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Dale - Schreiber
Member of the Firm

Direct Dial 212.969.3475
dschreiber@proskauer.com

September 30, 2002

BY FAX AND FIRST CLASS MAIL

Mitchell R. Schrage, Esq.
Mitchell R. Schrage & Associates, PLLC
Tower 56
126 E. 56th St.
New York, NY 10022

Re: 350 Bleecker Street Apartment Corp. v. Kenneth B. Newman et al.

Dear Mr. Schrage:

          As you know, we represent defendants in the above action, including Kenneth B. Newman and Bleecker Charles Company ("the Sponsor").

          By my letter dated August 30, 2002 to you, I advised you that the Chubb Group through its subsidiary Federal Insurance Company ("Chubb") has for several years provided directors and officers liability policies ("the Policies") to your client 350 Bleecker Street Apartment Corp. ("the Co-op"). Under the Policies, the Co-op's present and Former directors are named insureds. Thus, Mr. Newman; is insured in his capacity as a former officer and director of the Co-op and he is so on the matters covered by the Co-op's above action against him.

          In my letter, l further advised you that Chubb had disclaimed coverage for Mr. Newman on grounds, among others, that the Co-op had failed to give Chubb notice of the action brought by the Sponsor for a declaratory judgment and other relief in the United States District Court for the Southern District of New York, as a result of the Co-op's attempt to terminate, under the Condominium and Cooperative Conversion Protection and Abuse Relief Act ("the Federal Action"), the portion of the Lease dated July 31,1985 between the Co-op, as landlord, and the Sponsor, as lessee, covering the parking garage located in the Co-op's apartment building. I therefore asked you, as counsel for the Co-op, to assist Mr. Newman in persuading Chubb to provide him with

PROSKAUER ROSE LLP

Mitchell R. Schrage, Esq.
September 30, 2002
Page 2

coverage for the claims made against him by your client in the above action, since Mr. Newman had a right to indemnification for his defenses costs in the above action from the Co-op under its By-Law and the New York Business Corporation Law ("BCL") and the Co-op could avoid this liability by invoking its rights, or assisting Mr. Newman in asserting his separate rights, under one or more of the Policies.

To date, neither you nor anyone else on behalf of the Co-op has responded to my letter.

          Last Friday, we served the respective answers to the complaint in the above action of Mr. Newman, the Sponsor and Kenneth B. Newman Realty Corp. Mr. Newman's answer contains a counterclaim for indemnification for his defense costs from the Co-op on the grounds noted above, for which, also as noted above, the Co-op would be entitled to coverage under one or more of the Policies, subject to applicable deductibles. Last Friday, we also served Mr. Newman's third-party complaint upon Mark Lilien and James Kafadar, two current directors of the Co-op, asserting Mr. Newman's claims for contribution against them, in the event Mr. Newman is found to have liability in the above action. It would appear that Messrs. Lilien and Kafadar will seek indemnification for their defense costs from the Co-op on the same grounds as Mr. Newman has done so and that the Co-op would also be entitled to coverage under one or more of the Policies for such indemnification, if granted, subject to applicable deductibles. Chubb will no doubt continue to disclaim coverage for all indemnification claims relating to the above action on the grounds noted in my earlier letter and the enclosed letter* from Chubb.

          In the present procedural posture of the above action, it would seem that the Co-op and Messrs. Newman, Lilien and Kafadar, despite their adverse positions in that action, have a common interest in trying to persuade Chubb to provide coverage for all of them. Chubb representatives have advised me that Chubb would be willing to meet with counsel for the parties to discuss Chubb's position.

          I would like to know promptly whether or not you or other counsel designated by the Co-op will participate in such a meeting. It appears to highly desirable for all concerned to try to resolve the coverage disputes with Chubb before the Second Circuit hands down its decision on the Co-op's appeal from the judgment in the Federal Action or at least ascertain whether or not litigation against Chubb will be necessary.

          I am also aware from reviewing the Co-op's newsletters posted on its web site that the scope of your engagement letter with the Co-op does not envision your advising the Co-op on these insurance coverage matters, or in providing a defense to

PROSKAUER ROSE LLP

Mitchell R. Schrage, Esq.
September 30, 2002
Page 3

Messrs. Lilien and Kafadar on Mr. Newman's claims for contribution, or in providing a defense to the Co-op on Mr. Newman's claims for indemnification. Since the Co-op will have to engage counsel to represent its interests on the matters falling outside of your present engagement, whether you or other counsel, and since some time will be required for the Co-op's Board to be advised about and to determine its course of action, I trust that you will promptly call the Co-op's Board's attention our request for cooperation in dealing with Chubb.

          On a related matter, I received a telephone call on September 24, 2002 from Pamela Pagnani, General Counsel for Vanderbilt Properties, LLC ("Vanderbilt"). As you may recall, for many years, Vanderbilt has acted as the principal broker for the Co-op in procuring its annual insurance package. Ms. Pagnani informed me that Vanderbilt engaged Madison Brokerage Corp. ("Madison") as its broker of record for the directors and officers liability component of the Co-op's insurance package. For this reason, Ms. Pagnani said that Vanderbilt is unwilling to deal with the coverage issues relating to Mr. Newman under the Policies raised by my letter dated August 30, 2002 to you and she referred me to Eric Weiner who is director of sales for Madison. At Mr. Weiner's request, I have directed to him copies of relevant correspondence regarding Chubb's declination of coverage for Mr. Newman under the Co-op's directors and officers liability policies and have requested his assistance on behalf of Mr. Newman in dealing with Chubb. Mr. Weiner indicated that he was not sure that Madison could assist in any meaningful way. Now that the Co-op has a stronger interest in dealing with Chubb, perhaps you could persuade Mr. Weiner that Madison should use its best efforts to persuade Chubb to change its position and avoid coverage litigation.

          This letter is without prejudice to all rights, remedies and defenses of our clients.

Very truly yours,
/s/ Dale A. Schreiber
Dale A. Schreiber

DAS/dgr-j

cc: Bruce E. Fader, Esq.