
<PAGE>
  
                                                                   EXHIBIT 10.11

                                October 1, 1998



Mr. Douglas Hickey
1850 Warf Road
Capitola, CA 95010

Dear Doug:

     We are extremely pleased to offer you the position of President and Chief
Executive Officer of Critical Path, Inc. (the "Company").  The terms of your
employment with the Company are set forth below.

     1.   Position.
          -------- 

     (a)  You will become the President and Chief Executive Officer and a member
of the Board of Directors of the Company, working out of the Company's offices
in San Francisco, California.  You will report to the Company's Board of
Directors.  Your start date will be within 30 days of the date of this letter,
with the specific date to be mutually agreed upon by you and the Company.

     (b)  You agree to the best of your ability and experience that you will at
all times loyally and conscientiously perform all of the duties and obligations
required of you pursuant to the express and implicit terms hereof, and to the
reasonable satisfaction of the Company.  During the term of your employment, you
further agree that you will devote all of your business time and attention to
the business of the Company, unless the Company expressly agrees otherwise.  You
are not permitted to engage in any business activity that competes with the
Company's business.

     2.   Compensation.
          ------------ 

     (a)  Salary.  Your salary will be $250,000.00 on an annualized basis, and
          ------                                                              
you will be paid a monthly salary of $20,833.33 (payable semi-monthly), less
regular payroll deductions, which covers all hours worked.  Your salary will be
reviewed annually as part of the Company's normal salary review process.

     (b)  Bonus upon Change of Control.  In the event that while you are a full-
          ----------------------------                                         
time employee of the Company and prior to the closing of the Company's initial
public offering, a Change of Control occurs (as defined in Appendix A), you will
receive for each Share of
<PAGE>
 
Mr. Douglas Hickey
October 1, 1998
Page 2


Common Stock then held by you (and issued in conjunction with this Agreement)
and each vested option (including options that vest by virtue of such Change of
Control) a bonus equal to the difference, if any, between the value of the
consideration per share to be received by the Company's Series B Preferred
stockholders in the transaction (calculated taking into account the payment of
this bonus to you) and the value of the consideration per share to be received
by the Company's Common stockholders in such transaction (net of the payment of
this bonus to you).  This bonus shall be payable at the Company's option in cash
or in the same consideration received by the Company's Series B Preferred
stockholders in such Change of Control transaction.  The bonus will be payable
up to a maximum amount equal to $8 million less the consideration payable in the
transaction with respect to your Shares.  The portion of this bonus attributable
to any unvested Shares of Common Stock held by you after the closing of such
transaction, shall be placed in escrow and paid to you if and when such Shares
would have vested in accordance with Section 3 below.

     (c)  Loan.  The Company will extend you a loan in the principal amount of
          ----                                                                
$500,000 (the "Loan").  The Loan will bear interest at the applicable federal
rate, will be due upon the earlier of five years or thirty days following
termination of your employment, and will be secured by shares of the Company's
Common Stock held by you.  The Loan will be non-recourse, unless you terminate
your employment voluntarily.

     3.   Stock Options.  The Company will grant you an option to purchase
          -------------                                                   
5,668,828 shares (the "Shares") of Common Stock (an amount currently equal to 8%
of the Company's fully diluted capitalization, based on all of the Company's
outstanding capital stock, options, warrants and all other outstanding
securities, convertible, exchangeable or exercisable for shares of capital
stock, after taking into account this grant).  The option will be exercisable at
the fair market value of the Common Stock (currently $0.38 per share) and will
vest in equal monthly installments over four years (118,100.5 Shares per month).
The specific terms of the option will be set forth in an option agreement to be
issued pursuant to the Company's stock option plan and shall provide for, among
other items, the early exercise of up to all of the options granted to you prior
to vesting of such options.

     In the event of a Change of Control of the Company, 1,417,207 of the
unvested Shares (or such lesser amount as is then remaining unvested) will vest
immediately preceding such Change of Control, and if you are terminated without
Cause (as defined in Appendix A) within 12 months following a Change of Control,
a like number of additional Shares will vest.

     In the event you are terminated by the Company (or any successor to the
Company) without Cause or if you terminate your employment for Good Reason (as
defined in Appendix A) you will receive payment of severance benefits equal to
your regular monthly salary for nine months from the date of termination, and
you will also vest as to an additional six months of Shares; provided that as a
condition to such severance and vesting acceleration,
<PAGE>
 
Mr. Douglas Hickey
October 1, 1998
Page 3


you execute an agreement in form acceptable to the Company providing for a
mutual release of any claims you or the Company may have against the Company,
its officers, directors, stockholders, agents and affiliates, on the one hand,
and you, on the other hand.

     The Company will allow you to exercise all or a portion of your option at
any time for the Shares by execution of a full-recourse promissory note and
security agreement (a full recourse note is required for tax purposes to
commence the capital gains holding period).  The note will bear interest at the
applicable federal rate and will be due upon the earlier of five years from
issuance or ninety (90) days after the termination of your employment.

     The option grants and the $500,000 loan described above have been approved
by the Board of Directors.  The loan will be subject to approval by the
shareholders of the Company under California law.

     4.   Benefits.
          -------- 

     (a)  You will be eligible for paid vacation, sick leave and holidays.  You
will be provided with health insurance benefits as provided in our benefit
plans.  These benefits may change from time to time.  You will be covered by
workers' compensation insurance and State Disability Insurance, as required by
state law.

     (b)  The Company will provide you with standard medical and dental
insurance benefits and paid vacation in accordance with Company policy.

     (c)  The Company will pay the cost of an apartment in the San Francisco Bay
area (not to exceed $3,000 per month) and will pay the reasonable costs of
leasing a car for your use.

     (d)  The Company will provide at its expense (or reimburse you for)
continuation of your existing financial planning services through AYCO Company.

     (e) The Company will expeditiously enter into an indemnification agreement
in form reasonably acceptable to you, which agreement shall provide that the
Company will indemnify, defend, protect and hold you harmless from any claims or
actions arising out of your actions as an officer or director of the Company.

     5.   Proprietary Information Agreement.  You will be required to sign and
          ---------------------------------                                   
abide by the terms of Critical Path's standard proprietary information
agreement, which is incorporated into this agreement by reference. You will also
represent and warrant to Critical Path that the performance of your duties will
not violate any agreements with or trade secrets of any other person or entity.
<PAGE>
 
Mr. Douglas Hickey
October 1, 1998
Page 4


     6.   Immigration Documentation.  Please be advised that your employment is
          -------------------------                                            
contingent on your ability to prove your identity and authorization to work in
the U.S. for Critical Path.  You must comply with the Immigration and
Naturalization Service's employment verification requirements.

     7.   Term of Employment.  Your employment with Critical Path is "at-will."
          ------------------                                                    
In other words, either you or Critical Path can terminate your employment at any
time for any reason, with or without Cause and with or without notice.

     8.   Dispute Resolution Procedure.  The parties agree that any dispute
          ----------------------------                                     
arising out of or related to the employment relationship between them, including
the termination of that relationship and any allegations of unfair or
discriminatory treatment arising under state or federal law or otherwise, shall
be resolved by final and binding arbitration, except where the law specifically
forbids the use of arbitration as a final and binding remedy.

     (a)  The party claiming to be aggrieved shall furnish to the other party a
written statement of the grievance identifying any witnesses or documents that
support the grievance and the relief requested or proposed.

     (b)  If the other party does not agree to furnish the relief requested or
proposed, or otherwise does not satisfy the demand of the party claiming to be
aggrieved, the parties shall submit the dispute to non-binding mediation before
a mediator to be jointly selected by the parties.  Critical Path will pay the
cost of such mediation.

     (c)  If the mediation does not produce a resolution of the dispute, the
parties agree that the dispute shall be resolved by final and binding
arbitration.  The parties shall attempt to agree to the identity of an
arbitrator, and, if they are unable to do so, they will obtain a list of
arbitrators from the Federal Mediation and Conciliation Service and select an
arbitrator by striking names from that list.

     The arbitrator shall have the authority to determine whether the conduct
complained of in paragraph (a) of this section violates the rights of the
complaining party and, if so, to grant any relief authorized by law; provided,
however, the parties agree, that for violations of the employee's trade secret
obligations, the Company retains the right to seek preliminary injunctive relief
in court in order to preserve the status quo or prevent irreparable injury
before the matter can be heard in arbitration.  The arbitrator shall not have
the authority to modify, change or refuse to enforce the terms of any employment
agreement between the parties.  In addition, the arbitrator shall not have the
authority to require Critical Path to change any lawful policy or benefit plan.
<PAGE>
 
Mr. Douglas Hickey
October 1, 1998
Page 5


     Critical Path shall bear the costs of the arbitration if the employee
prevails.  If Critical Path prevails, the employee will pay half the cost of the
arbitration or $500, whichever is less.  Each party shall be responsible for
paying its own attorneys' fees.

     Arbitration shall be the exclusive final remedy for any dispute between the
parties, including but not limited to disputes involving claims for
discrimination or harassment (such as claims under the Fair Employment and
Housing Act, Title VII of the Civil Rights Act of 1964, the Americans with
Disabilities Act, or the Age Discrimination in Employment Act), wrongful
termination, breach of contract, breach of public policy, physical or mental
harm or distress or any other disputes, and the parties agree that no dispute
shall be submitted to arbitration where the party claiming to be aggrieved has
not complied with the preliminary steps provided for in paragraphs (a) and (b)
above.

     The parties agree that the arbitration award shall be enforceable in any
court having jurisdiction to enforce this Agreement and Release of Claims, so
long as the arbitrator's findings of fact are supported by substantial evidence
on the whole and the arbitrator has not made errors of law.

     (d)  Critical Path reserves the right to modify, change or cancel this
provision upon 30 days written notice.  However, such cancellation shall not
affect matters that have already been submitted to arbitration.

     9.   Integrated Agreement.  Please note that this Agreement supersedes any
          --------------------                                                 
prior agreements, representations or promises of any kind, whether written,
oral, express or implied between the parties hereto with respect to the subject
matters herein.  This Agreement, constitutes the full, complete and exclusive
agreement between you and Critical Path with respect to the subject matters
herein.  This agreement cannot be changed unless in writing, signed by you and
another officer of Critical Path.

     10.  Severability.  If any term of this Agreement is held to be invalid,
          ------------                                                       
void or unenforceable, the remainder of this Agreement shall remain in full
force and effect and shall in no way be affected; and, the parties shall use
their best efforts to find an alternative way to achieve the same result.

     11.  Counterparts.  This Agreement may be signed in counterparts.
          ------------                                                

     Doug, as you know, we are very excited about the contribution you can make
to the future success of Critical Path, and we look forward to your joining our
organization.  In order to confirm your agreement with and acceptance of these
terms, please sign a copy of
<PAGE>
 
Mr. Douglas Hickey
October 1, 1998
Page 6


this letter and return it to me.  If there is any matter in this letter that you
wish to discuss further, please do not hesitate to call me.

Sincerely,



/s/ David Hayden
David Hayden
For the Board of Directors




 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I accept Critical Paths' offer under the terms expressed in this letter.  I
understand that this is not an employment contract for any fixed period, and
that, subject to the provisions of this letter agreement, either party may end
the employment relationship at any time for any reason.



/s/ Douglas Hickey                  
------------------------------     ------------------------------
Douglas Hickey                     Date
<PAGE>
 
                                   APPENDIX A
                                   ----------

                                  DEFINITIONS
                                  -----------


     "Change of Control" shall mean the consummation of one of the following:

          (i)  the acquisition of 50% or more of the outstanding stock of the
     Company pursuant to a tender offer validly made under any federal or state
     law (other than a tender offer by the Company);

          (ii)  a merger, consolidation or other reorganization of the Company
     (other than a reincorporation of the Company), if after giving effect to
     such merger, consolidation or other reorganization of the Company, the
     shareholders of the Company immediately prior to such merger, consolidation
     or other reorganization do not represent a majority in interest of the
     holders of voting securities (on a fully diluted basis) with the ordinary
     voting power to elect directors of the surviving entity after such merger,
     consolidation or other reorganization;

          (iii)  the sale of all or substantially all of the assets of the
     Company to a third party who is not an affiliate of the Company.


     "Cause" shall mean (i) failure or refusal to perform a directive of the
      -----                                                                 
Board of Directors of the Company that is consistent with your duties and
responsibilities as set forth in paragraph 1 hereof (provided, that the Company
provides to you written notice specifying the nature of such failure or refusal
and the actions needed to be taken by you to cure the same and such failure or
refusal is not cured by you within thirty (30) days of receipt of such notice),
(ii) you shall have been determined to be guilty of willful misconduct or be in
material violation of your fiduciary obligations to the Company (provided, that
the Company provides to you written notice specifying the nature of such breach
and actions needed to be taken by you to cure same and such breach is not cured
by you within ten (10) days of receipt of such notice), (iii) you perform your
duties in a grossly negligent manner, or (iv) are convicted of any crime that
has a material adverse impact on (A) your ability to perform your duties
hereunder, (B) the Company or (C) the Company's business.

     "Good Reason" shall be deemed to occur if (a)(1) there is a material
      -----------                                                        
adverse change in employee's position causing such position to be of
significantly less stature or of significantly less responsibility, (2) a
reduction of more than twenty percent (20%) of employee's base compensation
unless in connection with similar decreases of other similarly situated
employees of the Company, or (3) employee's refusal to relocate to a facility or
location more than fifty (50) miles from the Company's current location; and (b)
within the thirty (30) day period immediately following such material change or
reduction employee elects to terminate his employment voluntarily.
