SUPREME COURT STATE OF NEW YORK
COUNTY OF NEW YORK
--------------------------------------------------x

350 BLEECKER STREET APARTMENT                     : Index #: 113271/02
CORPORATION 

               Plaintiff,                         : 
     
        -against-                                 : VERIFIED REPLY TO
                                                    COUNTERCLAIM WITH
KENNETH B. NEWMAN, individually and as              AFFIRMATIVE DEFENSES
managing/general partner of BLEECKER CHARLES      :
COMPANY and KENNETH B. NEWMAN 
REALTY CORP.,                                     :

               Defendants.
--------------------------------------------------x
KENNETH B. NEWMAN,                                :

           Defendant and Third-Party Plaintiff,   :

        -against-                                 : Index No. 591057/02

MARK LILIEN AND JAMES D. KAFADAR                  :

           Third-Party Defendants.                 :

--------------------------------------------------x

                PLAINTIFF, by and through its attorneys, MITCHELL R. SCHRAGE & ASSOCIATES, PLLC, reply to defendant, Kenneth B. Newman's Counterclaim as follows:

1.             With respect to the allegations in paragraphs 67 and 68 of the Counterclaim, the plaintiff respectfully refers the Court to the actual documents and statutes which will speak for themselves.

2.             Plaintiffs deny the allegations contained within paragraphs 69, 70, 71, 73

3.             With respect to the allegations of paragraph 72, plaintiff admits that a letter was sent by Mitchell R. Schrage & Associates, PLLC to the defendants' attorneys, Proskauer Rose, LLP, but maintains that the content of the letter will speak for itself.

AS AND FOR A FIRST AFFIRMATIVE DEFENSE:

4.             The defendant has unclean hands and therefore should be estopped from bringing this Counterclaim.

AS AND FOR A SECOND AFFIRMATIVE DEFENSE:

5.             The allegations in defendant's Counterclaim fail to state a cause of action upon which relief can be granted.

AS AND FOR A THIRD AFFIRMATIVE DEFENSE:

6.             The defendant has failed to mitigate his damages.

             WHEREFORE, plaintiff demands judgement against the defendant dismissing the Counterclaims in all respects and judgement against the defendant in the amount sought in the Complaint, together with costs and disbursements.

Dated: New York, New York
             October 22, 2002

CLIENT'S VERIFICATION

STATE OF NEW YORK            )
                                                      ) ss.:
COUNTY OF NEW YORK         )

                   MARK LILIEN, being duly sworn, deposes and says:

                   Deponent is an officer of 350 BLEECKER STREET APARTMENT CORPORATION, the plaintiff in the within action.

                   Deponent has read the foregoing VERIFIED REPLY TO COUNTERCLAIMS WITH AFFIRMATIVE DEFENSES and knows the contents thereof; the same is true to deponent's own knowledge, except as to the matters therein alleged upon information and belief, and those matters deponent believes to be true.

/s/ Mark Lilien
   Mark Lilien

Sworn to before me this
22nd day of October, 2002