Document:

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                                                                    Exhibit 10.1

              AMENDMENT NO. 2 TO THE SHAREHOLDERS RIGHTS AGREEMENT

THIS AMENDMENT NO. 2 TO THE SHAREHOLDERS RIGHTS AGREEMENT, dated as of July 1,
2002 (this "Amendment"), between Shelbourne Properties I, Inc. (the "Company")
and American Stock Transfer & Trust Company, as rights agent (the "Rights
Agent"), at the Company's direction. Capitalized terms used herein and not
otherwise defined have the meanings ascribed to such terms in the Rights
Agreement (as defined below).

                  WHEREAS, the Company and the Rights Agent entered into the
Shareholder Rights Agreement, dated February 8, 2001, as amended by Amendment of
Rights Agreement, dated as of February 14, 2002 (the "Rights Agreement"),
setting forth the terms of the Rights;

                  WHEREAS, the Company and the Rights Agent may, from time to
time, supplement or amend the Rights Agreement pursuant to the provisions of
Section 27 of the Rights Agreement;

                  WHEREAS, the Board of Directors of the Company (the "Board of
Directors"), on July 1, 2002, resolved that it is advisable, fair and in the
best interests of the Company and the stockholders for HX Investors, L.P. and
its affiliates ("HX Investors") to acquire up to 251,785 issued and outstanding
shares of common stock of the Company in connection with the Settlement
Agreement (as defined below) and the Stock Purchase Agreement (as defined
below);

                  WHEREAS, the Board of Directors further resolved to approve
this Amendment which provides, among other things, that (1) HX Investors, to the
extent that HX Investors shall not be the Beneficial Owner of more than 42% of
the Common Shares then outstanding, is exempt from the definition of Acquiring
Person, (2) the Settlement Agreement, the Stock Purchase Agreement and the
transactions contemplated thereby shall not constitute a Distribution Date, an
event described in Section 11(a)(ii) of the Rights Agreement, an event described
in Section 13 of the Rights Agreement, a Stock Acquisition Date or a Triggering
Event and (3) no Rights shall be exercisable pursuant to the Rights Agreement as
a result of the transactions contemplated by the Stock Purchase Agreement;

                  NOW THEREFORE, in consideration of the premises and mutual
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Rights Agent hereby agree as follows:

                  SECTION 1. Amendment to Rights Agreement. The Rights Agreement
is hereby amended as follows:

                  (a) The definition of "Acquiring Person" in Section 1 is
amended by inserting the following sentence at the end of such definition:

             "Notwithstanding anything in this Agreement to the contrary, none
             of HX Investors, L.P., a New York limited partnership ("HX
             Investors"), its Affiliates or its Associates, either individually
             or as a group, shall become an Acquiring Person

                                       5
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             by reason of the approval, execution or delivery of the Settlement
             and Mutual Release, dated July 1, 2002, between HX Investors and
             certain additional plaintiffs, as plaintiffs, and the Company,
             Shelbourne Properties II, Inc. and Shelbourne Properties III, Inc.,
             as defendants (the "Settlement Agreement"), the Stock Purchase
             Agreement, dated July 1, 2002, by and among HX Investors, Exeter
             Capital Corporation and the Company (the "Stock Purchase
             Agreement") or the consummation of the transactions contemplated
             thereby or any announcement of the same."

                  (b) A new Section 35 is added to read in its entirety as
follows:

                    "SECTION 35. Purchase of Stock by HX Investors.
             Notwithstanding anything in this Agreement to the contrary, none of
             HX Investors, its Affiliates or its Associates, either individually
             or as a group, to the extent they shall not be the Beneficial Owner
             of more than 42% of the Common Shares then outstanding, shall be
             considered an Acquiring Person, and no event described in Section
             11(a)(ii), no event described in Section 13, no Stock Acquisition
             Date and no Triggering Event shall occur and no Rights shall be
             exercisable pursuant to Section 7 or any other provision of this
             Agreement by reason of the approval, execution or delivery of the
             Settlement Agreement and the Stock Purchase Agreement, the
             consummation of the transactions contemplated thereby or
             announcement of the same."

                  SECTION 2. Full Force and Effect. In all respects not
inconsistent with the terms and provisions of this Agreement, the Rights
Agreement is hereby ratified and confirmed. In executing and delivering this
Amendment, the Rights Agent shall be entitled to all of the privileges and
immunities afforded to the Rights Agent under the terms and conditions of the
Rights Agreement.

                  SECTION 3. Counterparts. This Amendment may be executed in two
or more counterparts and each such counterpart shall for all purposes be deemed
to be an original and all such counterparts shall together constitute but one
and the same instrument. Delivery of an executed counterpart of a signature page
to this Amendment by telecopier shall be as effective as delivery of a manually
executed counterpart of this Amendment.

                  SECTION 4. Governing Law. This Amendment shall be deemed to be
a contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such state
applicable to contracts to be made and to be performed entirely within such
state.

                                       6
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to the
Rights Agreement to be duly executed as of the date first written above.

                                      SHELBOURNE PROPERTIES I, INC.

                                      By   /s/ Donald Wallace Coons
                                         ------------------------------------
                                           Name:  Donald Wallace Coons
                                           Title: Director

                                      AMERICAN STOCK TRANSFER & TRUST COMPANY

                                      By  /s/ Herbert J. Lemmer
                                         -----------------------
                                           Name:  Herbert J. Lemmer
                                           Title: Vice President

                                       7
<PAGE>

         CERTIFICATION OF COMPLIANCE WITH SECTION 27 OF RIGHTS AGREEMENT

The undersigned officer of Shelbourne Properties I, Inc. (the "Company"), being
an appropriate officer of the Company and authorized to do so by resolution of
the board of directors of the Company, dated July 1, 2002, hereby certifies to
American Stock Transfer & Trust Company, as rights agent, that the Amendment No.
2 to the Shareholder Rights Agreement is in compliance with the terms of Section
27 of such agreement.

                                       SHELBOURNE PROPERTIES I, INC.

                                       By   /s/ Donald Wallace Coons
                                          ------------------------------------
                                            Name:  Donald Wallace Coons
                                            Title: Director

           Acknowledged and Agreed:

           AMERICAN STOCK TRANSFER & TRUST COMPANY

          By   /s/ Herbert J. Lemmer
             ---------------------------------
               Name: Herbert J. Lemmer
               Title:   Vice President

                                        8<PAGE>

                                                                    Exhibit 10.1

              AMENDMENT NO. 2 TO THE SHAREHOLDERS RIGHTS AGREEMENT

THIS AMENDMENT NO. 2 TO THE SHAREHOLDERS RIGHTS AGREEMENT, dated as of July 1,
2002 (this "Amendment"), between Shelbourne Properties II, Inc. (the "Company")
and American Stock Transfer & Trust Company, as rights agent (the "Rights
Agent"), at the Company's direction. Capitalized terms used herein and not
otherwise defined have the meanings ascribed to such terms in the Rights
Agreement (as defined below).

WHEREAS, the Company and the Rights Agent entered into the Shareholder Rights
Agreement, dated February 8, 2001, as amended by Amendment of Rights Agreement,
dated as of February 14, 2002 (the "Rights Agreement"), setting forth the terms
of the Rights;

                  WHEREAS, the Company and the Rights Agent may, from time to
time, supplement or amend the Rights Agreement pursuant to the provisions of
Section 27 of the Rights Agreement;

                  WHEREAS, the Board of Directors of the Company (the "Board of
Directors"), on July 1, 2002, resolved that it is advisable, fair and in the
best interests of the Company and the stockholders for HX Investors, L.P. and
its affiliates ("HX Investors") to acquire up to 268,444 issued and outstanding
shares of common stock of the Company in connection with the Settlement
Agreement (as defined below) and the Stock Purchase Agreement (as defined
below);

                  WHEREAS, the Board of Directors further resolved to approve
this Amendment which provides, among other things, that (1) HX Investors, to the
extent that HX Investors shall not be the Beneficial Owner of more than 42% of
the Common Shares then outstanding, is exempt from the definition of Acquiring
Person, (2) the Settlement Agreement, the Stock Purchase Agreement and the
transactions contemplated thereby shall not constitute a Distribution Date, an
event described in Section 11(a)(ii) of the Rights Agreement, an event described
in Section 13 of the Rights Agreement, a Stock Acquisition Date or a Triggering
Event and (3) no Rights shall be exercisable pursuant to the Rights Agreement as
a result of the transactions contemplated by the Stock Purchase Agreement;

                  NOW THEREFORE, in consideration of the premises and mutual
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Rights Agent hereby agree as follows:

                  SECTION 1. Amendment to Rights Agreement. The Rights Agreement
is hereby amended as follows:

                  (a) The definition of "Acquiring Person" in Section 1 is
amended by inserting the following sentence at the end of such definition:

             "Notwithstanding anything in this Agreement to the contrary, none
             of HX Investors, L.P., a New York limited partnership ("HX
             Investors"), its Affiliates or its Associates, either individually
             or as a group, shall become an Acquiring Person by reason of the
             approval, execution or delivery of the Settlement and Mutual
             Release, dated July 1, 2002, between HX Investors and certain
             additional plaintiffs, as plaintiffs, and the Company, Shelbourne
             Properties I, Inc. and

                                       5
<PAGE>

             Shelbourne Properties III, Inc., as defendants (the "Settlement
             Agreement"), the Stock Purchase Agreement, dated July 1, 2002, by
             and among HX Investors, Exeter Capital Corporation and the Company
             (the "Stock Purchase Agreement"), or the consummation of the
             transactions contemplated thereby or any announcement of the same."

                  (b) A new Section 35 is added to read in its entirety as
follows:

                 "SECTION 35. Purchase of Stock by HX Investors. Notwithstanding
             anything in this Agreement to the contrary, none of HX Investors,
             its Affiliates or its Associates, either individually or as a
             group, to the extent they shall not be the Beneficial Owner of more
             than 42% of the Common Shares then outstanding, shall be considered
             an Acquiring Person, and no event described in Section 11(a)(ii),
             no event described in Section 13, no Stock Acquisition Date and no
             Triggering Event shall occur and no Rights shall be exercisable
             pursuant to Section 7 or any other provision of this Agreement by
             reason of the approval, execution or delivery of the Settlement
             Agreement and the Stock Purchase Agreement, the consummation of the
             transactions contemplated thereby or announcement of the same."

                  SECTION 2. Full Force and Effect. In all respects not
inconsistent with the terms and provisions of this Agreement, the Rights
Agreement is hereby ratified and confirmed. In executing and delivering this
Amendment, the Rights Agent shall be entitled to all of the privileges and
immunities afforded to the Rights Agent under the terms and conditions of the
Rights Agreement.

                  SECTION 3. Counterparts. This Amendment may be executed in two
or more counterparts and each such counterpart shall for all purposes be deemed
to be an original and all such counterparts shall together constitute but one
and the same instrument. Delivery of an executed counterpart of a signature page
to this Amendment by telecopier shall be as effective as delivery of a manually
executed counterpart of this Amendment.

                  SECTION 4. Governing Law. This Amendment shall be deemed to be
a contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such state
applicable to contracts to be made and to be performed entirely within such
state.

                                        6
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to the
Rights Agreement to be duly executed as of the date first written above.

                                    SHELBOURNE PROPERTIES II, INC.

                                    By   /s/ Donald Wallace Coons
                                       ------------------------------------
                                        Name:  Donald Wallace Coons
                                        Title: Director

                                    AMERICAN STOCK TRANSFER & TRUST COMPANY

                                    By   /s/ Herbert J. Lemmer
                                       ------------------------------------
                                        Name:  Herbert J. Lemmer
                                        Title: Vice President

                                        7
<PAGE>

         CERTIFICATION OF COMPLIANCE WITH SECTION 27 OF RIGHTS AGREEMENT

The undersigned officer of Shelbourne Properties II, Inc. (the "Company"), being
an appropriate officer of the Company and authorized to do so by resolution of
the board of directors of the Company, dated July 1, 2002, hereby certifies to
American Stock Transfer & Trust Company, as rights agent, that the Amendment No.
2 to the Shareholder Rights Agreement is in compliance with the terms of Section
27 of such agreement.

                                           SHELBOURNE PROPERTIES II, INC.

                                           By   /s/ Donald Wallace Coons
                                              ----------------------------------
                                               Name:  Donald Wallace Coons
                                               Title: Director

           Acknowledged and Agreed:

           AMERICAN STOCK TRANSFER & TRUST COMPANY

           By   /s/ Herbert J. Lemmer
              ---------------------------------
               Name: Herbert J. Lemmer
               Title:   Vice President

                                        8

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