Vertical Signs Patent License Agreement and Settlement Agreement; Ends Litigation and Saves Vertical $1.2 million in Cash Payments Due in 2006.

CAMBRIDGE, Mass. -- Vertical Communications (OTCBB: VRCC)("Vertical"), a leading provider of next-generation, IP-based phone systems and applications that help businesses better serve their customers, announced today it signed a Settlement Agreement with Consolidated IP Holdings, Inc. and a Patent License Agreement with Converged Data Solutions LLC. The Settlement Agreement settles certain litigation between Vertical and Consolidated IP Holdings relating to the September 23, 2004 Asset Purchase Agreement between the companies. The License Agreement redefines and restates Vertical's rights to use certain patents which were assigned to Converged Data Solutions by Consolidated IP Holdings and provides Vertical with a perpetual, irrevocable, world-wide, royalty free license to use these patents.

"We are very excited about the signing of these agreements, which provides Vertical with a broad patent license covering certain of our current product portfolio, including our InstantOffice line of products, and which also settles an open legal dispute from our 2004 acquisition of Vertical Networks," said Bill Tauscher, Vertical's Chairman and Chief Executive Officer. "In exchange for certain rights we previously held, the settlement reduces by $1.2 million the amount of cash payments we expected to make in 2006 relating to the earn-out provisions in connection with the Vertical Networks acquisition and will be reflected in the Company's quarterly earnings statement."

The Settlement Agreement provides for the following:

--the parties mutually released each other from any and all claims relating to the current litigation between the parties;

--Vertical released to Consolidated IP Holdings funds in the amount of $559,566 previously held in escrow under the Asset Purchase Agreement;

--Vertical agreed to make disbursements to Consolidated IP Holdings of earnout payments currently due under the Asset Purchase Agreement, as well as future earnout payments which might become due and payable to Consolidated after December 2006;

--the Settlement Agreement reduced the amount of earnout payments due in 2006 from Vertical to Consolidated under the Asset Purchase Agreement by $1.2 million;

--the Asset Purchase Agreement was amended to provide that the maximum amount of earnout payments Vertical will owe Consolidated IP Holdings shall be $4,300,000, reduced from $5,500,000.

Additional details about the terms of this settlement can be found in Vertical's filings with the Securities and Exchange Commission, including the company's most recent filings on Form 8-K.

About Vertical

Vertical Communications, Inc. is a leading provider of next-generation IP-based voice and data communications systems for business. Vertical combines voice and data technologies with business process understanding to deliver integrated IP-PBX and application solutions that enhance customer service and business productivity. Vertical's customers are leading companies of all sizes - from small to large and distributed - and include CVS/pharmacy, Staples and Apria Healthcare. Vertical is headquartered in Cambridge, Mass. and delivers its solutions through a worldwide network of systems integrators, resellers and distributors. For more information, please visit the company's Website at www.vertical.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995.

This release contains forward-looking statements based on current expectations or beliefs, as well as a number of assumptions about future events, and these statements are subject to important facts and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The forward-looking statements in this release address a variety of subjects, including, without limitation, our future. The following factors, among others, could cause actual results to differ materially from those described in these forward-looking statements: the risk that we are incorrect in evaluating future prospects, and other factors detailed in the Company's filings with the Securities and Exchange Commission including its most recent filings on Form 10-K.

Trademark Information

Vertical Communications and the Vertical Communications logo and combinations thereof are trademarks of Vertical Communications, Inc. TeleVantage, InstantOffice and Vertical Networks are registered trademarks of Vertical Communications, Inc. All other brand and product names are used for identification only and are the property of their respective holders.