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INDEMNITY, SUBROGATION AND                             Fleet National Bank
CONTRIBUTION AGREEMENT                                 AGENT


     INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT (hereinafter, the
"Agreement") dated as of February 19th, 2003 among (a) Shelbourne Properties I,
Inc., a Delaware corporation ("Shelbourne I"), Shelbourne Properties II, Inc., a
Delaware corporation ("Shelbourne II"), and Shelbourne Properties III, Inc., a
Delaware corporation, each with a mailing address at Bulfinch Place, Suite 500,
Boston, Massachusetts (Shelbourne I, Shelbourne II and Shelbourne III
hereinafter, individually and collectively, the "Guarantor" or "Guarantors"),
and (b) Fleet National Bank, a national banking association with offices at 100
Federal Street, 8th Floor, Boston, Massachusetts 02110, as agent (in such
capacity, hereinafter the "Agent") for the Lenders (as defined in the Loan
Agreement).

     Reference is made to the Loan Agreement dated as of February 19th, 2003 (as
such may be amended, modified, supplemented or restated hereafter, the "Loan
Agreement") among (i) Shelbourne Properties I L.P., Shelbourne Properties II
L.P., and Shelbourne Properties III L.P., (ii) Century Park I Joint Venture,
Seattle Landmark Joint Venture, Tri-Columbus Associates, Shelbourne Matthews
Company LLC, Shelbourne Richmond Company LLC, and Shelbourne Las Vegas Company
LLC (hereinafter, the "Borrower"), (iii) the Agent, and (iii) the Lenders named
therein. Capitalized terms used herein and not defined herein shall have the
meanings assigned to such terms in the Loan Agreement, which capitalized terms
are hereby incorporated by reference herein..

     The Lenders have agreed to make a Loan to the Borrower, pursuant to, and
upon the terms and subject to the conditions specified in, the Loan Agreement.
The obligations of the Lenders to make the Loan are conditioned on, among other
things, the execution and delivery by the Guarantor of an agreement in the form
hereof.

     Accordingly, the Guarantor and the Agent agree as follows:

     SECTION 1. Contribution and Subrogation. Each Guarantor (a "Contributing
Party") agrees (subject to Section 2) that, in the event a payment shall be made
by any other Guarantor (the "Claiming Party") under the Loan Agreement or any
other Loan Document, or assets of any Claiming Party shall be sold pursuant to
any Loan Document to satisfy a claim of any Lender, the Contributing Party shall
indemnify the Claiming Party in an amount equal to (a)(i) the amount of such
payment or (ii) if no such payment is made and any Lender is the purchaser of
the assets, the greater of (A) the book value of the assets so sold and (B) the
fair market value of such assets, as the case may be, in each case multiplied by
(b) a fraction of which (x) the numerator shall be the Claiming Party's
Allocable Amount (as hereinafter defined) less all payments made by the Claiming
Party to date which reduce the principal balance of the Loan, but in no event
less than zero and (y) the denominator shall be the principal balance of the
Loan less all reductions of principal on the Loan to date; provided, however,
such amount shall not be reduced by any reductions in principal attributable to
payments by a Guarantor in excess of such Guarantor's Allocable Amount. Any
Contributing Party making any payment to a Claiming Party pursuant to this
Section 1 shall be subrogated to the rights of such Claiming Party under Section
1 to the extent of such payment. As used herein, "Allocable Amount" shall mean
$17,494,084 for Shelbourne I, $22,081,542 for Shelbourne II, and $15,423,374 for
Shelbourne III.

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     SECTION 2. Subordination. Notwithstanding any provision of this Agreement
to the contrary, all rights of the Guarantors under Section 1 and all other
rights of indemnity, contribution or subrogation under applicable law or
otherwise shall be fully subordinated to the indefeasible payment in full in
cash of the Obligations. To that end, no payments shall be made by any
Contributing Party to any Claiming Party until all Obligations shall have been
indefeasibly paid in full in cash, and all Commitments under the Loan Agreement
have been terminated. No failure on the part of any Guarantor to make the
payments required by Section 1 (or any other payments required under applicable
law or otherwise) shall in any respect limit the obligations and liabilities of
any Guarantor with respect to its obligations hereunder, and each Guarantor
shall remain liable for the full amount of the obligations of such Guarantor
hereunder.

     SECTION 3. Termination. This Agreement shall survive and be in full force
and effect so long as any Obligation is outstanding and has not been
indefeasibly paid in full in cash, and so long as any of the Commitments under
the Loan Agreement have not been terminated, and shall continue to be effective
or be reinstated, as the case may be, if at any time payment, or any part
thereof, of any Obligation is rescinded or must otherwise be restored by any
Lender or any Guarantor upon the bankruptcy or reorganization of any Guarantor,
or otherwise.

     SECTION 4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.

     SECTION 5. No Waiver; Amendment.

         (a) No failure on the part of the Agent or any Guarantor to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by the Agent or any Guarantor preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. All
remedies hereunder are cumulative and are not exclusive of any other remedies
provided by law. Neither the Agent nor any of the Guarantors shall be deemed to
have waived any rights hereunder unless such waiver shall be in writing and
signed by such parties.

         (b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
the Guarantors and the Agent, with the prior written consent of Agent and the
Lenders (except as otherwise provided in the Loan Agreement).

     SECTION 6. Notices. All communications and notices hereunder shall be in
writing and given as provided in the Loan Agreement.

     SECTION 7. Binding Agreement; Assignments. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party, and all covenants, promises and
agreements by or on behalf of the parties that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.
The Guarantors may not assign or transfer any of their rights or obligations
hereunder (and any such attempted assignment or transfer shall be void) without
the prior written consent of Agent and the Lenders. Notwithstanding the
foregoing, at the time any Guarantor is released from its obligations under the
Loan Agreement in accordance with the terms thereof, such Guarantor will cease
to have any rights or obligations under this Agreement.

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     SECTION 8. Survival of Agreement; Severability. (a) All covenants and
agreements made by the Guarantors herein shall be considered to have been relied
upon by the Agent and the other Lenders and shall survive the making by the
Lenders of the Loans, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loans or any other fee or amount
payable under the Loan Agreement or this Agreement or under any of the other
Loan Documents is outstanding and unpaid or as long as any of the Commitments
have not been terminated.

         (b) In case any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, no
party hereto shall be required to comply with such provision for so long as such
provision is held to be invalid, illegal or unenforceable, but the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions, the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

     SECTION 9. Counterparts. This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract.


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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers under seal as of the date first
appearing above.

GUARANTORS:                    SHELBOURNE PROPERTIES I, INC.,
                               a Delaware corporation

                               By:
                                  ------------------------------------
                                  Name:
                                  Title:


                               SHELBOURNE PROPERTIES II, INC.,
                               a Delaware corporation

                               By:
                                  ------------------------------------
                                  Name:
                                  Title:

                               SHELBOURNE PROPERTIES III, INC.,
                               a Delaware corporation

                               By:
                                  ------------------------------------
                                  Name:
                                  Title:

AGENT:                         FLEET NATIONAL BANK, as Agent


                               By:
                                  ------------------------------------
                                  Name:
                                  Title: