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                                      )
NORTHPOINT COMMUNICATIONS GROUP,      )
a Delaware Corporation.; and          )
NORTHPOINT COMMUNICATIONS, INC.,      ) 
a Delaware Corporation.               )  
                                      )
              Plaintiffs              )
v.                                    )
                                      )
VERIZON COMMUNICATIONS, INC.          )
(formerly known as BELL ATLANTIC      )
CORPORATION), a Delaware Corporation; )
DOES 1-l00, inclusive,                )
                                      )
             Defendents               )
                                      )
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Plaintiffs NorthPoint Communications Group, Inc. and NorthPoint Communications. Inc. (hereinafter collectively "NorthPoint" complain of defendants Verizon Communications, Inc. and DOES 1-100, inclusive, as follows:

1.     Plaintiff NorthPoint Communications group, Inc. was and is a corporation duly organized and existing under laws of the State of Delaware with its former principal place of business in San Francisco, California.

2.     Plaintiff NorthPoint communications, Inc. was and is a corporation duly organized and existing under the laws of the State of Delaware, with its former principal place of business in San Francisco, California.

3.     Defendant Verizon Communications, Inc. (hereinafter "Verizon") was and is a corporation organized and existing under the laws of the State of Delaware, with its principal place of business in New York, New York, and Verizon was and is authorized to do business and is actively conducting business In California.

4.     NorthPoint does not presently know of the true names of the defendants sued herein as DOES 1-100, inclusive, and for that reason sues those defendants by their fictitious names. When the true names and capacities of those defendants have been ascertained, NorthPoint will seek leave of court to amend this Complaint as necessary. NorthPoint is informed and believes that each of the defendants named as a DOE is liable to NorthPoint for the matters alleged herein. NorthPoint is informed and believes that at all times mentioned herein, defendants, and each of them, were the agents and employees of each of the other defendants and were acting in the course and scope of such agency and employment.

NATURE OF THE LAWSUIT

5.     On August 7, 2000, defendant Verizon, the largest wireline and wireless telecommunications provider in the United States, and plaintiff NorthPoint, a nationwide provider of DSL (digital subscriber line) services, entered into a Merger Agreement and related Funding Agreement. Pursuant to those agreements, Verizon and NorthPoint agreed to merge their DSL businesses, with Verizon contributing $500 million in cash and over $500 million of unique Verizon DSL Assets, and with Verizon obtaining a 55% interest in the NorthPoint DSL business. The closing of the merger was to occur after certain actions had been taken by the parties (such as obtaining any necessary regulatory approvals) and before August 7, 2001. However, the Merge; and Funding Agreements were final and binding, and Verizon was only allowed to terminate the agreements under extremely limited circumstances.

6.     On August 8, 2000, there were public announcements of the merger by Verizon and NorthPoint. In its public announcement, Verizon extolled the virtues of the Merger Agreement noting that it was a "groundbreaking agreement to fundamentally change the dynamics of the broadband industry. "Verizon further noted in its announcement that the merger of the DSL businesses would create "a strong broadband competitor ideally positioned to unleash the Internet’s full potential for delivering applications to high-speed customers," In connection with the merger, Verizon also represented to certain state and federal agencies that the unique structure of the combination and substantial investment in NorthPoint would enhance competition in he telecommunications market and increase the availability of broadband services nationwide.

7.     This lawsuit is about defendant Verizon wrongfully terminating the Merger Agreement and Funding Agreement under false pretenses, and then reneging on its promises to invest $800 million in cash and over $500 million in assets. On November 29, 2000, without any legal or factual basis, and without advance notice, Verizon purported to terminate the merger. In doing so Verizon wrongfully contended that there had been a "Material Adverse Effect" (as that term is defined in the agreements) on NorthPoint’s business, and that Verizon was therefore, entitled to terminate the merger. This alleged basis was false and fabricated, and it did not offer any ground for Verizon to Terminate the Merger Agreement and Funding Agreement which was binding and enforceable.

8.     As described in detail below, in the Merger Agreement, the parties expressly limited the Circumstances under which Verizon would be entitled to terminate the merger based on an alleged "Material Adverse Effect." During the course of the negotiations of the Merger Agreement, Verizon (including, principally, Mr. Lawrence Babbio, President and Vice Chairman, Verizon, Telecom) expressly represented to NorthPoint that the circumstances under which Verizon could terminate would have to be serious and irreparable with a long-term, lasting effect on NorthPoint, such as "DSL causing cancer" or the "FCC outlawing DSL."Mr. Babbio further represented that deviations of approximately 30% from year-end revenue projections and deviations of 20,000 or more from year-end digital subscriber line projections would not be the type of circumstances leading to a ‘Material Adverse effect" These representations were made by Mr. Babbio to Ms. Elizabeth Fetter, President and Chief Executive Officer of NorthPoint. and Messrs. Rachleff and Yeary, members of NorthPoint’s Board of Directors, at various times in mid to late July and early August 2000, Including on or about July 17,18,21,28, 2000, and August 3, and 5, 2000. In addition, during the course of the negotiations, Mr. Stephen Smith (Vice President, Business Development, the lead business negotiator for Verizon) represented that Mr. Babbio was a "man of his word," such that Verizon would honor what Mr. Babbio agreed to in how the Material Adverse Effect clause was to be interpreted and implemented.

9.     Verizon (including Mr. Smith) further represented that Verizon would not use material changes in NorthPoint’s "prospects" as a basis for terminating the merger, and for this reason the word "prospects" was deleted from the definition of "Material Adverse Effect." Verizon also promised to use an objective analysis in evaluating whether or not a Material Adverse Effect had occurred on NorthPoint and for this reason agreed to delete the phrase "which could reasonably be expected to" from the definition of Material Adverse Effect. Verizon (including Mr. Smith) further represented that the exclusions ultimately agreed to in the Material Adverse Effect clause narrowed further the circumstances under which Verizon could terminate the merger from those originally proposed by Verizon. These representations were made by Mr. Smith to NorthPoint representatives (including, principally, Mr. Glinsky. NorthPoint’s Chief Financial Officer) in mid to late July and early August, 2000, including on and about July 13 and 14.

10.     In making the promises set forth In Sections 9.1(d)(ii) and 10.4(k) of the Merger Agreement related to the circumstances under which Verizon could terminate the merger, and in making to representations mentioned above, Verizon (including Messrs Babble and Smith) acted fraudulently, had no intent to honor the negotiated limitations in the Merger Agreement relating to the potential termination of the merger, and concealed material information. Contrary to the representations and promises made to NorthPoint, Verizon (Including Messrs. Babbio and Smith) always Intended to terminate the merger and/or seek to renegotiate the terms of the merger if Verizon became dissatisfied with the merger, regardless of whether a "Material Adverse Effect," as used in the Merger Agreement, had occurred. Thus, shortly after signing the Merger Agreement and before Verizon even contended that a Material Adverse Effect had occurred on NorthPoint, Verizon (Including Mr. Smith) prepared internal documents suggesting that Verizon should renegotiate the terms of the merger to acquire 100% interest in the NorthPoint business at a fraction of the overall cost, even though Verizon had no legal basis for doing so. Within days of the signing of the Merger Agreement, Mr. Smith had also raised the question in an internal memorandum of whether rather than merging with NorthPoint Verizon should let NorthPoint go bankrupt and then buy NorthPoint cheap out of bankruptcy. In addition, contrary to the representation made to NorthPoint and the promises contained in the Merger Agreement at all times Verizon (including Messrs.. Babbio and Smith) intended to, and did (a) take Into account alleged changes in NorthPoint’s "prospects" in deciding whether to terminate the merger, despite the fact that the parties had expressly deleted changes in "prospects" as basis for termination; (b) use short-term results of operations as a basis for invoking the Material Adverse Effect clause even if the results were consistent with past performance and would not have any material effect on the long-term success of NorthPoint or the strategic reasons for the merger; and (c) employ a 'subjective" (rather than objective) analysis of whether a "Material Adverse Effect" had allegedly occurred, contrary to the terms of the Merger Agreement. Verizon (Including Messrs. Babbio and Smith) concealed material information reflecting Verizon’s true intent from NorthPoint.

11.     In approving and entering into the Merger Agreement, NorthPoint (Including Ms. Fetter and Messrs. Glinsky, and NorthPoint’s Board) relied on the representations and promises made to them (as referenced above) and on Verizon’s performance in accordance with the limited termination provision. Had NorthPoint known the true intent of Verizon and not been defrauded by Verizon, NorthPoint would not have entered into the Merger Agreement instead, NorthPoint would have followed a different business strategy (including among other things, selling NorthPoint’s DSL. business to another buyer, conserving cash, and/or drawing down on NorthPoint’s line of credit to allow NorthPoint to continue to fund operations while exploring other business opportunities).

12.     The true reasons Verizon terminated the merger were not because of an alleged 'Material Adverse Effect" on NorthPoint, but rather because Verizon and its management had been criticized for having entered into the Merger and Funding Agreements and, therefore, wanted to extricate Verizon from the merger (even if wrongful and unjustified) In order to defray the criticism of Verizon’s management; because Verizon and its management were desirous of avoiding the investment obligations of Verizon under the Merger Agreement and Funding Agreement; because Verizon and its management wanted to announce increased near-term earnings estimates for Verizon after improperly voiding the investment obligation. so as to inflate the stock price of Verizon: because Verizon and its management also determined that Verizon could devastate NorthPoint’s business by reneging on the merger and could then usurp the DSL business opportunities and confidential trade secrets of NorthPoint; and because Verizon did not want to disclose to NorthPoint and others information about Verizon’ s DSL business as required by the Merger Agreement which on information and belief, would have revealed unfair and predatory business practice.

13.     As a insult of Verizon's wrongful breach of the Merger Agreement (including. but not limited to, the covenant of good faith and fair dealing implied in every contract), NorthPoint has suffered damages in excess of $1 billion, or according to proof at trial. In addition, as a result of Verizon's fraud, NorthPoint did pot pursue other business strategies and opportunities and has suffered damages in excess of $1 billion, or according to proof. Further, the conduct of Verizon, which was fraudulent, oppressive and malicious, entitles NorthPoint to punitive damages.

14.     NorthPoint was founded in June, 1997 in San Francisco, California. As of August, 2000 NorthPoint employed over 1,200 employees nationwide, with approximately 1,000 in the Bay Area. NorthPoint was headquartered in San Francisco, California. NorthPoint’s management was located in San Francisco, California, and, under the Merger Agreement, NorthPoint’s managers were to continue to run the combined DSL businesses following the merger from its current headquarters In San Francisco, California.

15.     NorthPoint was one of the fastest growing DSL service providers in the United States. In three years, NorthPoint built a national broadband network designed to deliver affordable, high-speed Internet access to consumers and businesses throughout the United States. As of August 2000, NorthPoint operated DSL-based local networks in approximately 99 metropolitan statistical areas nationwide mud had operations in approximately 1,500 central offices, including numerous network operations throughout California where It was headquartered.

16.     Verizon was formed by the merger of Bell Atlantic Corporation and GTE Corporation. Following that merger, Verizon was the largest provider of wireline and wireless communications, including telephone communications, in the United States. In addition, Verizon was the second largest provider of DSL services In the United States.

17.     By Agreement and Plan of Merger, dated August 7, 2000 (hereinafter the "Merger Agreement"), Verizon and NorthPoint agreed to combine their DSL businesses. Verizon was to contribute $800 million of cash and $513.5 million of unique tangible assets as well as employees and other intangible assets (the "Verizon DSL Assets’) from its DSL business. In exchange, Verizon was to receive a 55% interest in the combined businesses to be run by NorthPoint management. Verizon would also receive the benefit of NorthPoint’s expertise, management skills and proprietary, confidential and trade secret information related to the DSL businesses. A true and correct copy of the Merger Agreement (without exhibits) is attached hereto as Exhibit A and incorporated herein by reference.

18.     Under the terms and condition of the Merger Agreement;

(a)   Verizon promised that its Board of Directors had approved the merger, which it had (p.1 of the Merger Agreement);

(b)   Verizon represented that the Merger Agreement had "been duly authorized by all necessary corporate action on the part of Verizon" and the Merger Agreement 'constitutes a legal valid and binding obligation of Verizon..." (§ 5.2 of the Merger Agreement);

(c)   Verizon represented that it would deliver at Closing "good and valid title to ...all of the Verizon DSL Assets... " (§ 5.9 of the Merger Agreement);

(d)   Verizon promised not to take "any action which ... could reasonably be expected to adversely affect or delay in any material respect the ability of any or the parties hereto to obtain any approval of any Governmental Entity required to consummate the transaction contemplated hereby" (§ 6.2(b) of the Merger Agreement);

(e)   Verizon promised to "as promptly as practicable... prepare and file with the SEC (Securities and Exchange Commission) and any applicable blue sky authorities the Registration Settlement" and to "use all commercially reasonable efforts to cause the Registration Statement to be declared effective by the SEC and such authorities" (§ 7.1(a) of the Merger Agreement);

(f)   Verizon promised that it would "use all commercially reasonable efforts to obtain in a timely manner all necessary waivers, consents and approvals and to effect all necessary registrations and filings, and to use all commercially reasonable efforts to take, or cause to be taken, all other actions and to do, or cause to be done. all other things necessary, proper or advisable to consummate and make affective as promptly a practicable the transactions contemplated by this Merger Agreement and to effect all necessary filings under the 1933 Act, the Exchange Act and the HSR [Hart-Scott-Rodino] Act" (§ 7.3(a) of the merger Agreement); and

(g)   Verizon promised that it would not "issue any press release or public statement with respect to this [Merger] Agreement or the transactions contemplated hereby... without [NorthPoint’s] prior consent, except as may be required by applicable law or court process" (§ 7.5 of the Merger Agreement)

(h)   Verizon impliedly promised to deal with NorthPoint fairly and in good faith, to do everything that the Merger Agreement presupposed to accomplish the merger and to do nothing to injure the rights of NorthPoint to receive the benefits of the Merger Agreement.

19.     On August 7, 2000, Verizon and NorthPoint also entered into a Commitment Letter (heninafter the "Funding Agreement"), pursuant to which Verizon agreed to provide interim financing to NorthPoint, including as much as $200 million in financing on January 1,2001. Attached hereto as Exhibit B is a true and correct copy of the Funding Agreement which is incorporated herein by reference.

20.     In entering into the Merger Agreement and Funding Agreement, Verizon understood and agreed that NorthPoint would continue to Invest heavily in its DSL operations, spending millions of dollars to expand into additional markets throughout the United States, to acquire space in additional central offices throughout the United States, and to install additional DSL equipment and capacity in central offices in order to meet the growing demand for high-speed Internet access services to businesses and residential consumers throughout California and the United States. Verizon was also fully aware that prior to and following the merger and during a continuing period of growth, NorthPoint’s operations would not be profitable; Instead, Verizon was fully aware that while building a substantial DSL infrastructure, NorthPoint would incur millions of dollars of losses. Verizon understood that the Investments of over $1.3 billion of cash and assets that Verizon was to make to NorthPoint pursuant to the merger were critical to the plans of success of the New Northpoint.

21.     In reliance on Verizon fulfilling its obligations under the Merger Agreement and Funding Agreement, and in reliance on Verizon not improperly terminating the agreements without a legal or factual basis, NorthPoint continued its expansion efforts (above and beyond what NorthPoint was obligated to undertake), and NorthPoint did not pursue various business opportunities and funding arrangements that may have arisen. Instead, NorthPoint diligently spent substantial time and effort toward consummating the merger and expanding the business consistent with Verizon’s demands.

22.     Both Verizon and NorthPoint understood that the merger offered a unique, non-replicable business opportunity. Thus, in Verizon's Form 1O-Q Quarterly Report filed on November 14, 2000 with the United States Securities and Exchange Commission, Verizon stated: "We [Verizon] and NorthPoint...will merge our DSL businesses to form a premier broadband communications company dedicated to accelerating the delivery of high-speed data services nationwide, The merger will combine the companies’ DSL networks, products, technology, and strategic partnerships and management." Verizon also represented in the Quarterly Report filed November 14, 2000 that "we expect the merger to close in 2001"

23.     In the press release on August 8, 2000, announcing the merger, Verizon also represented, among other things:

(a)   That the Merger Agreement was a "groundbreaking agreement to fundamentally change the dynamics of the broadband industry. The companies [Verizon and NorthPoint] will merge their digital subscriber line (DSL) business to form a premier broadband communications company dedicated to accelerating the delivery of high-speed data services nationwide;"

(b)   "The merger will combine the companies’ DSL networks, products, technology, and strategic partnerships and management, creating a strong broadband competitor ideally positioned to unleash the Internet’s full potential for delivering an unlimited array of content and applications to high-speed customers;"

(c)   "This deal [the merger] combines complementary assets -- Verizon's position in the consumer market and NorthPoint's presence with business customers -- to provide the scale to fuel growth and deliver the full benefits of high-speed connections;"

(d)   "The ‘new’ NorthPoint will become the national provider of choice for consumers, businesses and ISP’s [Internet service providers] with the scale, scope and financial resources to aggressively expand availability of broadband services and applications;" and

(e)   That the assets of the combined DSL operations would include "a broadband network, comprised of wore than 3,000 unique operational central offices, passing approximately 63 million homes and businesses in 163 U.S. MSM (metropolitan statistical areas)," with "more than 600,000 DSL lines" and "approximately 3,000 employees dedicated to supporting the new NorthPoint's competitive, customer-focused strategy."

24.     Similarly, in a draft of the Registration Statement that was required pursuant to the Merger Agreement and that included language approved by the parties’ representatives, it was stated, among other things:

(a)   That the anticipated benefits of the merger Included "economies of scale, growth opportunities and synergies from combining [the] respective DSL businesses;"

(b)   That the merger allowed the "immediate expansion of NorthPoint’s network and service portfolio and an enhanced ability co expand NorthPoint’s network and services in the future;"

(c)   That the merger allowed for the "formation of a broad national metropolitan footprint to attract and retain service and content providers who desire a single broadband access relationship;"

(d)   That the merger provided for "benefits of Verizons DSL marketing relationships;" and

(e)   That the merger allowed for "significant purchases by Verizon-affiliated companies of DSL service for New NorthPoint over the next six years."

D.   Efforts Toward Closing the Meger

25.     Article VIII of the Merger Agreement set forth various conditions relating to the merger. Thus, under Section 8.1(c) "any waiting period... under the HSR (Hart-Scott-Rodino) Act shall have expired or been terminated" and under Section 8.1(d), "all authorizations, consents, orders, permits or approvals of, or declarations or filings with, and all expirations of waiting periods imposed by, any governmental entity... which are necessary... shall have been filed, have occurred or have been obtained... " As set forth in Sections 1.3(a) and 9.1, the "Closing" of the merger was to take place within two (2) business days after the satisfaction or wavier of the conditions set forth in Article VIII, and no later than August 7, 2001 unless the parties mutually extended such date.

26.     To assure satisfaction of various conditions in Article VIII, among other things, Verizon and NorthPoint jointly filed applications to transfer Certificates of Public Convenience and Necessity (CPCNs) in more than 16 states, Including before the California Public Utilities commission. Verizon and NorthPoint also filed a Premerger Notification and Report form on September 19, 2000 with the United States Department of Justice, Antitrust Division, and the United States Federal Trade Commission. Verizon and NorthPoint also filed a petition to transfer relevant licenses in a proceeding before the Federal Communications Commission. In each of these matters,Verizon had extolled the virtues of the merger, representing that the contemplated merger would not violate any laws or regulations, would expand competitive opportunities in the telecommunications market and increase substantially the availability of high-speed internet access services.

27.     As part of the contemplated merger, between August 7 and November 29, 2000, NorthPoint also engaged in "integration" planning meetings with Verizon in San Francisco, California. during the course of these integration planning meetings, Verizon inquired as to proprietary, confidential and trade secret information of NorthPoint (including financial forecasts, business strategies, growth plans, marketing plans, and intellectual property related to NorthPoint’s DSL services). In response and in reliance on the Verizon’s prior representations (as described above), in reliance on Verizon’s expressed intention to abide by the terms of the Merger Agreement and in reliance on Verizon not terminating the merger without a legal or factual basis, NorthPoint disclosed proprietary, trade secret information (Including business forecasts and pricing) On a confidential basis.

28.     At no time during the regulatory approval process or during the integration process from August 7 to November 29, 2000 did Verizon ever state or advise that any condition to closing the merger had not been and could not be met.

29.     At all times, NorthPoint performed all covenants and agreements required of it under the Merger Agreement and Funding Agreement, and at no time has verizon stated or advised NorthPoint that it breached or failed to perform any covenant or agreements contained in the Merger Agreement and Funding Agreement. In addition, in the Merger Agreement, NorthPoint made various representations and warranties in Article lV, all of which were accurate, and at no time has Verizon stated or advised NorthPoint that any of its representations or warranties were inaccurate in any respect.

30.     Because of the importance of the cash and assets to be invested by Verizon as part of the merger to NorthPoint’s growth plans, and because NorthPoint would be foregoing other business and lending opportunities, NorthPoint insisted that Verzon’s right to terminate the Merger Agreement be extremely limited, Section 9.1(d)(ii) of the Merger Agreement provides that termination is only permitted by Verizon if:

(a)   NorthPoint shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (1) is incapable of being cured by NorthPoint prior to the Termination Date (August 7, 2001) and (2) renders any condition under Section 8.1 or 8.3 hereof incapable of being satisfied prior to the Termination Date (August 7,2001), or

(b)   if a condition under Section 3.1 or 8.3 hereof to Verizon’s obligations hereunder cannot be satisfied prior to the Termination Date (August 7, 2001).

31.     Thus, the ability of Verizon to terminate the Merger Agreement is limited in a number of respects, such that Verizon could terminate the Merger Agreement only if none of the limitations were applicable. The limitations included, among other things:

FIRST   NorthPoint had to actually breach or fail to perform in a material respect its representations, warranties, covenants or other agreements in the Merger Agreement, or there had to have been a failure of a condition in Article VIII to Verizon’s obligation to close.

SECOND   any failure to perform or breach had to be "material"

THIRD   NorthPoint had the right to cure any breach or failure to perform prior to the Termination Date (i.e., August 7, 2001).

FOURTH   any failure to perform or breach had to render a condition wider Section 8.1 or 8.3 "incapable of being satisfied" prior to August 7, 2001.

FIFTH   any failure of any condition in Section 8.1 or 8.3 had to be such that it "cannot be satisfied" prior to August 7, 2001.

32.     In addition, to the extent Verizon might seek to rely on the condition set forth in Section 8.3(g) of Article VIII of the Merger Agreement -- "There shall not have occurred any Material Adverse Effect on NorthPoint" -- as an alleged basis for termination, there were yet further limitations on Verizon’s ability to terminate. FIRST. a "Material Adverse Effect" on NorthPoint had to have occurred which could not be cured or satisfied prior to August 7, 2001. SECOND. "Material Adverse Effect" was narrowly defined in the Merger Agreement at the insistence of NorthPoint. Section 10.4(k) defined "Material Adverse Effect" as follows:

(i)   in the case of NorthPoint or Parent, any fact, event, change or effect having. or which will have, a material adverse effect on the business, operations. properties (including intangible properties), financial condition, assert or liabilities of NorthPoint or Parent, as the case may be, and its Subsidiaries taken as a whole. but shall not include facts, events, changes or effects that are generally applicable to (A) the data industry, (B) the United States economy or (C) the United States securities markets generally or the Nasdaq Technology Index in particular, nor shall it. include any fact, event, or change or effect caused predominantly by Verizon’s involvement in the transactions contemplated by this Agreement;

Thus, any fact, event, change or effect had to have a "material" adverse effect on NorthPoint "taken as a whole." In addition, all "facts, events, changes or effects" applicable to "the data industry," or to "the United States economy" or to "the United Stares securities markets generally or the Nasdaq Technology index in particular" were excluded from the definition. The definition also excluded "any fact, event, change or effect caused predominantly by Verizon’s involvement in the transactions."

33.     During the negotiations of the Merger Agreement, Verizon made numerous representations and promises regarding the circumstances under which Verizon could terminate the merger. These representations were false and fraudulent, and Verizon had no intent to perform in accordance with the representations and promises or the terms of the Merger Agreement when it negotiated and entered into the agreement In this regard, on or about July 7 and 13, 2000, in presenting early drafts of the "Material Adverse Effect" clause (Section 10.4(k) of the Merger Agreement, Mr. Stephen Smith (Vice President, Business Development, Verizon Telecom, a lead business negotiator for Verizon) and Verizon proposed:

(a)   that Verizon would be able to terminate the merger if there was a change "which could reasonably be expected to have" a material adverse effect on NorthPoint;

(b)   that Verizon could terminate the merger if there was a material adverse effect on NorthPoint’s "prospects," but

(c)   that Verizon could not terminate the merger if any Material Adverse Effect on NorthPoint was generally applicable to changes in the "telecommunications industry."

    Each of these proposals, among others, was unacceptable to NorthPoint, as communicated by NortPolnt’s negotiators (including Mr. Glinsky) to Verizon’s negotiators (including Mr. Smith). In mid July, 2000, NorthPoint (including Ms. Fetter and Mr. Glinsky) advised Verizon (including Messrs. Babbio and Smith) that it was imperative that the original definition of "Material Adverse Effect" be narrowed because if Verizon, after a few months, suddenly terminated the merger, this would result in NorthPoint’s bankruptcy given that NorthPoint would have expended precious capital in the meantime, Both Mr. Babbio and Mr. Smith agreed in conversations on or about July 11, 13, 14, 17 and/or 18, 2000 to narrow the definition of "Material Adverse Effect" and, thus, the circumstances under which Verizon would be entitled to terminate the merger.

34.     Accordingly, among other things, it was expressly agreed with Verizon that the definition of "Material Adverse Effect" would be changed such that (a) the phrase "which could reasonably be expected to have" would be replaced by the phrase "which will have" so as to remove certainty of any "Material Adverse Effect" and so as to assure that a subjective analysis would not be used by Verizon in attempting to terminate the merger, and (b) the word "prospects" would be eliminated from definitions of "Material Adverse Effect" so that Verizon could not take into account changes in NorthPoint’s "prospects" in attempting to terminate the merger. Verizon (including Mr. Smith) concurred with these changes in meetings attended by Mr. Glinsky in New York (including on July 13 and 14), as did Mr. Babbio and others at Verizon when the Merger Agreementwas signed on August 7, 2000. In addition, on or about July 14, 2000 and thereafter, in the negotiations of the Merger Agreement, Verizon (including its business negotiator, Mr. Smith) expressly represented to NorthPoint (including Mr. Glinsky and NorthPoint’s counsel) that Verizon would expand the exclusions to the "Material Adverse Effect" clause by, among other things, substituting the phrase "data industry" for the phrase "telecommunications industry" so as to narrow the circumstances under which Verizon could terminate the merger. Unbeknownst to Mr. Gilinsky or any other NorthPoint representatives, Verizon (including Mr. Smith) secretly harbored the intent to assert that said substitution was not a compromise, as represented to NorthPoint (but rather expanded the ability of Verizon to terminate the merger), and that Verizon "negotiated one past NorthPoint"

35.     Ms.Fetter specifically discussed with Mr. Babbio the circumstances under which Verizon could invoke the unique Material Adverse Effect clause, as being drafted by the parties, including in telephone conversations from the San Francisco Bay Area on or about July 17, 18, 21, 28 and August 2. During the course of the discussion, Ms. Fetter noted that Verizon’s DSL business was experiencing approximately a $100 million shortfall in projected revenues for the year 2000 (approximately 30%) as reported by Verizon’s negotiators (including Mr. Smith and others), and Mr. Babbio represented that a shortfall of this magnitude in NorthPoint’ a business would not be deemed a "Material Adverse Effect" but that, instead, something more serious like "DSL causing cancer" would be required. The severity of the required material adverse effect for any potential termination was further confirmed by Mr. Babbio in Conversations with Messrs. Yeary and Rachleff, NorthPoint Board mermbers in conversations on or about August 3 or 5. Mr. Babbio expressly represented to Mr. Yeary that an event such as "the FCC Outlawing DSL" was the sort of event covered by the Material Adverse Effect clause.

36.     The above representations and promises so made by Verizon (including Messrs. Smith and Babbio), were false and fraudulent at the time they were made, and Verizon (including Messrs. Smith and Babbio) had no intent for Verizon to honor the representations and promises made (including those set forth in the Merger Agreement) regarding the ability of Verizon to terminate the merger by reason of an alleged Material Adverse Effect on NorthPoint Among other things, Verizon (including Messrs. Smith and Babbio) concealed their true intent regarding the Material Adverse Effect clause, always intending to employ a subjective and biased analysis of NorthPoint’s financial condition; always intending to reserve the right to terminate the merger based on changes in NorthPoint's "prospects"; always intending to contend that if NorthPoint failed to achieve projections over a very short period of time, that Verizon would be entitled to terminate the merger even if NorthPoint’s financial condition had not deteriorated when compared to the financial results prior to the signing of the Merger Agreement; and always intending to ignore (rather than honor) the exclusions to the Material Adverse Effect clause, all of which Verizon wrongfully did in terminating the merger, as described below.

37.     The representations and promises so made were for the purpose of inducing NorthPoint to enter into the Merger Agreement. NorthPoint reasonably and justifiably relied on the above representations and promises of Verizon in entering into and performing under the Merger Agreement. But for Verizon representations and promises, which Verizon had no intent to honor, NorthPoint would not have entered into the Merger Agreement and would have pursued other business strategies.

38.     On November 29, 2000, in material breach of its obligations under the Merger Agreement and Funding Agreement, and without any advance warning, Verizon sent a notice to NorthPoint purporting to terminate the Merger Agreement and Funding Agreement. Verizon simultaneously issued a press release to the public advising of Verizon’s purported termination of the agreements. Verizon did so at a point in time when it knew that NorthPoint would not be able to arrange for alternative financing, such that NorthPoint would go bankrupt and Verizon would then be able to usurp NorthPoint’s business.

39.     The notice of termination was based solely on the ground that allegedly a "Material Adverse Effect on NorthPoint has occurred." However, no "Material Adverse Effect" on NorthPoint had occurred. Verizon had no basis, legally or factually, for the purported termination. Verizon intentionally fabricated its alleged basis for the termination. Moreover, Verizon intentionally ignored the fact that it was not entitled to terminate the Merger Agreement unless NorthPoint failed to cure the alleged basis for termination prior to August 7, 2001 or unless the condition relied upon by Verizon for termination could not be satisfied prior to August 7, 2001.

40.     In terminating the merger, Verizon contended that there had been a "Material Adverse Effect" an NorthPoint’s business based on the fact that in November 2000, NorthPoint announced that its revenues for the Third Quarter of 2000 would be approximately $24 million (rather than $30 million as announced a few weeks earlier) and its loans would be approximately $90 million (rather than $79 million as previously announced) because a few Internet Service providers (who were essentially distributors, not end users of DSL service) had experienced financial difficulty. Verizon took this position even though the revenues of NorthPoint for the Third Quarter 2000 were still at the same level as the Second Quarter (i.e., $24 million for each or the quarters) and higher than the revenues in the First Quarter of 2000, even after taking into account the "revised" Third Quarter "results." Moreover, the losses about which Verizon complained were within the guidelines Verizon had helped negotiate and "approve" with NothPoint's banks, and were less than the rate of losses experienced earlier as NorthPoint had continued its expansion of its nationwide infrastructure.

41.     Verizon’s purported termination of the Merger Agreement and Funding Agreement were impermissible and in breach of Verizon’s obligations. Contrary to Verizon’s unsupported allegations, there had been no "Material Adverse Effect" on NorthPoint, one of the pre-conditions to the termination of either the Merger Agreement or Funding Agreement. Indeed, prior to filing its Form 10-Q far the third quarter of 2000 with the Securities and Exchange Commission, NorthPoint notified Verizon of NorthPoint’s financial condition and results of operation. After being so notified and reviewing the results with NorthPoint’s management (Including Ms. Fetter and Mr. Glinsky) on November 13, 2000, Verizon (including Ms. Doreen Toben, Chief Financial Officer, Verizon Telecom) advised Mr. Glinsky of NorthPoint that "Verizon was in," meaning prepared to proceed with the merger and without asserting any "material Adverse Effect" justifying termination. In addition, on November 14, 2000, Verizon filed its own Form 10Q for the third quarter of 2000 with the Securities and Exchange Commission, and in that filing Verizon expressly represented that "we expect the merger to close in 2001." At no point in its Form 10-Q filing did Verizon state that there had been a "Material Adverse Effect" on NorthPoint, or that Verizon had any intention of or basis for terminating the Merger Agreement or Funding Agreement.

42.     At various other times after the signing of the Merger Agreement on August 7, 2000, and after being advised of NorthPoint’a business, operations and financial condition, Verizon further acknowledged that there had been no "Material Adverse Effect," repeatedly stating that it intended to proceed with the merger. NorthPoint (including Mr. Glinsky) sought and obtained the prior approval of Verizon (specifically Mr. Smith) to issue a press release on November 20, 2000 in which NorthPoint expressly stated that "we continue to be on track with our prior expectation of closing the Verizon transaction in the first half of 2001."

43.     As stared above, in Connection with its execution of the Merger Agreement, representatives of Verizon also represented that events similar to those which Verizon has raised as the purported basis for terminating the Merger Agreement would not constitute a "Material Adverse Effect." While NorthPoint continued to incur losses during and as a result of the expansion of its operations, it was understood and agreed by Verizon that NorthPoint would incur millions of dollars of losses during this expansion effort, consistent with its obligations under the Merger Agreement, and the losses which NorthPoint experienced in the Third Quarter of 2000 (upon which Verizon relied in terminating the merger) were within the guidelines of NorthPoint’s bank loans. Also, while there has been a deterioration at the "data Industry" and the technology industry (as reflected In the stock market), any facts, events, changes or effects attributable to those items are not deemed to be "Material Adverse Effects;" as that term is defined in the Merger Agreement or in the Funding Agreement.

44.     Verizon terminated the merger under false pretenses. The true reasons for Verizon’s termination were that Verizon and its management were criticized for having entered into the Merger Agreement by stock market analysts, and Verizon’s stock had dropped precipitously after the announcement of the merger. As the stock market dropped between August and November 2000, Verizon (including Mr. Smith, Ms. Toben and Mr. Babbio) were aware of criticisms of Verizon for entering into the merger and lamented how Verizon could have bought NorthPoint cheaper had Verizon waited for NorthPoint’s stock price to drop along with the rest of the stock market. Verizon and its management (including Messrs. Babble and Smith and Ms. Toben) were, therefore, desirous of renegotiating the financial terms of the transaction even before Verizon had any alleged basis for contending that there had been a "Material Adverse Effect" on NorthPoint. Thus, by at least October 14, 2000, Verizon (including Mr. Smith) had prepared an internal memorandum proposing "renegotiation" at the transaction to acquire 100% (not 55%) of NorthPoint at a fraction of the overall cost. In addition Verizon (including Mr. Babbio and other senior management) desired to void the transaction and the investment and funding obligations to NorthPoint (even if there were no legal basis for doing so) so that Verison could announce Increased near-term earnings estimates for Verizon and thereby inflate the stock price of Verizon. In fact, the day after announcing the termination, Verizon increased its earnings estimates to account for the canceled merger. In addition, Verizon and its management determined that Verizon could destroy NorthPoint’s business by reneging on the merger and Could then usurp the DSL business opportunities of NorthPoint. In fact, contemporaneously with notifying NorthPoint and the public of the termination of the merger, Verizon launched an aggressive sales and marketing strategy to expand Verizon's DSL business and to exploit the damage done to NorthPoint by Verizon’s bad faith termination. Also, even after the termination, Verizon (including Mr. Smith) used and misappropriated trade secret information of NorthPoint, including NorthPoint’s business forecasts and pricing, despite the fact that Verizon knew or should have known that the trade secrets had economic value in not being publicly known and that NorthPoint had taken reasonable efforts to maintain their secrecy. Verizon was under a duty not to use or disclose NorthPoint’s trade secrets, but failed to do so.

45.     Verizon also wrongfully terminated the Merger Agreement so that it would not have to disclose to NorthPoint and others information about Verizon’s DSL business, as required by the Merger Agreement, which NorthPoint is informed and believes would have revealed unfair and predatory business practices and pricing. In this regard, pursuant to Section 7.1 of the Merger Agreement, Verizon was to "promptly as practicable" prepare a "registration Statement" which necessarily involved disclosing to NorthPoint financial information related to the Verizon DSL business. In material breach of its obligations under the Merger Agreement, following August 7, 2000, Verizon continuously failed to produce that information, instead, ultimately terminating the Merger Agreement without providing, and in order not to provide, the information.

46.     Rather than taking action to consummate the merger and to provide interim financing, as required by the Merger Agreement and Funding Agreement, following the termination notice on November 29, 2000 Verizon immediately took wrongful action to prevent the ultimate merger. In this regard, on or about November 30, 2000, Verizon notified the United States Department of Justice, Antitrust Division, and United States Federal Trade Commission that it was withdrawing the "Premerger Notification and Report" form which had been filed with those departments on September 19, 2000. Verizon has also advised that it will not be producing further documents or interrogatory responses in response to requests by the Department of Justice, Antitrust Division. Under the terms of the Merger Agreement, however, Verizon was not allowed to take these wrongful and harmful actions.

G.   Verizon Continued to Defraud NorthPoint
After Entering Into the merger Agreement,

47.     In order to induce NorthPoint to Continue with activities in anticipation of the merger (rather than taking action to mitigate damages associated with Verizon’s anticipatory breach of the merger, including, but not limited to, pursuing other business opportunities, drawing down on a line of credit of over $100 million, and conserving available cash resources), to induce NorthPoint to disclose confidential, proprietary, trade secret information to Verizon, and to induce NorthPoint to spend millions of precious dollars expanding its infrastructure (rather than taking action to conserve necessary cash resources)

48.     As alleged above, within days of signing the Merger Agreement, Verizon (including Mr. Smith, lead business negotiator of the merger for Verizon) questioned in internal documents whether Verizon should wait a few months to let NorthPoint run out of cash, refuse to fund NorthPoint in accordance with the Merger Agreement and then renegotiate the merger with "negotiating leverage" Then, as early as October 2000, before Verizon even contended that it had any basis for terminating the merger based on an alleged "Material Adverse Effect," Mr. Smith prepared an internal memorandum to senior management (including Ms. Doreen Toben, Chief Financial Officer, Verizon Telecom) proposing that Verizon renegotiate the merger terms so that Verizon could "retain 100% [not 55%] and full control of our DSL business." The reason for the proported renegotiation was not because Verizon had any legal basis for any renegotiation, but rather because "the market would respond positively" and because Verizon would have "much greater upside to earnings thereafter (as VZ [Verizon] captures 100% of the DSL business growth)."

49.     From August 7, 2000 (when the Merger Agreement was signed) until late November (when Verizon terminated the merger, the parties had numerous meetings, and Verizon never disclosed these internal memoranda or its true intentions, Thus, on October 20, 2000, NorthPoint representatives (including Ms. Fetter, CEO and President, and Mr. Glinsky, CFO) met with Verizon senior management (including Mr. Babbio, Ms. Toben and Mr. Smith) during which there were candid discussions of the DSL market trends and strategic initiatives. At no time in the meeting did Verizon’s representatives ever suggest that they intended to renegotiate or terminate the merger or that there had been a "Material Adverse effect" on NorthPoint. Nor did they disclose the previously-prepared internal memorandum regarding renegotiating the Merger Agreement Instead, Verizon representatives encouraged NorthPoint. To continue to expand NorthPoint’s infrastructure even though they were advised regarding concerns over NorthPoint’s ability to afford the necessary investments.

50.     In addition, at various times following the signing of the Merger Agreement, and after having been advised of NorthPoint’s financial condition and results of Operation for the Third Quarter of 2000 (ending September 30, 2000), NorthPoint and Verizon representatives had a number of discussions, including at a meeting on November 13, 2000. On November 13, 2000, Mr. Babbio, Ms. Toben and Mr. Smith of Verizon met with Ms. Fetter and Mr. Glinsky in New York, and Ms. Archambeau of NorthPoint also participated. After again being fully advised about NorthPoint’s business, financial condition and results of operation, the Verizon representatives did not disclose that they intended to terminate the merger or that there was any sort of "Material Adverse Effect" on NorthPoint. On the contrary, at the end of the meeting in response to a question as to whether Verizon was prepared to close the merger, Ms. Toben stated to Mr. Glinsky that "Verizon is in." In addition, the next day, Verizon filed its Form 10-Q for the Third Quarter of 2000 with the SEC. and in that filing, Verizon’s senior management represented that "we expect the merger to close in 2001." And, as alleged above, Verizon approved NorthPoint's November 20, 2000 press release in which NorthPoint stated that "we continue to be on track with our prior expectation of closing the Verizon transaction in the first half of 2001," even tough Verizon had already prepared additional internal memoranda recommending renegotiation or termination of the merger. Moreover, at no point after signing the Merger Agreement did any of the Verizon representatives advise NorthPoint that Verizon intended to attempt to invoke the termination provisions of the Merger Agreement based on events which Verizon had previously represented and promised would not be considered Material Adverse Effects."

51.     In reasonable and justifiable reliance on the representations and promises of Verizon and its representatives, among other things, NorthPoint continued to diligently perform its obligations under the Merger Agreement and Funding Agreement and to expend precious cash and human resources on expanding its infrastructure and on obtaining regulatory approval for the transaction and on integration planning. Meanwhile, NorthPoint did not pursue various other potential business opportunities, alternative strategies and funding arrangements in reasonable and justifiable reliance on Verizon’s promises to consummate the merger.

52.     Verizon and its representatives (Mr. Babbio, Ms. Toben, and Mr. Smith) intended for NorthPoint to rely upon said representations and promises and so continue to perform, to expand NorthPoint’s infrastructure, and to expend precious capital, without seeking other opportunities. Verizon and its representatives did so knowing that when Verizon later terminated the merger (without advance warning to NorthPoint and after NorthPoint’s cash resources were depleted), that such termination would devastate NorthPoint’s business and allow Verizon to usurp various aspects of NorthPoint’s business.

53.     As a direct and proximate result of the misrepresentations and concealment by Verizon, NorthPoint has been damaged in an amount of $ 1 billion or more, or according to proof at trial.

54.     The wrongful actions of Verizon and its representatives were willfully oppressive and malicious, entitling NorthPoint to punitive damages.

55.     NorthPoint realleges and incorporates herein by reference the allegations contained In paragraphs 1 through 54 above, as though set forth in full.

56.     As alleged above, Verizon has materially breached the Merger Agreement (including the covenant of good faith and fair dealing) with NorthPoint. by, among other things, its wrongful purported termination of the Merger Agreement, its failure to continue with and diligently pursue the merger, its failure to provide necessary information in connection with the Merger Agreement, its failure to continue to draft and file documents required by the Merger Agreement, and its failure to take appropriate action relating to necessary governmental approvals.

57.     NorthPoint has performed all covenants and agreements required to be performed by it under the Merger Agreement.

58.     As a direct and proximate result of the material breaches of the Merger Agreement by Verizon, NorthPoint has been damaged in excess of $1 billion, or according to proof at trial, together with interest thereon.

59.     NorthPoint realleges and incorporates herein by reference the allegations contained in paragraphs 1 through 54 above, as though set forth in full.

60.     As alleged above, in order to induce NorthPoint to enter into the Merger Agreement, to continue to perform under the Merger Agreement, to disclose confidential, proprietary, and trade secret information to Verizon, to spend precious capital, and to forego other business strategies and opportunities. Verizon made false representations and promises to NorthPoint and intentionally concealed material information. At the time it made false representations and promises, In fact Verizon had no intent of honoring the promises or representations and no intent of honoring the limitations under the Merger Agreement and Funding Agreement related to terminations based on alleged "Material Adverse Effect."

61.     These falsehoods and misleading omissions were material and were intended to and did induce NorthPoint to enter into the Merger Agreement, to continue to perform under the Merger Agreement and Funding Agreement, to disclose trade secret information, and to continue to incur substantial expenses while foregoing other business and funding opportunities. NorthPoint reasonably and justifiably relied on these falsehoods and omissions, to its detriment, as set forth above.

62.     Had NorthPoint known of the falsity of the representations and promises, and had NorthPoint known that Verizon was concealing material information, as alleged above. NorthPoint would not have entered into the Merger Agreement and would have taken immediate and appropriate steps to mitigate its damages, including exploring other business and funding arrangements, including drawing down on NorthPoint's line of credit,

63.     As a direct and proximate result of Verizon's falsehoods and omissions, NorthPoint has suffered damages in an amount of $1. billion or more, or according to proof at trial.

64.     The wrongful actions of Verizon in making these falsehoods and omissions was willful, oppressive and malicious, entitling NothPoint to punitive damages.

65.     NorthPoint realleges and incorporates herein by reference the allegations contained in paragraphs 1 through 54 above, as though set forth in full.

66.     In order to induce NorthPoint to enter into the Merger Agreement, to continue to perform under the Merger Agreement, to spend precious Capital, to disclose trade secret information, and to forego other business opportunities and strategies, Verizon made the material misrepresentations as alleged above.

67.     The representations made by Verizon were false, inaccurate and incomplete.

68.     Verizon was negligent in making the representations and had no reasonable basis for the representations in that, among other things, Verizon did not intend to abide by the provisions of the New Agreement and Funding Agreement relating to termination, and Verizon intended to renegotiate and/or terminate the Merger Agreement and Funding Agreement, without advance notice to NorthPoint and without a legal or factual basis.

69.     Verizon knew or should have known that NorthPoint would rely on Verizon’s representations and promises in continuing to perform under the Merger Agreement, in continuing to incur expenses, and in foregoing other strategies and opportunities. Verizon also knew or should have known that in reliance on the representations and promises, NorthPoint would forego other business opportunities and funding arrangements.

70.     NorthPoint reasonably and justifiably relied on the negligent misrepresentations by Verizon.

71.     Had NorthPoint known of the falsity of the representations and promises, and had NorthPoint known that Verizon was concealing material information relating to the termination of the Merger Agreement. NorthPoint would not have entered into the Merger Agreement and would have taken immediate and appropriate steps to mitigate its damages. including exploring other business and funding arrangements.

72.     As a direct and proximate result of the misrepresentations. NorthPoint has suffered and will continue to suffer damages in an amount of $1 billion or more, or according to proof at trial.

73.     Venzon’s actions in making the negligent misrepresentations ware willful, oppressive and malicious, entitling NorthPoint to punitive damages.

(1)   On the first Cause of Action, for damages in the amount of $1 billion or more, or according to proof, together with interest thereon;

(2)   On the Second Cause of Action, for damages in the amount of $l billion or more or according to proof, together with interest thereon and punitive damages:

(3)   On the Third Cause of Action, for damages of $1 billion or more, or according to proof, together with interest thereon and punitive damages;

(4)   For interest as allowed by law

(5)   For reasonable attorneys fees

(6)   For punitive damages;

(7)   For costs of the suit herein; and

(8)   For such other and further relief as the Court may deem just and proper.