225 LINCOLN PLACE

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.••..•.•...•.••• rent - collection from subtenant ..........•••.. violation of restrictions ••.•••..•..•.•...••.•• Subordination to mortgages and ground leases ....••• ~ Subrogation waiver - Lessor's obligations ....•.••.•. Subtenants remaining subject to rent laws •......•••. Surrender of apartment - lease expirati6n ...........•..•.•...•.•.••..... lease termination .................••.•...• : .. ~. liability continues ....•..•.•.•...•...• ~······· Term of lease ...................................... . Termination of lease - conditional limitation ..••••.....••...••..•••.. assignment unauthorized ..••••..•......•........ bankruptcy of Lessee ....••......•.•..........•• condemnation . ................................. . covenants breached •.•...•.•.••.•.••••••..•..•.. Termination of lease - destruction of building ..••...•..•••......••... loan agreement default ..•....•.••.......••.•••. occupancy unauthorized ..........••.....•••••••. objectionable conduct ....•.....

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S TO REPLACE THE BUILDING. IN ADDITION, IN THE EVENT OF A LOSS, THE INSURANCE PROCEEDS MAY BE APPLIED BY THE MORTGAGEE TO RE­ DUCE THE. OUTSTANDING MORTGAGE INDEBTEDNESS INSTEAD OF TO RESTORE THE PROPERTY. -2- ... ... ,j ' ,-;' r

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,~ ,;c',, :\ ,. ,, . -.· ~ -.· - .. ·.·. . .· :·--:' ....... -· ( 4) Although the Apartment Corporation will be responsible for pay­ ment of the mortgage indebtedness, tenant-shareholders will have no personal liability therefor. Debt service payments on the prop­ _erty's mortgage are included in the monthly maintenance charges. These amounts were computed based on the assumption that the Closing will occur on January 1, 1986. The amount of mortgage . shown in this column will be reduced by amortization. In the event that (i) a large enough number of shareholders fail to pay their maintenance charges, (ii) assessments are not levied and collected, and (iii) the debt service payments are not made, fore­ closure may result and shareholders may lose their equity in their apartment. ( 5) These amounts are estimated for the first year, based on the esti­ mate of Townhouse International Development, Ltd. contained in BUDGET FOR FIRST YEAR OF COOPERATIVE OPERATION, SCHEDULE B.

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e building in the event of a total loss. In the event of a loss. the insurance proceeds may be applied by the mortgagee to reduce the out­ standing mortgage indebtedness instead of to restore the property. An agreed amount replacement cost policy may be available at addi­ tional cost. The insurance listed above does not include coverage for loss of personal property of shareholders. Hence, it is desirable for shareholders to obtain additional insurance at their own cost to cover such risks as fire and casualty losses to unit contents, re­ placements, additions, upgraded fixtures and improvements, and liability coverage for occurrences· within the unit. (9) This amount is based on the Management Agreement described in the section of the Plan entitled MANAGEMENT AGREEMENT, CON­ TRACTS AND LEASES. and is within the range of the prevailing cost for similar services. ( 10) Estimated on the basis of current rates, namely . 0004 on gross assets for the State Franchise Tax and .00

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tive due dates. The consent of FHLMC is required for the conveyance of the property to the Apartment Corporation and for the placing of additional mortgage indebtedness on the property. If FHLMC consents to the title transfer, a fee will also be payable equal to at least 1% of the remaining principal balance of the mortgage. "If FHLMC does not consent to the title transfer, or if a fee substantially in excess of 1% is required, Sponsor will have the option of (a) refinancing or replacing the mort­ gage, or (b) abandoning the Plan. The management agreement must also be approved by FHLMC. The mortgage contains the following additional provisions: (a) in the event any payment of interest or escrow amounts is not made within 10 days of its due date a late charge will be imposed in an amount equal to $.05 for each $1.00 overdue; (b) the mortgagor shall not have the right to make any material alterations without the prior written consent of the mortgagee; and (c) the property m

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spect to the premises in excess of those contemplated in BUDGET FOR FIRST YEAR OF COOPERATIVE OPERATION, SCHEDULE B; (b) increase the amount of the mortgage indebtedness of the Apartment Corporation, extend, refinance or in any other way modify the terms of the mortgage on the premises or enter into any new mort­ gage or contract of sale or lease of the premises; (c) increase in any year the amount of the reserve for contingencies (or other reserves) over the amount allowed therefor set forth in BUDGET FOR FIRST YEAR OF COOPERATIVE OPERATION, SCHEDULE B provided that any unused portion of such reserve for any year may be added to the reserve for the following years; or (d) require any additional main­ tenance charges for capital improvements and repairs except as may be required by law. The Board of Directors will conduct the affairs of_ the Apart­ ment Corporation and supervise the operation of the building without receiving compensation therefor. It is not necessary for a

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al Features The basic financial plan of . this cooperative project is as fol- lows: Total cash amount of offering (5,542 shar~.s - 51 apartments) Mortgage Indebtedness Total Purchase Price Less Working Capital to be. retained by the Apartment Corporation Less Reserve Fund to be retained by the Apartment Corporation Net Purchase Price of Property to Sponsor Maximum Minimum Aggregate Aggregate $5,542,000 $3,325,200 1,072,937* 1,072,937* 6,614,937 4,398,137 -0- -0- 99,756** 99,756** 6,515,181 4,298,381 *This amount is the principal balance of the mortgage as of January 1, 1986. If the closing occurs at a later date, this ~mount will decrease by the amount of amortization paid on the mortgage after said date. **Subject to the provisions of the section entitled RESERVE FUND AND WORKING CAPITAL FUND. . The abovementioned maximum . aggregate net purchase price is based on the assumption that all of the shares and proprietary leases allocable to all apartments are sol

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Plan or provide services or equipment with respect to the premises in ex­ cess of those contemplated in Schedule B; (b) increase the amount of the mortgage indebtedness of Lessor, ex­ tend, refinance or in any other way modify the terms of the mortga·ge on the premises or enter into any new mort­ ga·ge or contract of sale or lease of the premises; ( c) increase in any year the amount of the reserve for con­ tingencies (or other reserves) over the amount allowed therefor set forth in Schedule B of the Pl an provided that any increased portion of such reserve for any year may be added to the reserve for the following years; or (d) require any additional maintenance charges for capi­ tal improvements and repairs except as may be required by law unless without such capital improvement the continued existence of the building is in jeopardy or there is a danger to the health or safety of the building's resi­ dents or the capital improvement is necessary to avoid a breakdown of a

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Purd1asc Price .......................... . 6.614.937 Less Working Capitai to be n:taincd by the Apartment Corporation •.................. -0- Less Reserve Fund to be retained by the Apartment Corporation ..................• 99.75<,•• Net Purchase Price c-f Property to Sponsor ....... . 6.515.181 Minimum Aggre11,atc S3.J25.200 1.072.937• 4.398.137 -0- 99.756·· 4.298.381 *This amount is the princip.-1 balance of the mortgage as of January I. 1986. If the closing occurs at a later date. this amount will dccrc:isc by the amount of amorti1.ation paid on the mortgage after s.iid elate. ••Subject to the Provisions of the Section entitled RESERVE FUND AND WORKING CAPiTAL FUND. NAME AND ADDRESS OF APARTMENT CORPORATION · WHOSE SHARES ARE OFFERED 225 Lincoln Apts. Corp. 225 Li!lCOln Place Brooklyn, New York . NAME AND ADDRESS OF SPONSOR Bernard Levine and David L.idsky 383 Lafayette Street New York. New York NAME AND ADDRESS OF SELLING AGENT Townhouse International De

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Y OF FUNDS FOR REFINANCING AT THE TIME THE MORTGAGE BECOMES DUE. 3. ON THE CLOSING DATE, THE APARTMENT CORPORA- TION -WILL NOT RETAIN ANY SUM .AS A WORKING CAPITAL FUND. IN THE EVENT THE SUM OF NET CLOSING ADJUSTMENTS AND THE ESCROWS TO BE FUNDED AT CLOSING PURSUANT TO THE MORT­ GAGES ARE IN FAVOR OF SPONSOR (WHICH IS VERY LIKELY), SAID SUM SHALL BE PAID PURSUANT TO A PROMISSORY NOTE TO BE EXECUTED BY THE APARTMENT CORPORATION AND DELIVERED TO SPONSOR AT THE CLOSING. SUCH PROMISSORY NOTE WILL BEAR INTEREST AT THE RATE OF 10% PER ANNUM AND WILL BE DUE THIR­ TEEN MONTHS AFTER THE CLOSING DATE. IF ,THE APARTMENT CORPORATION DOES NOT HAVE RESERVES FROM THE PAYMENT OF MAINTENANCE CHARGES BY THE TENANT-SHAREHOLDERS TO MAKE SUCH PAYMENTS, IT MAY BE NECESSARY TO REQUIRE ADDITIONAL MAINTENANCE CHARGES TO PAY OFF SUCH PROMISSORY NOTE. IN THE EVENT A WORKING CAPITAL FUND IS ESTABLISHED, THE AMOUNT OF SAME WILL BE INCREASED OR DECREASED BY SAID SUM OF NET CLOSING ADJUSTMENTS AND MOR

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ssociation dues, building (superintendent) telephone, licenses, permits, registration fees, estimated income taxes on any income (i.e., interest on reserve fund deposits) in excess of al­ lowable deductions, and miscellaneous other expenses. -16- .. J

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reases in the projected expenses. It is not intended to provide for capital repairs or replacements and should, therefore, not be confused with the Working Capital Fund or the Reserve Fund noted on the front cover of this Plan. No· representation is made as to the actual amount of unanticipated ex­ penses. The foregoing Schedule B is not intended and should not be taken as a guarantee by anyone that the annual maintenance charges or expenses for the first year or any subsequent year of operation of the property by the Apartment Corporation will be as set forth above or that such maintenance or expenses will not vary from the amounts shown in Schedule B, If the actual or anticipated date of commencement of coopera­ tive operation is to be substantially delayed from the budget year projected in the Plan , the Plan will be amended to include a revised budget disclosing current projections. If such amended projections ex­ ceed the original projections by twenty-five percent (2

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pecifically in point, if the Apartment Corporation is determined to be· a membership organization, then all non-member in­ come, which might include reserve fund contributions, interest on reserve funds, and commercial income, would be taxable and not offset by housing-related expenses. The opinions expressed herein are based on facts and opinions represented by Sponsor and Sponsor's experts and on our interpretation of applicable tax laws, regulations and rules of the Treasury Department, and judicial and administrative rulings construing same, as all of same exist on the date hereof. You understand that this is merely an opinion and that any opinions herein set forth are not intended, and should not be construed, as guarantees or warranties; and you further understand that no guarantee or warranty is given by the undersigned that the said tax authorities will allow the deductions pursuant to the above tax laws, or that the tax laws or the regulations issued thereunder,

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e required to deposit in escrow with the managing agent at the Closing Date an amount not less than two months' maintenance charges to be used as a working capital fund to furnish services re­ quired under the non-purchasing tenant's lease or occupancy and under existing law and regulations (as described above). Upon notice from the managing agent or the Apartment Corporation that the deposit has been diminished, the fund shall be replenished by ·the shareholder with­ in forty-five ( 45) days after receipt of the notice. The failure of the shareholder to replenish the fund in a timely fashion shall result in the Apartment Corporation having a lien against the shares appurtenant to the apartment. Interest, if any, earned on the fund shall belong to the shareholder. The Apartment Corporation shall agree that it will not retain any managing agent which does not agree to maintain the fore­ going escrow funds, in interest-bearing accounts, at no expense to the -40- • • • • •

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d; and a copy of notice of uncured violations of record in the apartment, if any, that are the responsibility of the pro- prietary lessee to cure. RESERVE FUND AND WORKING CAPITAL FUND On the Closing Date, the Apartment Corporation will not re­ tain any sum as a working capital fund. In the event the sum of net closing adjustments and the escrows to be funded at Closing pursuant to the mortgages are in favor of Sponsor (which is very likely), said sun:i shall be paid pursuant to a promissory note to be executed by the Apartment Corporation and delivered to Sponsor at the closing. Such promissory note will bear interest at the rate of 10% per annum and will be due thirteen months after the closing date. If the Apartment Corporation does not have reserves from the payment of maintenance charges by the tenant-shareholders to make such payments, it may be necessary to require additional maintenance charges to pay off such promissory note. In the event' a working capital fund

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or or will be paid by the Apartment Corporation from the proceeds of the sales of shares. In any event, closing costs will not be deducted from the working capital fund. On the Closing Date or within thirty (30) days thereafter, a reserve fund will be established for the benefit of the Apartment Cor­ poration to be used exclusively for making capital repairs, replacements and improvements necessary for the health and safety of the residents of the building. As provided in Chapter 51 of the Administrative Code of the City of New York, Section YYYY 51-3 .O (also known as Local Law 70), a copy of which appears in Part II of this Plan as Exhibit IX, such fund shall, at Sponsor's option, be established in an amount equal to either (i) three (3%) percent of the total price (which is defined as "the number of all shares in the offering multiplied by the last price per share which was offered to. tenants in occupancy prior to the effective date of the plan regardless of the number

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price· reduction offered to tenants in occupancy which results in a re­ duction of the total price as defined above. In lieu of the payment of the reserve fund as mentioned above, Sponsor reserves the right to amend the Plan so as to provide for the payment on the Closing Date of a reserve fund of an amount equal to one (1%) per cent of the total price as defined above, option (ii). The Apartment Corporation shall report to the shareholders on a semi..:.annual basis with respect to all deposits into and withdrawals from the reserve fund mandated by Section YYYY 51-3 .0. No representation is made that the working capital fund or the reserve fund will be adequate to cover current or future expenses, including repairs or replacements, and if additional funds are required over and above the working capital fund or the reserve fund, it may be necessary to increase maintenance charges. THE PROPERTY IS OFFERED IN ITS CURRENT CONDITION AS . SET ~ORTH IN THIS OFFERING PLAN; NEI

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Corporation to Sponsor consists of the cash received from sales of shares of the , Apartment Corporation (less the portion thereof allocable to the Reserve Fund and expenses paid by the Apartment Cor­ poration prior to Closing from the proceeds of the sale of shares), title being taken subject to the existing first mortgage, and the shares of stock and proprietary leases for apartments not sold to third parties and therefore purchased by Sponsor or Sponsor's nominee or designee as of the date of closing. If the shares and proprietary leases allocable to all apartments are sold as of -the 9ate of closing at a price of $600 per share, there will not be any Unsold Shares and therefore the Pur­ chase Price will be the sum of $4,298,381 payable $1,072,937 by taking title subject to the existing first mortgage and the balance (less various amounts to be deducted pursuant to the Plan) by cash or certified check on Closing. As mentioned in section entitled CHANGES IN PRICES AND UNI

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g fees, printing and photostating costs, title insurance fees, engineer's fees, transfer tax charges, mortgage tax (if any) and recording fees. The working capital fund referred to in RESERVE FUND AND WORKING CAPITAL FUND will not be reduced by closing costs paid by the Apartment Corporation.· -66- • • • • • • •

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operative project is as fol- lows: Total cash amount of offering (5,542 shar~.s - 51 apartments) Mortgage Indebtedness Total Purchase Price Less Working Capital to be. retained by the Apartment Corporation Less Reserve Fund to be retained by the Apartment Corporation Net Purchase Price of Property to Sponsor Maximum Minimum Aggregate Aggregate $5,542,000 $3,325,200 1,072,937* 1,072,937* 6,614,937 4,398,137 -0- -0- 99,756** 99,756** 6,515,181 4,298,381 *This amount is the principal balance of the mortgage as of January 1, 1986. If the closing occurs at a later date, this ~mount will decrease by the amount of amortization paid on the mortgage after said date. **Subject to the provisions of the section entitled RESERVE FUND AND WORKING CAPITAL FUND. . The abovementioned maximum . aggregate net purchase price is based on the assumption that all of the shares and proprietary leases allocable to all apartments are sold as of the date of closing at a price of $1,000

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I agree, at the closing, to deposit in escrow with the managing agent an -amount of not less than two months'_ maintenance charges to be used as a working capital fund to furnish services required under the non-purchasing ten~nt's iease or rental agreement and under existing law. Upon written notice from the managing agent that the deposit has been diminished, I agree to re­ plenish the fund within forty-five ( 45) days after receipt of the notice, n I f .r /; t.- • •• ' ,. ~·· ( • • • •

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Lessor's managing agent at the closing of Lessee's acquisition of this lease an amount not less than two month's maintenance charges to be used as working capital to furnish services required under the non-purchasing tenant's lease and under the applicable rent laws and' regulations. · Upon notice by Lessor or Lessor's managing agent that the deposit has been diminished, the fund shall be replenished by Lessee within forty-five (45) days after receipt of the notice. The failure of the Lessee to replenish the fund in a timely fashion shall result in Lessor having a lien against the shares appurtenant to the subject apartment. Interest, if any, earned on the fund shall be the prop­ erty of the Lessee. (b) The rentals payable by the subtenants and occu­ pants described in subparagraphs (a) and (b) of this Paragraph 47 shall continue to be regulated by the appli­ cable rent laws, regulations and guidelines. (c) The provisions of this Paragraph. 47 are in­ tended for the bene

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ns of record shall not be included. d. "Offeror"--the offerer, his nominees, assignees and suc­ cessors in interest. § YYYYSl-3.0 Establishment of reserve fund. a. Within thirty days after the closing of a conversion pur­ suant to an offering plan the offerer shall establish and transfer to the cooperative corporation or condominium board of managers, a reserve fund to be used exclusively for making capital repairs, re­ placements and improvements necessary for the health and safety of the residents of such buildings. Such reserve fund shall be exclu­ sive of any other funds required to be reserved under the plan or applicable law or regulation of the state attorney general, except a fund for capital repairs, replacements and improvements substan­ tially similar in" purpose to and in an · amount not less than the reserve fund mandated by this section. Such reserve fund also shall be exclusive of any working capital fund and shall not be subject to reduction for closing appo

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e made earlier or in an amount greater than so provided. An of­ ferer may claim and receive credit against the mandatory initial contribution to the reserve fund for the actual cost of capital replacements which he has begun after the plan is submitted for filing to the state department of law and before the plan is de­ clared effective; provided, however, that any such replacements must be set forth in the plan together with their actual or esti­ mated costs and further provided, that such credit shall not exceed the lesser of the actual cost of the capital replacements or one per cent of thr:. total price. d. Any building, construction of which was completed within three years prior to the closing of a conversion pursuant to an of­ fering plan, shall be exempt from the requirements of this section. § YYYYS 1-4. 0 Report on status of reserve fund. The cooperative corporation or condominium board of managers shall report to share­ holders and unit owners on a semi-annual ·bas

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or assists in the violation of section YYYY51-3 .O shall also be subject to a civil penalty of one thousand dollars per day for each day that the reserve fund required by section YYYYSl-3. O is not established; provided, however, that such civil penalty shall not exceed the amount required to be reserved pursuant to section YYYY51-3.0. c. In addition, any other action or proceeding in any court of competent jurisdiction that may be appropriate or necessary for the enforcement of the provisions of this title may be brought in the name of the city, including actions to secure permanent injunc­ tions enjoining any acts or practices which constitute a violation of any provision of this title, mandating compliance with the proyisions of this title or for such other relief as may be appro­ priate. In any such action or proceeding the city may apply to any court of competent jurisdiction, or to a judge or justice thereof, for a temporary restraining order or preliminary injunc_t