Vertical Completes Acquisition of Vodavi

Vertical Communications (“Vertical”), a leading provider of next-generation, IP-based phone systems and applications that help businesses better serve their customers, announced recently the completion of its acquisition of Phoenix, Arizona-based Vodavi Technology, Inc. for $7.50 per share, or approximately $31.1 Million in the aggregate. To finance the Vodavi acquisition as well as to provide additional corporate working capital, Vertical completed a private placement transaction through the issuance of convertible preferred stock of approximately $27 million and also secured debt financing of up to $30 million. As a result of the merger, trading in Vodavi’s stock has been suspended, and its shares will no longer be listed on the NASDAQ Capital Market. The combination of Vertical and Vodavi positions Vertical as a top-five telephony vendor serving the small to medium-sized business (SMB) market in North America, based on line shipments.

“We are pleased to complete the Vodavi acquisition and we look forward to working with our expanded base of employees and dealers in maximizing the benefits of this transaction,” said Bill Tauscher, Chairman and Chief Executive Officer. “The Vodavi acquisition substantially ratchets up our combined research and development footprint and should allow us to more rapidly bring innovative product solutions and enhancements to market. Additionally, the improved financial strength of the Company resulting from our recent financing transactions benefits both dealers and their end customers.”

Associated with the Vodavi acquisition, Vertical will benefit from a strategic business relationship with LG-Nortel Co., Ltd. (“LGN”), formerly Vodavi’s largest shareholder and currently its primary product development and manufacturing business partner. LGN, a worldwide leader in the telecommunications industry with world-class product development and manufacturing capabilities, made a $6.5 million convertible preferred stock equity investment into Vertical and, consequently, owns approximately 11 percent of Vertical’s fully diluted voting shares outstanding.

Vertical was formed through the combination of three industry-leading companies. In September 2004, Artisoft acquired Vertical Networks to form Vertical Communications, which then acquired the assets of Comdial in September 2005. Vertical has now completed the next step in its growth by acquiring Vodavi Technology, Inc. With a current installed base of over 200,000 customers, Vertical now features more than 300 employees in six principal locations in the United States and Europe, and an active worldwide distribution channel of more than 2,000 value-added resellers, distributors and systems integrators.

Vertical’s vision is to help organizations transform their businesses by unlocking the hidden potential of phone systems and voice to deliver enhanced customer service, reduce communications costs and significantly improve operational efficiencies. This acquisition is the next step in a series of initiatives Vertical has undertaken to realize its vision of building a world-class telephony organization, with the product set, market reach and channel footprint to deliver next-generation telephony solutions and voice applications to customers ranging from small and medium-sized businesses to large, distributed enterprises.

For more information, please visit www.vertical.com