Ends Litigation and Saves Vertical $1.2 million in Cash Payments Due in 2006

CAMBRIDGE, Mass. (June 1, 2006) -- Vertical Communications (VRCC.OB)(“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; he 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