CEDAR INCOME FUND LTD /MD/
EXHIBIT 10.16
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<TYPE>EX-10
<SEQUENCE>18
<FILENAME>ex10-16.txt
<DESCRIPTION>EXHIBIT 10.16
<TEXT>
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                        INDEMNIFICATION AGREEMENT BETWEEN
                        ---------------------------------
                              MARK G. CALDWELL AND
                              --------------------
                         NEWPORT PLAZA ASSOCIATES, L.P.
                         ------------------------------

         This INDEMNIFICATION AGREEMENT is dated this ______ day of February
2003, and made by and between MARK G. CALDWELL, ("Caldwell") and NEWPORT PLAZA
ASSOCIATES, L.P. ("Newport Plaza").

         WHEREAS, Caldwell is, contemporaneously with the execution of this
Indemnification Agreement, conveying a transfer of title to those certain
commercial improvements known as the Newport Plaza, Howe Township, Perry County,
Pennsylvania (hereinafter, "Premises"), which Premises contains, as an outparcel
thereon, a certain McDonald's restaurant (the "McDonald's Premises"), which is
leased by Caldwell to McDonald's, the initial Lease being dated May 28, 1993, as
amended by Agreement dated August 15, 1995 and Supplement dated January 25, 1996
(collectively, the "Lease"), which is being assigned from Caldwell to Newport
Plaza with the transfer of title to the Premises; and

         WHEREAS, the McDonald's Lease contains certain rights of McDonald's to
purchase the Premises at a sliding purchase price depending upon the date of
exercise of the option to purchase; and

         WHEREAS, on November 16, 2000, McDonald's gave notice of exercise of an
option to purchase the McDonald's Premises pursuant to Article 14 of the Lease,
which date was on or before the expiration of the first five years of the Lease
term, noting further that Article 14 of the Lease provides, in pertinent part,
the closing of the purchase is to occur ninety (90) days from the giving of
notice of exercise of the option; and

         WHEREAS, no purchase agreement was signed, although McDonald's and
Caldwell engaged in certain discussions concerning amending the Lease and
deferring the option to purchase to a later date, whereupon McDonald's and
Caldwell entered into an Agreement to Extend Closing Date ("Closing Extension
Agreement") providing for the obligation of the parties to be deferred and
otherwise amending the Lease. McDonald's and Caldwell entered into the Closing
Extension Agreement providing for a period until November 30, 2001 to enter into
such amendment and, failing such, to close on or before January 31, 2002; and






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         WHEREAS, no amendment to the Lease was executed and McDonald's took no
further actions to proceed with closing or exercise of the option to purchase at
that time; and

         WHEREAS, McDonald's was recently contacted relative to the instant
transaction between Caldwell and Newport Plaza, whereupon it claimed that it had
exercised the option at the then-option price in November 2000, which would be a
total of $60,000.00 less than if the option were exercised at this time; and

         WHEREAS, therefore, dispute or potential dispute would appear to exist
or may exist in the future with McDonald's relative to whether the November 16,
2000 exercise of the option was a nullity and, if McDonald's wishes to pursue
exercise of the option, what price would control; and

         WHEREAS, although Caldwell and Newport Plaza do acknowledge that,
according to the McDonald's Lease, McDonald's may have the right in the future
to exercise rights to purchase, Caldwell and Newport Plaza reasonably believe
the exercise by McDonald's in November 16, 2000 failed by reason of the lack of
action to proceed with subdivision, governmental approval and transfer, or
otherwise, to further their intended exercise of the right to purchase the
Premises; and

         WHEREAS, Newport Plaza wishes to proceed with the purchase of the
Premises and succeed to the rights and duties of Caldwell with regard to the
McDonald's Lease, it has agreed to do so in view of such dispute with
McDonald's, only upon Caldwell's entering into this Indemnification Agreement in
accord with the specific terms, provisions and limitations hereinafter stated.

         NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, do agree as follows:









                                        2
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         1. The parties incorporate the recitals hereinbefore set forth into the
body of this Agreement as though same were again set forth where not
inconsistent with the following paragraphs.

         2. In the event, at any time after the date of execution and delivery
of this Indemnification Agreement, and for a period thereafter not to exceed two
(2) years ("McDonald's Claim Period") in the event McDonald's proceeds in any
manner to assert, in writing, a claim or takes any such other actions to attempt
to proceed with the purchase of the Premises based upon the August 27, 1998
exercise of option, and the option price therein provided, Newport Plaza shall
promptly notify Caldwell, not later than thirty (30) days after receipt of any
such notice of McDonald's, of such actions, whereupon Caldwell shall, within ten
(10) days of receipt from Newport Plaza, notify Newport Plaza in writing that it
shall assume responsibility for defense of any such actions or assertions by
McDonald's, the cost of which defense and litigation, if required, to be however
equally divided between Caldwell and Newport Plaza. It is noted the parties
acknowledge that McDonald's has the future and ongoing right to exercise the
option to purchase the Premises, but only at the then-stated price in the Lease
at the time of the exercise and timely purchase of the McDonald's Premises. If
Caldwell receives any notices, it shall likewise timely share same with Newport
Associates. Caldwell and Newport Plaza agree that neither shall intentionally
initiate any communications in any form and manner with McDonald's to address
the subject option or any matters in this Indemnification Agreement during the
term of the McDonald's Claim Period, except in response to any claim relating
thereto initiated by McDonald's, in which event copies of such claims shall be
furnished to the other party, absent written prior notice and receipt of written
consent from the other party.

         3. Newport Plaza shall have the opportunity to participate with its own
attorneys and advisors in any such defense and litigation, but so long as
Caldwell is timely and responsibly fulfilling its obligations pursuant to this
Indemnification Agreement to defend hereunder, such further attorneys and
consultants of Newport Plaza shall be at its own cost. It is further noted that
the above-referenced time frame shall not release or terminate Caldwell's to
defend and indemnify Newport Plaza by virtue of excusable late notice, unless
such late notice would materially prejudice Caldwell's ability to defend any
such actions or claims of McDonald's.


                                        3
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         4. A. Indemnification. Furthermore, in the event McDonald's would
prevail by final or appealable decree, judgment, or by agreement of McDonald's,
Caldwell and Newport Plaza, that would result in determination or agreement that
the option price in effect in August 27, 1998 is the applicable price for
purchase of the McDonald's Premises, Caldwell will indemnify Newport Plaza for
the difference between such price and the sum of $360,000 (such amount, the
"Price Differential"), provided that the maximum limit of Caldwell's
indemnification under this Agreement shall not exceed $60,000 plus Caldwell's
one-half of the attorneys' fees and costs of defending against McDonald's
attempt to enforce its option. Caldwell shall pay the Price Differential to
Newport on the date that Newport shall be required to convey title to the
McDonald's Premises to McDonald's for a purchase price less than $360,000. If,
however, the McDonald's Premiss cannot be separately subdivided from the
remainder of the Newport Plaza Shopping Center and therefore under the terms of
the McDonald's lease, McDonald's is entitled to receive a new lease for the
maximum term allowed by law upon payment of a sum less than $360,000, Caldwell
shall pay the Price Differential to Newport upon the execution of such new
lease, provided the maximum limit of Caldwell's obligation shall not exceed
$60,000, plus one- half (1/2) of any legal costs to defend against McDonald's
attempt to enforce its option.

         B. Letter of Credit. For the purpose of securing the performance of
Caldwell's indemnification obligations to Newport Plaza under this
Indemnification Agreement, Caldwell is hereby delivering to Newport Plaza with
this Indemnification Agreement an unconditional irrevocable stand-by letter of
credit in the sum of $60,000 from a commercial bank or savings and loan
association having a branch where such letter of credit may be presented for
payment in the County of Dauphin, such letter of credit to be in the form of
Exhibit "A" attached hereto and made a part hereof (the "Letter of Credit"). The
Letter of Credit shall have an expiration date no earlier than one (1) year from


                                        4
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the execution and delivery of this Indemnification Agreement. Newport Plaza
shall have the right to draw down the Letter of Credit in accordance with the
provisions of subparagraph C hereof. The Letter of Credit, if not drawn upon by
Newport Plaza by reason of Caldwell's default hereunder, shall be returned to
Caldwell following the expiration of the McDonald's Claim Period, provided that
McDonald's has not asserted, claimed, or taken such other action to attempt to
proceed with the purchase of the Premises during the McDonald's Claim Period, or
(ii) in the event McDonald's has asserted, claimed or taken such other action to
attempt to proceed with the purchase of the Premises during the McDonald's Claim
Period, upon the complete fulfillment of Caldwell's obligations hereunder,
including, but not limited to, its indemnification of Newport Plaza for the
McDonald's Purchase Price Differential.

         C. Renewal and Replacement Letter of Credit. (1) Caldwell shall renew
or replace the Letter of Credit at least thirty (30) days prior to its
expiration date with a renewal or replacement Letter of Credit complying with
the terms of this paragraph and having an expiration date no earlier than one
(1) year from its issuance, and will thereafter renew or replace such renewal or
replacement Letter of Credit and each succeeding Letter of Credit thirty (30)
days prior to its expiration, so that a Letter of Credit complying with the
terms of this Indemnification Agreement shall continuously remain in effect
until the later to occur of (i) the expiration of the McDonald's Claim Period
(provided that McDonald's has not, subsequent to the date of this
Indemnification Agreement, asserted, claimed or taken such other action to
attempt to proceed with the purchase of the Premises during the McDonald's Claim
Period for a purchase price less than $360,000), or (ii) in the event McDonald's
has asserted, claimed or taken such other action to attempt to proceed with the
purchase of the Premises during the McDonald's Claim Period for a purchase price
less than $360,000, the complete fulfillment of Caldwell's obligations
hereunder, including, but not limited to, its indemnification of Newport Plaza
for the McDonald's Purchase Price Differential, but which may also include the
legal challenge to any such claim asserted by McDonald's, in which event the
McDonald's Claim Period would expire upon final and unappealable dismissal of
the McDonald's claim.


                                        5
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         (2) In addition to its obligations to do so under subparagraph B and
subparagraph (1) of this subparagraph C, Tenant shall replace the Letter of
Credit within five (5) days of receipt of written notice from Newport Plaza that
the issuer has (i) entered into a supervisory agreement or consent order with
the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, or
any other state or federal regulatory authority with jurisdiction such issuer;
or (ii) become subject to an order or directive of any of the foregoing
authorities with respect to the regulation of its activities; or (iii) notified
Newport Plaza that it shall not (A) honor a draw under the Letter of Credit; or
(B) renew or extend the Letter of Credit beyond its then current expiration
date.

         D. Newport Plaza's Draw Down of Letter of Credit. Newport Plaza shall
have the absolute right to draw on the Letter of Credit in full immediately upon
the occurrence of any of the following:

                  (a) Caldwell's failure to renew or replace the Letter of
         Credit in accordance with this Paragraph 3, which failure is not cured
         within two (2) business days following receipt of written notice from
         Newport Plaza to Caldwell; or

                  (b) Caldwell's failure to promptly take, within twenty (20)
         days after notice thereof from Newport, such actions as Caldwell may
         reasonably deem appropriate to defend any action brought by McDonald's
         for specific performance of its purchase option or for declaratory
         relief as to the option price or any other action brought by McDonald's
         relating to an attempt to purchase the Premises for a purchase price
         less than $360,000 (e.g., Caldwell's failure to confirm that it will
         file responsive pleadings within the time periods.)

                  (c) Caldwell's failure to pay its share of the costs of
         defense as referred to in this Agreement, which failure is not cured
         within twenty (20) days after receipt of notice thereof from Newport
         Plaza to Caldwell; and


                                        6
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            (d) Caldwell's failure to pay the McDonald's Price Differential to
         Newport Plaza, as herein provided, on or before the applicable date
         required herein, and failure is not cured within twenty (20) days after
         receipt of notice from Newport Plaza to Caldwell.

         5. Any notice pursuant to this Indemnification Agreement shall be
validly given, if in writing, sent by recognized national overnight delivery
service or in person, in which event the date of service is the day of delivery,
or by pre-paid registered or certified mail, restricted delivery, return receipt
requested, in which event the date of service shall be the date of acceptance or
refusal addressed to:

            If to Newport Associates:

            Newport Plaza Associates, L.P.
            c/o Cedar Bay Realty Advisors, Inc.
            44 South Bayles Avenue
            Port Washington, New York 11050

            With a copy to:

            Warren S. Sacks, P.C.
            707 Westchester Avenue, Suite 303
            White Plains, NY 10604

            If to Caldwell:

            Caldwell Development, Inc.
            434 North Front Street
            Wormleysburg, PA 17043

            With a copy to:

            James R. Clippinger, Esquire
            Caldwell & Kearns
            3631 North Front Street
            Harrisburg, PA 17110

         6. Other than as herein set forth, Caldwell shall have no other
obligation to Newport Associates, or its predecessor, Cedar Income Fund
Partnership, LP, in any manner, form or regard with regard to the McDonald's
Lease.


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         7. The rights created by this Indemnification Agreement shall inure to
the benefit of, and the obligations created hereby shall be binding upon the
successors and assigns of the parties hereto.

         8. This Indemnification Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.

         9. This Indemnification Agreement may be amended only by the writing
signed by all the parties hereto.

         10. If any provisions of this Indemnification Agreement shall be held
invalid under any applicable laws, such invalidity shall not affect any other
provision of this Agreement that can be given effect without the invalid
provision, and to this end, the provisions hereof are severable.

         11. This Indemnification Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.

         IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement on the day and year first above written.


WITNESS:


___________________________                   By:_______________________________
                                                       Mark G. Caldwell



ATTEST:                                       NEWPORT PLAZA ASSOCIATES, L.P

______________________________                By:_______________________________
51748
                                              Title:____________________________

















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