
                                   Shares to subscribe for or purchase Common
                                   Shares at less than the Fair Market Value,
                                   there shall be taken into account any
                                   consideration received by the Company upon
                                   issuance and upon exercise of such rights,
                                   options or warrants, the value of such
                                   consideration, if other than cash, to be
                                   determined by the Chief Executive Officer of
                                   the Company or the Board of Trust Managers.

                            (iii)  If the Company shall distribute to all
                                   holders of its Common Shares any shares of
                                   beneficial interest of the Company (other
                                   than Common Shares) or evidence of its
                                   indebtedness or assets (excluding cash
                                   distributions paid out of the total equity
                                   applicable to Common Shares, including
                                   revaluation equity, less the amount of
                                   stated capital attributable to Common
                                   Shares, determined on the basis of the most
                                   recent annual consolidated cost basis and
                                   current value basis and quarterly
                                   consolidated balance sheets of the Company
                                   and its consolidated subsidiaries available
                                   at the time of the declaration of the
                                   distribution) or rights, options or warrants
                                   to subscribe for or purchase any of its
                                   securities (excluding those rights, options
                                   and warrants issued to all holders of Common
                                   Shares entitling them for a period expiring
                                   within 45 days after the record





                                      -14-
<PAGE>   15
                                   date referred to in subsection (ii) above to
                                   subscribe for or purchase Common Shares,
                                   which rights, options and warrants are
                                   referred to in and treated under subsection
                                   (ii) above) (any of the foregoing being
                                   hereinafter in this subsection (iii) called
                                   the "Securities"), then in each case the
                                   Conversion Price shall be adjusted so that
                                   it shall equal the price determined by
                                   multiplying (I) the Conversion Price in
                                   effect immediately prior to the close of
                                   business on the date fixed for the
                                   determination of shareholders entitled to
                                   receive such distribution by (II) a
                                   fraction, the numerator of which shall be
                                   the Fair Market Value per Common Share on
                                   the record date mentioned below less the
                                   then fair market value (as determined by the
                                   Chief Executive Officer of the Company or
                                   the Board of Trust Managers, whose
                                   determination shall be conclusive) of the
                                   portion of the shares of beneficial interest
                                   or assets or evidences of indebtedness so
                                   distributed or of such rights, options or
                                   warrants applicable to one Common Share, and
                                   the denominator of which shall be the Fair
                                   Market Value per Common Share on the record
                                   date mentioned below.  Such adjustment shall
                                   become effective immediately at the opening
                                   of business on the Business Day next
                                   following (except as provided in subsection
                                   (h) below) the record date for the
                                   determination of shareholders entitled to
                                   receive such distribution.  For the purposes
                                   of this subsection (iii), the distribution
                                   of a Security, which is distributed not only
                                   to the holders of the Common Shares on the
                                   date fixed for the determination of
                                   shareholders entitled to such distribution
                                   of such Security, but also is distributed
                                   with each Common Share delivered to a Person
                                   converting a Series A Preferred Share after
                                   such determination date, shall not require
                                   an adjustment of the Conversion Price
                                   pursuant to this subsection (iii); provided
                                   that on the date, if any, on which a Person
                                   converting a Series A Preferred Share would
                                   no longer be entitled to receive such
                                   Security with a Common Share (other than as
                                   a result of the termination of all such
                                   Securities), a distribution of such
                                   Securities shall be deemed to have occurred,
                                   and the Conversion Price shall be adjusted
                                   as provided in this subsection (iii) (and
                                   such day shall be deemed to be "the date
                                   fixed for the determination of the
                                   shareholders entitled to receive such
                                   distribution"





                                      -15-
<PAGE>   16
                                   and "the record date" within the meaning of
                                   the two preceding sentences).

                            (iv)   No adjustment in the Conversion Price shall
                                   be required unless such adjustment would
                                   require a cumulative increase or decrease of
                                   at least 1% in such price; provided,
                                   however, that any adjustments that by reason
                                   of this subsection (iv) are not required to
                                   be made shall be carried forward and taken
                                   into account in any subsequent adjustment
                                   until made; and provided, further, that any
                                   adjustment shall be required and made in
                                   accordance with the provisions of this
                                   subparagraph (7) (other than this subsection
                                   (iv)) not later than such time as may be
                                   required in order to preserve the tax-free
                                   nature of a distribution to the holders of
                                   Common Shares.  Notwithstanding any other
                                   provisions of this subparagraph (7), the
                                   Company shall not be required to make any
                                   adjustment of the Conversion Price for the
                                   issuance of any Common Shares pursuant to
                                   any plan providing for the reinvestment of
                                   distributions or interest payable on
                                   securities of the Company and the investment
                                   of additional optional amounts in Common
                                   Shares under such plan.  All calculations
                                   under this subparagraph (7) shall be made to
                                   the nearest cent (with $.005 being rounded
                                   upward) or to the nearest one-ten-thousandth
                                   of a share (with .0005 of a share being
                                   rounded upward), as the case may be.
                                   Anything in this subsection (d) to the
                                   contrary notwithstanding, the Company shall
                                   be entitled, to the extent permitted by law,
                                   to make such reductions in the Conversion
                                   Price, in addition to those required by this
                                   subsection (d), as it in its sole discretion
                                   shall determine to be advisable in order
                                   that any share distributions, subdivision of
                                   shares, reclassification or combination of
                                   shares, distribution of rights, options or
                                   warrants to purchase shares or securities,
                                   or distribution of other assets (other than
                                   cash distributions) hereafter made by the
                                   Company to its shareholders shall not be
                                   taxable.

                     (e)    If the Company shall be a party to any transaction
                            (including without limitation a merger,
                            consolidation, statutory share exchange, self
                            tender offer for all or substantially all of the
                            Common Shares, sale of all or substantially all of
                            the Company's assets or recapitalization of the
                            Common Shares and excluding any transaction as to
                            which subsection (d)(i) of this subparagraph (7)





                                      -16-
<PAGE>   17
                            applied) (each of the foregoing being referred to
                            herein as a "Transaction"), in each case as a
                            result of which Common Shares shall be converted
                            into the right to receive shares, stock, securities
                            or other property (including cash or any
                            combination thereof), each Series A Preferred Share
                            which is not converted into the right to receive
                            shares, stock, securities or other property in
                            connection with such Transaction shall thereafter
                            be convertible into the kind and amount of shares,
                            stock, securities and other property (including
                            cash or any combination thereof) receivable upon
                            the consummation of such Transaction by a holder of
                            that number of Common Shares into which one Series
                            A Preferred Share was convertible immediately prior
                            to such Transaction, assuming such holder of Common
                            Shares (i) is not a Person with which the Company
                            consolidated or into which the Company merged or
                            which merged into the Company or to which such sale
                            or transfer was made, as the case may be (a
                            "Constituent Person"), or an affiliate of a
                            Constituent Person and (ii) failed to exercise his
                            rights of the election, if any, as to the kind or
                            amount of shares, stock, securities and other
                            property (including cash) receivable upon such
                            Transaction (each a "Non-Electing Share") (provided
                            that if the kind or amount of shares, stock,
                            securities and other property (including cash)
                            receivable upon such Transaction by each Non-
                            Electing Share is not the same for each Non-
                            Electing Share, then the kind and amount of shares,
                            stock, securities and other property (including
                            cash) receivable upon such Transaction for each
                            Non-Electing Share shall be deemed to be the kind
                            and amount so receivable per share by a plurality
                            of the Non-Electing Shares).  The Company shall not
                            be a party to any Transaction unless the terms of
                            such Transaction are consistent with the provisions
                            of this subsection (e), and it shall not consent or
                            agree to the occurrence of any Transaction until
                            the Company has entered into an agreement with the
                            successor or purchasing entity, as the case may be,
                            for the benefit of the holders of the Series A
                            Preferred Shares that will require such successor
                            or purchasing entity, as the case may be, to make
                            provision in its certificate or articles of
                            incorporation or other constituent documents to the
                            end that the provisions of this subsection (e)
                            shall thereafter correspondingly be made applicable
                            as nearly as may reasonably be, in relation to any
                            shares of stock or other securities or property
                            thereafter deliverable upon conversion of the
                            Series A Preferred Shares.  The provisions of this
                            subsection (e) shall similarly apply to successive
                            Transactions.





                                      -17-
<PAGE>   18
                     (f)    If:

                            (i)    the Company shall declare a distribution on
                                   the Common Shares (other than in cash out of
                                   the total equity applicable to Common
                                   Shares, including revaluation equity, less
                                   the amount of stated capital attributable to
                                   Common Shares, determined on the basis of
                                   the most recent annual consolidated cost
                                   basis and current value basis and quarterly
                                   consolidated balance sheets of the Company
                                   and its consolidated subsidiaries available
                                   at the time of the declaration of the
                                   distribution); or

                            (ii)   the Company shall authorize the granting to
                                   all holders of the Common Shares of rights,
                                   options or warrants to subscribe for or
                                   purchase any shares of any class or any
                                   other rights, options or warrants; or

                            (iii)  there shall be any reclassifications of the
                                   Common Shares (other than an event to which
                                   subsection (d)(i) of this subparagraph (7)
                                   applied) or any consolidation or merger to
                                   which the Company is a party and for which
                                   approval of any shareholders of the Company
                                   is required, or a statutory share exchange
                                   involving the conversion or exchange of
                                   Common Shares into securities or other
                                   property, or a self tender offer by the
                                   Company for all or substantially all of its
                                   outstanding Common Shares, or the sale or
                                   transfer of all or substantially all of the
                                   assets of the Company and for which approval
                                   of any stockholder of the Company is
                                   required; or

                            (iv)   there shall occur the voluntary or
                                   involuntary liquidation, dissolution or
                                   winding up of the Company,

                            then the Company shall cause to be filed with the
                            Transfer Agent and shall cause to be mailed to the
                            holders of the Series A Preferred Shares at their
                            addresses as shown on the share records of the
                            Company, as promptly as possible, but at least 15
                            days prior to the applicable date hereinafter
                            specified, a notice stating (A) the date on which a
                            record is to be taken for the purpose of such
                            distribution or grant of rights, options or
                            warrants, or, if a record is not to be taken, the
                            date as of which the holders of Common Shares of
                            record to be entitled to such distribution or grant
                            of rights, options or warrants are to be
                            determined, provided, however, that no such
                            notification need be made in respect





                                      -18-
<PAGE>   19
                            of a record or determination date for a
                            distribution or grant of rights unless the
                            corresponding adjustment in the Conversion Price
                            would be an increase or decrease of at least 1% or
                            (B) the date on which such reclassification,
                            consolidation, merger, statutory share exchange,
                            self tender offer, sale, transfer, liquidation,
                            dissolution or winding up is expected to become
                            effective, and the date as of which it is expected
                            that holders of Common Shares of record shall be
                            entitled to exchange their Common Shares for
                            securities or other property, if any, deliverable
                            upon such reclassification, consolidation, merger,
                            statutory share exchange, self tender offer, sale,
                            transfer, liquidation, dissolution or winding up.
                            Failure to give or receive such notice or any
                            defect therein shall not affect the legality or
                            validity of the proceedings described in this
                            subparagraph (7).

                     (g)    Whenever the Conversion Price is adjusted as herein
                            provided, the Company shall promptly file with the
                            Transfer Agent an officer's certificate setting
                            forth the Conversion Price after such adjustment
                            and setting forth a brief statement of the facts
                            requiring such adjustment, which certificate shall
                            be conclusive evidence of the correctness of such
                            adjustment absent manifest error.  Promptly after
                            delivery of such certificate, the Company shall
                            prepare a notice of such adjustment of the
                            Conversion Price setting forth the adjusted
                            Conversion Price and the effective date of such
                            adjustment and shall mail such notice of such
                            adjustment of the Conversion Price to the holder of
                            each Series A Preferred Share at such holder's last
                            address as shown on the share records of the
                            Company.

                     (h)    In any case in which subsection (d) of this
                            subparagraph (7) provides that an adjustment shall
                            become effective on the date next following the
                            record date for an event, the Company may defer
                            until the occurrence of such event (A) issuing to
                            the holder of any Series A Preferred Shares
                            converted after such record date and before the
                            occurrence of such event the additional Common
                            Shares issuable upon such conversion by reason of
                            the adjustment required by such event over and
                            above the Common Shares issuable upon such
                            conversion before giving effect to such adjustment
                            and (B) fractionalizing any Series A Preferred
                            Share and/or paying to such holder any amount of
                            cash in lieu of any fraction pursuant to subsection
                            (c) of this subparagraph (7).

                     (i)    There shall be no adjustment of the Conversion
                            Price in case of the issuance of any shares of
                            beneficial interest of the Company





                                      -19-
<PAGE>   20
                            in a reorganization, acquisition or other similar
                            transaction except as specifically set forth in
                            this subparagraph (7).  If any action or
                            transaction would require adjustment of the
                            Conversion Price pursuant to more than one
                            subsection of this subparagraph (7), only one
                            adjustment shall be made, and such adjustment shall
                            be the amount of adjustment that has the highest
                            absolute value.

                     (j)    If the Company shall take any action affecting the
                            Common Shares, other than action described in this
                            subparagraph (7), that in the opinion of the Board
                            of Trust Managers would materially adversely affect
                            the conversion rights of the holders of the Series
                            A Preferred Shares, the Conversion Price for the
                            Series A Preferred Shares may be adjusted, to the
                            extent permitted by law, in such manner, if any,
                            and at such time, as the Board of Trust Managers,
                            in its sole discretion, may determine to be
                            equitable in the circumstances.

                     (k)    The Company covenants that it will at all times
                            reserve and keep available, free from preemptive
                            rights, out of the aggregate of its authorized but
                            unissued Common Shares, for the purpose of
                            effecting conversion of the Series A Preferred
                            Shares, the full number of Common Shares
                            deliverable upon the conversion of all outstanding
                            Series A Preferred Shares not theretofore
                            converted.  For purposes of this subsection (k),
                            the number of Common Shares that shall be
                            deliverable upon the conversion of all outstanding
                            Series A Preferred Shares shall be computed as if
                            at the time of computation all such outstanding
                            shares were held by a single holder.

                            The Company covenants that any Common Shares issued
                            upon conversion of the Series A Preferred Shares
                            shall be validly issued, fully paid and
                            nonassessable.  Before taking any action that would
                            cause an adjustment reducing the Conversion Price
                            below the then par value of the Common Shares
                            deliverable upon conversion of the Series A
                            Preferred Shares, the Company will take any action
                            that, in the opinion of its counsel, may be
                            necessary in order that the Company may validly and
                            legally issue fully paid and nonassessable Common
                            Shares at such adjusted Conversion Price.

                            The Company shall endeavor to list the Common
                            Shares required to be delivered upon conversion of
                            the Series A Preferred Shares, prior to such
                            delivery, upon each national securities exchange,





                                      -20-
<PAGE>   21
                            if any, upon which the outstanding Common Shares
                            are listed at the time of such delivery.

                            Prior to the delivery of any securities that the
                            Company shall be obligated to deliver upon
                            conversion of the Series A Preferred Shares, the
                            Company shall endeavor to comply with all federal
                            and state laws and regulations thereunder requiring
                            the registration of such securities, or any
                            approval of or consent to the delivery thereof by
                            any governmental authority.

                     (l)    The Company will pay any and all documentary stamp
                            or similar issue or transfer taxes payable in
                            respect of the issue or delivery of Common Shares
                            or other securities or property on conversion of
                            the Series A Preferred Shares pursuant hereto;
                            provided, however, that the Company shall not be
                            required to pay any tax that may be payable in
                            respect of any transfer involved in the issue or
                            delivery of  Common Shares or other securities or
                            property in a name other than that of the holder of
                            the Series A Preferred Shares to be converted, and
                            no such issue or delivery shall be made unless and
                            until the Person requesting such issue or delivery
                            has paid to the Company the amount of any such tax
                            or has established, to the reasonable satisfaction
                            of the Company, that such tax has been paid.

                     (m)    In addition to the foregoing adjustments, the
                            Company will be permitted to make such reductions
                            in the Conversion Price as it considers to be
                            advisable in order that any event treated for
                            federal income tax purposes as a dividend of stock
                            or stock rights will not be taxable to the holders
                            of the Common Shares.

                     (n)    Whenever reference is made in this subparagraph (7)
                            to the issuance or sale of Common Shares, the term
                            "Common Shares" shall include any shares of
                            beneficial interest of any class of the Company
                            other than preferred shares of any class with a
                            fixed (absolutely or by reference to an adjustment
                            formula) limit on dividends and a fixed amount
                            payable in the event of any voluntary or
                            involuntary liquidation, dissolution or winding up
                            of the Company.

              (8)    Voting Rights.  Except as required by law or as provided
below, the holders of the Series A Preferred Shares shall not be entitled to
vote at any meeting of the shareholders for election of Trust Managers or for
any other purposes or otherwise to participate





                                      -21-
<PAGE>   22
in any action taken by the Company or the shareholders thereof, or to receive
notice of any meeting of shareholders.


                     (a)    In any matter in which the Series A Preferred
                            Shares are entitled to vote (as expressly provided
                            herein or as may be required by law), including any
                            action by written consent, each Series A Preferred
                            Share shall be entitled to one vote.

                     (b)    Whenever distributions on any Series A Preferred
                            Shares shall be in arrears for six or more
                            Distribution Periods, whether or not such
                            Distribution Periods are consecutive, the holders
                            of the Series A Preferred Shares, voting separately
                            as a class with all other series of Preferred
                            Shares upon which like voting rights have been
                            conferred and are exercisable, will be entitled to
                            vote for the election of two additional Trust
                            Managers of the Company at a special meeting called
                            by the holders of record of at least ten percent
                            (10%) of any series of Preferred Shares so in
                            arrears (unless such request is received less than
                            90 days before the date fixed for the next annual
                            or special meeting of the shareholders) or at the
                            next annual meeting of shareholders, and all other
                            Trust Managers of the Company shall be elected by
                            the holders of the Company's Common Shares.  In
                            such case, the entire Board of Trust Managers of
                            the Company will be increased by two Trust
                            Managers.  Voting rights of the holders of the
                            Series A Preferred Shares shall continue at each
                            subsequent annual meeting until all distributions
                            accumulated on such Series A Preferred Shares for
                            the past Distribution Periods and the then current
                            Distribution Period shall have been fully paid or
                            declared and a sum sufficient for the payment
                            thereof set aside for payment.

                     (c)    As long as any Series A Preferred Shares remain
                            outstanding, the Company will not, without the
                            affirmative vote or consent of the holders of at
                            least two-thirds of the Series A Preferred Shares
                            outstanding at the time, given in person or by
                            proxy, either in writing or at a meeting (such
                            series voting separately as a class) (i) authorize
                            or create, or increase the authorized or issued
                            amount of, any class or series of shares of
                            beneficial interest ranking prior to the Series A
                            Preferred Shares with respect to the payment of
                            distributions or the distribution of assets upon
                            liquidation, dissolution or winding up or
                            reclassify any authorized shares of beneficial
                            interest of the Company into such shares, or
                            create, authorize or issue any obligation or
                            security convertible into or evidencing the right
                            to purchase any such shares; or (ii) amend, alter
                            or repeal the provisions of the Declaration of





                                      -22-
<PAGE>   23
                            Trust or this Statement of Designation, whether by
                            merger, consolidation or otherwise (an "Event"), so
                            as to materially and adversely affect any right,
                            preference, privilege or voting power of the Series
                            A Preferred Shares or the holders thereof;
                            provided, however, with respect to the occurrence
                            of any of the Events set forth in (ii) above, so
                            long as the Series A Preferred Shares (or shares
                            into which the Series A Preferred Shares have been
                            converted in any successor entity to the Company)
                            remain outstanding with the terms thereof
                            materially unchanged, taking into account that upon
                            the occurrence of an Event, the Company may not be
                            the surviving entity, the occurrence of any such
                            Event shall not be deemed to materially and
                            adversely affect such rights, preferences,
                            privileges or voting power of holders of Series A
                            Preferred Shares and provided further that (x) any
                            increase in the amount of the authorized Preferred
                            Shares or the creation or issuance of any other
                            Series A Preferred Shares, or (y) any increase in
                            the amount of authorized Series A Preferred Shares,
                            in each case ranking on a parity with or junior to
                            the Series A Preferred Shares with respect to
                            payment of distributions or the distribution of
                            assets upon liquidation, dissolution or winding up,
                            shall not be deemed to materially and adversely
                            affect such rights, preferences, privileges or
                            voting power.

                            The foregoing voting provisions will not apply if,
                            at or prior to the time when the act with respect
                            to which such vote would otherwise be required
                            shall be effected, all outstanding Series A
                            Preferred Shares shall have been redeemed or called
                            for redemption and sufficient funds shall have been
                            deposited in trust to effect such redemption.

       C.     Exclusion of Other Rights.

              Except as may otherwise be required by law, the Series A
Preferred Shares shall not have any voting powers, preferences and relative,
participating, optional or other special rights, other than those specifically
set forth in this Statement of Designation (as such Statement of Designation
may be amended from time to time) and in the Declaration of Trust.  The Series
A Preferred Shares shall have no preemptive or subscription rights.

       D.     Headings of Subdivisions.

              The headings of the various subdivisions hereof are for
convenience of reference only and shall not affect the interpretation of any of
the provisions hereof.





                                      -23-
<PAGE>   24
       E.     Severability of Provisions.

              If any voting powers, preferences and relative, participating,
optional and other special rights of the Series A Preferred Shares and
qualifications, limitations and restrictions thereof set forth in this
Statement of Designation (as such Statement of Designation may be amended from
time to time) is invalid, unlawful or incapable of being enforced by reason of
any rule of law or public policy, all other voting powers, preferences and
relative, participating, optional and other special rights of Series A
Preferred Shares and qualifications, limitations and restrictions thereof set
forth in this Statement of Designation (as so amended) which can be given
effect without the invalid, unlawful or unenforceable voting powers,
preferences and relative, participating, optional or other special rights of
Series A Preferred Shares and qualifications, limitations and restrictions
thereof herein set forth shall be deemed dependent upon any other such voting
powers, preferences and relative, participating, optional or other special
right of Series A Preferred Shares and qualifications, limitations and
restrictions thereof unless so expressed herein.

       F.     Adoption.

              This Statement of Designation was duly adopted by the Board of
Trust Managers of the Company.  Shareholder action was not required.



                            *          *          *





                                      -24-
<PAGE>   25

       IN WITNESS WHEREOF, I hereby certify that I, Gerald W. Haddock, am the
President and Chief Executive Officer of Crescent Real Estates Equities Company
(the "Company") and that as such, I am authorized to execute and file with the
County Clerk of Tarrant County, Texas this Statement of Designation (the
"Statement of Designation") on behalf of the Company and I further certify on
behalf of the Company that this Statement of Designation was authorized by the
Board of Trust Managers by unanimous written consent dated as of February 13,
1998 and is still in full force and effect as of the date hereof.  I further
certify that my signature to this document is my free act and deed, that to the
best of my knowledge, information and belief, the matters and facts set forth
herein are true in all material respects and that this statement is made under
penalty of perjury.

Dated:  February 18, 1998

                                   CRESCENT REAL ESTATE EQUITIES COMPANY


                                   /s/ GERALD W. HADDOCK
                                   ---------------------------------------
                                   Name:   Gerald W. Haddock
                                   Title:  President and Chief Executive
                                           Officer



       The undersigned, David M. Dean, the Senior Vice President, Law and
Secretary of the Company, hereby certifies that Gerald W. Haddock is the
President and Chief Executive Officer of the Company and that the signature set
forth above is his genuine signature.

       IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 18th
day of February, 1998.



                                   /s/ DAVID M. DEAN
                                   ---------------------------------------
                                   Name:  David M. Dean
                                   Title:    Senior Vice President, Law
                                             and Secretary





                                      -25-
<PAGE>   26
STATE OF TEXAS
COUNTY OF TARRANT

      This instrument was acknowledged before me on February 18, 1998, by
Gerald W. Haddock, President and Chief Executive Officer of Crescent Real
Estate Equities Company, a Texas real estate investment trust, on behalf of
said real estate investment trust.



      [NOTARY PUBLIC STAMP]               /s/ LYNN SONSEL
      LYNN SONSEL                         ---------------------------------
      Notary Public                       Notary Public - State of Texas
      STATE OF TEXAS
      My Comm. Exp. 08/29/2000
                                          ---------------------------------
                                          Printed Name of Notary Public

My commission expires:

---------------------------



STATE OF TEXAS
COUNTY OF TARRANT

      This instrument was acknowledged before me on February 18, 1998, by
David M. Dean.


      [NOTARY PUBLIC STAMP]               /s/ LYNN SONSEL
      LYNN SONSEL                         ---------------------------------
      Notary Public                       Notary Public - State of Texas
      STATE OF TEXAS
      My Comm. Exp. 08/29/2000
                                          ---------------------------------
                                          Printed Name of Notary Public

My commission expires:

----------------------------