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                                                                    EXHIBIT 4.08

                          STATEMENT OF DESIGNATION
                                       OF
                       $3.50 CONVERTIBLE 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 2,070,000 $3.50 Convertible
Preferred Shares of beneficial interest, $.01 par value per share (Liquidation
Preference $50.00 Per Share) (the "$3.50 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:

         Section 1. Amount. The maximum number of $3.50 Preferred Shares shall
be 2,070,000.

         Section 2. Rank. All $3.50 Preferred Shares shall rank prior, both as
to payment of distributions and as to distributions of assets upon liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, to
all of the Company's now or hereafter issued Common Shares. The term "Common
Shares" shall mean the common shares of beneficial interest, $.01 par value per
share, of the Company as the same exists at the date hereof or as such shares
may be constituted from time to time.

         Section 3. Distributions. The holders of $3.50 Preferred Shares shall
be entitled to receive, when, as and if declared by the Board of Trust Managers
of the Company out of funds of the Company at the time legally available
therefor, distributions at the annual rate of $3.50 per share, or 7% of the
liquidation preference of $50.00 per share, and no more, which shall be fully
cumulative, shall accrue without interest from the date of first issuance and
shall be payable in cash quarterly in arrears on March 15, June 15, September
15 and December 15 of each year, commencing ____________ (except that if any
such date is a Saturday, Sunday or legal holiday, then such distribution shall
be payable on the next succeeding day that is not a Saturday, Sunday or legal
holiday) to holders of record of $3.50 Preferred Shares on such record dates,
not more than 60 nor less than 10 days preceding the payment dates for such
distributions, as are fixed by the Board of

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Trust Managers. For purposes hereof, the term "legal holiday" shall mean any day
on which banking institutions are authorized to close in New York, New York or
in Dallas, Texas. Subject to the next paragraph of this Section 3, distributions
on account of arrears for any past distribution period may be declared and paid
at any time, without reference to any regular distribution payment date. The
amount of distributions payable per $3.50 Preferred Share for each quarterly
distribution period, including the initial distribution period, shall be
computed by dividing the annual amount by four. The amount of distributions
payable for any period shorter than a full quarterly distribution period, other
than the initial distribution period, shall be computed on the basis of a
360-day year of twelve 30-day months. Holders of $3.50 Preferred Shares shall
not be entitled to any distribution, whether payment in cash, property or
shares, in excess of the full cumulative distributions on such shares of $3.50
Preferred Shares.

                    On each distribution payment date all distributions which
shall have accrued on each $3.50 Preferred Share outstanding on such
distribution payment date shall accumulate and be deemed to become "due" whether
or not there shall be funds legally available for the payment thereof. Any
distribution which shall not be paid on the distribution payment date on which
it shall become due shall be deemed to be "past due" until such distribution
shall be paid or until the $3.50 Preferred Share with respect to which such
distribution became due shall no longer be outstanding, whichever is the earlier
to occur. No interest, sum of money in lieu of interest, or other property or
securities shall be payable in respect of any distribution payment or payments
which are past due. Distributions paid on $3.50 Preferred Shares in an amount
less than the total amount of such distributions at the time accumulated and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.

                    No distributions, other than distributions payable solely in
Common Shares or other shares of beneficial interest of the Company ranking
junior as to distributions and as to liquidation rights to the $3.50 Preferred
Shares which is neither convertible into, nor exchangeable or exercisable for,
any securities of the Company other than Common Shares or other shares of
beneficial interest of the Company ranking junior as to distributions and as to
liquidation rights to the $3.50 Preferred Shares, shall be paid, or declared and
set apart for payment, and no purchase, redemption or other acquisition shall be
made by the Company of, any Common Shares or other shares of beneficial interest
of the Company ranking junior as to distributions or as to liquidation rights to
the $3.50 Preferred Shares (the "Junior Distribution Shares") unless and until
all accrued and unpaid distributions on the $3.50 Preferred Shares, including
the full distribution for the then current distribution period, shall have been
paid or declared and set apart for payment and the Company is not in default in
respect of the optional redemption of any $3.50 Preferred Shares.

                    No full distributions shall be paid or declared and set
apart for payment on any class or series of the Company's shares of beneficial
interest ranking, as to distributions, on a parity with the $3.50 Preferred
Shares (the "Parity Distribution Shares") for any period unless full cumulative
distributions have been, or contemporaneously are, paid or declared and set
apart for such payment on the $3.50 Preferred Shares for all distribution
payment periods terminating on or prior to the date of payment of such full
cumulative 



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distributions. No full distributions shall be paid or declared and set apart for
payment on the $3.50 Preferred Shares for any period unless full cumulative
distributions have been, or contemporaneously are, paid or declared and set
apart for payment on the Parity Distribution Shares for all distribution periods
terminating on or prior to the date of payment of such full cumulative
distributions. When distributions are not paid in full upon the $3.50 Preferred
Shares and the Parity Distribution Shares, all distributions paid or declared
and set aside for payment upon shares of $3.50 Preferred Shares and the Parity
Distribution Shares shall be paid or declared and set aside for payment pro rata
so that the amount of distributions paid or declared and set aside for payment
per share on the $3.50 Preferred Shares and the Parity Distribution Shares shall
in all cases bear to each other the same ratio that accrued and unpaid
distributions per share on the shares of $3.50 Preferred Shares and the Parity
Distribution Shares bear to each other.

                    The Company shall not permit any subsidiary of the Company
to purchase or otherwise acquire for consideration any shares of the Company
unless the Company could, under this Section 3, purchase or otherwise acquire
such shares at such time and in such manner.

                    Any reference to "distribution" contained in this Section 3
shall not be deemed to include any distribution made in connection with any
liquidation dissolution or winding up of the Company, whether voluntary or
involuntary.

         Section 4. Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the
holders of $3.50 Preferred Shares shall be entitled to receive out of the assets
of the Company, whether such assets are stated capital or surplus of any nature,
an amount equal to the distributions accrued and unpaid thereon to the date of
final distribution to such holders, whether or not declared, without interest,
and a sum equal to $50.00 per share, and no more, before any payment shall be
made or any assets distributed to the holders of Common Shares or any other
class or series of the Company's shares of beneficial interest ranking junior as
to liquidation rights to the $3.50 Preferred Shares (the "Junior Liquidation
Shares"). In the event the assets of the Company available for distribution to
shareholders upon any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, shall be insufficient to pay in full the
amounts payable with respect to the $3.50 Preferred Shares and any other class
or series of the Company's shares of beneficial interest having parity as to
liquidation rights with the $3.50 Preferred Shares (the "Parity Liquidation
Shares"), the holders of the $3.50 Preferred Shares and the holders of the
Parity Liquidation Shares shall share ratably in any distribution of assets of
the Company in proportion to the full respective preferential amounts to which
they are entitled (but only to the extent of such preferential amounts). After
payment in full of the liquidation preferences of the $3.50 Preferred Shares,
the holders of such shares shall not be entitled to any further participation in
any distribution of assets by the Company. Neither a merger, consolidation, or
other business combination of the Company with or into another company or other
entity nor a sale or transfer of all or part of the Company's assets for cash,
securities or other property shall be considered a liquidation, dissolution or
winding up of the Company for purposes of this Section 4 (unless in connection
therewith the liquidation of the Company is specifically approved).




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                    The holder of any $3.50 Preferred Shares shall not be
entitled to receive any payment owed for such shares under this Section 4 until
such holder shall cause to be delivered to the Company (i) the certificate(s)
representing such $3.50 Preferred Shares and (ii) transfer instrument(s)
satisfactory to the Company and sufficient to transfer such $3.50 Preferred
Shares to the Company free of any adverse interest. As in the case of the
Redemption Price referred to below, no interest shall accrue on any payment upon
liquidation after the due date thereof.

         Section 5. Redemption at Option of the Company. Except as otherwise
provided in this Section 5, the Company may not redeem the $3.50 Preferred
Shares prior to March 15, 1999. The Company, at its option, may at any time on
and after March 15, 1999 redeem for Common Shares the $3.50 Preferred Shares, in
whole or from time to time in part, on any date set by the Board of Trust
Managers, at the following redemption prices if redeemed during the twelve-month
period beginning March 15 of the year specified below:

<TABLE>
<CAPTION>
                 Year                               Price Per Share
                 ----                               ---------------
<S>                                                 <C>   
                 1999                                   $52.45
                 2000                                   $52.10
                 2001                                   $51.75
                 2002                                   $51.40
                 2003                                   $51.05
                 2004                                   $50.70
                 2005                                   $50.35
</TABLE>

and thereafter at $50.00 per share, plus, in each case, an amount equal to all
distributions on such $3.50 Preferred Shares accrued and unpaid thereon, whether
or not declared or due, to the date fixed for redemption, such sum being
hereinafter referred to as the "Redemption Price" (subject to the right of the
holder of record of $3.50 Preferred Shares on a record date for the payment of a
distribution on the $3.50 Preferred Shares to receive the distribution due on
such $3.50 Preferred Shares on the corresponding distribution payment date).
Except as provided in Section 6 hereof, at no time shall the $3.50 Preferred
Shares be redeemable for cash.

                    Prior to March 15, 1999, the $3.50 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 $52.80 per $3.50 Preferred Share, plus an amount equal
to all distributions on such $3.50 Preferred Shares accrued and unpaid thereon,
whether or not declared or due, to the date fixed for redemption, 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.

                    The Company shall issue in payment of the Redemption Price
for each share of $3.50 Preferred Shares to be redeemed such number of Common
Shares as equals (x) the then-current Redemption Price of the $3.50 Preferred
Shares, divided by (y) the market price (the "Market Price") of the Common
Shares. The Market Price shall be equal to the lower of (i) the average of the
daily closing prices of the Common Shares for the 20 consecutive




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trading days immediately preceding the first business day immediately preceding
the date of the applicable redemption notice, or (ii) the closing price of the
Common Shares on the trading day immediately preceding the first business day
immediately preceding the date of the applicable redemption notice. The "closing
price" for each day shall be the last reported sales price on the New York Stock
Exchange (the "NYSE"). If the Common Shares are not traded on the NYSE, the
"closing price" for each day shall be the last reported sales price or, in case
no such reported sales take place on such day, the average of the closing bid
and asked prices for such day, in each case as reported by the national exchange
on which the Common Shares is traded. If the shares of Common Shares are neither
quoted by the Nasdaq National Market nor listed on any national exchange, the
determination of Market Price shall be determined in good faith by the Board of
Trust Managers of the Company or, if such determination cannot be made, by a
nationally recognized independent investment banking firm selected in good faith
by the Board of Trust Managers of the Company. For the purposes of this Section
5, trading day shall mean a day on which the securities exchange specified for
purposes of this Section 5 shall be open for business or, if the Common Shares
shall not be listed on such exchange for such period, a day with respect to
which quotations of the character referred to in the next preceding sentence
shall be reported. In lieu of any fractional Common Share which would otherwise
be issued upon any redemption of $3.50 Preferred Shares, the Company shall pay a
cash adjustment in respect of such fractional interest in an amount in cash
(computed to the nearest cent) equal to the Market Price multiplied by the
fractional interest that otherwise would have been deliverable upon such
redemption of such $3.50 Preferred Shares.

                    In case of the redemption of less than all of the then
outstanding $3.50 Preferred Shares, the $3.50 Preferred Shares to be redeemed
shall be redeemed pro rata or by lot or in such other manner as the Board of
Trust Managers may determine. In the event that such redemption is to be by lot,
if as a result of such redemption any holder of $3.50 Preferred Shares would
own, or be deemed to own by virtue of certain attribution provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), as specified in the
Restated Declaration of Trust, in excess of 9.9% of the $3.50 Preferred Shares
issued and outstanding because such holder's $3.50 Preferred Shares were not
redeemed, or were only redeemed in part, then the Company will redeem the
requisite number of $3.50 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 Restated Declaration of Trust in excess of 9.9% of
$3.50 Preferred Shares issued and outstanding subsequent to such redemption.

                    Notwithstanding the foregoing, the Company shall not redeem
less than all of the $3.50 Preferred Shares at any time outstanding until all
distributions accrued and in arrears upon all $3.50 Preferred Shares then
outstanding shall have been paid for the current and all past distribution
periods unless 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.

                    Not more than 60 nor less than 30 days prior to the
redemption date, notice by first class mail, postage prepaid, shall be given to
each holder of record of the $3.50 Preferred Shares to be redeemed, at such
holder's address as it shall appear upon the stock



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transfer books of the Company. Each such notice of redemption shall specify the
date fixed for redemption, the Redemption Price, the place or places of payment,
that payment will be made upon presentation and surrender of the certificate(s)
evidencing the $3.50 Preferred Shares to be redeemed, that on and after the
redemption date, distributions will cease to accrue on such shares, the then
effective conversion price pursuant to Section 7 and that the right of holders
to convert shall terminate at the close of business on the date immediately
prior to the redemption date (unless the Company defaults in the payment of the
Redemption Price).

                    Any notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of the
$3.50 Preferred Shares receives such notice; and failure to give such notice by
mail, or any defect in such notice, to the holders of any shares designated for
redemption shall not affect the validity of the proceedings for the redemption
of any other $3.50 Preferred Shares. On or after the date fixed for redemption
as stated in such notice, each holder of the shares called for redemption shall
surrender the certificate evidencing such shares to the Company at the place
designated in such notice and shall thereupon be entitled to receive payment of
the Redemption Price as herein provided. If less than all the shares represented
by any such surrendered certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares. If, on the date fixed for redemption,
Common Shares and funds necessary for the redemption shall be available therefor
and shall have been irrevocably deposited or set aside, then, notwithstanding
that the certificates evidencing any shares so called for redemption shall not
have been surrendered the distributions with respect to the shares so called
shall cease to accrue after the date fixed for redemption, the shares shall no
longer be deemed outstanding, the holders thereof shall cease to be holders of
$3.50 Preferred Shares, and all rights whatsoever with respect to the shares so
called for redemption (except the right of the holders to receive payment of the
Redemption Price as herein provided without interest upon surrender of their
certificates therefor) shall terminate. At the close of business on the
redemption date, each holder of $3.50 Preferred Shares so redeemed (unless the
Company defaults on its obligations to deliver shares of Common Shares or cash)
shall be, without any further action, deemed a holder of the number of Common
Shares for which such $3.50 Preferred Shares is redeemable.

                    The $3.50 Preferred Shares shall not be subject to the
operation of any purchase, retirement, mandatory redemption or sinking fund.

                    The holder of any $3.50 Preferred Shares redeemed upon any
exercise of the Company's redemption right shall not be entitled to receive
payment of the Redemption Price for such shares until such holder shall cause to
be delivered to the place specified in the notice given with respect to such
redemption (i) the certificate(s) representing such $3.50 Preferred Shares
redeemed and (ii) transfer instrument(s) satisfactory to the Company and
sufficient to transfer such $3.50 Preferred Shares to the Company free of any
adverse interest. No interest shall accrue on the Redemption Price of any $3.50
Preferred Share after its redemption date.

                    All Common Shares which may be delivered upon redemption of
the $3.50 Preferred Shares will upon delivery be duly and validly issued and
fully paid and


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non-assessable, free of all liens and charges and not subject to any preemptive
rights, and prior to giving any notice of redemption the Company shall take any
corporate action necessary therefor.

                    In the event that any $3.50 Preferred Shares shall be
converted into Common Shares pursuant to Section 7, then (i) the Company shall
not have the right to redeem such shares and (ii) Common Shares and any funds
which shall have been deposited for the payment of the Redemption Price for such
$3.50 Preferred Shares shall be returned to the Company immediately after such
conversion (subject to declared distributions payable to holders of $3.50
Preferred Shares on the record date for such distributions being so payable, to
the extent set forth in Section 7 hereof, regardless of whether such shares are
converted subsequent to such record date and prior to the related distribution
payment date).

         Section 6. Mandatory Disposition Pursuant to Gaming Laws. If a record
or beneficial owner of $3.50 Preferred Shares is required by the Nevada Gaming
Commission, the Nevada State Gaming Control Board or any agency of any state,
county, city or other political subdivision which has, or may at any time after
the date of this Statement of Designation have, any jurisdiction over all or any
portion of the gaming activities of the Company or any of its subsidiaries or
any successor to such authority ("Gaming Authority") to be found suitable, such
record or beneficial owner shall apply for a finding of suitability within 30
days after requests of such Gaming Authority. The applicant for a finding of
suitability must pay all costs of the investigation for such finding of
suitability. If a record or beneficial owner is required to be found suitable
and is not found suitable by such Gaming Authority, (i) the record or beneficial
owner shall, upon request of the Company, dispose of such owner's $3.50
Preferred Shares within 30 days or within that time prescribed by such Gaming
Authority, whichever is earlier, or (ii) the Company may, at its option, redeem
each of such owner's $3.50 Preferred Shares (or Common Shares after conversion)
at the lesser of (x) the amount per Common Share that would be (or was) obtained
upon conversion of the $3.50 Preferred Shares at the Conversion Price (as
defined in Section 7(d)) or (y) the price at which such $3.50 Preferred Shares
were acquired by such owner, together with, in either case, accrued and unpaid
distributions to the date of the finding of unsuitability by such Gaming
Authority. The Company shall have the right to pay the Redemption Price for any
redemption pursuant to this Section 6 in cash.

         Section 7. Conversion Privilege.

                    (a) Right of Conversion. Subject to and upon compliance with
the provisions of this Section 7, each $3.50 Preferred Share shall, at the
option of the holder thereof, be convertible at any time (unless such share is
called for redemption, then to and including but not after the close of business
on the date immediately prior to the date fixed for such redemption, unless the
Company shall default in payment due upon redemption thereof), into that number
of fully paid and non-assessable Common Shares (calculated as to each conversion
to the nearest 1/100th of a share) obtained by dividing $50.00 by the Conversion
Price in effect at such time and by surrender of such share so to be converted
in the manner provided in Section 7(b).

                    (b) Manner of Exercise of Conversion Privilege. In order to
exercise the conversion privilege, the holder of one or more $3.50 Preferred
Shares to be 


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converted shall surrender such shares at any of the offices or agencies to be
maintained for such purpose by the Company accompanied by the funds, if any,
required by the last paragraph of this Section 7(b) and shall give written
notice of conversion in the form provided on such $3.50 Preferred Shares (or
such other notice as is acceptable to the Company) to the Company at such office
or agency that the holder elects to convert the $3.50 Preferred Shares specified
in said notice. Such notice shall also state the name or names, together with
address or addresses, in which the certificate or certificates for Common Shares
which shall be issuable in such conversion shall be issued. Each $3.50 Preferred
Share surrendered for conversion shall, unless the shares issuable on conversion
are to be issued in the same name as the name in which such share is registered,
be accompanied by instruments of transfer, in form satisfactory to the Company,
duly executed by the holder or his duly authorized attorney and an amount
sufficient to pay any transfer or similar tax. As promptly as practicable after
the surrender of such $3.50 Preferred Shares and the receipt of such notice,
instruments of transfer and funds, if any, as aforesaid, the Company shall issue
and shall deliver at such office or agency 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 $3.50 Preferred Share in accordance with
the provisions of this Section 7 and a check or cash in respect of any
fractional interest in a Common Share arising upon such conversion, as provided
in Section 7(c).

                    Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which such $3.50
Preferred Shares shall have been surrendered and such notice (and any applicable
instruments of transfer and any required taxes) 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 on such date, unless the stock 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 stock transfer books
are open, but such conversion shall be at the Conversion Price in effect on the
date upon which such $3.50 Preferred Shares shall have been surrendered and such
notice received by the Company.

                    Any $3.50 Preferred Shares surrendered for conversion during
the period from the close of business on the record date for any distribution
payment to the opening of business on the related distribution payment date
shall (unless such $3.50 Preferred Shares shall have been called for redemption
on a date in such period) be accompanied by payment, in funds acceptable to the
Company, of an amount equal to the distribution otherwise payable on such
distribution payment date; provided, however, that no such payment need be made
if there shall exist at the time of conversion a default in the payment of
distributions on the $3.50 Preferred Shares. An amount equal to such payment
shall be paid by the Company on such distribution payment date to the holder of
such $3.50 Preferred Shares at the close of business on such record date;
provided, however, that if the Company shall default in the payment of
distributions on such distribution payment date, such amount shall be paid to
the person who made such required payment. Except as provided for above in this
Section, no adjustment shall 



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be made for distributions accrued on any $3.50 Preferred Shares converted or for
distributions on any shares issued upon the conversion of such shares as
provided in this Section.

                    (c) Cash Payments in Lieu of Fractional Shares. No
fractional shares or scrip representing fractions of Common Shares shall be
issued upon conversion of $3.50 Preferred Shares. If more than one share of
$3.50 Preferred Shares shall be surrendered for conversion at one time by the
same holder, the number of full shares of Common Shares issuable upon conversion
thereof shall be computed on the basis of the aggregate of $50.00 for each such
share so surrendered. In lieu of any fractional interest in a Common Share which
would otherwise be deliverable upon the conversion of any $3.50 Preferred Share,
the Company shall pay to the holder of such shares an amount in cash (computed
to the nearest cent) equal to the closing price (as defined in Section 5 hereof)
on the business day next preceding the day of conversion multiplied by the
fractional interest that otherwise would have been deliverable upon conversion
of such share.

                    (d) Adjustment of Conversion Price. The Conversion Price
shall mean and be $32.94, subject to adjustment from time to time by the Company
as follows:

                        (i) In case the Company shall (A) 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 by reclassification of its Common
Shares any shares of beneficial interest of the Company, then in each such case
the Conversion Price in effect immediately prior to such action shall be
adjusted so that the holder of any $3.50 Preferred Share thereafter surrendered
for conversion shall be entitled to receive the number of Common Shares or other
shares of beneficial interest of the Company which he would have owned or been
entitled to receive immediately following such action had such share been
converted immediately prior to the occurrence of such event. An adjustment made
pursuant to this subsection (i) shall become effective immediately after the
record date, in the case of a distribution, or immediately after the effective
date, in the case of a subdivision, combination or reclassification. If, as a
result of an adjustment made pursuant to this subsection (i), the holder of any
$3.50 Preferred Share thereafter surrendered for conversion shall become
entitled to receive shares of two or more classes of shares of beneficial
interest or Common Shares and other shares of beneficial interest of the
Company, the Board of Trust Managers (whose determination shall be conclusive
and shall be described in a statement filed by the Company with the stock
transfer or conversion agent, as appropriate) shall determine the allocation of
the adjusted Conversion Price between or among shares of such classes of shares
of beneficial interest or Common Shares and other shares of beneficial interest.

                        (ii) In case the Company shall issue rights or warrants
to all holders of its outstanding 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 current market
price per share (as determined pursuant to subsection (iv) of this Section 7(d))
of the Common Shares (other than pursuant to any stock option, restricted shares
or other incentive or benefit plan or stock ownership or purchase plan for the 



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<PAGE>   10
 benefit of employees, trust managers or officers or any distribution
reinvestment plan of the Company in effect at the time hereof or any other
similar plan adopted or implemented hereafter), then the Conversion Price in
effect immediately prior thereto shall be adjusted so that it shall equal the
price determined by multiplying the Conversion Price in effect immediately prior
to the date of issuance of such rights or warrants by a fraction on which the
numerator shall be the number of Common Shares outstanding on the date of
issuance of such rights or warrants (immediately prior to such issuance) plus
the number of shares which the aggregate offering price of the total number of
shares so offered would purchase at such current market price, and of which the
denominator shall be the number of Common Shares outstanding on the date of
issuance of such rights or warrants (immediately prior to such issuance) plus
the number of additional Common Shares offered for subscription or purchase.
Such adjustment shall be made successively whenever any rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants;
provided, however, in the event that all the Common Shares offered for
subscription or purchase are not delivered upon the exercise of such rights or
warrants, upon the expiration of such rights or warrants the Conversion Price
shall be readjusted to the Conversion Price which would have been in effect had
the numerator and the denominator of the foregoing fraction and the resulting
adjustment been made based upon the number of Common Shares actually delivered
upon the exercise of such rights or warrants rather than upon the number of
Common Shares offered for subscription or purchase. In determining whether any
rights or warrants entitle the holders to subscribe for or purchase Common
Shares at less than such current market price, and in determining the aggregate
offering price of such Common Shares, there shall be taken into account any
consideration received by the Company for such rights or warrants, the value of
such consideration, if other than cash, to be determined by the Board of Trust
Managers (whose determination shall be conclusive and shall be described in a
statement filed by the Company with the stock transfer or conversion agent, as
appropriate).

                        (iii) In case the Company shall, by distribution or
otherwise, distribute to all holders of its outstanding Common Shares or shares
of beneficial interest (other than Common Shares), evidences of its indebtedness
or assets (including securities and cash, but excluding any regular periodic
cash distribution of the Company and distributions or distributions payable in
shares for which adjustment is made pursuant to subsection (i) of this Section
7(d)) or rights or warrants to subscribe for or purchase securities of the
Company (excluding those referred to in subsection (ii) of this Section 7(d)),
then in each such case the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the record date of such distribution by a fraction of which
the numerator shall be the current market price per share as determined pursuant
to subsection (iv) of this Section 7(d) of the Common Shares less the fair
market value on such record date (as determined by the Board of Trust Managers,
whose determination shall be conclusive and shall be described in a statement
filed by the Company with the stock transfer or conversion agent, as
appropriate) of the portion of the capital stock or assets or the evidences of
indebtedness or assets so distributed to the holder of one Common Share or of
such subscription rights or warrants applicable to one Common Share, and of
which the denominator shall be such current market price per Common Share. Such
adjustment shall 



                                       10
<PAGE>   11

become effective immediately after the record date for the
determination of shareholders entitled to receive such distribution.

                        (iv) For the purpose of any computation under
subsections (ii) and (iii) of this Section 7(d), the current market price per
Common Share on any date shall be deemed to be the average of the closing price
(as defined in Section 5) for the shorter of (A) 30 consecutive trading days (as
defined in Section 5) ending on the last full trading day prior to the Time of
Determination or (B) the period commencing on the date next succeeding the first
public announcement of the issuance of such rights or warrants or such
distribution through such last full trading day prior to the Time of
Determination. For purposes of the foregoing, the term "Time of Determination"
shall mean the time and date of the earlier of (I) the record date for
determining shareholders entitled to receive the rights, warrants or
distributions referred to in Section 7(d)(ii) and (iii) or (II) the commencement
of "ex-dividend" trading on the exchange or market referred to in the definition
of "closing price."

                        (v) In any case in which this Section 7(d) shall require
that an adjustment be made immediately following a record date or an effective
date the Company may elect to defer (but only until the filing by the Company
with the stock transfer or conversion agent, as the case may be, of the
certificate required by subsection (vii) of this Section 7(d)) issuing to the
holder of any $3.50 Preferred Share converted after such record date or
effective date the Common Shares issuable upon such conversion over and above
the Common Shares issuable upon such conversion on the basis of the Conversion
Price prior to adjustment, and paying to such holder any amount of cash in lieu
of a fractional share.

                        (vi) No adjustment in the Conversion Price shall be
required to be made unless such adjustment would require an increase or decrease
of at least one percent of such price; provided, however, that any adjustments
which by reason of this subsection (vi) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 7(d) shall be made to the nearest cent or to the
nearest 1/1000th of a share, as the case may be. Anything in this Section 7(d)
to the contrary notwithstanding, the Company shall be entitled to make such
reduction in the Conversion Price, in addition to those required by this Section
7(d), as it in its discretion shall determine to be advisable in order that any
shares distribution, subdivision of shares distribution of rights to purchase
shares or securities, or distribution of securities convertible into or
exchangeable for shares hereafter made by the Company to its shareholders shall
not be taxable to the recipients. Except as set forth in subsections (i), (ii)
and (iii) above, the Conversion Price shall not be adjusted for the issuance of
Common Shares, or any securities convertible into or exchangeable for Common
Shares or carrying the right to purchase any of the foregoing, in exchange for
cash, property or services.

                        (vii) Whenever the Conversion Price is adjusted as
herein provided, (A) the Company shall promptly file with the stock transfer or
conversion agent, as appropriate, a certificate setting forth the Conversion
Price after such adjustment and a brief statement of the facts requiring such
adjustment and the manner of computing the same, 



                                       11
<PAGE>   12
which certificate shall be conclusive evidence of the correctness of such
adjustment, and (B) the Company shall also mail or cause to be mailed by first
class mail, postage prepaid, as soon as practicable to each holder of record of
$3.50 Preferred Shares a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price. The stock transfer or
conversion agent, as the case may be, shall not be under any duty or
responsibility with respect to the certificate required by this subsection (vii)
except to exhibit the same to any holder of $3.50 Preferred Shares who requests
to inspect it.

                        (viii) In the event that at any time, as a result of an
adjustment made pursuant to subsection (i) of this Section 7(d), the holder of
any $3.50 Preferred Share thereafter surrendered for conversion shall become
entitled to receive any shares of the Company other than Common Shares,
thereafter the Conversion Price of such other shares so receivable upon
conversion of any $3.50 Preferred Share shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to Common Shares contained in this Section.

                        (ix) The Company from time to time may decrease the
Conversion Price by any amount for any period of time if the period is at least
20 days and if the decrease is irrevocable during the period. Whenever the
Conversion Price is so decreased, the Company shall mail to holders of record of
$3.50 Preferred Shares a notice of the decrease at least 15 days before the date
the decreased Conversion Price takes effect, and such notice shall state the
decreased Conversion Price and the period it will be in effect.

                    (e) Notice to Holders Prior to Certain Company Actions. In
Case:

                        (i) the Company shall take any action which would
require an adjustment in the Conversion Price pursuant to Section 7(d); or

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

                        (iii) there shall be any reorganization or
reclassification of the Common Shares (other than a subdivision or combination
of the outstanding Common Shares and other than a change in the par value of the
Common Shares), or any merger or consolidation to which the Company is a party
or any statutory exchange of securities with another company and for which
approval of any shareholders of the Company is required, or any sale or transfer
of all or substantially all of the assets of the Company; or

                        (iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;

then in each such case the Company shall cause to be given to the holders of
$3.50 Preferred Shares and the stock transfer or conversion agent, as
appropriate, as promptly as possible, but in 

                                       12
<PAGE>   13

any event at least 20 days prior to the applicable date hereinafter specified, a
notice stating (i) the date on which a record is to be taken for the purchase of
such action or granting of rights 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, rights or warrants are to be determined, or (ii)
the date on which such reorganization, reclassification, merger, consolidation,
sale, transfer, statutory exchange, dissolution, liquidation or winding-up is
expected to become effective or occur, 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, cash or other property deliverable upon such
reorganization, reclassification, merger, consolidation, sale, transfer,
statutory exchange, dissolution, liquidation or winding-up. Failure to give such
notice or any defect therein shall not affect the legality or validity or the
proceedings described in subsection (i), (ii), (iii) or (iv) of this Section
7(e).

                    (f) Reservation of Common Shares. 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 or its issued
Common Shares held in its treasury, or both, for the purpose of effecting
conversions of $3.50 Preferred Shares, the full number of Common Shares
deliverable upon the conversion of all outstanding $3.50 Preferred Shares not
theretofore converted and on or before (and as a condition of) taking any action
that would cause an adjustment of the Conversion Price resulting in an increase
in the number of Common Shares deliverable upon conversion above the number
thereof previously reserved and available therefor, the Company shall take all
such action so required. For purposes of this Section 7(f), the number of Common
Shares which shall be deliverable upon the conversion of all outstanding $3.50
Preferred Shares shall be computed as if at the time of computation all
outstanding $3.50 Preferred Shares were held by a single holder.

                    Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value (if any) of the Common
Shares deliverable upon conversion of the $3.50 Preferred Shares, the Company
shall take any action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
non-assessable Common Shares at such adjusted Conversion Price.

                    (g) Transfer Taxes, Etc. The Company shall pay any and all
documentary, stamp, issue or transfer taxes, and any other similar taxes payable
in respect of the issue or delivery of Common Shares upon conversions of $3.50
Preferred Shares pursuant hereto; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issue or delivery of Common Shares in a name other than that of
the holder of the $3.50 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 satisfaction of the Company, that such tax has been paid.

                    (h) Merger or Consolidation or Sale of Assets.
Notwithstanding any other provision herein to the contrary, in case of any
merger or 




                                       13
<PAGE>   14

consolidation to which the Company is a party (other than a merger or
consolidation in which the Company is the continuing company and in which the
Common Shares outstanding immediately prior to the merger or consolidation are
not exchanged for cash, or the securities or other property of another company),
or in case of any sale or transfer to another company of the property of the
Company as an entirety or substantially as an entirety, or in the case of any
statutory exchange of securities with another company (other than in connection
with a merger or acquisition), then lawful provision shall be made by the
company formed by such consolidation or the company whose securities, cash or
other property will immediately after the merger or consolidation be owned, by
virtue of the merger or consolidation, by the holders of Common Shares
immediately prior to the merger or consolidation, or the company which shall
have acquired such assets or securities of the Company (collectively the
"Formed, Surviving or Acquiring Company"), as the case may be, providing that
the holder of each $3.50 Preferred Share then outstanding shall have the right
thereafter to convert such share into the kind and amount of securities, cash or
other property receivable upon such merger, consolidation, sale, transfer or
statutory exchange by a holder of the number of Common Shares into which such
$3.50 Preferred Share might have been converted immediately prior to such
merger, consolidation, sale, transfer or statutory exchange assuming such holder
of Common Shares did not exercise his rights of election, if any, as to the kind
or amount of securities, cash or other property receivable upon such merger,
consolidation, sale, transfer or statutory exchange (provided that, if the kind
or amount of securities, cash or other property receivable upon such merger,
consolidation, sale, transfer or statutory exchange is not the same for each
Common Share in respect of which such rights of election shall not have been
exercised ("non-electing share"), then for the purposes of this Section 7(h) the
kind and amount of securities, cash or other property receivable upon such
merger, consolidation, sale, transfer or statutory exchange 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 Formed, Surviving or
Acquiring Company, as the case may be, shall make provision in its certificate
or articles of incorporation or other constituent documents to the end that the
provisions set forth in this Section 7(h) shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
beneficial interest or other securities or property thereafter deliverable on
the conversion of the $3.50 Preferred Shares.

                    The above provisions of this Section 7(h) shall similarly
apply to successive mergers, consolidations, sales, transfers or statutory
exchanges.

                    (i) Covenant as to Common Shares. The Company covenants that
all Common Shares which may be delivered upon conversions of $3.50 Preferred
Shares will upon delivery be duly and validly issued and fully paid and
non-assessable, free of all liens and charges and not subject to any preemptive
rights.

                    The Company covenants that if any Common Shares to be
provided for the purpose of conversion of $3.50 Preferred Shares hereunder
require registration with or approval of any governmental authority under any
Federal or State law before such shares may be validly issued upon conversion,
the Company will in good faith and as expeditiously as possible endeavor to
secure such registration or approval, as the case may be. 



                                       14
<PAGE>   15

                    The Company further covenants that if at any time the Common
Shares shall be listed on the New York Stock Exchange or any other national
securities exchange or the Nasdaq National Market, the Company will, if
permitted by the rules of such exchange or market, list and keep listed so long
as the Common Shares shall be so listed on such exchange or market, all Common
Shares issuable upon conversion of the $3.50 Preferred Shares.

         Section 8. Voting Rights.

                    (a) General. The holders of $3.50 Preferred Shares shall not
have any voting rights except as set forth below or as otherwise from time to
time required by law. In connection with any right to vote, each holder of $3.50
Preferred Shares will have one vote for each share held. Any $3.50 Preferred
Shares held by the Company or any entity controlled by the Company shall not
have voting rights hereunder and shall not be counted in determining the
presence of a quorum.

                    (b) Default Voting Rights. Whenever distributions on the
$3.50 Preferred Shares shall be in arrears in an amount equal to at least six
quarterly distributions (whether or not consecutive), (i) the number of members
of the Board of Trust Managers of that Company shall be increased by two,
effective as of the time of election of such trust managers as hereinafter
provided, and (ii) the holders of the $3.50 Preferred Shares (voting separately
as a class with all other affected classes or series of Parity Distribution
Shares upon which like voting rights have been conferred and are exercisable)
will have the exclusive right to vote for and elect such two additional trust
managers of the Company at any Meeting of shareholders of the Company at which
trust managers are to be elected held during the period such distributions
remain in arrears. The right of the holders of the $3.50 Preferred Shares to
vote for such two additional trust managers shall terminate when all accrued and
unpaid distributions on the $3.50 Preferred Shares have been declared and paid
or set apart for payment. The term of office of all trust managers so elected
shall terminate immediately upon the termination of the right of the holders of
the $3.50 Preferred Shares and such Parity Distribution Shares to vote for such
two additional trust managers.

                    The foregoing right of the holders of the $3.50 Preferred
Shares with respect to the election of two trust managers may be exercised at
any annual meeting of shareholders or at any special meeting of shareholders
held for such purpose. If the right to elect trust managers shall have accrued
to the holders of the $3.50 Preferred Shares more than 90 days preceding the
date established for the next annual meeting of shareholders, the President of
the Company shall, within 20 days after the delivery to the Company at its
principal office of a written request for a special meeting signed by the
holders of at least ten percent (10%) of the $3.50 Preferred Shares then
outstanding, call a special meeting of the holders of the $3.50 Preferred Shares
to be held within 60 days after the delivery of such request for the purpose of
electing such additional trust managers. 

                    The holders of the $3.50 Preferred Shares and any Parity
Distribution Shares referred to above voting as a class shall have the right to
remove without 



                                       15
<PAGE>   16

cause at any time and replace any trust managers such holders have elected 
pursuant to this Section 8.

                    (c) Class Voting Rights. So long as the $3.50 Preferred
Shares are outstanding, the Company shall not, without the affirmative vote or
consent of the holders of at least 66 2/3 percent of all outstanding $3.50
Preferred Shares (unless the vote or consent of a greater percentage is required
by applicable law or the Restated Declaration of Trust of the Company), voting
separately as a class, (i) amend, alter or repeal (by merger, consolidation or
otherwise) any provision of the Restated Declaration of Trust or the Amended and
Restated Bylaws of the Company, as amended, so as to affect adversely the
relative rights, preferences, qualifications, limitations or restrictions of the
$3.50 Preferred Shares, (ii) authorize or issue, or increase the authorized
amount of, any additional class or series of shares, or any security convertible
into shares of such class or series, ranking prior to the $3.50 Preferred Shares
in respect of the payment of distributions or upon liquidation, dissolution or
winding-up of the Company, or (iii) effect any reclassification of the $3.50
Preferred Shares. A class vote on the part of the $3.50 Preferred Shares shall,
without limitation, specifically not be deemed to be required (except as
otherwise required by law or resolution of the Company's Board of Trust
Managers) in connection with: (a) the authorization, issuance or increase in the
authorized amount of any shares of any other class or series of shares that
ranks junior to, or on a parity with, the $3.50 Preferred Shares in respect of
the payment of distributions and upon liquidation, dissolution or winding-up of
the Company; or (b) the authorization, issuance or increase in the amount of any
notes, bonds, mortgages, debentures or other obligations of the Company not
convertible into or exchangeable, directly or indirectly, for shares ranking
prior to the $3.50 Preferred Shares in respect of the payment of distributions
or upon liquidation, dissolution or winding-up of the Company.

         Section 9. Outstanding Shares. For purposes of this Statement of
Designations, all $3.50 Preferred Shares shall be deemed outstanding except (i)
from the date fixed for redemption pursuant to Section 5, all $3.50 Preferred
Shares that have been so-called for redemption under Section 5 if Common Shares
and funds necessary for payment of the redemption price have been irrevocably
set apart, (ii) from the date of surrender of certificates representing $3.50
Preferred Shares, all $3.50 Preferred Shares converted into Common Shares; and
(iii) from the date of registration of transfer, all $3.50 Preferred Shares held
of record by the Company or any subsidiary of the Company.

         Section 10. Status of Acquired Shares. $3.50 Preferred Shares redeemed
by the Company, received upon conversion pursuant to Section 7 or otherwise
acquired by the Company will be restored to the status of authorized and
unissued preferred shares, without designation as to series, and may thereafter
be issued, but not as $3.50 Preferred Shares.

         Section 11. Preemptive Rights. The $3.50 Preferred Shares are not
entitled to any preemptive or subscription rights in respect of any securities
of the Company.

         Section 12. Severability of Provisions. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and valid
under applicable law, but if 



                                       16
<PAGE>   17

any provision hereof is held to be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating or otherwise adversely affecting the
remaining provisions hereof. If a court of competent jurisdiction should
determine that a provision hereof would be valid or enforceable if a period of
time were extended or shortened or a particular percentage were increased or
decreased, then such court may make such change as shall be necessary to render
the provision in question effective and valid under applicable law.

         Section 13. Adoption. This Statement of Designation was duly adopted by
the Board of Trust Managers of the Company. Shareholder action was not required.

                                      * * *




                                       17
<PAGE>   18

         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 ________, 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.

                                CRESCENT REAL ESTATE EQUITIES COMPANY



                                -----------------------------------------------
                                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 ____
day of June, 1998.


                                -----------------------------------------------
                                Name:  David M. Dean
                                Title: Senior Vice President, Law and Secretary

[Acknowledgment]





                                       18