Vertical Communications Closes $5.25M Financing with Current Investors
and Chief Executive Officer

CAMBRIDGE, Mass. (March 19, 2008) – 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 that the Company had entered into a securities purchase agreement (the “SPA”) with certain of its current investors (the “Initial Investors”) including its chief executive officer.  The terms of the SPA includes the issuance and sale of $5.25 million of short-term subordinated convertible promissory notes (the “Notes”) and, in connection the conversion of the Notes, the issuance of certain to-be-established series of the Company’s preferred stock (the “Series F Preferred Stock”).

The Notes are due on demand, bear interest at 15 percent per annum and are convertible into Series F Preferred Stock upon a qualifying investment of $1,000,000 (the “Qualifying Investment”) by one of the Company’s shareholders not included in the Initial Investors.  Upon the occurrence of the Qualifying Investment, the Notes will automatically convert into Series F Preferred Stock with terms substantially similar to the Company’s previously issued Series E Preferred Stock and with warrants to purchase shares of the Company’s common stock (the “Warrants”).  If no Qualifying Investment is made within 60 days of the initial closing date, the Notes will automatically convert into Series F Preferred Stock that also have terms substantially similar to the Series E Preferred Stock but with the following exceptions: a) senior position to all other classes or series of capital stock of the Company’s with respect to the payment of dividends, redemption and other rights; b) preference to all other holders of capital stock of three times the value of the current funding round plus all declared and unpaid dividends associated with such Series F Preferred Stock in connection with either a redemption or liquidation, as defined.

In connection with the SPA, the Initial Investors agreed to enter into subordination agreements (the “Subordination Agreements”) with each of Silicon Valley Bank and NEIPF, L.P. (the “Senior Lenders”) to subordinate payment of the Notes to the prior payment of the indebtedness under the Company’s existing credit facilities with the Senior Lenders.  The Company also entered into agreements with the Senior Lenders to amend each of its existing credit facilities to: a) consent to the SPA; b) waive certain historical events of default, and c) amend certain financial covenants contained in each of the existing credit facilities.

The Company will offer additional Notes to certain investors in certain of the Company’s previous equity financing transactions upon the same terms and conditions as offered to the Initial Investors, subject to certain limitations with a maximum limit for the funding of $7,500,000, including the amounts disclosed above.

“This additional capital will support the Company’s continuing progress in executing a strategic transition to selling a range of powerful, cost-effective next-generation IP business communications solutions – including Wave IP 2500™ and SBX IP 320™ -- to our market,” said Bill Tauscher, chairman and chief executive officer. “With the release of Wave IP 2500 last quarter and the release of SBX IP 320 this quarter, we are more excited than ever about the potential for these recent and strategic new product releases to transform our revenue and margin picture. Our investors, banking partners, and most importantly our customers, continue to provide us validation of the potential of the strategy we began to implement several years ago; we remain committed, confident and focused on executing that strategy.”

For a more detailed description of the terms and conditions of the SPA and the Notes, please see the Company’s Form 8-K.

About Vertical Communications, Inc.
Vertical Communications is one of the largest telephony vendors in North America and a global leader in next-generation IP-based business communications systems and applications, with a current installed base of over 200,000 customers. 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 delivers its solutions through a worldwide network of over 1800 business partners. With headquarters in Cambridge MA, Vertical has facilities in Charlottesville VA, Phoenix AZ, Santa Clara CA, Sarasota FL, Munich Germany and Hyderabad India. For more information about Vertical, please call 877-VERTICAL or visit our Website at www.vertical.com.

Financial Community Contact:
Ken Clinebell
Vertical Communications, Inc.
kclinebell@vertical.com
941-554-5000 x1513

Press Contact:
Peter Bailey
Vertical Communications, Inc.
pbailey@vertical.com
408-332-5402

"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, the Company’s need for additional working capital, the effect of the receipt of additional working capital on the Company’s business, operations and growth, the Company’s ability to execute a strategic transition in its product offerings, the anticipated effect of the Company’s strategic transition to new product offerings on its revenues and profits, and the strength of the Company’s strategic plan.  The following factors, among others, could cause actual results to differ materially from those described in these forward-looking statements: the risk that the Company will need additional working capital in the future, the lack of which would likely have a significant negative impact on its current level of operations; the risk that Company will not receive the anticipated benefits of the working capital received; the risk that the Company will be unable to execute its strategic transition to its new product offerings; the risk that the new product offerings will not be successful or meet the Company’s expectations or forecasts; the risk that the Company’s investors, banking partners and customers will not continue to support the Company’s strategic plan; the risk that the Company’s strategic plan will not be successful or meet the Company’s expectations; and other factors detailed in the Company's filings with the Securities and Exchange Commission including its most recent filings on Form 10-Q.

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