<SUBMISSION>
<ACCESSION-NUMBER>0000950149-02-001042
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>9
<PERIOD>20020331
<FILING-DATE>20020515
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>CRITICAL PATH INC
<CIK>0001060801
<ASSIGNED-SIC>7389
<IRS-NUMBER>911788300
<STATE-OF-INCORPORATION>CA
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-25331
<FILM-NUMBER>02653439
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>320 FIRST STREET
<CITY>SAN FRANCISCO
<STATE>CA
<ZIP>94105
<PHONE>4158088800
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>320 FIRST STREET
<CITY>SAN FRNACISCO
<STATE>CA
<ZIP>94105
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>f81657e10-q.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>e10-q</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

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</DIV>

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<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="center">
<B><FONT size="4">UNITED STATES SECURITIES AND EXCHANGE
COMMISSION</FONT></B>

<DIV align="center">
<B>Washington, D.C. 20549</B>
</DIV>

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<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B><FONT size="5">Form 10-Q</FONT></B>

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<HR size="1" width="26%" align="center" noshade>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="16%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="81%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2"><FONT face="wingdings">&#254;</FONT>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <B><FONT size="2">QUARTERLY REPORT PURSUANT TO SECTION 13 OR
    15(d)<BR>
    OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <B><FONT size="2">For the quarterly period ended March&nbsp;31,
    2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2"><FONT face="wingdings">&#111;</FONT></FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <B><FONT size="2">TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d)<BR>
    OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <B><FONT size="2">For the transition period
    from &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.</FONT></B></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<B><FONT size="2">Commission File Number: 000-25331</FONT></B>

<P align="center">
<B><FONT size="6">Critical Path, Inc.</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="53%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">A California Corporation</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">I.R.S. Employer No.&nbsp;91-1788300</FONT></B></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<B><FONT size="2">350 The Embarcadero</FONT></B>

<DIV align="center">
<B><FONT size="2">San Francisco, California 94105</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">415-808-8800</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Indicate by check mark whether the registrant
(1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12&nbsp;months (or for such shorter period
that the registrant was required to file such reports), and
(2)&nbsp;has been subject to such filing requirements for the
past
90&nbsp;days.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#254;</FONT>&nbsp;Yes&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>&nbsp;No
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of April&nbsp;30, 2002, the company had
outstanding 77,646,645 shares of common stock, $0.001 par value
per share.
</FONT>

<P align="left">
<HR size="1" width="100%" align="left" noshade>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

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<P><HR noshade><P>

<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000"><FONT size="2">PART I</FONT></A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001"><FONT size="2">Item 1. Condensed Consolidated Financial Statements (Unaudited)</FONT></A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#002"><FONT size="2">CONDENSED CONSOLIDATED BALANCE SHEETS</FONT></A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#003"><FONT size="2">CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</FONT></A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#004"><FONT size="2">CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</FONT></A></TD></TR>
<TR><TD></TD><TD></TD><TD colspan="7"><A HREF="#005"><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT></A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006"><FONT size="2">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</FONT></A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007"><FONT size="2">Item 2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</FONT></A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008"><FONT size="2">SUPPLEMENTAL ALTERNATIVE MEASUREMENT FINANCIAL DATA</FONT></A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#009"><FONT size="2">Item 3. Quantitative and Qualitative Disclosures About Market Risk</FONT></A></TD></TR>
<TR><TD colspan="9"><A HREF="#010"><FONT size="2">PART 2 -- OTHER INFORMATION</FONT></A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011"><FONT size="2">Item 1. Legal Proceedings</FONT></A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012"><FONT size="2">Item 6. Exhibits and Reports on Form 8-K</FONT></A></TD></TR>
<TR><TD colspan="9"><A HREF="#013"><FONT size="2">SIGNATURE</FONT></A></TD></TR>
<TR><TD colspan="9"><A HREF="#014"><FONT size="2">INDEX TO EXHIBITS</FONT></A></TD></TR>
<TR><TD colspan="9"><A HREF="f81657ex4-1.txt">Exhibit 4.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="f81657ex4-2.txt">Exhibit 4.2</A></TD></TR>
<TR><TD colspan="9"><A HREF="f81657ex4-3.txt">Exhibit 4.3</A></TD></TR>
<TR><TD colspan="9"><A HREF="f81657ex4-4.txt">Exhibit 4.4</A></TD></TR>
<TR><TD colspan="9"><A HREF="f81657ex4-5.txt">Exhibit 4.5</A></TD></TR>
<TR><TD colspan="9"><A HREF="f81657ex10-1.txt">Exhibit 10.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="f81657ex10-2.txt">Exhibit 10.2</A></TD></TR>
<TR><TD colspan="9"><A HREF="f81657ex15-1.txt">Exhibit 15.1</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">CRITICAL PATH, INC.</FONT></B>

<P align="center">
<B><FONT size="2">INDEX</FONT></B>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="78%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="7" align="center" valign="top">
    <B><FONT size="2">PART I</FONT></B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;1.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Condensed Consolidated Financial Statements
    (Unaudited)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Condensed Consolidated Balance Sheets
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Condensed Consolidated Statements of Operations
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Condensed Consolidated Statements of Cash Flows
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Notes to Condensed Consolidated Financial
    Statements
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;2.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Supplemental Alternative Measurement Financial
    Data (Unaudited)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;3.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Quantitative and Qualitative Disclosures About
    Market Risk
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="7" align="center" valign="top">
    <B><FONT size="2">PART II</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;1.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Legal Proceedings
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Item&nbsp;6.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Exhibits and Reports on Form 8-K
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">1
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "<FONT size="2">PART I</FONT>" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="center">
<B><FONT size="2">PART I</FONT></B>

<!-- link2 "<FONT size="2">Item 1. Condensed Consolidated Financial Statements (Unaudited)</FONT>" -->
<DIV align="left"><A NAME="001"></A></DIV>

<P align="left">
<B><FONT size="2">Item&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Condensed
Consolidated Financial Statements (Unaudited)</I></FONT></B>

<P align="center">
<B><FONT size="2">CRITICAL PATH, INC.</FONT></B>

<DIV>&nbsp;</DIV>

<!-- link3 "<FONT size="2">CONDENSED CONSOLIDATED BALANCE SHEETS</FONT>" -->
<DIV align="left"><A NAME="002"></A></DIV>

<DIV align="center">
<B><FONT size="2">CONDENSED CONSOLIDATED BALANCE
SHEETS</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except per
share&nbsp;amounts)</FONT></B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="12" align="center" valign="top">
    <B><FONT size="2">ASSETS</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59,463</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,257</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,702</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,272</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,692</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,114</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,588</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101,224</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99,231</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,247</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,285</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,584</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Intangible assets, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,879</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restricted cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,674</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,671</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">199,952</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">179,282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="12" align="center" valign="top">
    <B><FONT size="2">LIABILITIES, MANDATORILY REDEEMABLE PREFERRED
    STOCK AND<BR>
    SHAREHOLDERS&#146; EQUITY</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,318</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,251</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease and other obligations, current
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,431</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">661</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,915</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,039</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Convertible subordinated notes payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,360</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,360</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease and other obligations, long-term
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,149</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">865</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85,424</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commitments and contingencies
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mandatorily redeemable preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,373</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,442</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common Stock and paid-in-capital, $0.001 par value
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shares authorized: 500,000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shares issued and outstanding: 76,581 and 77,507,
    respectively
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,176,370</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,173,496</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes receivable from shareholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,222</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unearned compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,050</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,130</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated deficit, including other
    comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,064,193</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,091,040</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">109,155</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,576</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities, mandatorily redeemable
    preferred stock and shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">199,952</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">179,282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.
</FONT>

<P align="center"><FONT size="2">2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">CRITICAL PATH, INC.</FONT></B>

<DIV>&nbsp;</DIV>

<!-- link3 "<FONT size="2">CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</FONT>" -->
<DIV align="left"><A NAME="003"></A></DIV>

<DIV align="center">
<B><FONT size="2">CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except per share
amounts)</FONT></B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Software license
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,550</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,911</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hosted messaging
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,440</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,964</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional services
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maintenance and support
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,737</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total net revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,143</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,689</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of net revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Software license
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">287</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hosted messaging
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,938</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,817</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional services
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,443</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maintenance and support
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,586</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of purchased technology
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,630</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stock-based expense&nbsp;&#151; Hosted messaging
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,303</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stock-based expense&nbsp;&#151; Professional
    services
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stock-based expense&nbsp;&#151; Maintenance and
    support
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">151</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total cost of net revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,697</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross profit (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,613</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,992</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales and marketing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,712</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Research and development
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of intangible assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,131</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition-related retention bonuses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stock-based expense&nbsp;&#151; Sales and
    marketing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,536</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stock-based expense&nbsp;&#151; Research and
    development
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,097</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stock-based expense&nbsp;&#151; General and
    administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,733</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,019</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(66,285</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,027</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest and other income (expense), net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,425</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">629</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,067</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(783</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity in net loss of joint venture
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(776</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(403</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(69,703</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,584</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefit from (provision for) income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(343</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">573</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(70,046</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,011</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion on redeemable convertible preferred
    shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,206</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(70,046</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(29,217</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss per share&nbsp;&#151; basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.97</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss per share attributable to
    common&nbsp;&#151; basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.97</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.38</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average shares&nbsp;&#151; basic and
    diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,137</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,514</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.
</FONT>

<P align="center"><FONT size="2">3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">CRITICAL PATH, INC.</FONT></B>

<DIV>&nbsp;</DIV>

<!-- link3 "<FONT size="2">CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</FONT>" -->
<DIV align="left"><A NAME="004"></A></DIV>

<DIV align="center">
<B><FONT size="2">CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands)</FONT></B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(70,046</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,011</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provision for doubtful accounts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,642</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of intangible assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,761</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of stock-based costs and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,912</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity in net loss of joint venture
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">776</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">403</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in fair value of preferred stock instrument
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(200</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(507</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,198</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,212</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,132</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,363</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,625</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,489</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash used in operating activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,222</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,107</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes receivable from officers
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment purchases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,156</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,307</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Payments for acquisitions, net of cash acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,898</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,569</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restricted cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash used in investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,997</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,711</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Financing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from issuance of Preferred Stock, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from issuance of Common Stock, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">575</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">677</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from payments of shareholder notes
    receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,221</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Principal payments on lease obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,355</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,054</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of Common Stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(51</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash used in financing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,831</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,231</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net change in cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44,050</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,049</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Effect of exchange rates on cash and cash
    equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(858</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(157</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">216,542</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59,463</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">171,634</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,257</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.
</FONT>

<P align="center"><FONT size="2">4
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">CRITICAL PATH, INC.</FONT></B>

<DIV>&nbsp;</DIV>

<!-- link3 "<FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>" -->
<DIV align="left"><A NAME="005"></A></DIV>

<DIV align="center">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(Unaudited)</FONT></B>
</DIV>

<P align="left">
<B><FONT size="2">Note 1&nbsp;&#151; Basis of Presentation and
Summary of Significant Accounting Policies</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">The Company</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Critical Path, Inc. was incorporated in
California on February&nbsp;19, 1997. Critical Path, along with
its subsidiaries (collectively referred to herein as the
&#147;Company&#148;), provides messaging and collaboration
solutions, from wireless, secure and unified messaging to basic
email and personal information management, as well as identity
management solutions that simplify user profile management and
strengthen information security. The Company&#146;s customers
are corporate enterprises, carriers and service providers,
postal authorities and government agencies. The unaudited
condensed consolidated financial statements (&#147;Financial
Statements&#148;) of Critical Path, Inc. and Subsidiaries
furnished herein reflect all adjustments that are, in the
opinion of management, necessary to present fairly the financial
position and results of operations for each interim period
presented. All adjustments are normal recurring adjustments. The
Financial Statements should be read in conjunction with the
audited consolidated financial statements and notes thereto,
together with management&#146;s discussion and analysis of
financial condition and results of operations, presented in the
Company&#146;s 2001 Annual Report on Form&nbsp;10-K. The results
of operations for the interim periods presented herein are not
necessarily indicative of the results to be expected for the
entire year.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Basis of Presentation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The condensed consolidated financial statements
include the accounts of the Company, and its wholly-owned and
majority-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
The equity method is used to account for investments in
unconsolidated entities if the Company has the ability to
exercise significant influence over financial and operating
matters, but does not have the ability to control such entities.
The cost method is used to account for equity investments in
unconsolidated entities where the Company does not have the
ability to exercise significant influence over financial and
operating matters.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Segment and Geographic
    Information</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company does not currently manage its
business in a manner that requires it to report financial
results on a segment basis. The Company currently operates in
one segment: Internet messaging and communication products and
services and management uses one measure of profitability.
Revenue information on a product basis has been disclosed in our
statement of operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Reclassifications</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain amounts previously reported have been
reclassified to conform to the current period presentation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Recent accounting
    pronouncements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 2002, the Financial Accounting Standards
Board (&#147;FASB&#148;) issued Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;145, Rescission
of FASB Statements No.&nbsp;4, 44 and 64, Amendment of SFAS
No.&nbsp;13, and Technical Corrections. SFAS No.&nbsp;145 is
effective for financial statements issued on or after
May&nbsp;15, 2002 and rescinds both SFAS No.&nbsp;4, Reporting
Gains and Losses from Extinguishment of Debt, and the amendment
to SFAS No.&nbsp;4, SFAS No.&nbsp;64, Extinguishments of Debt
Made to Satisfy Sinking-Fund Requirements. Through this
rescission, SFAS No.&nbsp;145 eliminates the requirement that
gains and losses from the extinguishment of debt be aggregated
and, if material, classified as an extraordinary item, net of
the related income tax effect.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2001, the FASB issued SFAS No.&nbsp;142,
Goodwill and Other Intangible Assets. This Statement addressed
financial accounting and reporting for intangible assets
acquired individually or with a group of
</FONT>

<P align="center"><FONT size="2">5
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">CRITICAL PATH, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<FONT size="2">other assets (but not those acquired in a
business combination) at acquisition and goodwill and other
intangible assets subsequent to their acquisition. This
Statement supersedes APB Opinion No.&nbsp;17, Intangible Assets.
Under the provisions of this Statement, if an intangible asset
is determined to have an indefinite useful life, it shall not be
amortized until its useful life is determined to be no longer
indefinite. An intangible asset that is not subject to
amortization shall be tested for impairment annually, or more
frequently if events or changes in circumstances indicate that
the asset might be impaired. Goodwill shall not be amortized.
Goodwill shall be tested for impairment on an annual basis and
between annual tests in certain circumstances at a level of
reporting referred to as a reporting unit. Goodwill and
intangible assets acquired after June&nbsp;30, 2001 will be
subject immediately to the nonamortization and amortization
provisions of this Statement. The Company adopted the new rules
on accounting for goodwill and other intangible assets in the
first quarter of fiscal 2002. Adoption resulted in approximately
$5.5&nbsp;million related to acquired workforce and goodwill
that will no longer be amortized, however we will annually test
them for impairment, if not on a more frequent basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The gross carrying value related to these assets
totaled $12.3&nbsp;million and $10.9&nbsp;million as of
March&nbsp;31, 2001 and March&nbsp;31, 2002, respectively, and
accumulated amortization totaled $1.3&nbsp;million and
$5.4&nbsp;million. The aggregate amortization expense related to
these assets during the first quarter of 2001 and 2002 totaled
$1.3&nbsp;million and zero. The estimated total amortization
expense related to all intangible assets is $43.1&nbsp;million
for the year ended 2002, at which time all amortizable
intangible assets will be fully amortized.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table presents net loss
attributable to common shares and net loss per share
attributable to common basic and diluted, as if the acquired
workforce and goodwill had not been amortized during the periods
presented (in thousands, except per share amounts):
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reported net loss attributable to common shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">(70,046</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">(29,217</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of acquired workforce and goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common shares, as
    adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">(68,762</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">(29,217</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="9"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reported net loss per share attributable to common
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">(0.97</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">(0.38</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of acquired workforce and goodwill
    per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">0.02</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss per share attributable to common, as
    adjusted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">(0.95</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">(0.38</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Note 2&nbsp;&#151; Commitments and
Contingencies</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a party to lawsuits in the normal course
of our business. Litigation in general, and securities and
intellectual property litigation in particular, can be expensive
and disruptive to normal business operations. Moreover, the
results of complex legal proceedings are difficult to predict.
Other than as described below, we are not a party to any other
material legal proceedings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Securities Class&nbsp;Actions in Northern
District of California. </FONT></I><FONT size="2">Beginning on
February&nbsp;2, 2001, a number of securities class action
complaints were filed against the Company and certain of our
current and former officers and directors in the United States
District Court for the Northern District of California. The
complaints were filed as purported class actions by individuals
who allege that they purchased the Company&#146;s common stock
during a purported class period and sought an unspecified amount
in damages; the alleged class periods vary among the complaints.
The complaints were consolidated into a single action which
alleged that, during the period from September&nbsp;26, 2000 to
February&nbsp;1, 2001, the Company and certain of its former
officers made false or misleading statements of material fact
about the Company&#146;s financial statements, including its
revenues, revenue recognition policies, business operations and
prospects for the year 2000 and
</FONT>

<P align="center"><FONT size="2">6
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">CRITICAL PATH, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<FONT size="2">beyond. In addition, on September&nbsp;24, 2001,
certain former shareholders of PeerLogic, Inc. filed a putative
class action in the Superior Court of the State of California
alleging that Critical Path breached representations and
warranties made in connection with the acquisition of PeerLogic.
The complaint sought an unspecified amount in damages. We
subsequently removed the PeerLogic action to the United States
District Court for the Northern District of California. On
November&nbsp;8, 2001, Critical Path announced that it had
reached an agreement in principle to settle these cases. In
February 2002, the Court gave preliminary approval to the
settlement of the class action litigation. The Court also set
the hearing date for final approval of the settlement agreement
for May&nbsp;23, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On April&nbsp;30, 2002, MBCP PeerLogic LLC and
other named plaintiffs filed suit in the U.S.&nbsp;District
Court for the Southern District of New York against Critical
Path and certain of its former officers. The plaintiff
shareholders opted out of the shareholder litigation settlement
currently pending in the U.S. District Court for the Northern
District of California. The complaint, which has not been served
on the Company, alleges breach of contract, unjust enrichment,
common law fraud and violations of federal securities laws and
seeks compensatory and punitive damages in an unnamed amount but
in excess of $200&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Derivative Actions in Northern District of
California. </FONT></I><FONT size="2">Beginning on
February&nbsp;5, 2001, Critical Path was named as a nominal
defendant in a number of derivative actions, purportedly brought
on the Company&#146;s behalf, filed in the Superior Court of the
State of California and in the United States District Court for
the Northern District of California. The derivative complaints
alleged that certain of Critical Path&#146;s current and former
officers and directors breached their fiduciary duties to the
Company, engaged in abuses of their control of the Company, were
unjustly enriched by their sales of the Company&#146;s common
stock, engaged in insider trading in violation of California law
or published false financial information in violation of
California law. The plaintiffs sought unspecified damages on the
Company&#146;s behalf from each of the defendants. Because of
the nature of derivative litigation, any recovery in the action
would inure to the Company&#146;s benefit. Contemporaneously
with settlement of the securities class action described above,
an agreement in principle has been reached to settle the
derivative action.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Securities and Exchange Commission
Investigation. </FONT></I><FONT size="2">In February 2001, the
Securities and Exchange Commission (the &#147;SEC&#148;) issued
a formal order of investigation of the Company and certain of
the Company&#146;s current and former officers and directors
associated with the Company with respect to non-specified
accounting matters, financial reports, other public disclosures
and trading activity in the Company&#146;s securities. The
Company fully cooperated with the SEC in its investigation. The
SEC&#146;s investigation was concluded against the Company in
January 2002 with no imposition of fines or penalties against
the Company. The Company consented, without admitting or denying
liability, to an administrative order that the Company violated
certain non-fraud provisions of the federal securities laws and
to a cease and desist order. The investigation has thus far
resulted with charges being filed against two former executive
officers of the Company. The investigation of former executive
officers and directors of the Company is continuing and while
the Company is fully cooperating with such investigation we do
not know the status of the investigation with respect to many of
such former officers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Securities Class&nbsp;Action in Southern
District of New York. </FONT></I><FONT size="2">Beginning on
July&nbsp;18, 2001, a number of securities class action
complaints were filed against the Company, and certain of our
current and former officers and directors and underwriters
connected with our initial public offering of common stock in
the United States District Court for the Southern District of
New York. The purported class action complaints were filed by
individuals who allege that they purchased common stock at the
initial public offering of common stock between March&nbsp;26,
1999 and December&nbsp;6, 2000. The complaints allege generally
that the Prospectus under which such securities were sold
contained false and misleading statements with respect to
discounts and commissions received by the underwriters. The
complaints have been consolidated into a single action. The
complaints seek an unspecified amount in damages on behalf of
persons who purchased Critical Path stock during the specified
period.
</FONT>

<P align="center"><FONT size="2">7
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">CRITICAL PATH, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Lease Dispute.</FONT></I><FONT size="2"> In
July 2000, PeerLogic, an acquired subsidiary of Critical Path,
signed a lease for office space at 292&nbsp;Ivy Street in
San&nbsp;Francisco, CA. The landlord and PeerLogic had begun
construction work to build out the space, when Critical Path
acquired PeerLogic in December 2000. After reviewing its
obligations under the lease, Critical Path noted that local
zoning laws likely prohibited a business like Critical Path or
PeerLogic from occupying the leased premises, and promptly
sought a zoning determination from the San&nbsp;Francisco Zoning
Administrator to resolve the matter. The preliminary zoning
determination stated that Critical Path&#146;s proposed use of
the leased premises was not permitted. The landlord appealed
this determination and prevailed before the San&nbsp;Francisco
Board of Appeals. Critical Path appealed that determination but
upon rehearing the Board of Appeals confirmed its decision. As
anticipated, thereafter the landlord filed suit for back rent
and breach of contract against Critical Path on April&nbsp;30,
2002. The complaint seeks $7&nbsp;million in compensatory
damages and an unspecified amount of punitive damages. The
Company intends to vigorously defend its rights but there can be
no assurance as to the outcome of this litigation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The uncertainty associated with these and other
unresolved or threatened lawsuits could seriously harm the
Company&#146;s business and financial condition. In particular,
the lawsuits or the continued effects of the SEC investigation
could harm our relationships with existing customers and our
ability to obtain new customers. The continued defense of the
lawsuits could also result in the diversion of management&#146;s
time and attention away from business operations, which could
harm the Company&#146;s business. Although some of the named
lawsuits are in the final stages of settlement, there can be no
assurance that the applicable courts will accept the final
settlement as executed, or at all. Negative developments with
respect to the settlements or the lawsuits could cause the
Company&#146;s stock price to decline significantly. In
addition, although the Company is unable to determine the
amount, if any, that it may be required to pay in connection
with the resolution of these lawsuits or the investigation by
settlement or otherwise, the size of any such payments could
seriously harm the Company&#146;s financial condition.
</FONT>

<P align="left">
<B><FONT size="2">Note 3&nbsp;&#151; Related Party
Transactions</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Loans to Executive Officers</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001 and in connection with his employment
agreement, the Company made a loan and held a note receivable
from David Hayden, Executive Chairman, in the amount of
$1.5&nbsp;million. The full recourse note accrues interest at
the rate of 6.75% per annum and could be repaid by the
achievement of performance-based milestones described in
Mr.&nbsp;Hayden&#146;s employment agreement and performance loan
agreement. The loan was also subject to forgiveness upon certain
change of control events. In February 2002, the Board approved
an amendment of Mr.&nbsp;Hayden&#146;s employment agreement
which eliminated the original performance-based milestones in
favor of a single performance-based milestone tied to a change
of control event. In addition, the Board increased the amount
available under the loan agreement by an additional $450,000,
which Mr.&nbsp;Hayden borrowed in March 2002. The loan amount is
secured by a first priority security interest in all of
Mr.&nbsp;Hayden&#146;s shares and options in the Company, with
all other terms of the loan and other agreements unchanged.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2001, the Board approved a fully
secured loan to William McGlashan, Jr., the Company&#146;s Chief
Executive Officer, of up to $4.0&nbsp;million in connection with
the purchase of a principal residence in the San Francisco Bay
Area. In May 2002, the Compensation Committee of the Board and
Mr.&nbsp;McGlashan agreed to amend the agreement in order to
reduce the amount of the loan commitment to $1.5&nbsp;million.
In connection with the reduction of the loan commitment,
Mr.&nbsp;McGlashan was granted additional options to purchase
shares of the Company&#146;s Common Stock. As of May&nbsp;14,
2002, no portion of the loan commitment had been funded.
</FONT>

<P align="center"><FONT size="2">8
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">CRITICAL PATH, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<B><FONT size="2">Note 4 &#151; Strategic Restructuring and
Employee Severance</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2001, the Company announced a strategic
restructuring plan that involved reorganizing Critical
Path&#146;s product and service offerings around a group of core
communications solutions, a reduction in the Company&#146;s
workforce, and the consolidation of facilities and operations.
Total restructuring charges amounted to $18.3&nbsp;million, all
of which was recognized during 2001. As of December&nbsp;31,
2001 a $2.2&nbsp;million accrual remained as a component of
accounts payable. During the first quarter of 2002,
approximately $400,000 was charged against this accrual,
primarily cash paid related to facilities and operations
consolidation restructuring activities, leaving a remaining
restructuring accrual of $1.8&nbsp;million as of March&nbsp;31,
2002, which is expected to be paid over the next 12 months.
</FONT>

<P align="left">
<B><FONT size="2">Note 5 &#151; Other Comprehensive
Loss</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The components of other comprehensive loss are as
follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(70,046</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,011</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized investment gains (losses)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">302</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign currency translation adjustments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(839</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(339</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(70,583</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,847</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Accumulated other comprehensive loss consists of
unrealized gains (losses) on available-for-sale securities, net
of tax, and cumulative translation adjustments, as presented on
the accompanying consolidated balance sheet.
</FONT>

<P align="center"><FONT size="2">9
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="2">CRITICAL PATH, INC.</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151; (Continued)</FONT></B>

<P align="left">
<B><FONT size="2">Note 6 &#151; Net Loss Per Share</FONT></B>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Net loss per share is calculated as follows: <BR>
     &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(In thousands, except per share
    amounts)
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net loss</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(70,046</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,011</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion on redeemable convertible preferred
    shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,206</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(70,046</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(29,217</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Weighted average shares outstanding</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average shares outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74,268</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average common shares issued subject to
    repurchase agreements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(526</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(58</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shares held in escrow related to acquisitions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,605</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(344</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shares used in computation of basic and diluted
    net loss per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,137</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,514</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Basic and diluted net loss per share</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.97</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion on redeemable convertible preferred
    shares Weighted average shares outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.04</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss attributable to common shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.97</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.38</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the three months ended March&nbsp;31, 2002,
approximately 91,603,266&nbsp;million potential common shares
were excluded from the determination of diluted net loss per
share, as the effect of such shares on a weighted average basis
was anti-dilutive.
</FONT>

<P align="center"><FONT size="2">10
</FONT>

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<P align="center">
<B><FONT size="2">CRITICAL PATH, INC.</FONT></B>

<DIV>&nbsp;</DIV>

<!-- link2 "<FONT size="2">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</FONT>" -->
<DIV align="left"><A NAME="006"></A></DIV>

<DIV align="center">
<B><FONT size="2">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS
OF</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">FINANCIAL CONDITION AND RESULTS OF
OPERATIONS</FONT></B>
</DIV>

<!-- link2 "<FONT size="2">Item 2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</FONT>" -->
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<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
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    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">This report on Form&nbsp;10-Q contains
forward-looking statements within the meaning of the &#147;safe
harbor&#148; provisions of the Private Securities Litigation
Reform Act of 1995, as amended and in effect from time to time.
The words &#147;anticipates,&#148; &#147;expects,&#148;
&#147;intends,&#148; &#147;plans,&#148; &#147;believes,&#148;
&#147;seek,&#148; and &#147;estimate&#148; and similar
expressions are intended to identify forward-looking statements.
These are statements that relate to future periods and include
statements regarding our future strategic, operational and
financial plans, anticipated or projected revenues, expenses and
operational growth, markets and potential customers for our
products and services, plans related to sales strategies and
global sales efforts, the anticipated benefits of our
relationships with strategic partners, growth of our
competition, our ability to compete, investments in product
development, the adequacy of our current facilities and our
ability to obtain additional space, our litigation strategy, use
of future earnings, the feature, benefits and performance of our
current and future products and services, plans to reduce
operating costs through continued expense reduction, anticipated
effects of restructuring and retirement of debt, and our belief
as to our ability to successfully emerge from the restructuring
and refocusing of our operations. These forward-looking
statements are subject to risks and uncertainties that could
cause actual results to differ materially from those projected.
Factors that might cause future results to differ materially
from those projected in the forward-looking statements include,
but are not limited to, difficulties of forecasting future
results due to our limited operating history, failure to meet
sales and revenue forecasts, evolving business strategy and the
emerging nature of the market for our products and services,
finalization of pending litigation and the settlement of the
continuing SEC investigation against former executives and
directors, turnover within and integration of senior management,
board of directors members and other key personnel, difficulties
in our strategic plans to exit certain products and services
offerings, failure to expand our sales and marketing activities,
potential difficulties associated with strategic relationships,
investments and uncollected bills, general economic conditions
in markets in which the Company does business, risks associated
with our international operations, foreign currency
fluctuations, unplanned system interruptions and capacity
constraints, software defects, and failure to expand our sales
and marketing activities, potential difficulties associated with
strategic relationships, investments and uncollected bills,
risks associated with an inability to maintain continued
compliance with the Nasdaq National Market listing requirements,
risks associated with our international operations, unplanned
system interruptions and capacity constraints, software defects,
and those discussed in &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations&#148;
and &#147;Additional Factors That May Affect Future Operating
Results&#148; and elsewhere in this report. Readers are
cautioned not to place undue reliance on these forward-looking
statements. The forward-looking statements speak only as of the
date hereof. We expressly disclaim any obligation to publicly
release the results of any revisions to these forward-looking
statements to reflect events or circumstances after the date of
this filing.</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">All references to &#147;Critical Path,&#148;
&#147;we,&#148; &#147;our,&#148; or the &#147;Company&#148; mean
Critical Path, Inc. and its subsidiaries, except where it is
clear from the context that such terms means only the parent
company and excludes subsidiaries.</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">This Quarterly Report on Form&nbsp;10-Q
includes numerous trademarks and registered trademarks of
Critical Path. Products or service names of other companies
mentioned in this Quarterly Report on Form&nbsp;10-Q may be
trademarks or registered trademarks of their respective
owners.</FONT></I>

<P align="left">
<B><FONT size="2">Overview</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Critical Path, Inc., a global leader in Internet
communications, delivers software and services that are designed
to maximize the value of Internet communications. We provide
messaging and collaboration solutions from wireless, secure and
unified messaging to basic email and personal information
management, as well as identity management solutions that
simplify user profile management and strengthen information
</FONT>

<P align="center"><FONT size="2">11
</FONT>

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<DIV align="left">
<FONT size="2">security. Our standards-based Critical Path
Communications Platform, built to perform reliably at the scale
of public networks, delivers the industry&#146;s lowest total
cost of ownership for messaging solutions and lays a solid
foundation for next-generation communications services.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our primary sources of revenue come from
providing a wide range of messaging and directory products and
services. Critical Path&#146;s customers are corporate
enterprises, carriers and service providers, postal authorities
and government agencies. Critical Path was founded in 1997 and
is headquartered in San Francisco, California with offices
worldwide.
</FONT>

<P align="left">
<B><FONT size="2">Results of Operations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In view of the rapidly evolving nature of our
business, prior acquisitions, organizational restructuring, and
limited operating history, we believe that period-to-period
comparisons of revenues and operating results, including gross
profit margin and operating expenses as a percentage of total
net revenues, are not meaningful and should not be relied upon
as indications of future performance. At March&nbsp;31, 2002, we
had 583&nbsp;employees, in comparison with 562 employees at
December&nbsp;31, 2001 and 1,011 employees at March&nbsp;31,
2001. We do not believe that our historical growth rates for
revenue, expenses, or personnel are indicative of future results.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net
Revenues</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We derive most of our revenues through the sale
of our messaging and directory communications solutions. These
solutions include both licensed software products and hosted
messaging services. In addition, we receive revenues from
professional services and maintenance and support services.
Software license revenues are derived from perpetual and term
licenses for our messaging, directory, collaborative and
enterprise application integration technologies. Hosted
messaging revenues relates to fees for our hosted messaging and
collaboration services. These fees are primarily based upon
monthly contractual per unit rates for the services involved,
and are recognized as revenue on a ratable monthly basis over
the term of the contract. Professional services revenues are
derived from fees primarily related to training, installation
and configuration services and revenue is recognized as services
are performed. Maintenance and support revenue is derived from
fees related to post-contract customer support agreements
associated with software product licenses. Maintenance and
support revenues are recognized ratably over the term of the
agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Software License. </FONT></I><FONT size="2">We
recognized $10.9&nbsp;million in software license revenues
during the first quarter of 2002, compared to $5.6&nbsp;million
in the same quarter in 2001. The significant increase in
software license revenues over the prior year was due primarily
to the uncertainty surrounding Critical Path during the first
quarter of 2001, which caused a number of current and potential
customers to delay making purchase decisions. This uncertainty
was created by the Company&#146;s restatement of certain
previously released financial results for the third quarter of
2000, significant turnover within the senior management group
and the termination and resignation of much of the leadership
within our sales organization. Even with the higher license
revenues levels during the first quarter of 2002, our business
activities continue to be impacted by the difficult worldwide
business climate, which has resulted in lower and delayed
information technology spending across the enterprise software
market.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Hosted Messaging. </FONT></I><FONT size="2">We
recognized $7.0&nbsp;million in hosted messaging revenues during
the first quarter of 2002, compared to $14.4&nbsp;million in the
same quarter in 2001. This decrease in 2002 hosted messaging
revenues resulted primarily from the Company having either
exited or sold, as part of its 2001 restructuring initiatives,
certain non-core hosted messaging services during the second
half of 2001. These non-core services accounted for a
significant portion of first quarter 2001 hosted messaging
revenues.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Professional Services.
</FONT></I><FONT size="2">We recognized $1.9&nbsp;million in
professional services revenues during the first quarter of 2002,
compared to $3.4&nbsp;million in the same quarter in 2001. This
decrease in 2002 was due primarily to higher first quarter 2001
professional services revenues directly resulting from the
Company&#146;s September 2000 acquisition of PeerLogic, Inc. In
addition, the Company&#146;s 2001 restructuring initiatives
eliminated certain non-core products, reducing the professional
services revenues derived from these products.
</FONT>

<P align="center"><FONT size="2">12
</FONT>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Maintenance and Support.
</FONT></I><FONT size="2">We recognized $3.9&nbsp;million in
maintenance and support revenues during the first quarter of
2002, compared to $3.7&nbsp;million for the same quarter in
2001. This increase in 2002 resulted primarily from the higher
software license revenues levels compared to the first quarter
of 2001, partially offset by the loss of maintenance and support
revenues from the elimination of certain non-core products and
services as part of the Company&#146;s 2001 restructuring
initiatives.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Critical Path&#146;s international operations
accounted for approximately 52% of net revenues in the first
quarter of 2002. Revenues from international operations
accounted for approximately 30% of net revenues in the first
quarter of 2001. This significant increase in the percentage of
international revenues related primarily to a dramatic reduction
in enterprise information technology spending during the first
quarter of 2001, as it impacted the sale of our license products
in international markets.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cost of Net
Revenues</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Software License.
</FONT></I><FONT size="2">Cost of net software license revenues
consists primarily of product media duplication, manuals and
packaging materials, personnel and facility costs, and
third-party royalties. The cost of net software license revenues
for the first quarter of 2002 was comparable to the year ago
period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Hosted Messaging.
</FONT></I><FONT size="2">Cost of net hosted messaging revenues
consists primarily of costs incurred in the delivery and support
of messaging services, including depreciation of capital
equipment used in network infrastructure, amortization of
purchased technology, Internet connection charges, accretion of
acquisition-related retention bonuses, personnel costs incurred
in operations, and other direct and allocated indirect costs.
The cost of net hosted messaging revenues were significantly
lower in the first quarter of 2002 compared to the prior year
primarily due to the Company&#146;s restructuring initiatives
undertaken in the second half of 2001. As a result of these
initiatives, the costs associated with the Company&#146;s hosted
messaging revenues were reduced through the sale or exit of
several non-core services, the termination of employees and
reduction in employee-related costs, the retirement of surplus
network infrastructure equipment and software, and the
consolidation of data centers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Professional Services.
</FONT></I><FONT size="2">Cost of net professional services
revenues consist primarily of personnel costs including custom
engineering, installation and training services for both hosted
and licensed solutions, and other direct and allocated indirect
costs. As a result of the Company&#146;s 2001 restructuring
initiatives, personnel and certain overhead costs were reduced,
resulting in lower professional services cost of net revenues in
the first quarter of 2002, in comparison to the same period in
the prior year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Maintenance and Support.
</FONT></I><FONT size="2">Cost of net maintenance and support
revenues consists primarily of personnel costs related to the
customer support functions for both hosted and licensed
solutions, and other direct and allocated indirect costs. The
cost of net maintenance and support revenues was lower in the
first quarter of 2002 in comparison to the year ago period, due
primarily to a decrease in staffing levels and a reduction in
employee-related costs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Operations, customer support, and professional
services staff decreased to 192 employees at March&nbsp;31, 2002
from 349 employees at March&nbsp;31, 2001.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating
Expenses</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Sales and Marketing.
</FONT></I><FONT size="2">Sales and marketing expenses consist
primarily of compensation for sales and marketing personnel,
advertising, public relations, other promotional costs, and, to
a lesser extent, related overhead. Sales and marketing expenses
for the first quarter of 2002 decreased significantly over the
prior year&#146;s first quarter due primarily to cost savings
generated from the Company&#146;s 2001 restructuring
initiatives. With actions taken as part of the restructuring,
sales and marketing staffing levels were reduced to
143&nbsp;employees at March&nbsp;31, 2002 from
286&nbsp;employees at March&nbsp;31, 2001. The savings in
personnel and personnel-related costs together with the
termination of certain strategic marketing relationships related
to non-core services accounts for the reduction in sales and
marketing expenses from the first quarter of 2001 to the same
quarter of 2002.
</FONT>

<P align="center"><FONT size="2">13
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Research and Development.
</FONT></I><FONT size="2">Research and development expenses
consist primarily of compensation for technical staff, payments
to outside contractors, depreciation of capital equipment
associated with research and development activities, and, to a
lesser extent, related overhead. This significant decrease in
first quarter 2002 research and development expenses resulted
primarily from a reduction in headcount and related personnel
costs as part of the Company&#146;s 2001 restructuring
initiatives. These actions have contributed to a decrease in
research and development staffing to 156 employees at
March&nbsp;31, 2002, from 244 employees at March&nbsp;31, 2001.
In addition, savings realized from the termination of certain
outside consulting arrangements and consolidation of facilities
also contributed to this decrease in research and development
expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">General and Administrative.
</FONT></I><FONT size="2">General and administrative expenses
consist primarily of compensation for personnel, fees for
outside professional services, occupancy costs and, to a lesser
extent, related overhead. The significant decrease in first
quarter 2002 general and administrative expenses in comparison
to the same period in the prior year was due primarily to cost
savings realized from the Company&#146;s 2001 restructuring
initiatives. Savings were realized from a decrease in general
and administrative staffing levels to 92&nbsp;employees at
March&nbsp;31, 2002 from 132&nbsp;employees at March&nbsp;31,
2001, as well as lower facilities costs resulting from the
Company&#146;s reduction in facilities from 77 at
December&nbsp;31, 2000 to 27 at March&nbsp;31, 2002. In
addition, as a result of the restatement of certain previously
released 2000 financial results, the Company incurred higher
fees for outside professional services in the first quarter of
2001, in particular higher legal and accounting fees related to
the SEC investigation and extended outside audit work.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Amortization
of Intangible Assets</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the acquisitions we completed
in 1999 and 2000, which were all accounted for using the
purchase method of accounting, we recorded goodwill and other
intangible assets, primarily for assembled workforce, customer
base, and existing technology. During 2000 and 2001, we recorded
charges of $1.3&nbsp;billion and $26.6&nbsp;million,
respectively, related to the impairment of certain long-lived
assets, including intangible assets. In addition, with the
adoption of SFAS No.&nbsp;142, Goodwill and Other Intangible
Assets, in the beginning of 2002, approximately
$5.5&nbsp;million of the Company&#146;s intangible assets
related to acquired workforce and goodwill will no longer be
subject to amortization, but instead will be periodically tested
for impairment. As a result of the 2001 impairment charge and
the adoption of SFAS No.&nbsp;142, first quarter 2002
amortization expense decreased significantly from the first
quarter of 2001. Based upon the types of identifiable
intangibles acquired, first quarter 2002 amortization expense of
$4.6&nbsp;million was allocated to cost of net revenues and the
remaining amortization expense of $6.1&nbsp;million was
allocated to operating expenses.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Acquisition-Related
Retention Bonuses</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the numerous acquisitions
completed in 1999 and 2000, we established various retention
bonus programs that in the aggregate amounted to approximately
$20.7&nbsp;million in incentives for certain former employees of
these companies to encourage their continued employment with
Critical Path. The significant decrease in acquisition-related
retention bonus expense resulted from the completion during
fiscal year 2001 of all but one of the acquisition-related
retention bonus programs. The remaining program concluded in
April 2002.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Stock-Based
Expenses</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Stock-based expenses are comprised of charges
related to certain stock options and warrants granted to
employees, directors and consultants from 1998 through 2001 and
common stock issued to certain employees, directors and advisors
in 1998 and 1999. The decline in stock-based expenses in the
first quarter of 2002 in comparison to the first quarter of 2001
was primarily the result of certain stock-based charges related
to 1998 grant activity becoming fully amortized in the
second-half of 2001.
</FONT>

<P align="center"><FONT size="2">14
</FONT>
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<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest and
Other Income (Expense)</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest and other income (expense)&nbsp;consists
primarily of interest earnings on cash and cash equivalents as
well as net realized gains (losses)&nbsp;on foreign exchange
transactions. Interest income amounted to $336,000 and
$2.3&nbsp;million in the first quarters of 2002 and 2001,
respectively. Interest income was lower for the first quarter of
2002 compared to the same period in the prior year due to lower
cash balances available for investing. Cash balances declined
during the twelve months ended March&nbsp;31, 2002, due
primarily to the funding of the Company&#146;s net losses and
cash utilized in 2001 to retire a significant portion of the
Company&#146;s convertible debt obligations. Also included in
interest and other income (expense) were net gains recognized
from foreign currency transactions associated with our
international operations in the amounts of $202,000 and $136,000
for the first quarter of 2002 and 2001, respectively.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest
Expense</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest expense consists primarily of the
interest, amortization of related issuance costs associated with
the Convertible Subordinated Notes we issued in March 2000, and
interest on certain capital leases. Because of the retirement of
a significant portion of our convertible subordinated notes and
capital leases during 2001, interest expense for the first
quarter of 2002 declined to $783,000 from $5.1&nbsp;million for
the first quarter of 2001. For the first quarter of 2002, we
incurred approximately $552,000 in interest expense on the
Convertible Subordinated Notes, and approximately $69,000 from
the amortization of debt issuance costs. We incurred
approximately $4.3&nbsp;million in interest expense on the
Convertible Subordinated Notes, and approximately $538,000
related to amortization of debt issuance costs during the first
quarter of 2001. The amortization of the issuance costs
associated with the redeemable convertible preferred shares
which the Company issued in the fourth quarter of 2001 totalled
$139,000 for the first quarter of 2002 and is also reported as a
component of interest expense. Interest on capital leases and
other long-term obligations amounted to approximately $23,000
for the first quarter of 2002 and $264,000 during the first
quarter of 2001.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Equity in Net
Loss of Critical Path Pacific</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2000, we established a joint venture,
Critical Path Pacific, with Mitsui and Co., Ltd.,
NTT&nbsp;Communications Corporation and NEC Corporation to
deliver advanced Internet messaging solutions to businesses in
Asia. We invested $7.5&nbsp;million and hold a 40% ownership
interest in the joint venture. This investment is being
accounted for using the equity method. During the first quarter
of 2002, we recorded equity in net loss of joint venture of
approximately $403,000, compared to a net loss of $776,000
recorded in the first quarter of 2001.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Provision for Income Taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An $800,000 benefit for U.S. federal income taxes
was recorded during the first quarter of 2002 due to the repeal
of the federal corporate alternative minimum tax. No current
provision for U.S. federal or state income taxes has been
recorded as we have incurred net operating losses for income tax
purposes since our inception. No deferred provision or benefit
for federal or state income taxes has been recorded as we are in
a net deferred tax asset position for which a full valuation
allowance has been provided due to uncertainty of realization.
As a partial offset to the U.S. tax benefit we recorded, we
recognized a provision for foreign income taxes during the first
quarter of 2002 as certain of our European operations generated
income taxable in certain European jurisdictions.
</FONT>

<P align="left">
<B><FONT size="2">Liquidity and Capital Resources</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of March&nbsp;31, 2002, our cash, cash
equivalents and short-term investments totaled
$63.5&nbsp;million, comprised of $52.2&nbsp;million in cash and
cash equivalents and $11.3&nbsp;million in short-term
investments. Our working capital amounted to approximately
$52.2&nbsp;million. During the first quarter of 2002, we used
approximately $7.0&nbsp;million in cash.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We used cash of $3.1&nbsp;million to fund
operating activities during the first quarter of 2002 primarily
due to our net loss, adjusted for non-cash charges, as operating
costs, primarily employee and employee related costs,
</FONT>

<P align="center"><FONT size="2">15
</FONT>

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<DIV align="left">
<FONT size="2">exceeded the related sales of our software
products and services. In addition, we used cash to make certain
insurance, and software and hardware support and maintenance
renewal payments during the quarter, accounting for the
$3.2&nbsp;million in cash used for other assets. These uses of
cash to fund operating activities were partially offset by the
growth in our accounts payable balances by $5.4&nbsp;million.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We used cash in investing activities during the
first quarter of 2002 totaling $2.7&nbsp;million. Cash was
primarily used to purchase additional short-term investments of
$1.6&nbsp;million and $1.3&nbsp;million was used to purchase
additional network infrastructure equipment and to fund a
portion of the tenant improvements in the Company&#146;s new San
Francisco office.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We used cash from financing activities during the
first quarter of 2002 of $1.2&nbsp;million. Cash was principally
used to retire $3.1&nbsp;million in principal on capital lease
obligations. This use of cash was partially offset by proceeds
the Company received from the repayment of notes receivable from
former officers and shareholders totaling $1.2&nbsp;million and
$677,000 from the sale of the Company&#146;s common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our primary sources of capital have come from
both debt and equity financings, that have been completed by
Critical Path over the past three years. Revenues generated from
the sale of our products and services may not increase to a
level that exceeds our operating expenses or could fluctuate
significantly as a result of changes in customer demand or
acceptance of future products. We also expect to experience
increased operating expenses, including moderate increases in
strategic areas, such as sales and marketing, and we anticipate
that operating expenses and capital expenditures will constitute
a material use of our cash. Accordingly, our cash flow from
operations may continue to be negatively impacted. We believe
that our cash, cash equivalents and anticipated cash from
operations will be sufficient to maintain current and planned
operations for at least the next twelve months.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Additionally, we have no present understandings,
commitments or agreements for any material acquisitions of, or
investments in, other complementary businesses, products or
technologies. We continually evaluate potential acquisitions of,
or investments in, other businesses, products and technologies,
and may in the future utilize our cash resources or may require
additional equity or debt financing to accomplish any
acquisitions or investments. Currently, we are considering
several alternatives to expend our presence in the Asian markets
and potentially other international markets. These alternatives
could increase liquidity through the infusion of investment
capital by third-party investors or decrease our liquidity as a
result of Critical Path seeking to fund expansion into these
markets. Such expansions might also cause an increase in capital
expenditures and operating expenses.
</FONT>

<P align="left">
<B><FONT size="2">Additional Factors That May Affect Future
Operating Results</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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    <TD></TD>
    <TD>
    <B><I><FONT size="2">Due to our limited operating history,
    evolving business strategy and the nature of the messaging and
    directory infrastructure market, our future revenues are
    unpredictable, and our quarterly operating results may
    fluctuate.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We cannot accurately forecast our revenues as a
result of our limited operating history, evolving business
strategy and the emerging nature of the Internet messaging
infrastructure market. Forecasting is further complicated by
rapid changes in our business due to integration of acquisitions
we completed in 1999 and 2000, our recent strategic and
operational restructuring, as well as significant fluctuations
in license revenues as a percentage of total revenues from an
insignificant percentage in 1999, to 38% in 2000, 30% in 2001
and 46% for the first quarter of 2002. Our revenues have in some
quarters and could continue to fall short of expectations if we
experience delays or cancellations of even a small number of
orders. We often offer volume-based pricing, which may affect
operating margins. A number of factors are likely to cause
fluctuations in operating results, including, but not limited to:
</FONT>
<P>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the demand for outsourced messaging services
    generally and the use of messaging and directory infrastructure
    products and services in particular;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the demand for licensed solutions for messaging,
    directory, and other products;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to attract and retain customers and
    maintain customer satisfaction;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">16
</FONT>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to attract and retain qualified
    personnel with industry expertise, particularly sales personnel;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the ability to upgrade, develop and maintain our
    systems and infrastructure and to effectively respond to the
    rapid technology change of the messaging and directory
    infrastructure market;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the budgeting cycles of our customers and
    potential customers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the amount and timing of operating costs and
    capital expenditures relating to expansion of business and
    infrastructure;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our ability to quickly handle and alleviate
    technical difficulties or system outages;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the announcement or introduction of new or
    enhanced services by competitors; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">general economic and market conditions and their
    affect on our operations and that of our customers.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to the factors set forth above,
operating results have been and will continue to be impacted by
the extent to which we incur non-cash charges associated with
stock-based arrangements with employees and non-employees. In
particular, we have incurred and expect to continue to incur
substantial non-cash charges associated with the grant of stock
options to employees and non-employees and the grant of warrants
to customers, investors and other parties with which we have
business relationships. These grants of options and warrants
also may be dilutive to existing shareholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although we have largely exited non-core product
lines, our operating results have been and could continue to be
impacted by decisions to eliminate product or service offerings
through termination, sale or other disposition or to sustain
certain products and services at a minimum level where customer
commitments prevent us from eliminating the offering altogether.
Decisions to eliminate or limit any other offerings of a product
or service would involve other factors affecting operational
results including the expenditure of capital, the realization of
losses, further reductions in our workforce, facility
consolidation or the elimination of revenues along with the
associated costs, any of which could harm our financial
condition and operating results.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of the foregoing, we do not believe
that period-to-period comparisons of operating results are a
good indication of future performance. It is likely that
operating results in some quarters will be below market
expectations. In this event, the price of our common stock is
likely to prove volatile and/or decline.
</FONT>

<DIV>&nbsp;</DIV>

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<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We depend on strategic relationships as
    well as other sales channels and the loss of any key strategic
    relationships could harm our business and negatively affect our
    revenues.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We depend on strategic relationships to expand
distribution channels and to undertake joint product development
and marketing efforts. Our ability to increase revenues depends
upon aggressively marketing our services through new and
existing strategic relationships. We depend on a broad
acceptance of our software and outsourced messaging services on
the part of potential resellers and partners and our acceptance
as a supplier of outsourced messaging solutions. We also depend
on joint marketing and product development through strategic
relationships to achieve further market acceptance and brand
recognition. Our agreements with strategic partners typically do
not restrict them from introducing competing services. These
agreements typically are for terms of one to three years, and
automatically renew for additional one-year periods unless
either party gives prior notice of its intention to terminate
the agreement. In addition, these agreements are terminable by
our partners without cause, and some agreements are terminable
by us, upon 30&nbsp;-&nbsp;120&nbsp;days notice. Most of the
agreements also provide for the partial refund of fees paid or
other monetary penalties in the event that our services fail to
meet defined minimum performance standards. Distribution
partners may choose not to renew existing arrangements on
commercially acceptable terms, or at all. In addition to
strategic relationships, we also depend on the ability of our
customers to aggressively sell and market our services to their
end-users. If we lose any strategic relationships, fail to renew
these agreements or relationships, fail to fully exploit our
relationships, or fail to develop new strategic relationships,
our business and financial results will suffer. The loss of any
key strategic relationships would have an adverse impact on our
current and future revenues.
</FONT>

<P align="center"><FONT size="2">17
</FONT>

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<DIV>&nbsp;</DIV>

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    <TD></TD>
    <TD>
    <B><I><FONT size="2">We have experienced turnover of senior
    management and our current management team has been together for
    a limited time, which could harm our business and
    operations.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the first quarter of 2001, in response to the
restatement of our financial results, we announced a series of
changes in our management that included the departure of many
senior executives. In the second quarter of 2001, we announced a
series of additional changes in our management and board of
directors that also included the departures of senior executives
and board members. A majority of the current senior executives
of the Company joined us in the second and third quarters of
2001. Because of these recent changes and their recent
recruitment, our management team has not worked together for a
significant length of time and may not be able to work together
effectively to successfully implement our strategy. If our
management team is unable to accomplish our business objectives,
our ability to grow our business and successfully meet
operational challenges could be severely impaired. We do not
have long-term employment agreements with any of our executive
officers. It is possible this high turnover at our senior
management levels may also continue for a variety of reasons.
The loss of the services of one or more of our current senior
executive officers could harm our business and affect our
ability to successfully implement our business objectives.
</FONT>

<DIV>&nbsp;</DIV>

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<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We have a history of losses, expect
    continuing losses and may never achieve
    profitability.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of March&nbsp;31, 2002, we had an accumulated
deficit, including other comprehensive income, of approximately
$2.1&nbsp;billion. We have not achieved profitability in any
period and expect to continue to incur net losses in accordance
with generally accepted accounting principles for the
foreseeable future. We do expect that our operating expenses
will continue to decrease as a result of our strategic and
operational restructuring and other cost-cutting efforts.
However, we will continue to spend resources on maintaining and
strengthening our business, and this may, in the near term, have
a negative effect on our operating results and our financial
condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In past quarters, we have spent heavily on
technology and infrastructure development. We may continue to
spend substantial financial and other resources to develop and
introduce new end-to-end messaging and directory infrastructure
solutions, and to improve our sales and marketing organizations,
strategic relationships and operating infrastructure. In
addition, in future periods we will continue to incur
significant non-cash charges related to the ten acquisitions we
completed in 1999 and 2000 and related stock-based compensation.
We expect that our cost of revenues, sales and marketing
expenses, general and administrative expenses, operations and
customer support expenses and depreciation and amortization
expenses could continue to increase in absolute dollars and may
increase as a percent of revenues. If revenues do not
correspondingly increase, our operating results and financial
condition could be harmed. If we continue to incur net losses in
future periods, we may not be able to retain employees, or fund
investments in capital equipment, sales and marketing programs,
and research and development to successfully compete against our
competitors. We may never obtain sufficient revenues to achieve
profitability. If we do achieve profitability, we may not
sustain or increase profitability in the future. This may also,
in turn, cause the price of our common stock to demonstrate
volatility and/or to decline.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">If we fail to improve our sales and
    marketing results, we may be unable to grow our business which
    would negatively impact our operating results.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our ability to increase revenues will depend on
our ability to successfully recruit, train and retain
experienced and effective sales and marketing personnel.
Competition for qualified personnel is intense and we may not be
able to hire and retain personnel with relevant experience. The
complexity and implementation of our messaging and directory
infrastructure products and services require highly trained
sales and marketing personnel to educate prospective customers
regarding the use and benefits of our services. Current and
prospective customers, in turn, must be able to educate their
end-users. Any delays or difficulties encountered in our
staffing efforts would impair our ability to attract new
customers and enhance our relationships with existing customers,
and ultimately, grow revenues. This would also adversely impact
the timing and extent of our revenues. Because we have
experienced turnover in our sales force and the majority of our
current sales and marketing personnel have recently joined us
and have limited experience working together, our sales and
marketing organizations may not be able to compete successfully
against the sales and marketing organiza-
</FONT>

<P align="center"><FONT size="2">18
</FONT>

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<DIV align="left">
<FONT size="2">tions of our competitors. If we do not
successfully operate and grow our sales and marketing
activities, our business could suffer and the price of our
common stock could decline.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">A limited number of customers account for a
    high percentage of our revenues and if we lose a major customer
    or are unable to attract new customers, revenues could
    decline.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect that sales of our services to a limited
number of customers will continue to account for a high
percentage of our revenue for the foreseeable future. Our future
success depends on our ability to retain our current customers,
and to attract new customers, in our target markets. The loss of
a major customer could harm our business. Our agreements with
our customers typically have terms of one to three years often
with automatic one year renewals and can be terminated without
cause upon 30&nbsp;-&nbsp;120&nbsp;days notice. In addition, a
number of our technology industry customers have also suffered
from falling revenue, job losses, restructuring and decreased
technology spending in the recent economic downturn. If our
customers terminate their agreements for any reason before the
end of the contract term, the loss of the customer could have an
adverse impact on our current and future revenues. Also, if we
are unable to enter into agreements with new customers, our
business will not grow and we will not generate additional
revenues.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">If we are unable to successfully compete in
    our product market, our operating results could be
    harmed.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because we have a variety of messaging and
directory infrastructure products and services, we encounter
different competitors at each level of our products and
services. Our competitors for corporate customers seeking
outsourced hosted messaging solutions are email service
providers, such as Commtouch, Easylink, USA.NET and application
service providers who offer hosted exchange services. Our
primary competitors for service providers seeking insourced or
outsourced product-based solutions are iPlanet and OpenWave. For
secure delivery services, our competitors include Tumbleweed for
product-based solutions and SlamDunk for service-based
solutions. In the enterprise/eBusiness directory category, we
compete primarily with iPlanet, Microsoft and Novell, and our
competitors in the meta-directory market are iPlanet, Microsoft,
Novell and Siemens.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that competitive factors affecting the
market for messaging and directory infrastructure solutions
include:
</FONT>
<P>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">breadth of platform features and functionality;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">ease of integration into customers&#146; existing
    systems;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">scalability, reliability and performance, and
    ease of expansion and upgrade;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">flexibility to enable customers to manage certain
    aspects of their systems internally and leverage outsourced
    services in other cases when resources, costs and time to market
    reasons favor an outsourced offering; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">total cost of ownership and operation.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe competition will continue to be fierce
and further increase as current competitors increase the
sophistication of their offerings and as new participants enter
the market. Many of our current and potential competitors have
longer operating histories, larger customer bases, greater brand
recognition and significantly greater financial, marketing and
other resources than we do and may enter into strategic or
commercial relationships with larger, more established and
better-financed companies. Any delay in our development and
delivery of new services or enhancement of existing services
would allow our competitors additional time to improve their
service or product offerings, and provide time for new
competitors to develop and market messaging and directory
infrastructure products and services and solicit prospective
customers within our target markets. Increased competition could
result in pricing pressures, reduced operating margins and loss
of market share, any of which could cause our business to suffer.
</FONT>

<P align="center"><FONT size="2">19
</FONT>

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<DIV>&nbsp;</DIV>

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    <TD width="3%"></TD>
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</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Our sales cycle is lengthy and our results
    could be harmed by delays or cancellations in
    orders.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because we sell complex and sophisticated
technology, our sales cycle can be long and unpredictable, often
taking between two to twelve months. Because of the nature of
our product and service offerings it can take many months of
customer education and product evaluation before a purchase
decision is made. In addition, many factors can influence the
decision to purchase our product and service offerings including
budgetary restraints and decreases in capital expenditures,
quarterly fluctuations in operating results of customers and
potential customers, the emerging and evolving nature of the
internet-based services and wireless services markets.
Furthermore, general global economic conditions, and a slowdown
in technology spending in particular, have further lengthened
and affected our sales cycle, leading to delays and
postponements in purchasing decisions. Any delay or cancellation
in sales of our products or services could cause our operating
results to differ from those projected and cause our stock price
to decline.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We may need to raise additional capital and
    to initiate other operational strategies that may dilute
    existing shareholders.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that existing capital resources will
enable us to maintain current and planned operations through
March&nbsp;31, 2003. However, additional capital may be required
to continue operations and achieve profitability. In addition,
we may be required to raise additional funds due to unforeseen
circumstances. If our capital requirements vary materially from
those currently planned, we may require additional financing
sooner than anticipated. Such financing may not be available in
sufficient amounts or on terms acceptable to us and may be
dilutive to existing shareholders. Additionally, we face a
number of challenges in operating our business, including but
not limited to the resources to maintain worldwide operations,
our leveraged capital structure and significant contingent
liabilities associated with litigation. In the event that
resolution of these or other operational matters involve
issuance of stock or other derivative instruments, our existing
shareholders may experience significant dilution.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Pending litigation could harm relationships
    with existing or potential strategic partners and customers, and
    divert management&#146;s attention, either of which could harm
    our business.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have had filed in recent years, a number of
lawsuits against us, including securities class action and
shareholder derivative litigation filed in February and August
2001, and certain of our current and former officers and
directors and some of our subsidiaries, as well as other
lawsuits related to acquisitions, employee terminations and
copyright infringement. While these lawsuits vary greatly in the
materiality of potential liability associated with them, the
uncertainty associated with substantial unresolved lawsuits
could seriously harm our business, financial condition and
reputation, whether material individually or in the aggregate.
In particular, this uncertainty could harm our relationships
with existing customers, our ability to obtain new customers and
our ability to operate certain aspects of our business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The continued defense of the lawsuits also could
result in continued diversion of our management&#146;s time and
attention away from business operations, which could harm our
business. Negative developments with respect to the lawsuits
could cause the price of our common stock to decline
significantly. In addition, although we are unable to determine
the amount, if any, that we may be required to pay in connection
with the resolution of these lawsuits by settlement or
otherwise, the size of any such payments, individually or in the
aggregate, could seriously harm our financial condition. Many of
the complaints associated with these lawsuits do not specify the
amount of damages that plaintiffs seek. As a result, we are
unable to estimate the possible range of damages that might be
incurred as a result of the lawsuits. While we maintain
customary business insurance coverage, we have not set aside any
financial reserves relating to potential damages associated with
any of these lawsuits.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Failure to complete the settlement of
    pending securities class action and shareholder derivative
    action could materially harm our business.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although the Company has reached settlement
agreements in connection with the securities class action
pending in the U.S. District Court for the Northern District of
California, we cannot provide assurance that a
</FONT>

<P align="center"><FONT size="2">20
</FONT>

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<DIV align="left">
<FONT size="2">final settlement shall be approved in accordance
with the settlement agreement, or at all. The approval of the
definitive settlement agreements between the parties is subject
to other factors, such as court review and approval, before the
subject actions are dismissed. In addition, the definitive
settlement agreements entered into between the parties are also
subject to notice to the putative class and of the shareholders
of the Company, as well as review and approval by the court.
There can be no assurance that the court will approve the
settlement. If the settlement were not given final approval, it
could have a number of materially detrimental effects on the
Company&#146;s financial condition and business.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Should the Court fail to approve the settlement,
and the litigation continue, there can be no assurance that fees
and expenses, and any ultimate resolution associated with such
litigation, shall be within the coverage limits of our insurance
and/or our ability to pay such amounts. Although the terms of
the settlement agreement are within the coverage limits of the
Company&#146;s directors and officers insurance, should the
current agreement in principle fail to be approved by the court,
there can be no assurance that the Company will be able to
conclude such litigation on terms that coincide with the
coverage limits of our insurance and/or ability to pay upon any
final determination. A failure to complete the settlement could
also cast doubt as to the prospects of the Company in the eyes
of our customers, potential customers and investors, and cause
the Company&#146;s stock price to decline.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Although concluded without penalty to the
    Company, lingering effects of the recent SEC investigation could
    harm our business.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2001, the Securities and Exchange
Commission, or SEC, issued a formal order of investigation of us
and certain current and former officers associated with us. The
investigation relates to non-specified accounting matters,
financial reports, other public disclosures and trading activity
in our stock. In February 2002, the SEC announced the conclusion
of the investigation as to the Company. Although the SEC did not
impose any penalties against the Company, we consented without
admitting or denying liability, to an administrative order that
the Company violated certain non-fraud provisions of the federal
securities laws and to a cease and desist order. In addition,
the SEC and the Department of Justice charged two former
employees of the Company with various violations of the
securities laws. Despite the conclusion of the investigation of
the Company, lingering concerns about the actions leading up to
the restatement of financials for the third quarter of 2000 has
nevertheless cast doubt on the future of the Company in the eyes
of customers and investors and could continue to harm our
business and cause the price of our common stock to continue to
fluctuate and/or decline significantly.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">We may not be able to maintain our listing
    on The Nasdaq National Market and if we fail to do so, the price
    and liquidity of our common stock may decline.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Nasdaq Stock Market has quantitative
maintenance criteria for the continued listing of common stock
on the Nasdaq National Market. The current requirements
affecting us include (i)&nbsp;having net tangible assets of at
least $4&nbsp;million and (ii)&nbsp;maintaining a minimum bid
price per share of $1. As of March&nbsp;31, 2002 we were in
compliance with all Nasdaq National Market listing requirements.
However, there were periods in the second and third quarters of
2001 when the closing bid price per share for our common stock
was well below $1. Although our bid price has been above $1 per
share since November&nbsp;1, 2001, if the bid price of our
common stock price again slips below $1 per share for more than
60&nbsp;days, our common stock may not remain listed on The
Nasdaq National Market. Also effective November&nbsp;1, 2002, we
will need to comply with the Nasdaq National Market&#146;s
revised quantitative maintenance criteria including a new
minimum requirement of $10.0&nbsp;million in stockholders&#146;
equity. The Nasdaq National Market&#146;s Audit Committee Rules
require that our audit committee be comprised of at least three
independent members. We believe that we currently comply with
this requirement. However, there can be no assurance that we
will be able to comply with the quantitative maintenance
criteria or any of the Nasdaq National Market&#146;s rules in
the future. If we fail to maintain continued listing on the
Nasdaq National Market and must move to a market with less
liquidity, our financial condition could be harmed and our stock
price would likely decline. If we are delisted, it could have a
material adverse effect on the market price of, and the
liquidity of the trading market for, our common stock.
</FONT>

<P align="center"><FONT size="2">21
</FONT>

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<DIV>&nbsp;</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Our stock price has demonstrated volatility
    during recent quarters and continued volatility in the stock
    market may cause further fluctuations and/or decline in our
    stock price.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The trading price of our common stock has been
and may continue to experience volatility and wide fluctuations.
For example, during the fourth quarter of 2001, the closing sale
prices of our common stock on the Nasdaq National Market ranged
from $0.51 on October&nbsp;1, 2001 to $2.74 on December&nbsp;31,
2001, and the closing price of our stock on March&nbsp;28, 2002
was $2.16 per share. Our stock price may further fluctuate or
decline in response to any number of factors and events, such as
announcements related to litigation, technological innovations,
strategic and sales relationships, new product and service
offerings by us or our competitors, changes in senior
management, changes in financial estimates and recommendations
of securities analysts, the operating and stock price
performance of other companies that investors may deem
comparable, news reports relating to trends in our markets and
overall market conditions. In addition, the stock market in
general, particularly with respect to technology stocks, has
experienced extreme volatility and a significant cumulative
decline in recent quarters. This volatility and decline has
affected many companies, including our company, irrespective of
the specific operating performance of such companies. These
broad market influences and fluctuations may adversely affect
the price of our stock, and our ability to remain listed on the
Nasdaq National Market, regardless of our operating performance
or other factors.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Limitations of our director and officer
    liability insurance may harm our business.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our liability insurance for actions taken by
officers and directors during the period from March 1999 to
March 2001, the period during which events related to securities
class action lawsuits against us and certain of our current and
former executive officers are alleged to have occurred, provides
only limited liability protection. If these policies do not
adequately cover our expenses related to those lawsuits, our
business and financial condition could be seriously harmed. Our
director and officer liability insurance, that was in place
through March 2002, and our current insurance that was renewed
through March 2003, contain similar provisions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under California law, in connection with our
charter documents and indemnification agreements we entered into
with our executive officers and directors, we must indemnify our
current and former officers and directors to the fullest extent
permitted by law. The indemnification covers any expenses and
liabilities reasonably incurred in connection with the
investigation, defense, settlement or appeal of legal
proceedings. The Company has made payments in connection with
the indemnification of officers and directors in connection with
currently pending lawsuits and has reserved for estimated future
amounts to be paid in connection with legal expenses and others
costs of defense of pending lawsuits.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">We may experience difficulty in attracting
    and retaining key personnel, which may negatively affect our
    ability to develop new services or retain and attract
    customers.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The loss of the services of key personnel could
harm our business results. Our success also depends on our
ability to recruit, retain and motivate highly skilled sales and
marketing, operational, technical and managerial personnel.
Competition for these people is intense and we may not be able
to successfully recruit, train or retain qualified personnel. If
we fail to do so, we may be unable to develop new services or
continue to provide a high level of customer service, which
could result in the loss of customers and revenues.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not have long-term employment agreements
with any of our key personnel. In addition, we do not maintain
key person life insurance on our employees and have no plans to
do so. The loss of the services of one or more of our current
key personnel could harm our business and affect our ability to
successfully implement our business objectives.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Our failure to carefully manage expenses
    and growth could cause our operating results to
    suffer.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the past, our management of operational
expenses and the growth of our business have contributed to our
history of losses. In addition, the expansion of our operations
placed a significant strain on managerial, operational and
financial resources. To manage any future growth, we may need to
improve or replace our existing operational, customer service
and financial systems, procedures and controls. Any failure to
properly
</FONT>

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<DIV align="left">
<FONT size="2">manage these systems and procedural transitions
could impair our ability to attract and service customers, and
could cause us to incur higher operating costs and delays in the
execution of our business plan. We will also need to hire
additional personnel including sales personnel. Our management
may not be able to hire, train, retain, motivate and manage
required personnel. In addition, our management may not be able
to successfully identify, manage and exploit existing and
potential market opportunities. If we cannot manage growth and
expenses effectively, our business and operating results could
suffer.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">If we are not successful in implementing
    our strategic plan, including the exit of certain non-core
    products and services, our business could be negatively
    impacted.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the first quarter of 2001, we developed a
strategic plan that involved reorganizing our product and
service offerings around a group of core products deemed most
imperative to our ability to serve the messaging and directory
infrastructure market. In the second and third quarters of 2001,
implementation of the plan occurred and, accordingly, products
and services determined to be non-core to our strategy were
exited. As a result, revenue from non-core products and services
comprising approximately 37% of total revenues in the first
quarter of 2001, had declined to approximately 24% of total
revenues in the second quarter of 2001, approximately 18% of
total revenues in the third quarter of 2001, and approximately
3% of total revenues in the fourth quarter of 2001 and none in
2002. Our strategic plan also included initiatives aimed at
reducing operating costs through headcount reduction and
consolidation of approximately two-thirds of our office space
and related contracts and leases, all in keeping with our
increased focus on core messaging products and services. During
the fourth quarter of 2001 we incurred additional charges in
connection with previously announced reductions in force and
were able to finalize the consolidation of additional facilities
and related contracts and expenses associated with those
facilities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">We may face continued technical,
    operational and strategic challenges preventing us from
    successfully continuing the integration or divestiture of
    acquired businesses.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acquisitions involve risks related to the
integration and management of acquired technology, operations
and personnel. In addition, in connection with our strategic
restructuring, the Company elected to divest or discontinue many
of the acquired businesses. Both the integration and divestiture
of acquired businesses have been and will continue to be
complex, time consuming and expensive processes, which may
disrupt and distract our management from its core business. With
respect to integration, we must operate as a combined
organization utilizing common information and communication
systems, operating procedures, financial controls and human
resources practices to be successful. In particular, we are
currently evaluating, upgrading or replacing our financial
information systems and establishing uniformity among the
systems of the acquired businesses. With divestitures, the
timing and transition of those businesses and their customers to
other entities has required and will continue to require
resources from our legal, finance and corporate development
teams as well as expenses associated with the conclusion of
those transactions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Consequently, we may not be successful or
efficient in integrating or divesting acquired businesses or
technologies and may not achieve anticipated revenues and
benefits and/or cost reductions. We also cannot guarantee that
these acquisitions will result in sufficient revenues or
earnings to justify our investment in, or expenses related to,
these acquisitions or that any synergies will be realized. In
addition, if we are not successful in divesting non-core
acquired businesses, we will incur costs associated with the
cessation of operations or wind up of acquired businesses. In
either event, we will likely further incur significant expenses
as well as non-cash charges to write-off acquired assets, which
could seriously harm our financial condition and operating
results.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Further, due in part to the significant
underperformance of some of our acquisitions relative to
expectations, we have reviewed the products and services we sell
to customers, the locations in which we operate and the manner
in which we go to market with our core product and service
offerings. As a result of this review, in 2001, we decided to
eliminate certain acquired product or service offerings through
termination, sale or other disposition or to sustain certain
products and services at a minimum level where customer
commitments prevent us from eliminating the offering altogether.
Such decisions to eliminate or limit our offering of an acquired
product or service involved and could continue to include the
expenditure of capital,
</FONT>

<P align="center"><FONT size="2">23
</FONT>
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<DIV align="left">
<FONT size="2">the realization of losses, further reduction in
workforce, facility consolidation, and/or the elimination of
revenues along with the associated costs, any of which could
harm our financial condition and operating results.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">We currently license many third-party
    technologies and may need to license further technologies and we
    face risks in doing so that could cause our operating results to
    suffer.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to continue to license certain
technologies from third parties and incorporate such
technologies into our products and services, including web
server technology, virus and anti-spam solutions and encryption
technology. The market is evolving and we may need to license
additional technologies to remain competitive. We may not be
able to license these technologies on commercially reasonable
terms or at all. To the extent we cannot license needed
technologies or solutions, we may have to devote Company
resources to the development of such technologies which could
materially harm our business and operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we may fail to successfully
integrate any licensed technology into our services. These
third-party in-licenses may expose us to increased risks,
including risks related to the integration of new technology,
potential patent and copyright infringement issues, the
diversion of resources from the development of proprietary
technology, and an inability to generate revenues from new
technology sufficient to offset associated acquisition and
maintenance costs. In addition, an inability to obtain needed
licenses could delay product and service development until
equivalent technology can be identified, licensed and
integrated. Any delays in services or integration problems could
cause our business and operating results to suffer.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">If our system security is breached, our
    business and reputation could suffer.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A fundamental requirement for online
communications is the secure transmission of confidential
information over public networks. Third parties may attempt to
breach our security or that of our customers. If these attempts
are successful, customers&#146; confidential information,
including customers&#146; profiles, passwords, financial account
information, credit card numbers or other personal information
could be breached. We may be liable to our customers for any
breach in security and a breach could harm our reputation. We
rely on encryption technology licensed from third parties.
Although we have implemented network security measures, our
servers remain vulnerable to computer viruses, physical or
electronic break-ins and similar disruptions, which could lead
to interruptions, delays or loss of data. We may be required to
expend significant capital and other resources to license
encryption technology and additional technologies to protect
against security breaches or to alleviate problems caused by any
breach. Failure to prevent security breaches may harm our
business and operating results.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Changes in the regulatory environment for
    the operation of our business or those of our customers could
    pose risks.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Few laws currently apply directly to activity on
the Internet and the messaging business, however new laws are
proposed and other laws made applicable to Internet
communications every year. In particular, the Company faces
risks associated with privacy, confidentiality of user data and
communications, consumer protection, taxation, content,
copyright, trade secrets, trademarks, antitrust, defamation and
other legal issues. In particular, legal concerns with respect
to communication of confidential data have affected our
financial services and health care customers due to newly
enacted federal legislation. The growth of the industry and the
proliferation of Internet-based messaging devices and services
may prompt further legislative attention to our industry and
thus invite more regulatory control of our business. The
imposition of more stringent protections and/or new regulations
and application of laws to our business could burden our company
and those with which we do business. Further, the adoption of
additional laws and regulations could limit the growth of our
business and that of our business partners and customers. Any
decreased generalized demand for our services or the loss of, or
decrease, in business by a key partner due to regulation or the
expense of compliance with any regulation, could either increase
the costs associated with our business or affect revenue, either
of which could harm our financial condition or operating
results. Certain of our service offerings include operations
subject to the Digital Millenium Copyright Act of 1998. The
Company has expended resources and implemented
</FONT>

<P align="center"><FONT size="2">24
</FONT>

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<DIV align="left">
<FONT size="2">processes and controls in order to remain in
compliance with DMCA but there can be no assurance that our
efforts will be sufficient and/or new legislation and case law
will not affect the operation of certain services.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the applicability of laws and
regulations directly applicable to the businesses of our
customers, particularly customers in the fields of banking and
health care, will continue to affect us. The security of
information about our customers&#146; end-users continues to be
an area where a variety of laws and regulations with respect to
privacy and confidentiality are enacted. As our customers
implement the protections and prohibitions with respect to the
transmission of end user data, our customers will look to us to
assist them in remaining in compliance with this evolving area
of regulation. In particular the Gramm-Leach-Blilely Act
contains restrictions with respect to the use and protection of
banking records for end-users whose information may pass through
our system.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Unknown software defects could disrupt our
    services and harm our business and reputation.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our software products are inherently complex.
Additionally, our service offerings depend on complex software,
both internally developed and licensed from third parties.
Complex software often contains defects, particularly when first
introduced or when new versions are released. We may not
discover software defects in our products or that affect new or
current services or enhancements until after they are deployed.
Although we have not experienced any material software defects
to date, it is possible that, despite testing, defects may occur
in the software. These defects could cause service
interruptions, which could damage our reputation or increase
service costs, cause us to lose revenue, delay market acceptance
or divert development resources, any of which could cause our
business to suffer.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">We may have liability for Internet content
    and we may not have adequate liability insurance.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a provider of messaging and directory
services, we face potential liability for defamation,
negligence, copyright, patent or trademark infringement and
other claims based on the nature and content of the materials
transmitted via our services. We do not and cannot screen all of
the content generated by our users, and we could be exposed to
liability with respect to this content. Furthermore, some
foreign governments, such as Germany, have enforced laws and
regulations related to content distributed over the Internet
that are more strict than those currently in place in the United
States. In some instances, we may be subject to criminal
liability in connection with Internet content transmission.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although we carry general liability and umbrella
liability insurance, our insurance may not cover claims of these
types or may not be adequate to indemnify us for all liability
that may be imposed. There is a risk that a single claim or
multiple claims, if successfully asserted against us, could
exceed the total of our coverage limits. There also is a risk
that a single claim or multiple claims asserted against us may
not qualify for coverage under our insurance policies as a
result of coverage exclusions that are contained within these
policies. Should either of these risks occur, capital
contributed by our shareholders might need to be used to settle
claims. Any imposition of liability, particularly liability that
is not covered by insurance or is in excess of insurance
coverage could harm our reputation and business and operating
results, or could result in the imposition of criminal penalties.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Unplanned system interruptions and capacity
    constraints could reduce our ability to provide messaging
    services and could harm our business reputation.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our customers have, in the past, experienced some
interruptions in our messaging service. We believe that these
interruptions will continue to occur from time to time. These
interruptions are due to hardware failures, unsolicited bulk
email, or &#147;spam,&#148; attacks and operating system
failures. Our business will suffer if we experience frequent or
long system interruptions that result in the unavailability or
reduced performance of systems or networks or reduce our ability
to provide email services. We expect to experience occasional
temporary capacity constraints due to sharply increased traffic,
which may cause unanticipated system disruptions, slower
response times, impaired quality and degradation in levels of
customer service. If this were to continue to happen, our
business and reputation could suffer dramatically.
</FONT>

<P align="center"><FONT size="2">25
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have entered into messaging agreements with
some customers that require minimum performance standards,
including standards regarding the availability and response time
of messaging services. If we fail to meet these standards, our
customers could terminate their relationships with us and we
could be subject to contractual monetary penalties.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">We rely on trademark, copyright, trade
    secret laws, contractual restrictions and patents to protect our
    proprietary rights, and if these rights are not sufficiently
    protected, our ability to compete and generate revenue could be
    harmed.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We rely on a combination of trademark, copyright
and trade secret laws, contractual restrictions, such as
confidentiality agreements and licenses, and patents to
establish and protect our proprietary rights, which we view as
critical to our success. Our ability to compete and grow our
business could suffer if these rights are not adequately
protected. We seek to protect our source code for our software,
documentation and other written materials under trade secret and
copyright laws. We license our software pursuant to agreements
that impose certain restrictions on the licensee&#146;s ability
to utilize the software. Despite these precautions, unauthorized
third parties may infringe or copy portions of our services or
reverse engineer or obtain and use information that we regard as
proprietary, which could harm our competitive position and
market share. We also seek to avoid disclosure of our
intellectual property by requiring employees and consultants
with access to our proprietary information to execute
confidentiality agreements. In addition, we have several patents
pending in the United States and may seek additional patents in
the future. However, the status of United States patent
protection in the software industry is not well defined and will
evolve as the U.S. Patent and Trademark Office grants additional
patents. We do not know if our patent applications or any of our
future patent applications will be issued with the scope of the
claims sought, if at all, or whether any patents we have
received or will receive will be challenged or invalidated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our proprietary rights may not be adequately
protected because:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">laws and contractual restrictions may not prevent
    misappropriation of our technologies or deter others from
    developing similar technologies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">policing unauthorized use of our products and
    trademarks is difficult, expensive and time-consuming, and we
    may be unable to determine the extent of this unauthorized use;
    and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">end user license provisions in our contracts that
    protect us against unauthorized use, copying, transfer and
    disclosure of the licensed program may be unenforceable.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the laws of some foreign countries
may not protect proprietary rights to the same extent as do the
laws of the United States. Our means of protecting proprietary
rights in the United States or abroad may not be adequate and
competitors may independently develop similar technology.
Additionally, although no claims of alleged patent infringement
are currently pending, we cannot be certain that our products do
not infringe issued patents that may relate to our products. In
addition, because patent applications in the United States are
not publicly disclosed until the patent is issued, applications
may have been filed which relate to our software products.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">We may not be able to respond to the rapid
    technological change of the messaging and directory
    infrastructure industry.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The messaging directory infrastructure industry
is characterized by rapid technological change, changes in user
and customer requirements and preferences, and the emergence of
new industry standards and practices that could render our
existing services, proprietary technology and systems obsolete.
We must continually improve the performance, features and
reliability of our services, particularly in response to
competitive offerings. Our success depends, in part, on our
ability to enhance our existing email and messaging services and
to develop new services, functionality and technology that
address the increasingly sophisticated and varied needs of
prospective customers. If we do not properly identify the
feature preferences of prospective customers, or if we fail to
deliver email features that meet the standards of these
customers, our ability to market our service successfully and to
increase revenues could be impaired. The development of
proprietary
</FONT>

<P align="center"><FONT size="2">26
</FONT>

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<DIV align="left">
<FONT size="2">technology and necessary service enhancements
entails significant technical and business risks and requires
substantial expenditures and lead-time. We may not be able to
keep pace with the latest technological developments. We may
also be unable to use new technologies effectively or adapt
services to customer requirements or emerging industry standards.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Our reserves may be insufficient to cover
    bills we are unable to collect.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We assume a certain level of credit risk with our
customers in order to do business. Conditions affecting any of
our customers could cause them to become unable or unwilling to
pay us in a timely manner, or at all, for products or services
we have already provided them. For example, if the current
economic conditions continue to decline or if new or
unanticipated government regulations are enacted which affect
our customers, they may be unable to pay their bills. In the
past, we have experienced significant collection delays from
certain customers, and we cannot predict whether we will
continue to experience similar or more severe delays in the
future. In particular, some of our customers are suffering from
the general weakness in the economy and among technology
companies in particular. Although we have established reserves
that we believe are sufficient to cover losses due to delays in
or inability to pay, there can be no assurance that such
reserves will be sufficient to cover our losses. If losses due
to delays or inability to pay are greater than our reserves, it
could harm our business, operating results and financial
condition.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">If we do not successfully address the risks
    inherent in the expansion of our international operations, our
    business could suffer.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We derived 52% of our revenues from international
sales in the quarter ended March&nbsp;31, 2002 and 30% of our
revenues from international sales in the first quarter of 2001.
We intend to continue to operate in international markets and to
spend significant financial and managerial resources to do so.
If revenues from international operations do not exceed the
expense of establishing and maintaining these operations, our
business, financial condition and operating results will suffer.
We have limited experience in international operations and may
not be able to compete or operate effectively in international
markets. We face certain risks inherent in conducting business
internationally, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">difficulties and costs of staffing and managing
    international operations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">fluctuations in currency exchange rates and
    imposition of currency exchange controls;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">differing technology standards;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">difficulties in collecting accounts receivable
    and longer collection periods;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in regulatory requirements, including
    U.S. export restrictions on encryption technologies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">political and economic instability;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">potential adverse tax consequences; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reduced protection for intellectual property
    rights in some countries.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any of these factors could harm our international
operations and, consequently, our business and consolidated
operating results. Specifically, failure to successfully manage
international growth could result in higher operating costs than
anticipated or could delay or preclude altogether our ability to
generate revenues in key international markets.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">We rely on a continuous power supply to
    conduct our operations, and any significance disruption in
    California&#146;s energy supply could harm our operations and
    increase our expenses.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2000 and 2001 California experienced a
serious energy crisis that could have and may in the future
disrupt our operations and increase our expenses. In the event
of an acute power shortage, that is, when power reserves for the
State of California fall below 1.5%, California has on some
occasions implemented, and may in the future continue to
implement, rolling blackouts throughout the state. If blackouts
interrupt our power supply or the power supply of any of our
customers, we, or our customers, may be temporarily unable to
</FONT>

<P align="center"><FONT size="2">27
</FONT>

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<DIV align="left">
<FONT size="2">operate. Any interruption in our ability to
continue operations could delay the development of or interfere
with the sales of our products. Future interruptions could
damage our reputation, harm our ability to retain existing
customers and to obtain new customers, and could result in lost
revenue, any of which could substantially harm our business and
results of operations. Any interruption in the ability of our
customers to continue their operations, could harm their
business, and ultimately could also harm our business if they
were to terminate or fail to renew contracts. We do not carry
sufficient business interruption insurance to compensate us for
losses that may occur as a result of blackouts, and any losses
or damages we incur could harm our business.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Furthermore, the deregulation of the energy
industry instituted in 1996 by the California government and
shortages in wholesale electricity supplies have caused power
prices to increase. If wholesale prices continue to increase,
our operating expenses will likely increase, as our headquarters
and many employees are based in California.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Our articles of incorporation and bylaws
    contain provisions that could delay or prevent a change in
    control.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our articles of incorporation and bylaws contain
provisions that could delay or prevent a change in control of
our company. These provisions could limit the price that
investors might be willing to pay in the future for shares of
our common stock. Some of these provisions:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">authorize the issuance of preferred stock that
    can be created and issued by our board of directors without
    prior shareholder approval, commonly referred to as &#147;blank
    check&#148; preferred stock, with rights senior to those of our
    common stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">prohibit shareholder action by written consent;
    and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">establish advance notice requirements for
    submitting nominations for election to our board of directors
    and for proposing matters that can be acted upon by shareholders
    at a meeting.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2001, we adopted a shareholder rights
plan or &#147;poison pill.&#148; This plan could cause the
acquisition of our company by a party not approved by our board
of directors to be prohibitively expensive.
</FONT>

<P align="center"><FONT size="2">28
</FONT>

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<!-- link2 "<FONT size="2">SUPPLEMENTAL ALTERNATIVE MEASUREMENT FINANCIAL DATA</FONT>" -->
<DIV align="left"><A NAME="008"></A></DIV>

<P align="center">
<B><FONT size="2">SUPPLEMENTAL ALTERNATIVE MEASUREMENT FINANCIAL
DATA</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following supplemental alternative
measurement financial information presents Critical Path&#146;s
condensed consolidated results of operations during the
three-month periods of 2001 and 2002, excluding the impact of
certain special charges consisting of (i)&nbsp;amortization of
intangible assets associated with purchase business combinations
and financing transactions, (ii)&nbsp;accruals for employee
retention bonuses associated with purchase business
combinations, (iii)&nbsp;stock-based compensation associated
with outstanding options and warrants, (iv)&nbsp;one-time
charges related to restructuring initiatives,
(v)&nbsp;write-down of investments, (vi)&nbsp;gain on adjustment
to market of the preferred stock instrument, and
(vii)&nbsp;accretion on redeemable convertible preferred shares.
This supplemental presentation is for informational purposes
only, and is not intended to replace the consolidated operating
results prepared and presented in accordance with generally
accepted accounting principles.
</FONT>

<P align="center">
<B><FONT size="2">CRITICAL PATH, INC.</FONT></B>

<P align="center">
<B><FONT size="2">CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
DATA</FONT></B>

<DIV align="center">
<B><FONT size="2">Excluding Certain Special Charges</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands, except per share
amounts)</FONT></B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Software license
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,550</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,911</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hosted messaging
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,440</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,964</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional services
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maintenance and support
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,737</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total net revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,143</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,689</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost of net revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Software license
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">287</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Hosted messaging
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,938</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,817</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional services
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,443</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maintenance and support
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,586</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total cost of net revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,781</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross profit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,362</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,039</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales and marketing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,712</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Research and development
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss from operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(38,577</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,584</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest and other income (expense), net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,425</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">533</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,051</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(570</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity in net loss of joint venture
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(776</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(403</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(41,979</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,024</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefit from (provision for) income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(343</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">573</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(42,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss per share&nbsp;&#151; basic and diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.59</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.15</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average shares&nbsp;&#151; basic and
    diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,137</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,514</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">EBITDA(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,393</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,784</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Earnings before interest, taxes, depreciation and
    amortization, equity in net loss of joint venture and one-time
    charges identified in the following table. EBITDA is calculated
    by adding depreciation, approximately $7.8&nbsp;million, back
    into loss from operations.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">29
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table reconciles the alternative
measurement financial data presented above to the consolidated
operating results prepared and presented in accordance with
generally accepted accounting principles (&#147;GAAP&#148;).
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Three Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">March 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Unaudited)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Supplemental alternative measurement net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(42,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of purchased technology
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,672</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,630</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of intangible assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,966</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,131</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition-related retention bonuses in
    operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(170</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stock-based expense in cost of revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,303</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(417</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stock-based expense in operating expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,597</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,255</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of debt issuance costs in
    non-operating expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(213</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss on investments in non-operating expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(104</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock instrument marked to market
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Subtotal of amounts excluded from pro forma net
    loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,724</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,560</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">GAAP net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(70,046</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,011</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion on redeemable convertible preferred
    shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,206</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">GAAP net loss attributable to common shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(70,046</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(29,217</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<B><FONT size="2">QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK</FONT></B>

<!-- link2 "<FONT size="2">Item 3. Quantitative and Qualitative Disclosures About Market Risk</FONT>" -->
<DIV align="left"><A NAME="009"></A></DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;3.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Quantitative and Qualitative Disclosures
    About Market Risk</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of March&nbsp;31, 2002, our investment
portfolio consisted of available-for-sale securities, excluding
those classified as cash equivalents, of $17.5&nbsp;million.
These securities consist of $6.2&nbsp;million of strategic
equity investments in corporate partners, certain of which are
publicly traded and marketable and certain of which are
privately held and $11.3&nbsp;million of high grade, low risk
government securities and corporate bonds. These securities are
subject to equity price risk. Critical Path&#146;s long-term
obligations consist of our $38.4&nbsp;million of face value
5.75% Convertible Subordinated Notes due April 2005, and certain
fixed rate capital leases. We do not plan to reduce or eliminate
our market exposure on these securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A significant portion of our worldwide operations
has a functional currency other than the United States dollar.
Accordingly, we are exposed to foreign currency exchange rate
risk inherent in our sales commitments, anticipated sales, and
assets and liabilities of these operations. Fluctuations in
exchange rates may harm our results of operations and could also
result in exchange losses. The impact of future exchange rate
fluctuations cannot be predicted adequately. To date, we have
not sought to hedge the risks associated with fluctuations in
exchange rates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Information relating to quantitative and
qualitative disclosures about market risk is set forth in
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations.&#148;
</FONT>

<P align="center"><FONT size="2">30
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center">
<B><FONT size="2">REPORT OF INDEPENDENT ACCOUNTANTS</FONT></B>

<P align="left">
<FONT size="2">To the Board of Directors and Shareholders
</FONT>

<DIV align="left">
<FONT size="2">of Critical Path, Inc.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have reviewed the accompanying condensed
consolidated balance sheets of Critical Path, Inc. and its
subsidiaries as of March&nbsp;31, 2002 and the related condensed
consolidated statement of operations for the three month period
ended March&nbsp;31, 2002 and the condensed consolidated
statement of cash flow for the three month period ended
March&nbsp;31, 2002. These financial statements are the
responsibility of the Company&#146;s management.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conducted our review in accordance with
standards established by the American Institute of Certified
Public Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in
scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Based on our review, we are not aware of any
material modifications that should be made to the accompanying
condensed consolidated interim financial statements for them to
be in conformity with accounting principles generally accepted
in the United States of America.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We previously audited in accordance with auditing
standards generally accepted in the United States of America,
the consolidated balance sheet as of December 31, 2001, and the
related consolidated statements of operations, of
shareholders&#146; equity, and of cash flows for the year then
ended (not presented herein), and in our report dated
February&nbsp;5, 2002 we expressed an unqualified opinion on
those financial statements. In our opinion, the information set
forth in the accompanying condensed balance sheet as of
December&nbsp;31, 2001, is fairly stated in all material
respects in relation to the consolidated balance sheet from
which it has been derived.
</FONT>

<P align="left">
<FONT size="2">/s/ PRICEWATERHOUSECOOPERS LLP
</FONT>

<P align="left">
<FONT size="2">San Jose, CA
</FONT>

<DIV align="left">
<FONT size="2">May&nbsp;8, 2002
</FONT>
</DIV>

<P align="center"><FONT size="2">31
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "<FONT size="2">PART 2 -- OTHER INFORMATION</FONT>" -->
<DIV align="left"><A NAME="010"></A></DIV>

<P align="center">
<B><FONT size="2">PART 2&nbsp;&#151; OTHER INFORMATION</FONT></B>

<!-- link2 "<FONT size="2">Item 1. Legal Proceedings</FONT>" -->
<DIV align="left"><A NAME="011"></A></DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;1.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Legal Proceedings</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a party to lawsuits in the normal course
of our business. Litigation in general, and securities and
intellectual property litigation in particular, can be expensive
and disruptive to normal business operations. Moreover, the
results of complex legal proceedings are difficult to predict.
Other than as described below, we are not a party to any other
material legal proceedings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Securities Class&nbsp;Actions in Northern
District of California. </FONT></I><FONT size="2">Beginning on
February&nbsp;2, 2001, a number of securities class action
complaints were filed against the Company, and certain of our
current and former officers and directors in the United States
District Court for the Northern District of California. The
complaints were filed as purported class actions by individuals
who allege that they purchased the Company&#146;s common stock
during a purported class period and sought an unspecified amount
in damages; the alleged class periods vary among the complaints.
The complaints were consolidated into a single action which
alleged that, during the period from September&nbsp;26, 2000 to
February&nbsp;1, 2001, the Company and certain of its former
officers made false or misleading statements of material fact
about the Company&#146;s financial statements, including its
revenues, revenue recognition policies, business operations and
prospects for the year 2000 and beyond. In addition, on
September&nbsp;24, 2001, certain former shareholders of
PeerLogic, Inc. filed a putative class action in the Superior
Court of the State of California alleging that Critical Path
breached representations and warranties made in connection with
the acquisition of PeerLogic. The complaint sought an
unspecified amount in damages. We subsequently removed the
PeerLogic action to the United States District Court for the
Northern District of California. On November&nbsp;8, 2001,
Critical Path announced that it had reached an agreement in
principle to settle these cases. In February 2002, the Court
gave preliminary approval to the settlement of the class action
litigation. The Court also set the hearing date for final
approval of the settlement agreement for May&nbsp;23, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On April&nbsp;30, 2002, MBCP PeerLogic LLC and
other named plaintiffs filed suit in the U.S.&nbsp;District
Court for the Southern District of New York against Critical
Path and certain of its former officers. The plaintiff
shareholders opted out of the shareholder litigation settlement
currently pending in the U.S. District Court for the Northern
District of California. The complaint, which has not been served
on the Company, alleges breach of contract, unjust enrichment,
common law fraud and violations of federal securities laws and
seeks compensatory and punitive damages in an unnamed amount but
in excess of $200&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Securities and Exchange Commission
Investigation. </FONT></I><FONT size="2">In February 2001, the
Securities and Exchange Commission (the &#147;SEC&#148;) issued
a formal order of investigation of the Company and certain of
the Company&#146;s current and former officers and directors
associated with the Company with respect to non-specified
accounting matters, financial reports, other public disclosures
and trading activity in the Company&#146;s securities. The
Company fully cooperated with the SEC in its investigation. The
SEC&#146;s investigation was concluded against the Company in
January 2002 with no imposition of fines or penalties against
the Company. The Company consented without admitting or denying
liability, to an administrative order that the Company violated
certain non-fraud provisions of the federal securities laws and
to a cease and desist order. The investigation has thus far
resulted with charges being filed against two former executive
officers of the Company. The investigation of former executives
officers and directors of the Company is continuing and while
the Company is fully cooperating with such investigation we do
not know the status of the investigation with respect to many of
such former officers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Derivative Actions in Northern District of
California. </FONT></I><FONT size="2">Beginning on
February&nbsp;5, 2001, Critical Path was named as a nominal
defendant in a number of derivative actions, purportedly brought
on the Company&#146;s behalf, filed in the Superior Court of the
State of California and in the United States District Court for
the Northern District of California. The derivative complaints
alleged that certain of Critical Path&#146;s current and former
officers and directors breached their fiduciary duties to the
Company, engaged in abuses of their control of the Company, were
unjustly enriched by their sales of the Company&#146;s common
stock, engaged in insider trading in violation of California law
or published false financial information in violation of
California law. The plaintiffs sought unspecified damages on the
Company&#146;s behalf from each of the defendants. Because
</FONT>

<P align="center"><FONT size="2">32
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="left">
<FONT size="2">of the nature of derivative litigation, any
recovery in the action would inure to the Company&#146;s
benefit. Contemporaneously with settlement of the securities
class action described above, an agreement in principle has been
reached to settle the derivative action.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Securities Class&nbsp;Action in Southern
District of New York. </FONT></I><FONT size="2">Beginning on
July&nbsp;18, 2001, a number of securities class action
complaints were filed against the Company, and certain of our
current and former officers and directors and underwriters
connected with our initial public offering of common stock in
the United States District Court for the Southern District of
New York. The purported class action complaints were filed by
individuals who allege that they purchased common stock at the
initial public offering of common stock between March&nbsp;26,
1999 and December&nbsp;6, 2000. The complaints allege generally
that the Prospectus under which such securities were sold
contained false and misleading statements with respect to
discounts and commissions received by the underwriters. The
complaints have been consolidated into a single action. The
complaints seek an unspecified amount in damages on behalf of
persons who purchased Critical Path stock during the specified
period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Lease Dispute. </FONT></I><FONT size="2">In
July 2000, PeerLogic, an acquired subsidiary of Critical Path,
signed a lease for office space at 292&nbsp;Ivy Street in
San&nbsp;Francisco, CA. The landlord and PeerLogic had begun
construction work to build out the space, when Critical Path
acquired PeerLogic in December 2000. After reviewing its
obligations under the lease, Critical Path noted that local
zoning laws likely prohibited a business like Critical Path or
PeerLogic from occupying the leased premises, and promptly
sought a zoning determination from the San&nbsp;Francisco Zoning
Administrator to resolve the matter. The preliminary zoning
determination stated that Critical Path&#146;s proposed use of
the leased premises was not permitted. The landlord appealed
this determination and prevailed before the San&nbsp;Francisco
Board of Appeals. Critical Path appealed that determination but
upon rehearing the Board of Appeals confirmed its decision. As
anticipated, thereafter the landlord filed suit for back rent
and breach of contract against Critical Path on April&nbsp;30,
2002. The complaint seeks compensatory damages of approximately
$7&nbsp;million and unspecified punitive damages. The Company
intends to vigorously defend its rights but there can be no
assurance as to the outcome of this litigation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The uncertainty associated with these and other
unresolved or threatened lawsuits could seriously harm the
Company&#146;s business and financial condition. In particular,
the lawsuits or the continued effects of the investigation could
harm its relationships with existing customers and its ability
to obtain new customers. The continued defense of the lawsuits
and conduct of the SEC investigation could also result in the
diversion of management&#146;s time and attention away from
business operations, which could harm the Company&#146;s
business. Although some of the named lawsuits are in the final
stages of settlement, there can be no assurance that the
applicable courts will accept the final settlement as executed,
or at all. Negative developments with respect to the settlements
or the lawsuits could cause the Company&#146;s stock price to
decline significantly. In addition, although the Company is
unable to determine the amount, if any, that it may be required
to pay in connection with the resolution of these lawsuits or
the investigation by settlement or otherwise, the size of any
such payments could seriously harm the Company&#146;s financial
condition.
</FONT>

<!-- link2 "<FONT size="2">Item 6. Exhibits and Reports on Form 8-K</FONT>" -->
<DIV align="left"><A NAME="012"></A></DIV>

<P align="left">
<B><FONT size="2">Item&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Exhibits
and Reports on Form&nbsp;8-K</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<I>Exhibits</I>
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant to Purchase Common Stock dated June 2000
    issued by the Registrant to i2 Technologies, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant to Purchase Common Stock dated June 2000
    issued by the Registrant to i2 Technologies, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant to Purchase Shares of Common Stock dated
    as of October&nbsp;20, 1999 by Registrant to U.S. Telesource.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant to Purchase Shares of Common Stock dated
    as of May&nbsp;9, 2001 by Registrant to LaHorgue Family Trust.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant to Purchase Shares of Common Stock dated
    as of May&nbsp;9, 2001 by Registrant to Rajiv Surendra Patel.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">33
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">First Amendment to Email Services Agreement by
    and between Registrant and ICQ, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment to Employment Agreement dated as of
    February&nbsp;12, 2002 by and between Registrant and David C.
    Hayden.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">15.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Letter of PricewaterhouseCoopers LLP on Unaudited
    Interim Financial Information
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;<I>Reports on Form&nbsp;8-K</I>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">None.
</FONT>

<P align="center"><FONT size="2">34
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "<FONT size="2">SIGNATURE</FONT>" -->
<DIV align="left"><A NAME="013"></A></DIV>

<P align="center">
<B><FONT size="2">SIGNATURE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">CRITICAL PATH, INC.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">/s/ LAUREEN DEBUONO
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <FONT size="2">Laureen DeBuono
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I><FONT size="2">Executive Vice President,</FONT></I></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <I><FONT size="2">Chief Financial Officer</FONT></I></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <FONT size="2">(Duly Authorized Officer and Principal
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    <FONT size="2">Financial and Accounting Officer)
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Date: May&nbsp;15, 2002
</FONT>

<P align="center"><FONT size="2">35
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "<FONT size="2">INDEX TO EXHIBITS</FONT>" -->
<DIV align="left"><A NAME="014"></A></DIV>

<P align="center">
<B><FONT size="2">INDEX TO EXHIBITS</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="85%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Exhibit Description</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant to Purchase Common Stock dated June 2000
    issued by the Registrant to i2 Technologies, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant to Purchase Common Stock dated June 2000
    issued by the Registrant to i2 Technologies, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant to Purchase Shares of Common Stock dated
    as of October&nbsp;20,1999 by Registrant to U.S. Telesource.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant to Purchase Shares of Common Stock dated
    as of May&nbsp;9, 2001 by Registrant to LaHorgue Family Trust.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant to Purchase Shares of Common Stock dated
    as of May&nbsp;9, 2001 by Registrant to Rajiv Surendro Patel.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">First Amendment to Email Services Agreement by
    and between Registrant and ICQ, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment to Employment Agreement dated as of
    February&nbsp;12, 2002 by and between Registrant and David C.
    Hayden.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">15.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Letter of PricewaterhouseCoopers LLP on Unaudited
    Interim Financial Information
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">See Exhibit&nbsp;Index attached hereto, which is
    incorporated herein by reference.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">36
</FONT>
</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>3
<FILENAME>f81657ex4-1.txt
<DESCRIPTION>EXHIBIT 4.1
<TEXT>
<PAGE>

                                                                   EXHIBIT 4.1


THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.



                                NETMOSPHERE, INC.

            WARRANT TO PURCHASE UP TO 194,863 SHARES OF COMMON STOCK


Issue date:  June ___, 2000

        1. General. THIS CERTIFIES THAT, i2 Technologies, Inc. (the "HOLDER") is
entitled to subscribe for and purchase up to One Hundred Ninety-Four Thousand
Eight Hundred Sixty-Three (194,863) fully paid and nonassessable shares of
common stock of Netmosphere, Inc., a California corporation (the "COMPANY"), at
a price of $0.22 per share (the "EXERCISE PRICE"), vested as of March 14, 2000,
subject to the provisions and upon the terms and conditions hereinafter set
forth. This Warrant, together with a Warrant for the purchase of Seven Hundred
Seventy-Nine Thousand Four Hundred Fifty (779,450) shares of Common Stock of
Netmosphere, satisfies any requirement to issue Netmosphere securities pursuant
to the letter agreement dated May 22, 2000 among the Company, Holder and
Critical Path, Inc.

        2. Exercise Period This Warrant may be exercised by the Holder at any
time and from time to time (but no more than four (4) times) from the issue date
above until March 14, 2003.

        3. Method of Exercise; Payment

           a. Cash Exercise. The Holder may exercise this Warrant in whole or in
part, by surrendering this Warrant (with the notice of exercise form attached
hereto as Exhibit A duly executed) at the principal office of the Company and by
the payment to the Company, by certified, cashier's or other check acceptable to
the Company, of an amount equal to the aggregate purchase price of the shares of
common stock being purchased.

           b. Stock Certificates. In the event the Holder exercises any of the
rights represented by this Warrant to purchase shares of common stock, the
Company shall deliver to the Holder certificates representing such shares within
a reasonable time and, unless the Holder has fully exercised this Warrant or the
Warrant has expired, a new warrant representing the remaining shares underlying
this Warrant.

        4. Reservation of Shares. The Company covenants and agrees that all
shares of common stock which may be issued upon the exercise of this Warrant
will, upon issuance, be duly



<PAGE>

authorized, validly issued, fully paid and nonassessable, free from all
preemptive rights of any stockholder and free from all taxes, liens and charges
created by the Company with respect to the issue thereof. During the period
within which the Holder may exercise this Warrant, the Company will at all times
have authorized, and reserved for the purpose of issuance upon exercise of this
Warrant, a sufficient number of shares of common stock to provide for the
exercise of the rights represented by this Warrant.

        5. Adjustment of Exercise Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events as follows:

           a. Reclassification or Merger. In case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value or as a result of a subdivision or
combination), or in case of any merger of the Company with or into another
company (other than (i) a merger effected solely for the purpose of changing the
Company's jurisdiction of incorporation or (ii) a merger with another company in
which the Company is the acquiring and surviving corporation and which does not
result in any reclassification or change of outstanding securities issuable upon
exercise of this Warrant), the Company, or such successor or purchasing company,
as the case may be, shall duly execute and deliver to the Holder a new warrant,
so that the Holder shall have the right to receive, at a total purchase price
not to exceed that payable upon the exercise of the unexercised portion of this
Warrant, and in lieu of the shares of common stock theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change or
merger by a holder of the number of shares of common stock under this Warrant.
Such new warrant shall provide for adjustments as nearly equivalent as may be
practicable to the adjustments provided for in this section. The provisions of
this subparagraph (a) shall similarly apply to successive reclassifications,
changes, mergers and consolidations. The Holder acknowledges that the Company
has entered into an Agreement and Plan of Reorganization with Critical Path,
Inc. and that the exchange ratio used for common stock of the Company is 0.0563,
which shall result in this Warrant being exercisable for 10,971 shares of
Critical Path common stock with an exercise price of $3.91 per share.

           b. Combination or Subdivision of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall combine its
outstanding shares of common stock, the number of shares purchasable shall be
proportionally decreased and the Exercise Price proportionally increased
effective concurrently with such combination. In the case of a subdivision, the
number of shares purchasable shall be proportionally increased and the Exercise
Price proportionally decreased effective concurrently with such subdivision.

           c. Stock Dividends. If the Company at any time while this Warrant is
outstanding and unexpired shall pay a dividend with respect to shares of common
stock in shares of common stock, then the Exercise Price shall be adjusted, from
and after the date of determination of stockholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Exercise
Price in effect immediately prior to such date of determination by a fraction
(i) the numerator of which shall be the total number of shares of common stock
outstanding immediately



<PAGE>

prior to such dividend or distribution and (ii) the denominator of which shall
be the total number of shares of common stock outstanding immediately after such
dividend or distribution.

        6. Fractional Shares. No fractional shares will be issued in connection
with any exercise hereunder, but in lieu of such fractional shares the Company
shall make a cash payment therefor upon the basis of the Exercise Price then in
effect.

        7. Compliance with Securities Law. The Holder, by acceptance hereof,
agrees that the Holder is acquiring this Warrant, and the shares of common stock
to be issued upon exercise hereof, for investment and will not offer, sell or
otherwise dispose of this Warrant, or any shares of common stock to be issued
upon exercise hereof, except under circumstances which will not result in a
violation of the Securities Act of 1933 (the "SECURITIES ACT"). Upon exercise of
this Warrant, unless the shares being acquired are registered under the
Securities Act or an exemption from such registration is available, the Holder
hereof shall confirm in writing, by executing the form attached as Schedule 1 to
Exhibit A hereto, that the shares of common stock so acquired are being acquired
for investment and not with a view towards distribution or resale. All shares of
common stock issued upon exercise of this Warrant shall be stamped or imprinted
with a legend in substantially the following form:

"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."

        8. Transferability. This Warrant and all rights hereunder are not
transferable without the prior written consent of the Company. In the event that
the Company agrees to any such transfer, such transfer shall be effected,
without charge to the Holder hereof (except for transfer taxes), upon surrender
of this Warrant properly endorsed.

        9. Rights as Stockholder. No Holder, solely as such, shall be entitled
to vote or receive dividends or be deemed a stockholder of the Company.

        10. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.

        11. Notices of Change.

            a. Promptly upon any adjustment in the number or class of shares
subject to this Warrant and of the Exercise Price, the Company shall give
written notice thereof to the Holder, setting forth in reasonable detail and
certifying the calculation of such adjustment.


<PAGE>

            b. The Company shall give written notice to the Holder at least ten
(10) business days prior to the date on which the Company closes its books or
takes a record for determining rights to receive any dividends or distributions.

        12. Transfer Books. The Company will at no time close its transfer books
against the transfer of this Warrant or of any shares of common stock issued or
issuable upon the exercise of this Warrant in any manner which interferes with
the timely exercise of this Warrant.

        13. Loss, Theft, Destruction, or Mutilation. The Company represents and
warrants to the Holder that, upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction, or mutilation of this Warrant and,
in the case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation
upon surrender and cancellation of this Warrant, the Company, at the Holder's
expense, will make and deliver a new warrant of like tenor in lieu of the lost,
stolen, destroyed or mutilated Warrant.

        14. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the Holder or the Company
shall be delivered via overnight courier by certified or registered mail,
postage prepaid, to the Holder's address as shown on the books of the Company or
to the Company at the address indicated on the signature page of this Warrant.

        15. Binding Effect on Successors. Except as otherwise set forth herein,
this Warrant shall be binding upon any company succeeding the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets. Holder acknowledges that this warrant will be assigned to Critical Path,
Inc. upon the closing of the proposed acquisition of the Company and that no
consent to such assignment shall be required by the Holder.

        16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.

        17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.


<PAGE>

        18. Acceptance. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.

                                          -------------------------------------

                                          -------------------------------------


                                          By:
                                             ----------------------------------

                                          Name
                                              ---------------------------------

                                          Title:
                                                -------------------------------


   Agreed and Accepted:
   Netmosphere, Inc.



By:
   ----------------------------------

Name
    ---------------------------------

Title:
      -------------------------------


<PAGE>

                                    EXHIBIT A

                               NOTICE OF EXERCISE



TO: Netmosphere, Inc.

        1. The undersigned hereby elects to purchase __________ shares of common
stock of Critical Path, Inc. pursuant to the terms of the attached Warrant.

        2. The undersigned elects to exercise the attached Warrant by means of a
cash payment, and tenders herewith payment in full for the purchase price of the
shares being purchased, together with all applicable transfer taxes, if any.

        3. Please issue a certificate or certificates representing said shares
of common stock in the name of the undersigned as is specified below:



        ------------------------------------
        (Name)

        ------------------------------------

        ------------------------------------

        ------------------------------------
        (Address)


        4. The undersigned hereby represents and warrants that the aforesaid
shares of common stock are being acquired for the account of the undersigned for
investment and not with a view to or for resale in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares. The undersigned hereby delivers an
Investment Representation Statement in the form attached to the Warrant as
Schedule 1 to Exhibit A.


Date:                                     By:
     -----------------------                 ----------------------------------

                                          Name
                                              ---------------------------------

                                          Title:
                                                -------------------------------
                                                (if applicable)


<PAGE>

                                   Schedule 1

                       INVESTMENT REPRESENTATION STATEMENT


Purchaser:
            -------------------------------

Security:   Shares of Common Stock

Amount:
            -------------------------------

Date:
            -------------------------------



        In connection with the purchase of the above-listed shares of common
stock (the "SECURITIES"), the undersigned (the "PURCHASER") represents to
Netmosphere, Inc. (the "COMPANY") as follows:

        (a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities. The
Purchaser is purchasing the Securities for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "SECURITIES ACT").

        (b) The Purchaser understands that the Securities have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein. In this
connection, the Purchaser understands that, in the view of the Securities and
Exchange Commission (the "SEC"), the statutory basis for such exemption may be
unavailable if the Purchaser's representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.

        (c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, the Purchaser
understands that the Company is under no obligation to register the Securities.
In addition, the Purchaser understands that the certificate evidencing the
Securities will be imprinted with the legend referred to in the Warrant under
which the Securities are being purchased.

        (d) The Purchaser is aware of the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than


<PAGE>

one year after the party has purchased and paid for the securities to be sold;
the sale being made through a broker in an unsolicited "broker's transaction" or
in transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934, as amended) and the amount of securities being
sold during any three-month period not exceeding the specified limitations
stated therein.

        (e) The Purchaser further understands that at the time it wishes to sell
the Securities there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and that, in
such event, the Purchaser may be precluded from selling the Securities under
Rule 144 even if the one-year minimum holding period had been satisfied.

        (f) The Purchaser further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required, and that, notwithstanding the fact that Rule 144 is not exclusive, the
SEC has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.


                                          PURCHASER

                                          By:
                                             ----------------------------------

                                          Name
                                              ---------------------------------

                                          Title:
                                                -------------------------------
                                                (if applicable)




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.2
<SEQUENCE>4
<FILENAME>f81657ex4-2.txt
<DESCRIPTION>EXHIBIT 4.2
<TEXT>
<PAGE>

                                                                   EXHIBIT 4.2


THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.

                                NETMOSPHERE, INC.

            WARRANT TO PURCHASE UP TO 779,450 SHARES OF COMMON STOCK


Issue date: June ___, 2000

        1. General. THIS CERTIFIES THAT, i2 Technologies, Inc. (the "HOLDER") is
entitled to subscribe for and purchase up to Seven Hundred Seventy-Nine Thousand
Four Hundred Fifty (779,450) fully paid and nonassessable shares of common stock
of Netmosphere, Inc., a California corporation (the "COMPANY"), at a price of
$2.27 per share (the "EXERCISE PRICE"), vested as of the Issue Date, subject to
the provisions and upon the terms and conditions hereinafter set forth. This
Warrant, together with a Warrant for the purchase of One Hundred Ninety-Four
Thousand Eight Hundred Sixty-Three (194,863) shares of Common Stock of
Netmosphere, satisfies any requirement to issue Netmosphere securities pursuant
to the letter agreement dated May 22, 2000 among the Company, Holder and
Critical Path, Inc.

        2. Exercise Period This Warrant may be exercised by the Holder at any
time and from time to time (but no more than four (4) times) prior to the date
that is three (3) years from the Issue Date.

        3. Method of Exercise; Payment

           a. Cash Exercise. The Holder may exercise this Warrant in whole or in
part, by surrendering this Warrant (with the notice of exercise form attached
hereto as Exhibit A duly executed) at the principal office of the Company and by
the payment to the Company, by certified, cashier's or other check acceptable to
the Company, of an amount equal to the aggregate purchase price of the shares of
common stock being purchased.

           b. Stock Certificates. In the event the Holder exercises any of the
rights represented by this Warrant to purchase shares of common stock, the
Company shall deliver to the Holder certificates representing such shares within
a reasonable time and, unless the Holder has fully exercised this Warrant or the
Warrant has expired, a new warrant representing the remaining shares underlying
this Warrant.


<PAGE>

        4. Reservation of Shares. The Company covenants and agrees that all
shares of common stock which may be issued upon the exercise of this Warrant
will, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable, free from all preemptive rights of any stockholder and free from
all taxes, liens and charges created by the Company with respect to the issue
thereof. During the period within which the Holder may exercise this Warrant,
the Company will at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of common
stock to provide for the exercise of the rights represented by this Warrant.

        5. Adjustment of Exercise Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events as follows:

           a. Reclassification or Merger. In case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value or as a result of a subdivision or
combination), or in case of any merger of the Company with or into another
company (other than (i) a merger effected solely for the purpose of changing the
Company's jurisdiction of incorporation or (ii) a merger with another company in
which the Company is the acquiring and surviving corporation and which does not
result in any reclassification or change of outstanding securities issuable upon
exercise of this Warrant), the Company, or such successor or purchasing company,
as the case may be, shall duly execute and deliver to the Holder a new warrant,
so that the Holder shall have the right to receive, at a total purchase price
not to exceed that payable upon the exercise of the unexercised portion of this
Warrant, and in lieu of the shares of common stock theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change or
merger by a holder of the number of shares of common stock under this Warrant.
Such new warrant shall provide for adjustments as nearly equivalent as may be
practicable to the adjustments provided for in this section. The provisions of
this subparagraph (a) shall similarly apply to successive reclassifications,
changes, mergers and consolidations. The Holder acknowledges that the Company
has entered into an Agreement and Plan of Reorganization with Critical Path,
Inc. and that the exchange ratio used for common stock of the Company is 0.0563,
which shall result in this Warrant being exerciseable for 43,883 shares of
Critical Path common stock with an exercise price of $40.32 per share.

           b. Combination or Subdivision of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall combine its
outstanding shares of common stock, the number of shares purchasable shall be
proportionally decreased and the Exercise Price proportionally increased
effective concurrently with such combination. In the case of a subdivision, the
number of shares purchasable shall be proportionally increased and the Exercise
Price proportionally decreased effective concurrently with such subdivision.

           c. Stock Dividends. If the Company at any time while this Warrant is
outstanding and unexpired shall pay a dividend with respect to shares of common
stock in shares of common stock, then the Exercise Price shall be adjusted, from
and after the date of determination of stockholders entitled to receive such
dividend or distribution, to that price determined by multiplying


<PAGE>

the Exercise Price in effect immediately prior to such date of determination by
a fraction (i) the numerator of which shall be the total number of shares of
common stock outstanding immediately prior to such dividend or distribution and
(ii) the denominator of which shall be the total number of shares of common
stock outstanding immediately after such dividend or distribution.

        6. Fractional Shares. No fractional shares will be issued in connection
with any exercise hereunder, but in lieu of such fractional shares the Company
shall make a cash payment therefor upon the basis of the Exercise Price then in
effect.

        7. Compliance with Securities Law. The Holder, by acceptance hereof,
agrees that the Holder is acquiring this Warrant, and the shares of common stock
to be issued upon exercise hereof, for investment and will not offer, sell or
otherwise dispose of this Warrant, or any shares of common stock to be issued
upon exercise hereof, except under circumstances which will not result in a
violation of the Securities Act of 1933 (the "SECURITIES ACT"). Upon exercise of
this Warrant, unless the shares being acquired are registered under the
Securities Act or an exemption from such registration is available, the Holder
hereof shall confirm in writing, by executing the form attached as Schedule 1 to
Exhibit A hereto, that the shares of common stock so acquired are being acquired
for investment and not with a view towards distribution or resale. All shares of
common stock issued upon exercise of this Warrant shall be stamped or imprinted
with a legend in substantially the following form:

"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."

        8. Transferability. This Warrant and all rights hereunder are not
transferable without the prior written consent of the Company. In the event that
the Company agrees to any such transfer, such transfer shall be effected,
without charge to the Holder hereof (except for transfer taxes), upon surrender
of this Warrant properly endorsed.

        9. Rights as Stockholder. No Holder, solely as such, shall be entitled
to vote or receive dividends or be deemed a stockholder of the Company.

        10. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.

        11. Notices of Change.

            a. Promptly upon any adjustment in the number or class of shares
subject to this Warrant and of the Exercise Price, the Company shall give
written notice thereof to the Holder,



<PAGE>

setting forth in reasonable detail and certifying the calculation of such
adjustment.

            b. The Company shall give written notice to the Holder at least ten
(10) business days prior to the date on which the Company closes its books or
takes a record for determining rights to receive any dividends or distributions.

        12. Transfer Books. The Company will at no time close its transfer books
against the transfer of this Warrant or of any shares of common stock issued or
issuable upon the exercise of this Warrant in any manner which interferes with
the timely exercise of this Warrant.

        13. Loss, Theft, Destruction, or Mutilation. The Company represents and
warrants to the Holder that, upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction, or mutilation of this Warrant and,
in the case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation
upon surrender and cancellation of this Warrant, the Company, at the Holder's
expense, will make and deliver a new warrant of like tenor in lieu of the lost,
stolen, destroyed or mutilated Warrant.

        14. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the Holder or the Company
shall be delivered via overnight courier by certified or registered mail,
postage prepaid, to the Holder's address as shown on the books of the Company or
to the Company at the address indicated on the signature page of this Warrant.

        15. Binding Effect on Successors. Except as otherwise set forth herein,
this Warrant shall be binding upon any company succeeding the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets. Holder acknowledges that this warrant will be assigned to Critical Path,
Inc. upon the closing of the proposed acquisition of the Company and that no
consent to such assignment shall be required by the Holder.

        16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.

        17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.



<PAGE>

        18. Acceptance. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.



                                          ----------------------------------

                                          ----------------------------------


                                          By:
                                             ----------------------------------

                                          Name:
                                               --------------------------------

                                          Title:
                                                -------------------------------




Agreed and Accepted:
Netmosphere, Inc.


By:
   ----------------------------------

Name:
     --------------------------------

Title:
      -------------------------------


<PAGE>


                                    EXHIBIT A

                               NOTICE OF EXERCISE


TO: Netmosphere, Inc.

        1. The undersigned hereby elects to purchase __________ shares of common
stock of Critical Path, Inc. pursuant to the terms of the attached Warrant.

        2. The undersigned elects to exercise the attached Warrant by means of a
cash payment, and tenders herewith payment in full for the purchase price of the
shares being purchased, together with all applicable transfer taxes, if any.

        3. Please issue a certificate or certificates representing said shares
of common stock in the name of the undersigned as is specified below:


        -------------------------------
        (Name)

        -------------------------------

        -------------------------------

        -------------------------------
        (Address)


        4. The undersigned hereby represents and warrants that the aforesaid
shares of common stock are being acquired for the account of the undersigned for
investment and not with a view to or for resale in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares. The undersigned hereby delivers an
Investment Representation Statement in the form attached to the Warrant as
Schedule 1 to Exhibit A.



Date:                                     By:
     -----------------------                 ----------------------------------

                                          Name:
                                               --------------------------------

                                          Title:
                                                -------------------------------
                                                (if applicable)


<PAGE>

                                   Schedule 1

                       INVESTMENT REPRESENTATION STATEMENT



Purchaser:
             ----------------------------------

Security:    Shares of Common Stock

Amount:
             ----------------------------------

Date:
             ----------------------------------


        In connection with the purchase of the above-listed shares of common
stock (the "SECURITIES"), the undersigned (the "PURCHASER") represents to
Netmosphere, Inc. (the "COMPANY") as follows:

        (a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities. The
Purchaser is purchasing the Securities for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "SECURITIES ACT").

        (b) The Purchaser understands that the Securities have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein. In this
connection, the Purchaser understands that, in the view of the Securities and
Exchange Commission (the "SEC"), the statutory basis for such exemption may be
unavailable if the Purchaser's representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.

        (c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, the Purchaser
understands that the Company is under no obligation to register the Securities.
In addition, the Purchaser understands that the certificate evidencing the
Securities will be imprinted with the legend referred to in the Warrant under
which the Securities are being purchased.

        (d) The Purchaser is aware of the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than


<PAGE>


one year after the party has purchased and paid for the securities to be sold;
the sale being made through a broker in an unsolicited "broker's transaction" or
in transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934, as amended) and the amount of securities being
sold during any three-month period not exceeding the specified limitations
stated therein.

        (e) The Purchaser further understands that at the time it wishes to sell
the Securities there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and that, in
such event, the Purchaser may be precluded from selling the Securities under
Rule 144 even if the one-year minimum holding period had been satisfied.

        (f) The Purchaser further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required, and that, notwithstanding the fact that Rule 144 is not exclusive, the
SEC has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.



                                          PURCHASER

                                          By:
                                             ----------------------------------

                                          Name:
                                               --------------------------------

                                          Title:
                                                -------------------------------
                                                (if applicable)



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.3
<SEQUENCE>5
<FILENAME>f81657ex4-3.txt
<DESCRIPTION>EXHIBIT 4.3
<TEXT>
<PAGE>

                                                                   EXHIBIT 4.3


NEITHER THE SECURITY EVIDENCED BY THIS WARRANT NOR THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE LAW, AND NO INTEREST HEREIN OR THEREIN MAY
BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS
(A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING SAID SECURITIES,
(B) THE COMPANY RECEIVES OPINION OF LEGAL COUNSEL FOR THE HOLDER OF SAID
SECURITIES (REASONABLY ACCEPTABLE TO THE COMPANY) STATING THAT SUCH TRANSACTION
IS EXEMPT FROM REGISTRATION, OR (C) THE COMPANY OTHERWISE SATISFIES ITSELF THAT
SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.

No. ____

ISSUED: October 20, 1999



                               CRITICAL PATH, INC.


                          COMMON STOCK PURCHASE WARRANT


        THIS IS TO CERTIFY that, subject to the terms and conditions hereof,
U.S. Telesource, Inc., a Delaware corporation (the "Holder"), or its assigns is
entitled to subscribe for and purchase from Critical Path, Inc., a California
corporation (the "Company"), at any time on or after the date hereof but not
later than 5:00 p.m., San Francisco time, on October 19, 2007 (the "Exercise
Period"), subject to the provisions hereof, up to a maximum of 3,543,539 shares
(subject to adjustment as provided herein) (the "Warrant Shares" ) of fully paid
and non-assessable shares of Common Stock, $.001 par value, of the Company (the
"Common Stock"), at a price per share (the "Exercise Price") as set forth in
Section 1.1 hereto. This Warrant is being issued pursuant to a certain Master
Agreement dated as of October 20, 1999, between Qwest Communications
Corporation, a Delaware corporation, and the Company (the "Master Agreement").
All capitalized terms used but not otherwise defined herein shall have the
meaning ascribed to such terms in the Master Agreement.


                               SECTION 1 EXERCISE


        1.1 Warrant Shares Eligible to be Purchased

                (a) Subject to the provisions of Sections 1.2, 1.3, 1.4 and 12,
                the Holder's rights to purchase Warrant Shares during the
                Exercise Period shall vest and the Exercise Price for such
                Warrant Shares shall be determined as set forth in the table
                below. For the purposes of determining the vesting requirements,
                a "Qwest Service Email Box" shall mean an email box registered
                by Qwest utilizing Critical Path's Services, as provided in
                Article 3 of the Master Agreement, provided that all such Qwest
                Email Service Boxes shall be Critical Path sub-branded. For the
                purposes of determining the Exercise Price, the "Closing Price"
                shall mean the closing price of Company Common Stock, as


                                      -1-
<PAGE>

                average of the closing bid and asked prices of the Common Stock
                as quoted in the Over-the-Counter Market Summary or the last
                reported sale price of the Common Stock or the closing price
                quoted on the Nasdaq national market system, on the last trading
                day National Market System or on any exchange on which the
                Common Stock is then listed, whichever is applicable, for the
                fifteen (15) trading days prior to the day in question.



<TABLE>
<CAPTION>
Number of Shares                         Vesting                                Exercise Price
----------------                         -------                                --------------
<S>                                     <C>                                    <C>
589,090 shares, or one-sixth of          The registration of the                The Closing Price for the
the Warrant Shares.                      400,000th Qwest Service                Effective Date (the "Initial
                                         Email Box Upon execution of            Exercise Price") ($41.581)
                                         this Warrant.

589,090 shares, or one-sixth of          The registration of the                The Initial Exercise Price plus
the Warrant Shares.                      400,000th Qwest Service                $3.00 ($44.581)
                                         Email Box.

589,090 shares, or one-sixth of          The registration of the                The Initial Exercise Price plus
the Warrant Shares.                      800,000th Qwest Service                $6.00 ($47.581)
                                         Email Box.

589,090 shares, or one-sixth of          The registration of the                The Initial Exercise Price plus
the Warrant Shares.                      1,200,000th Qwest Service              $9.00 ($50.581)
                                         Email Box.

589,090 shares, or one-sixth of          The registration of the                The Initial Exercise Price plus
the Warrant Shares.                      1,600,000th Qwest Service              $12.00 ($53.581)
                                         Email Box.

589,090 shares, or one-sixth of          The registration of the                The Initial Exercise Price plus
the Warrant Shares.                      2,000,000th Qwest Service              $15.00 ($56.581)
                                         Email Box.
</TABLE>


                (b) Notwithstanding anything herein to the contrary, if any
                portion of the Warrant Shares shall not have vested (in
                accordance with the table set forth in Section 1(a) above)
                within three years from the date of the Master Agreement, then
                the Holder's right to purchase such portion of the Warrant
                Shares shall terminate.

                (c) Notwithstanding the foregoing, any portion of the Warrant
                Shares that have vested (in accordance with the table set forth
                in Section 1(a) above) shall be exercisable for a period of five
                years commencing on the date such portion of the Warrant Shares
                vested, and thereafter any such rights to exercise such portion
                of the Warrant Shares shall terminate.

        1.2 Procedure for Exercise

        Subject to the foregoing, this Warrant may be exercised by the Holder,
as to those shares of Warrant Shares for which this Warrant is then exercisable
as determined in accordance with Section 1.1, at any time during the Exercise
Period in whole or part by delivering to the Company, at the address of the
Company set forth in Section 17, (a) the form of Exercise Notice attached hereto
duly completed and executed by the Holder, (b) this Warrant certificate, (c)
cash or a bank cashier's check payable to the Company in the amount of the
Exercise Price multiplied by the number of shares for which this Warrant is
being exercised (the "Purchase Price"), and



                                      -2-
<PAGE>


(d), a certificate signed by an appropriate officer of the Holder setting forth
the amount of all outstanding securities, including rights, options, or warrants
to acquire securities of the Company, that are owned by the Holder, and any
Subsidiary (as defined in Section 16) of the Holder, in order to assure
compliance with Section 1.4 below. The Holder will be deemed to be the holder of
record of the shares of Common Stock as to which the Warrant was exercised in
accordance with this Warrant, effective at the close of business, San Francisco
time, on the date such exercise is completed and all documents specified above
are delivered to the Company.

        1.3 Net Exercise

        Notwithstanding the payment provisions set forth above, the Holder may
elect to exercise this Warrant by converting this Warrant into shares of Warrant
Shares as provided in this Section 1.3, such election to be effected by
surrender of this Warrant at the principal office of the Company, together with
the Notice of Exercise indicating such election, in which case the Company shall
issue to the Holder the number of shares of Warrant Shares determined as
follows:

                               X  = Y (A-B)
                                    -------
                                       A

Where:          X = the number of shares of Warrant Shares to be issued

                Y = the number of shares of Warrant Shares as to which the
                Warrant is being exercised

                A = the Fair Market Value (as defined below) of one (1) share of
                Warrant Shares

                B = the applicable Exercise Price

                For purposes of the above calculation, the Fair Market Value of
        a share of Warrant Shares shall be determined in good faith by the Board
        of Directors of the Company (the "Board"); provided, however, that if a
        public market for the common stock of Company (the "Common Stock")
        exists at the time of such exercise, then such Fair Market Value shall
        be the average of the closing bid and asked prices of the Common Stock
        as quoted in the Over-the-Counter Market Summary or the last reported
        sale price of the Common Stock or the closing price quoted on the Nasdaq
        National Market System or on any exchange on which the Common Stock is
        then listed, whichever is applicable, for the five (5) trading days
        prior to the date of exercise of this Warrant. The Board shall promptly
        respond in writing to an inquiry by the Holder as to the Fair Market
        Value of one share of Warrant Shares.

        1.4 Restrictions on Exercise

        This Warrant shall not be exercisable as to any portion of the Warrant
Shares that would cause, on the date of the vesting of each one-sixth of the
Warrant Shares (as described in Section 1.1) (each a "Vesting Date"), the Holder
and any Affiliate (as defined in the Master Agreement) thereof to own, in the
aggregate, 10% or more of the Fully-Diluted Stock (as defined in Section 1.5
below) of the Company. Subject to the next two succeeding sentences, if on the
Exercise Date such restriction is applicable, the Warrant shall be exercisable
for a number of Warrant Shares equal to the remainder of (x) the number of
shares equal to 9.9% of the Fully-Diluted Stock of the Company minus (y) the
number of shares of Common Stock then owned in the aggregate by the Holder and
any Affiliate (the "Maximum Number of Warrant Shares"). The Holder's right to
purchase any vested Warrant Shares in excess of the Maximum Number of



                                      -3-
<PAGE>


Warrant Shares will terminate on the date that is six months after the most
recent Vesting Date, except that with respect to the last Vesting Date, such
right will terminate thereon.

        1.5 Representation of Company Regarding the Equity Percentage of the
Warrants

        The Company represents to Holder that, as of the date of the Master
Agreement (the "Designated Date"), the Warrant Shares, if all issued as of the
Designated Date, would constitute six percent (6%) of the number of shares of
voting capital stock of the Company on the Designated Date after giving effect
to the exercise, exchange or conversion of all outstanding securities, rights,
options, warrants (including this Warrant), calls, commitments or agreements of
any nature or character (whether debt or equity) that are, directly or
indirectly, exercisable or exchangeable for, or convertible into or otherwise
represent the right to purchase or otherwise receive, directly or indirectly,
any such capital stock or other arrangement to acquire at any time or under any
circumstance, voting capital stock of the Company or any such other outstanding
securities and including all shares or other equity interests subject, as of the
Designated Date to issued stock options or other rights to acquire equity of any
nature to officers, directors, employees or consultants of the Company under all
agreements, plans or arrangements theretofore approved by the Board of Directors
of the Company, whether on not the right to exercise such outstanding options or
other rights is currently effective or vested (collectively, the "Fully-Diluted
Stock").

                     SECTION 2 DELIVERY OF STOCK CERTIFICATE

        Within 20 days after the exercise of this Warrant (in full or in part)
and payment of the Purchase Price then due, the Company at its expense shall
issue in the name of and deliver to the Holder (a) a certificate or certificates
for the number of fully paid and nonassessable shares of Warrant Shares to which
the Holder shall be entitled upon such exercise and (b) if applicable, a new
Warrant of like tenor to purchase up to that number of shares of Warrant Shares,
if any, as to which this Warrant shall not have been previously exercised by the
Holder or repurchased by the Company.

                    SECTION 3 COVENANTS AS TO WARRANT SHARES

        The Company covenants and agrees that the Company will at all times have
authorized and reserved a sufficient number of shares of Common Stock to provide
for the exercise of the rights represented by this Warrant. The Company further
covenants that all shares of Common Stock which may be issued upon the exercise
of the rights represented by this Warrant, will, upon issuance, in accordance
with the terms of this Warrant, be validly issued, fully paid and non-assessable
and free from all taxes, liens and charges solely with respect to the issuance
thereof. The Company further covenants and agrees that the Company will from
time to time take all such action as may be requisite to assure that the stated
or par value per share of the Common Stock is at all times equal to or less than
the then effective Exercise Price per share of the Common Stock issuable upon
exercise of this Warrant. If and so long as the Common Stock issuable upon
exercise of the rights represented by this Warrant is listed on any national
securities exchange, the Company will, if permitted by the rules of such
exchange, use its best efforts to list and keep listed on such exchange, upon
official notice of issuance, all Warrant Shares.


                                      -4-
<PAGE>

                       SECTION 4 EFFECTS OF REORGANIZATION

        In the event of a merger or consolidation of the Company with another
entity or the acquisition of all or substantially all of the assets or stock of
the Company by another entity (collectively such events being a
"Reorganization"), the following provisions will apply:

        (a) The Holder will be provided with notice of such Reorganization at
        the same time as notice is provided to the Company's shareholders. In
        addition, the Holder will be provided copies of any notice sent to
        shareholders of the Company in connection with such Reorganization
        (including notice of any shareholder's meetings and shareholder's
        consents), simultaneously with such notice being provided to any
        shareholder.

        (b) In the event the shareholders of the Company receive cash, stock or
        other property or contractual rights in respect of their stock in the
        Company (including upon any Reorganization where the Company is not the
        surviving entity), this Warrant will be exchanged for a warrant to
        purchase such kind and number of shares of capital stock or other
        securities or property or rights of the Company or the surviving entity
        to which the Holder would have been entitled if it had held the Common
        Stock issuable upon the exercise hereof immediately prior to such
        Reorganization, which warrant shall have the same terms and conditions
        hereof; provided, however, that if the Holder does not receive such
        warrant in exchange for this Warrant, then the Warrant will vest and
        become fully exercisable with respect to the maximum number of Warrant
        Shares upon completion of the Reorganization and the Holder will be
        entitled to exercise such Warrant Shares effective concurrently with
        completion of the Reorganization (but immediately prior thereto).
        Despite the foregoing, if the sole consideration received by
        shareholders in any such Reorganization is cash, then Company shall not
        be required to issue an exchange warrant if it pays to the Holder,
        immediately upon closing, cash based on the amount that the Holder would
        have received in such Reorganization upon full exercise of the Warrant
        for all Warrant Shares then vested; it being understood that the net
        amount payable will be the net exercise price therefor calculated in the
        manner specified in Section 1.3 above.

           SECTION 5 ADJUSTMENTS FOR STOCK SPLITS AND SIMILAR MATTERS

        5.1 Stock Splits and Reverse Stock Splits

        If the Company shall issue any shares of Common Stock as a stock
dividend or subdivide the number of outstanding shares of Common Stock into a
greater number of shares, then, in either such case, then the Exercise Price in
effect before such dividend or subdivision shall be proportionately reduced and
the number of shares of Warrant Shares at that time purchasable pursuant to this
Warrant shall be proportionately increased; and, conversely, if the Company
shall reduce the number of outstanding shares of Common Stock by combining such
shares into a smaller number of shares, then the Exercise Price in effect before
such combination shall be proportionately increased and the number of shares of
Warrant Shares at that time purchasable pursuant to this Warrant shall be
proportionately decreased. Upon each adjustment in the Exercise Price pursuant
to this Section 5, the number of shares of Warrant Shares purchasable hereunder
shall be adjusted, to the nearest whole share, to the product obtained by
multiplying such number of shares purchasable immediately prior to such
adjustment in the Exercise Price by a fraction, the numerator of which shall be
the Exercise Price immediately prior to such



                                      -5-
<PAGE>

adjustment and the denominator of which shall be the Exercise Price immediately
thereafter. The Holder shall be entitled to the same notice and information
regarding such dividend or subdivision as is furnished to holders of Common
Stock, which notice shall be sent to the Holder no later than the date such
notice is sent to all holders of Common Stock. The foregoing is intended to
protect Holder against dilution due to stock dividends and stock splits.

        5.2 Other Dividends and Distributions

        In case the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Warrant) for the purpose of entitling them to receive any dividend or other
distribution other than as described in Section 5.1, or any right to subscribe
for or purchase any shares of stock of any class or any other securities, or to
receive any other right, then the Company will mail or cause to be mailed to the
Holder a notice specifying the date on which a record is to be taken for the
purpose of such dividend, distribution or right (the "Record Date"), and stating
the amount and character of such dividend, distribution or right. Such notice
shall be mailed at least 15 days prior to the Record Date therein specified.

                           SECTION 6 CHANGE OF CONTROL

        Upon a Change of Control (as defined below) of the Company, the
restrictions on exercise as described in Section 1.4 will terminate.

        For the purposes of this Warrant, "Change of Control" of the Company
        means: (i) an acquisition of Common Stock and any other securities
        issued by the Company having the ordinary power to vote in the election
        of directors of the Company (other than securities having such power
        only upon the happening of a contingency) (the "Voting Stock") by any
        person, individual, corporation, partnership, trust or other
        non-governmental entity or any governmental agency, court, authority or
        other body (whether foreign, federal, state, local or otherwise)
        (collectively, "Person") or a Group (as that term has the meaning
        comprehended by Section 13(d)(3) of the Securities Exchange Act of 1934,
        as amended, and the rules and regulations promulgated thereunder (the
        "Exchange Act")) (other than the Company or its affiliates) in a
        purchase or transaction or series of related purchases or transactions
        if immediately thereafter such Person or Group has Beneficial Ownership
        (as such term has the meaning comprehended by Section 13(d)(3) of the
        Exchange Act) of more than fifty percent (50%) of the combined voting
        power of the Company's then outstanding Voting Stock; (ii) the execution
        of an agreement providing for a tender offer, merger, consolidation or
        reorganization, or series of such related transactions involving the
        Company, unless the stockholders of the Company, immediately after such
        transaction or transactions are Beneficial Owners of at least fifty
        percent (50%) of the Voting Stock; (iii) a change or changes in the
        membership of the Company's board of directors that represents a change
        of a majority or more of such membership during any twelve month period
        (unless such change or changes in membership are caused by actions of
        the then existing board of directors and do not occur within twelve
        months of the commencement, threat or proposal of an Election Contest
        (as such term is defined in Rule 14a-11 of Regulation 14A under the
        Exchange Act), tender offer or other transaction that would constitute a
        Change of Control under (i) or (ii) of this paragraph; or (iv) to the
        extent not covered by (i), (ii) or (iii) of this paragraph, any event
        constituting a Reorganization under Section 4.



                                      -6-
<PAGE>

                          SECTION 7 FRACTIONAL SHARES

        No fractional shares shall be issued upon the exercise of this Warrant.
In lieu of fractional shares, the Company shall pay the Holder a sum in cash
equal to the fair market value of the fractional shares on the date of exercise.

                       SECTION 8 RESTRICTIONS ON TRANSFER

        Neither the Security evidenced by this Warrant nor the securities
issuable upon exercise of this Warrant may be transferred unless (a) there is an
effective registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), and applicable state securities laws covering any such
transaction involving said securities, (b) the Company receives opinion of legal
counsel for the holder of said securities (reasonably acceptable to the Company)
stating that such transaction is exempt from registration; provided, however,
that no such opinion of counsel shall be necessary for a transfer of Warrant
Shares pursuant to Rule 144(k) promulgated under the Securities Act or any
successor rule thereto ("Rule 144(k)"), or (c) the Company otherwise satisfies
itself that such transaction is exempt from registration. The Holder and Company
agree that all Warrant Shares shall have the same registration rights and be
subject to the same terms and conditions with respect to the registration and
sale of such stock as provided for in the Amended and Restated Investors' Rights
Agreement dated September 11, 1998 among the Company and the individuals and
entities listed on the signature pages thereto, as amended by the Amendment to
Amended and Restated Investors' Rights Agreement dated January 13, 1999 among
the Company and the individuals and entities listed on the signature pages
thereto (together, the "Rights Agreement"), and as possessed by the individuals
and entities listed on the signature pages to the Rights Agreement.

                                SECTION 9 LEGEND

        A legend setting forth or referring to the foregoing restrictions shall
be placed on this Warrant, any replacement hereof and any certificate
representing a security issued pursuant to the exercise hereof, and a stop
transfer restriction or order shall be placed on the books of the Company and
with any transfer agent until such securities may be legally sold or otherwise
transferred; provided, however, that such legend shall not be required and a
stop transfer restriction order shall not be placed if (a) in the opinion of
counsel to the Holder (reasonably acceptable to the Company) registration of any
future transfer is not required by the applicable provisions of the Securities
Act, (b) the Company shall have waived the requirements of such legends, or (c)
the transfer of Warrant Shares shall be made in compliance with the requirements
of Rule 144(k) or the Company otherwise satisfies itself that such transaction
is exempt from registration.

                           SECTION 10 HOLDER AS OWNER

        The Company may deem and treat the Holder of this Warrant as the
absolute owner hereof for all purposes regardless of any notice to the contrary.



                                      -7-
<PAGE>

                        SECTION 11 WARRANT HOLDER RIGHTS

        This Warrant shall not entitle the Holder to any voting rights or any
other rights as a shareholder of the Company or to any other rights whatsoever
except the rights stated herein; and except as otherwise provided herein, no
dividend or interest shall be payable or shall accrue in respect of this Warrant
or the Warrant Shares purchasable hereunder unless, until and to the extent that
this Warrant shall be exercised.

                             SECTION 12 CONSTRUCTION

        The validity and interpretation of the terms and provisions of this
Warrant shall be governed by the laws of the State of California without respect
to the conflicts of laws principles thereof. The descriptive headings of the
several sections of this Warrant are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions thereof.

                              SECTION 13 EXPIRATION

        Subject to the last sentence of Section1.4, any portion of the Warrant
Shares which shall not have become exercisable (in Accordance with the table set
forth in Section 1.1 (a) above) within three years from the date of the Master
Agreement shall be cancelled. Notwithstanding the above, any portion of the
Warrant Shares that have become exercisable (in accordance with the table set
forth in Section 1(a) above) shall be exercisable for a period of five years
commencing on the date such portion of the Warrant Shares became exercisable.
All restrictions set forth herein on the shares of capital stock issued upon
exercise of any rights hereunder shall survive such exercise and expiration of
the rights granted hereunder.

                         SECTION 14 EXCHANGE OF WARRANT

        This Warrant is exchangeable upon the surrender hereof by the Holder at
the office of the Company for new Warrants of like tenor representing in the
aggregate the rights to subscribe for and purchase the number of shares which
may be subscribed for and purchased hereunder, each of such new Warrants to
represent the right to subscribe for and purchase such number of shares as shall
be designated by the Holder at the time of such surrender.

                       SECTION 15 LOST WARRANT CERTIFICATE

        If this Warrant is lost, stolen, mutilated or destroyed, the Company
shall, upon request in writing from the Holder and subject to compliance by
Holder with the following sentence, issue a new Warrant of like denomination,
tenor and date as this Warrant, subject to the Company's right to require the
Holder to give the Company a bond or other satisfactory security sufficient to
indemnify the Company against any claim that may be made against it (including
any expense or liability) on account of the alleged loss, theft, mutilation or
destruction of this Warrant or the issuance of such new Warrant. The Holder
shall reimburse the Company for any and all expenses and costs incurred by the
Company in connection with issuing a new Warrant under this Section.



                                      -8-
<PAGE>

                        SECTION 16 WAIVERS AND AMENDMENTS

        This Warrant or any provision hereof may be changed, waived, discharged
or terminated only by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought.

                        SECTION 17 SUCCESSORS AND ASSIGNS

        This Warrant shall be binding upon the Company and inure to the benefit
of the Holder and its successors and assigns; provided, however, that the
Warrant shall only be assignable by the Holder to its Affiliates (as defined in
the Master Agreement).

                               SECTION 18 NOTICES

        All notices or other communications required or permitted hereunder
shall be in writing and shall be delivered by personal delivery, reputable
overnight courier service, telecopier or mailed by United States mail,
first-class postage prepaid, or by registered or certified mail with return
receipt requested, addressed as follows:


If to the Holder:
U.S. Telesource, Inc.
555 Seventeenth Street
Denver, Colorado 80202
Fax: 303-992-1724
Attention: Legal Counsel


If to the Company:

Critical Path, Inc.
320 First Street
San Francisco, California 94105
Fax: 415-808-8777
Attention: General Counsel

        Each of the foregoing parties shall be entitled to specify a different
address by giving five days' advance written notice as aforesaid to the other
parties. All such notices and communications shall be deemed to have been
received (i) in the case of personal delivery, on the date of such delivery and
(ii) in the case of mailing, on the third business day following the date of
such mailing.

                          SECTION 19 INVESTMENT INTENT

        By accepting this Warrant, the Holder represents that it is acquiring
this Warrant for investment and not with a view to, or for sale in connection
with, any distribution thereof.



                                      -9-
<PAGE>

        IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.



CRITICAL PATH, INC.

By:
    -----------------------
    Brett Roberston
    Vice President of Strategic Development and
    General Counsel



ACCEPTED AND AGREED:

U.S. TELESOURCE, INC.

By:
    -------------------------------

Name: Marc B. Weisberg
      ----------------------------

Title: President and CEO
       ---------------------------

Date: 10/29/99
      ----------------------------




                                      -10-
<PAGE>

                               NOTICE OF EXERCISE

                             TO CRITICAL PATH, INC.


        The undersigned hereby irrevocably elects to exercise the Warrant
delivered herewith pursuant to Section 1.2 thereof as to __________ shares of
Common Stock and requests that certificates for such shares be issued in the
name of and delivered to the undersigned at the address stated below, and, if
additional shares remain available for purchase pursuant to the Warrant, the new
Warrant evidencing the right to purchase the balance of such shares shall be
registered in the name of, and delivered to, the undersigned at the address
stated below. The undersigned hereby agrees with and represents to the Company
that said shares of common stock are acquired for investment and not with a view
to, or for sale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act of 1933, as amended, and agrees that
the exercise of the Warrant and the issuance and transfer of the common stock to
be purchased are subject to Sections 7 and 8 of the Warrant.

Payment is enclosed in the amount of $
                                      --------------------

Dated:
      --------------------------



--------------------------------

By:
    ----------------------------

Its:
    ----------------------------



Address:

--------------------------------

--------------------------------

--------------------------------

--------------------------------



                                      -11-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.4
<SEQUENCE>6
<FILENAME>f81657ex4-4.txt
<DESCRIPTION>EXHIBIT 4.4
<TEXT>
<PAGE>
                                                                    EXHIBIT 4.4


        THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

                           WARRANT TO PURCHASE SHARES
                             OF THE COMMON STOCK OF
                               CRITICAL PATH, INC.


                                DATE: MAY 9, 2001



        This certifies Michael A. LaHorgue and Elizabeth T. LaHorgue, Trustees
of the LAHORGUE FAMILY TRUST dated September 18, 2001 (c/o Seaview Ventures, 60
W. Seaview Avenue, San Rafael, CA 94901) (the "HOLDER"), for value received,
shall be entitled to purchase from Critical Path, Inc., a California corporation
(the "COMPANY"), having its principal place of business at 532 Folsom Street,
San Francisco, California, a maximum of Thirty-Three Thousand Three Hundred and
Thirty Three (33,333) shares of fully paid and assessable shares of the
Company's Common Stock ("COMMON STOCK") for cash, at a purchase price equal to
U.S. Two Dollars and Zero Cents ($2.00) per share (the "EXERCISE PRICE") at any
time, or from time to time, up to and including 5:00 p.m. (local time) on the
third anniversary from the date of this Warrant (the "EXPIRATION DATE"), upon
the surrender to the Company at its principal place of business (or at such
other location as the Company may advise the Holder in writing) of this Warrant
properly endorsed a Form of Subscription in substantially the form attached
hereto duly filled in and signed and upon payment in cash or by check of the
aggregate Exercise Price for the number of shares for which this Warrant is
being exercised determined in accordance with the provisions hereof. The
Exercise Price and the number of shares of Common Stock purchasable hereunder
are subject to adjustment as provided in Section 3 of this Warrant.

        This Warrant is subject to the following terms and conditions:

        1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES. This Warrant
is exercisable at the option of the holder of record hereof at any time or from
time, to time, up to the Expiration Date for all or any part of the shares of
Common Stock (but not for a fraction of a share) which may be purchased
hereunder, provided however, that Holder must exercise this Warrant for not less
than one hundred (100) shares in each instance. The Company agrees that the
shares of Common Stock purchased under this Warrant shall be and are deemed to
be issued to the Holder hereof as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Common Stock so
purchased, together with any other securities or property to which the Holder is
entitled upon such exercise, shall be delivered to the Holder by the Company at
the Company's



                                       1.
<PAGE>


expense within a reasonable time after the rights represented by this Warrant
have been so exercised, and in any event, within fifteen (15) days of such
exercise. In case of a purchase of less than all the shares that may be
purchased under this Warrant, the Company shall cancel this Warrant and execute
and deliver a new Warrant or Warrants of like tenor for the balance of the
shares purchasable under the Warrant surrendered upon such purchase to the
Holder hereof within a reasonable time. Each stock certificate so delivered
shall be in such denominations of Common Stock as may be requested by the Holder
hereof, but in no event for less than one hundred (100) shares and shall be
registered in the name designated by such Holder.

        2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Common Stock which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder.. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Common Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such shares of
Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Common Stock may be listed; provided, however, that the
Company shall not be required to effect a registration under federal or state
securities laws with respect to such exercise. The Company will not take any
action that would result in any adjustment of the Exercise Price (as set forth
in Section 3 hereof) if the total number of shares of Common Stock issuable
after such action upon exercise of all outstanding warrants, together with all
shares of Common Stock then outstanding and all shares of Common Stock then
issuable upon exercise of all options and upon the conversion of all convertible
securities then outstanding, would exceed the total number of shares of Common
Stock then authorized by the Company's Articles of Incorporation.

        3. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The Exercise Price
and the number of shares purchasable upon the exercise of this Warrant shall be
subject to adjustment from time to time upon the occurrence of certain events
described in this Section 3. Upon each adjustment of the Exercise Price, the
Holder shall thereafter be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of shares obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Exercise Price resulting from such adjustment.

           3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at
any time subdivide its outstanding shares of Common Stock into a greater number
of shares, the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Common Stock of the Company shall be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination shall
be proportionately increased.



                                       2.
<PAGE>

           3.2 DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the Holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,

               (a) Common Stock or any shares of stock or other securities which
are at any time directly or indirectly convertible into or exchangeable for
Common Stock, or any rights or options to subscribe for, purchase or otherwise
acquire any of the foregoing by way of dividend or other distribution,

               (b) any cash paid or payable otherwise than as a cash dividend,
or

               (c) Common Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than shares of
Common Stock issued as a stock split or adjustments in respect of which shall be
covered by the terms of Section 3.1 above), then and in each such case, the
Holder hereof shall, upon the exercise of this Warrant, be entitled to receive,
in addition to the number of shares of Common Stock receivable thereupon, and
without payment of any additional consideration therefor, the amount of stock
and other securities and property (including cash in the cases referred to in
clause (b) above and this clause (c)) which such Holder would hold on the date
of such exercise had he been the holder of record of such Common Stock as of the
date on which holders of Common Stock received or became entitled to receive
such shares or all other additional stock and other securities and property.

            3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
If any recapitalization, reclassification or reorganization of the capital stock
of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, or other assets or property (an
"ORGANIC CHANGE"), then, as a condition of such Organic Change, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented by this Warrant) such shares of
stock, securities or other assets or property as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented by this
Warrant. In the event of any Organic Change, appropriate provision shall be made
by the Company with respect to the rights and interests of the Holder of this
Warrant to the end that the provisions hereof (including, without limitation,
provisions for adjustments of the Exercise Price and of the number of shares
purchasable and receivable upon the exercise of this Warrant) shall thereafter
be applicable, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company will not effect any
such consolidation, merger or sale unless, prior to the consummation thereof,
the successor corporation (if other than the Company) resulting from such
consolidation or the corporation purchasing such assets shall assume by written
instrument reasonably satisfactory in form and substance to the Holders executed
and mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the



                                       3.
<PAGE>

Company, the obligation to deliver to such Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase.

            3.4 NOTICES OF CHANGE. Immediately upon any adjustment in the number
or class of shares subject to this Warrant and of the Exercise Price, the
Company shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment.

        4. ISSUE TAX. The issuance of certificates for shares of Common Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder.

        5. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.

        6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholder of
the Company or any other matters or any rights whatsoever as a stockholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such Holder for the Exercise Price or as a stockholder of the Company, whether
such liability is asserted by the Company or by its creditors.

        7. WARRANTS NON-TRANSFERABLE. This Warrant shall not be transferable by
the Holder without the prior written consent of the Company.

        8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant, shall survive the
exercise of this Warrant.

        9. REPRESENTATIONS AND COVENANTS OF THE HOLDER.

           This Warrant has been issued by the Company in reliance upon the
following representations and covenants of the Holder:

               (a) INVESTMENT PURPOSE. The Warrant or the Common Stock issuable
upon exercise of the Warrant (collectively, the "Securities") will be acquired
for investment and not with a view to the sale or distribution of any part
thereof, and the Holder has no present intention of selling or engaging in any
public distribution of the Securities except pursuant to a registration or
exemption.


                                       4.
<PAGE>

               (b) PRIVATE ISSUE. The Holder understands (i) that the Warrant
and the Common Stock issuable upon exercise of this Warrant is not registered
under the Securities Act or qualified under applicable state securities laws on
the ground that the issuance contemplated by this Warrant will be exempt from
the registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 9.

               (c) DISPOSITION OF SECURITIES. In no event will the Holder make a
disposition of the Warrant or the Common Stock issuable upon exercise of the
Warrant unless and until (i) it shall have notified the Company of the proposed
disposition, and (ii) if requested by the Company, it shall have furnished the
Company with an opinion of counsel (which counsel may either be inside or
outside counsel to the Holder) satisfactory to the Company and its counsel to
the effect that (A) appropriate action necessary for compliance with the
Securities Act has been taken, or (B) an exemption from the registration
requirements of the Securities Act is available. Notwithstanding the foregoing,
the restrictions imposed upon the transferability of any of its rights to
acquire Common Stock or Common Stock issuable on the exercise of such rights do
not apply to transfers from the beneficial owner of any of the aforementioned
securities to its nominee or from such nominee to its beneficial owner, and
shall terminate as to any particular share of Common Stock when (1) such
security shall have been effectively registered under the Securities Act and
sold by the holder thereof in accordance with such registration or (2) such
security shall have been sold without registration in compliance with Rule 144
under the Securities Act, or (3) a letter shall have been issued to the Holder
at its request by the staff of the Securities and Exchange Commission or a
ruling shall have been issued to the Holder at its request by such Commission
stating that no action shall be recommended by such staff or taken by such
Commission, as the case may be, if such security is transferred without
registration under the Securities Act in accordance with the conditions set
forth in such letter or ruling and such letter or ruling specifies that no
subsequent restrictions on transfer are required. Whenever the restrictions
imposed hereunder shall terminate, as hereinabove provided, the Holder or holder
of a share of Common Stock then outstanding as to which such restrictions have
terminated shall be entitled to receive from the Company, without expense to
such holder, one or more new certificates for the Warrant or for such shares of
Common Stock not bearing any restrictive legend.

               (d) FINANCIAL RISK. The Holder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.

               (e) RISK OF NO REGISTRATION. The Holder understands that if a
registration statement covering the Securities under the Securities Act is not
in effect when it desires to sell the Warrant or the Common Stock issuable upon
exercise of the Warrant, it may be required to hold such securities for an
indefinite period. The Holder also understands that any sale of the Warrant or
the Common Stock issuable upon exercise of the Warrant that might be made by it
in reliance upon Rule 144 under the Securities Act may be made only in
accordance with the terms and conditions of that Rule.

        10. "MARKET STAND-OFF" AGREEMENT. The Holder hereby agrees that the
Holder shall not sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the



                                       5.
<PAGE>

Company held the Holder (other than those included in the registration) for a
period specified by the representative of the underwriters of Common Stock (or
other securities) of the Company not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Company filed
under the Securities Act.

        The Holder further agrees to execute and deliver such other agreements
as may be reasonably requested by the Company or the underwriter which are
consistent with the foregoing or which are necessary to give further effect
thereto. In addition, if requested by the Company or the representative of the
underwriters of Common Stock (or other securities) of the Company, each the
Holder shall provide, within ten (10) days of such request, such information as
may be required by the Company or such representative in connection with the
completion of any public offering of the Company's securities pursuant to a
registration statement filed under the Securities Act. The obligations described
in this Section 11 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-4 or similar forms that may be promulgated in the future.
The Company may impose stop-transfer instructions with respect to the shares of
Common Stock (or other securities) subject to the foregoing restriction until
the end of said one-hundred-eighty (180)-day period.

        11. MODIFICATION AND WAIVER. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.

        12. NOTICES. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered
or shall be sent by certified mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.

        13. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Common Stock issuable upon the exercise of this Warrant
shall survive the exercise and termination of this Warrant. All of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the holder hereof.

        14. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.

        15. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will



                                       6.
<PAGE>

make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.

        16. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Exercise Price.



                      [THIS SPACE INTENTIONALLY LEFT BLANK]



                                       7.
<PAGE>

        IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this __ day of ____________,
2001.


                                        CRITICAL PATH, INC.
                                        a California corporation


                                        By:
                                           ------------------------------------

                                        Print Name:

                                        Title: Senior Vice President, General
                                               Counsel and Secretary



                                       8.
<PAGE>


                                    EXHIBIT A

                                SUBSCRIPTION FORM



                                                       Date:
                                                            --------------------



Critical Path, Inc.
532 Folsom Street
San Francisco, CA 94105


Attn:  Chief Financial Officer


Ladies and Gentlemen:


        The undersigned hereby elects to exercise the warrant issued to it by
Critical Path, Inc. (the "COMPANY") and dated ___________________ (the
"WARRANT"), and to purchase thereunder __________________________________ shares
of the Common Stock of the Company (the "SHARES") at a purchase price of Two
Dollars ($2.00) per Share or an aggregate purchase price of
__________________________________ Dollars ($__________) (the "EXERCISE PRICE").

        Pursuant to the terms of the Warrant the undersigned has delivered the
Exercise Price herewith in full in cash or by certified check or wire transfer.



                                          Very truly yours,



                                          -------------------------------------
                                          Company Name

                                          By:
                                             ----------------------------------

                                          Print Name
                                                    ---------------------------

                                          Title:
                                                -------------------------------




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.5
<SEQUENCE>7
<FILENAME>f81657ex4-5.txt
<DESCRIPTION>EXHIBIT 4.5
<TEXT>
<PAGE>

                                                                    EXHIBIT 4.5

        THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

                           WARRANT TO PURCHASE SHARES
                             OF THE COMMON STOCK OF
                               CRITICAL PATH, INC.


                                DATE: MAY 9, 2001



        This certifies Rajiv Surendra Patel, an individual (c/o Spear Street
Capital, Spear Tower, 35th floor, San Francisco, CA 94105) (the "HOLDER"), for
value received, shall be entitled to purchase from Critical Path, Inc., a
California corporation (the "COMPANY"), having its principal place of business
at 532 Folsom Street, San Francisco, California, a maximum of Sixteen Thousand
and Six Hundred Sixty-Seven (16,667) shares of fully paid and assessable shares
of the Company's Common Stock ("COMMON STOCK") for cash, at a purchase price
equal to U.S. Two Dollars and Zero Cents ($2.00) per share (the "EXERCISE
PRICE") at any time, or from time to time, up to and including 5:00 p.m. (local
time) on the third anniversary from the date of this Warrant (the "EXPIRATION
DATE"), upon the surrender to the Company at its principal place of business (or
at such other location as the Company may advise the Holder in writing) of this
Warrant properly endorsed a Form of Subscription in substantially the form
attached hereto duly filled in and signed and upon payment in cash or by check
of the aggregate Exercise Price for the number of shares for which this Warrant
is being exercised determined in accordance with the provisions hereof. The
Exercise Price and the number of shares of Common Stock purchasable hereunder
are subject to adjustment as provided in Section 3 of this Warrant.

        This Warrant is subject to the following terms and conditions:

        1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES. This Warrant
is exercisable at the option of the holder of record hereof at any time or from
time, to time, up to the Expiration Date for all or any part of the shares of
Common Stock (but not for a fraction of a share) which may be purchased
hereunder, provided however, that Holder must exercise this Warrant for not less
than one hundred (100) shares in each instance. The Company agrees that the
shares of Common Stock purchased under this Warrant shall be and are deemed to
be issued to the Holder hereof as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered,
properly endorsed, the completed, executed Form of Subscription delivered and
payment made for such shares. Certificates for the shares of Common Stock so
purchased, together with any other securities or property to which the Holder is
entitled upon such exercise, shall be delivered to the Holder by the Company at
the Company's expense within a reasonable time after the rights represented by
this Warrant have been so



                                       1.
<PAGE>

exercised, and in any event, within fifteen (15) days of such exercise. In case
of a purchase of less than all the shares that may be purchased under this
Warrant, the Company shall cancel this Warrant and execute and deliver a new
Warrant or Warrants of like tenor for the balance of the shares purchasable
under the Warrant surrendered upon such purchase to the Holder hereof within a
reasonable time. Each stock certificate so delivered shall be in such
denominations of Common Stock as may be requested by the Holder hereof, but in
no event for less than one hundred (100) shares and shall be registered in the
name designated by such Holder.

        2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Common Stock which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Common Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such shares of
Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Common Stock may be listed; provided, however, that the
Company shall not be required to effect a registration under federal or state
securities laws with respect to such exercise. The Company will not take any
action that would result in any adjustment of the Exercise Price (as set forth
in Section 3 hereof) if the total number of shares of Common Stock issuable
after such action upon exercise of all outstanding warrants, together with all
shares of Common Stock then outstanding and all shares of Common Stock then
issuable upon exercise of all options and upon the conversion of all convertible
securities then outstanding, would exceed the total number of shares of Common
Stock then authorized by the Company's Articles of Incorporation.

        3. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The Exercise Price
and the number of shares purchasable upon the exercise of this Warrant shall be
subject to adjustment from time to time upon the occurrence of certain events
described in this Section 3. Upon each adjustment of the Exercise Price, the
Holder shall thereafter be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of shares obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Exercise Price resulting from such adjustment.

           3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at
any time subdivide its outstanding shares of Common Stock into a greater number
of shares, the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Common Stock of the Company shall be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination shall
be proportionately increased.

           3.2 DIVIDENDS IN COMMON STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the Holders of Common
Stock (or any shares of stock or other



                                       2.
<PAGE>

securities at the time receivable upon the exercise of this Warrant) shall have
received or become entitled to receive, without payment therefor,

               (a) Common Stock or any shares of stock or other securities which
are at any time directly or indirectly convertible into or exchangeable for
Common Stock, or any rights or options to subscribe for, purchase or otherwise
acquire any of the foregoing by way of dividend or other distribution,

               (b) any cash paid or payable otherwise than as a cash dividend,
or

               (c) Common Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than shares of
Common Stock issued as a stock split or adjustments in respect of which shall be
covered by the terms of Section 3.1 above), then and in each such case, the
Holder hereof shall, upon the exercise of this Warrant, be entitled to receive,
in addition to the number of shares of Common Stock receivable thereupon, and
without payment of any additional consideration therefor, the amount of stock
and other securities and property (including cash in the cases referred to in
clause (b) above and this clause (c)) which such Holder would hold on the date
of such exercise had he been the holder of record of such Common Stock as of the
date on which holders of Common Stock received or became entitled to receive
such shares or all other additional stock and other securities and property.

               3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any recapitalization, reclassification or reorganization of the capital
stock of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, or other assets or property (an
"ORGANIC CHANGE"), then, as a condition of such Organic Change, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented by this Warrant) such shares of
stock, securities or other assets or property as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented by this
Warrant. In the event of any Organic Change, appropriate provision shall be made
by the Company with respect to the rights and interests of the Holder of this
Warrant to the end that the provisions hereof (including, without limitation,
provisions for adjustments of the Exercise Price and of the number of shares
purchasable and receivable upon the exercise of this Warrant) shall thereafter
be applicable, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company will not effect any
such consolidation, merger or sale unless, prior to the consummation thereof,
the successor corporation (if other than the Company) resulting from such
consolidation or the corporation purchasing such assets shall assume by written
instrument reasonably satisfactory in form and substance to the Holders executed
and mailed or delivered to the registered Holder hereof at the last address of
such Holder appearing on the books of the Company, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase.



                                       3.
<PAGE>

           3.4 NOTICES OF CHANGE. Immediately upon any adjustment in the number
or class of shares subject to this Warrant and of the Exercise Price, the
Company shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment.

        4. ISSUE TAX. The issuance of certificates for shares of Common Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder.

        5. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.

        6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholder of
the Company or any other matters or any rights whatsoever as a stockholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such Holder for the Exercise Price or as a stockholder of the Company, whether
such liability is asserted by the Company or by its creditors.

        7. WARRANTS NON-TRANSFERABLE. This Warrant shall not be transferable by
the Holder without the prior written consent of the Company.

        8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant, shall survive the
exercise of this Warrant.

        9. REPRESENTATIONS AND COVENANTS OF THE HOLDER.

           This Warrant has been issued by the Company in reliance upon the
following representations and covenants of the Holder:

               (a) INVESTMENT PURPOSE. The Warrant or the Common Stock issuable
upon exercise of the Warrant (collectively, the "Securities") will be acquired
for investment and not with a view to the sale or distribution of any part
thereof, and the Holder has no present intention of selling or engaging in any
public distribution of the Securities except pursuant to a registration or
exemption.

               (b) PRIVATE ISSUE. The Holder understands (i) that the Warrant
and the Common Stock issuable upon exercise of this Warrant is not registered
under the Securities Act or qualified under applicable state securities laws on
the ground that the issuance contemplated



                                       4.
<PAGE>

by this Warrant will be exempt from the registration and qualifications
requirements thereof, and (ii) that the Company's reliance on such exemption is
predicated on the representations set forth in this Section 9.

               (c) DISPOSITION OF SECURITIES. In no event will the Holder make a
disposition of the Warrant or the Common Stock issuable upon exercise of the
Warrant unless and until (i) it shall have notified the Company of the proposed
disposition, and (ii) if requested by the Company, it shall have furnished the
Company with an opinion of counsel (which counsel may either be inside or
outside counsel to the Holder) satisfactory to the Company and its counsel to
the effect that (A) appropriate action necessary for compliance with the
Securities Act has been taken, or (B) an exemption from the registration
requirements of the Securities Act is available. Notwithstanding the foregoing,
the restrictions imposed upon the transferability of any of its rights to
acquire Common Stock or Common Stock issuable on the exercise of such rights do
not apply to transfers from the beneficial owner of any of the aforementioned
securities to its nominee or from such nominee to its beneficial owner, and
shall terminate as to any particular share of Common Stock when (1) such
security shall have been effectively registered under the Securities Act and
sold by the holder thereof in accordance with such registration or (2) such
security shall have been sold without registration in compliance with Rule 144
under the Securities Act, or (3) a letter shall have been issued to the Holder
at its request by the staff of the Securities and Exchange Commission or a
ruling shall have been issued to the Holder at its request by such Commission
stating that no action shall be recommended by such staff or taken by such
Commission, as the case may be, if such security is transferred without
registration under the Securities Act in accordance with the conditions set
forth in such letter or ruling and such letter or ruling specifies that no
subsequent restrictions on transfer are required. Whenever the restrictions
imposed hereunder shall terminate, as hereinabove provided, the Holder or holder
of a share of Common Stock then outstanding as to which such restrictions have
terminated shall be entitled to receive from the Company, without expense to
such holder, one or more new certificates for the Warrant or for such shares of
Common Stock not bearing any restrictive legend.

               (d) FINANCIAL RISK. The Holder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.

               (e) RISK OF NO REGISTRATION. The Holder understands that if a
registration statement covering the Securities under the Securities Act is not
in effect when it desires to sell the Warrant or the Common Stock issuable upon
exercise of the Warrant, it may be required to hold such securities for an
indefinite period. The Holder also understands that any sale of the Warrant or
the Common Stock issuable upon exercise of the Warrant that might be made by it
in reliance upon Rule 144 under the Securities Act may be made only in
accordance with the terms and conditions of that Rule.

        10. "MARKET STAND-OFF" AGREEMENT. The Holder hereby agrees that the
Holder shall not sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company held the Holder (other than those included in
the registration) for a period specified by the representative of the
underwriters of Common Stock (or other securities) of the Company not



                                       5.
<PAGE>

to exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act.

        The Holder further agrees to execute and deliver such other agreements
as may be reasonably requested by the Company or the underwriter which are
consistent with the foregoing or which are necessary to give further effect
thereto. In addition, if requested by the Company or the representative of the
underwriters of Common Stock (or other securities) of the Company, each the
Holder shall provide, within ten (10) days of such request, such information as
may be required by the Company or such representative in connection with the
completion of any public offering of the Company's securities pursuant to a
registration statement filed under the Securities Act. The obligations described
in this Section 11 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-4 or similar forms that may be promulgated in the future.
The Company may impose stop-transfer instructions with respect to the shares of
Common Stock (or other securities) subject to the foregoing restriction until
the end of said one-hundred-eighty (180)-day period.

        11. MODIFICATION AND WAIVER. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.

        12. NOTICES. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered
or shall be sent by certified mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.

        13. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Common Stock issuable upon the exercise of this Warrant
shall survive the exercise and termination of this Warrant. All of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the holder hereof.

        14. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.

        15. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.



                                       6.
<PAGE>

        16. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Exercise Price.




                      [THIS SPACE INTENTIONALLY LEFT BLANK]


                                       7.
<PAGE>


         IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this __ day of
_____________, 2001.


                                        CRITICAL PATH, INC.
                                        a California corporation


                                        By:
                                           ------------------------------------

                                        Print Name:

                                        Title: Senior Vice President,
                                               General Counsel and Secretary



                                       8.
<PAGE>

                                    EXHIBIT A

                                SUBSCRIPTION FORM


                                                      Date:
                                                           --------------------



Critical Path, Inc.
532 Folsom Street
San Francisco, CA 94105

Attn:  Chief Financial Officer

Ladies and Gentlemen:



        The undersigned hereby elects to exercise the warrant issued to it by
Critical Path, Inc. (the "COMPANY") and dated ___________________ (the
"WARRANT"), and to purchase thereunder __________________________________ shares
of the Common Stock of the Company (the "SHARES") at a purchase price of Two
Dollars ($2.00) per Share or an aggregate purchase price of
__________________________________ Dollars ($__________) (the "EXERCISE PRICE").

        Pursuant to the terms of the Warrant the undersigned has delivered the
Exercise Price herewith in full in cash or by certified check or wire transfer.



                                          Very truly yours,



                                          -------------------------------------
                                          Company Name

                                          By:
                                             ----------------------------------

                                          Print Name
                                                    ---------------------------

                                          Title:
                                                -------------------------------




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>8
<FILENAME>f81657ex10-1.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.1


                   FIRST AMENDMENT TO EMAIL SERVICES AGREEMENT

        The following amendment (the "Amendment") is entered into by and between
Critical Path, Inc. and ICQ, Inc. (together the "Parties) as of this 7th day of
May, 1999.

WHEREAS, the Parties have entered into that certain Email Services Agreement
dated as of January 29, 1999.

WHEREAS, the Parties now desire to amend the Agreement as provided in this
Amendment below.

WHEREAS, the Parties now desire to amend the Agreement as provided in this
Amendment below.

NOW THEREFORE, for good and valuable consideration the sufficiency of which is
hereby acknowledged by the Parties, the Parties agree as follows:

        1. Definitions. Any capitalized term not otherwise defined herein shall
have the meanings assigned to them in the Agreement.

        2. Amendment. The Agreement shall be amended so that the existing
Section 9 shall be deleted in its entirety and replaced with the following:

        9. EXCLUSIVITY

Except as provided in this Section 9, the parties agree that the relationship
created by this Agreement shall be non-exclusive, and each of the parties may
enter into the same or a similar relationship with one or more third parties.
Without limiting the generality of the foregoing, ICQ shall be free to enter
into agreements with third parties for the use of integration of other web-based
email software and services with the ICQ Service, and CP shall be free to enter
into agreements with third parties pursuant to which it provides email products
and services to such third parties. However, notwithstanding the foregoing, CP
agrees that, during the term of this Agreement, it shall not integrate any email
or email related service it provides to any entity with any instant messaging,
or similar or related online, real time messaging product ("Instant Messaging
Product") of that entity (or of an affiliate of that entity), nor shall CP
integrate any Instant Messaging Program other than ICQ instant messaging product
into any email service provided by CP to end users directly or to more than one
particular customer of CP on a case-by-case basis (with any such integration for
the latter still being subject to the next following sentence). Further, CP
agrees that it will not assist any of its customers or partners in integrating
Instant Messaging Products other than ICQ instant messaging products into any
email product or service provided by CP or its affiliates, unless such customer
or partners insists upon such assistance after CP has used commercially
reasonably efforts to persuade such customer or partner to instead use ICQ
instant messaging products and


<PAGE>

services. During the term of this Agreement, CP will promote ICQ as CP's
preferred integrated instant messaging service and product.

        3. No Other Changes. Except as expressly amended herein, the provisions
of the Agreement shall remain in full force and effect and nothing in this
Amendment shall be constructed as a waiver of any of the rights and obligations
of the Parties under the Agreement.

        4. Governing Law. This Amendment shall be interpreted, constructed and
enforced in all respects in accordance with the laws of the Commonwealth of
Virginia except for it conflicts of laws principles.

        5. Counterparts. This Amendment may be executed in the counterparts,
each of which will constitute an original but all of which when taken together
will constitute one instrument.

        In witness whereof, the Parties have executed this Amendment on the date
first written above.



ICQ, INC.                                  CRITICAL PATH, INC.


By:  /s/                                   By:  /s/
   ----------------------------------         ----------------------------------

Name:                                      Name:
     --------------------------------           --------------------------------

Title:                                     Title:
      -------------------------------            -------------------------------



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>9
<FILENAME>f81657ex10-2.txt
<DESCRIPTION>EXHIBIT 10.2
<TEXT>
<PAGE>

                                                                   EXHIBIT 10.2


                             As of February 12, 2002

David C. Hayden
2510 Jackson Street

San Francisco, California 94115

Dear David:

         This letter agreement (the "Amendment") hereby supplements and amends
the terms and conditions of your employment agreement with Critical Path, Inc.,
a California corporation (the "Company") dated August 1, 2001 (the "Agreement")
and related performance loan and stock option documentation (collectively, the
"Agreements"). The purpose of this Amendment is to document changes to the
performance component of your employment, including the modifications to your
performance loan, in order to reflect the change in the focus of your job
responsibilities. Except as amended herein, the provisions contained in the
Agreements remain in effect. This Amendment has an effective date of February
12, 2002. Capitalized terms, unless otherwise defined herein, shall have the
meaning set forth in the Agreement.

         In consideration of the mutual covenants and promises made in this
Amendment, you and the Company agree as follows:

1.       Amendments.

         (a) Performance Loan. On August 13, 2001, the Company loaned you
$1,500,000 (the "Prior Performance Loan"). Interest on the Prior Performance
Loan has accrued at the rate of 6.75% per annum through February 11, 2002 and
such interest is due and payable on August 13, 2002 (the "Accrued Interest"). As
of February 12, 2002, the Prior Performance Loan was amended and restated in its
entirety and replaced with a new performance loan (the "Performance Loan") as
evidenced by this Amendment and the Amended and Restated Promissory Note that is
attached hereto as Exhibit A. The Performance Loan has an increased total loan
principal amount of $1,950,000, plus Accrued Interest, and is a full recourse
loan with a stated term that ends on August 13, 2004 except as otherwise
provided in the Amended and Restated Promissory Note. Beginning on February 12,
2002, the date that the additional loan amount of $450,000 from the Company was
provided to you, the Performance Loan will accrue at the rate of 6.75% per year
and interest is due and payable on August 13th of each year commencing on August
13, 2002.

         As security for the timely performance of your obligations under this
Amendment and the Amended and Restated Promissory Note, you hereby pledge and
grant to the Company a first priority perfected security interest in all of your
right, title and interest, whether now owned or hereafter acquired, in and to
(i) your stock options to purchase Company shares, (ii) the shares of the
Company's common stock acquired pursuant to such option exercises and (iii) the
proceeds thereof. Such common shares shall be held by the Company as secured
party until full repayment of all principal and interest arising under the
Performance Loan. You further acknowledge and agree that the common shares
underlying such stock options are subject to the

<PAGE>

security interest granted under this paragraph. The Company shall have the right
at any time to either (a) effectuate a cashless exercise/same day sale of such
options (provided that the then-fair market value of a Company common share is
greater than the per share exercise price of your options) with the sales
proceeds of such shares being first applied to satisfy required tax withholding
and to repay the Performance Loan or (b) cancel your stock options and apply the
difference between the then-fair market value of the underlying shares and the
aggregate option exercise price to satisfy required tax withholding and to repay
the Performance Loan. You hereby grant the Company an irrevocable Power of
Attorney, by executing the Power of Attorney form attached hereto as Exhibit B,
to effectuate the foregoing.

         In the event that you fail to perform any term of the Amendment or fail
to make any payment when due under the Performance Loan Note, the Company shall
have all of the rights and remedies of a creditor and secured party at law and
in equity, including (without limitation) the rights and remedies provided under
the Uniform Commercial Code. You hereby agree that any disposition of any or all
of the common shares you acquired by way of a private placement or other method
which in the opinion of the Company is required or advisable under Federal and
state securities laws is commercially reasonable. At any public sale, the
Company may (if it is the highest bidder) purchase all or any part of the common
shares at such price as the Company deems proper. Out of the proceeds of any
sale, the Company may retain an amount sufficient to pay all amounts then due
under the Note, together with the expenses of the sale and reasonable attorneys'
fees. The Company shall pay the balance of such proceeds, if any, to you. You
shall be liable for any deficiency that remains after the Company has exercised
its rights under this Amendment. You also agree to execute any documents
necessary for the Company to perfect its security interest.

         (b) Performance Loan Forgiveness. Provided that you are employed by the
Company on the date the negotiations or communications began (as determined by
the Company's Board of Directors in good faith) which lead to a Change in
Control of the Company and in which the Change in Control consideration received
by Company common shareholders is at least $10.00 per share (with such share
price adjusted for any future stock splits, stock dividends, recapitalization,
or similar events) (a "Corporate Transaction") and provided further that the
Compensation Committee certifies in writing that the Corporate Transaction has
been successfully achieved, the outstanding amount of principal (up to
$1,950,000) of your Performance Loan shall be forgiven ("Performance Loan
Forgiveness"). You must however timely and fully satisfy the withholding
obligations on the Performance Loan Forgiveness by paying to the Company the
required withholding amount in cash. To the extent that you do not satisfy the
withholding requirements on the Performance Loan Forgiveness, then the amount of
actual Performance Loan Forgiveness shall be reduced by such unsatisfied
withholding amount and the amount of such reduction shall instead be treated as
a cash bonus ("Withholding Bonus"). The Withholding Bonus, however, shall be
immediately applied to satisfy the required withholding on the sum of the
reduced Performance Loan Forgiveness amount and the Withholding Bonus. Purely
for illustrating how this Performance Loan Forgiveness reduction provision
operates, if there was a Corporate Transaction in which you were eligible to
receive Performance Loan Forgiveness and if the required withholding amount on
$1,950,000 of Performance Loan Forgiveness is $450,000 and if you did not timely
satisfy this withholding amount, then the actual amount of Performance Loan
Forgiveness would be reduced to $1,500,000 and the Withholding Bonus amount
would be $450,000 and such Withholding Bonus would be immediately applied by the
Company to satisfy the total withholding obligation. Any

<PAGE>

unpaid principal and interest on the Performance Loan remains a full recourse
obligation for you and may be repaid by you during or at the end of the
Performance Loan term. Any contrary provisions in the Agreement, including but
not limited to the change of control loan forgiveness provision are superseded
by this Amendment.

         (c) Cash Bonuses and Change in Control. The Cash Performance Bonus and
Change in Control loan forgiveness provisions previously provided for in your
Agreement are hereby replaced by the Performance Loan Forgiveness provision in
Section 1(b) of this Amendment and such former provisions shall no longer be
applicable upon the execution of this Amendment.

         If the terms of this Amendment are acceptable to you, please execute
the enclosed copy of this letter and return it to the undersigned.


                                          Very truly yours,

                                          CRITICAL PATH, INC.

                                                /s/ Michael Zukerman
                                          By: _________________________________


                                          Its: ________________________________


AGREED TO AND ACCEPTED BY:

       /s/ David C. Hayden
____________________________________
           David C. Hayden


____________________________________
             Date Signed

<PAGE>

                                    EXHIBIT A

                                  FULL RECOURSE

                      AMENDED AND RESTATED PROMISSORY NOTE

$1,950,000                                            San Francisco, California
                                                        As of February 12, 2002


         For value received, the undersigned promises to pay Critical Path,
Inc., a California corporation (the "Company"), at its principal office the
principal sum of $1,950,000 with interest from the date hereof at a rate of
6.75% per annum, compounded annually, on the unpaid balance of such principal
sum. Such principal and interest shall be due and payable on August 13, 2004,
and interest shall be due and payable annually before August 13th of each year
until paid in full (and the interest due by August 13, 2002 shall include
interest that has accrued (through the date immediately before the date of this
Note) at the rate of 6.75% per annum on the $1,500,000 that the Company loaned
to the undersigned pursuant to the promissory note, dated August 13, 2001, by
and between the Company and the undersigned) (such promissory note, the
"Original Note"). Such due date of August 13, 2004 shall be extended by two
years if the undersigned's employment with the Company is terminated either
without Cause or for Good Reason (as defined in the undersigned's employment
agreement with the Company, dated August 1, 2001, as amended on February 12,
2002). Notwithstanding the foregoing, the Company may at any time in its sole
and absolute discretion upon written notice to the undersigned demand that all
or any portion of the amounts evidenced by this Note shall immediately become
due and payable whereupon such amounts shall be due and payable in full.

         If the undersigned's employment or directorship with the Company is
terminated for Cause prior to payment in full of this Note, this Note shall be
immediately due and payable. Principal and interest are payable in lawful money
of the United States of America. PRINCIPAL AMOUNTS DUE UNDER THIS NOTE MAY BE
PREPAID WITHOUT PENALTY.

         Should suit be commenced to collect any sums due under this Note, such
sum as the Court may deem reasonable shall be added hereto as attorneys' fees.
The makers and endorsers have severally waived presentment for payment, protest,
notice of protest, and notice of nonpayment of this Note.

         This Note is a full recourse note secured by a first priority perfected
security interest in (i) the undersigned's stock options to purchase Company
common shares, (ii) the shares of Company common stock acquired pursuant to such
option exercises and (iii) the proceeds thereof. Such shares shall be held by
the Company as secured party until full repayment of all principal and interest
due under this Note, pursuant to an Amendment, of even date herewith, to the
undersigned's employment agreement, which is on file with the Secretary of the
Company. The undersigned agrees that the common shares underlying such stock
options are subject to the foregoing security interest. This Note amends and
restates in its entirety the Original Note.

                                                   /s/ David C. Hayden
                                                _______________________________
                                                       David C. Hayden


<PAGE>

                                    EXHIBIT B

                                POWER OF ATTORNEY

         This Power of Attorney is executed and delivered by David C. Hayden
("Grantor") to Critical Path, Inc., a California corporation (hereinafter
referred to as "Attorney"), under an amendment to Grantor's employment
agreement, dated February 12, 2002, and other related documents (the "Loan
Documents"). No person to whom this Power of Attorney is presented, as authority
for Attorney to take any action or actions contemplated hereby, shall be
required to inquire into or seek confirmation from Grantor as to the authority
of Attorney to take any action described below, or as to the existence of or
fulfillment of any condition to this Power of Attorney, which is intended to
grant to Attorney unconditionally the authority to take and perform the actions
contemplated herein, and Grantor irrevocable waives any right to commence any
suit or action, in law or equity, against any person or entity which acts in
reliance upon or acknowledges the authority granted under this Power of
Attorney. The Power of Attorney granted hereby is coupled with an interest, and
may not be revoked or canceled by Grantor without Attorney' s written consent.

         Grantor hereby irrevocably constitutes and appoints Attorney (and all
officers, employees or agents designated by Attorney), with full power of
substitution, as Grantor's true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of Grantor and in the
name of Grantor or in its own name, from time to time in Attorney's discretion,
to take any and all appropriate action and to execute and deliver any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of the Loan Documents and, without limiting the generality of the
foregoing, Grantor hereby grants to Attorney the power and right, on behalf of
Grantor, without notice to or assent by Grantor, and at any time, to do the
following: (a) exercise any portion or all of Grantor's options (including any
options that may be awarded to Grantor in the future) to purchase shares of
Attorney's common stock and to hold, retire, collect, sell or dispose of the
shares (or the proceeds of such shares) acquired pursuant to such option
exercises to satisfy any liability Grantor may owe to Attorney (even if such
liability is not then currently due); (b) pay or discharge any taxes, liens,
security interests, or other encumbrances levied or placed on or threatened
against Grantor or its property; (c) defend any suit, action or proceeding
brought against Grantor if Grantor does not defend such suit, action or
proceeding or if Attorney believes that Grantor is not pursuing such defense in
a manner that will maximize the recovery to Attorney, and settle, compromise or
adjust any suit, action, or proceeding described above and, in connection
therewith, give such discharges or releases as Attorney may deem appropriate;
(d) file or prosecute any claim, litigation, suit or proceeding in any court of
competent jurisdiction or before any arbitrator, or take any other action
otherwise deemed appropriate by Attorney for the purpose of collecting any and
all such moneys due to Grantor whenever payable and to enforce any other right
in respect of Grantor's property; (e) communicate in its own name with any party
to any contract with regard to the assignment of the right, title and interest
of Grantor in and under the contracts and other matters relating thereto; (f) to
file such financing statements with respect to any security agreement, with or
without Grantor's signature, or to file a photocopy of any security agreement in
substitution for a financing statement, as Attorney may deem appropriate and to
execute in Grantor's name such financing statements and amendments thereto and
continuation statements which may require Grantor's signature; and (g) execute,
in connection with any sale provided for in any Loan Document, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
collateral and to otherwise direct such sale or resale, all as though Attorney
were the absolute owner of the property of Grantor for all purposes, and to do,
at Attorney's option and Grantor's expense, at any time or from time to time,
all acts and other things that Attorney reasonably deems necessary to

<PAGE>

perfect, preserve, or realize upon Grantor's property or assets and Attorney's
liens thereon, all as fully and effectively as Grantor might do. Grantor hereby
ratifies, to the extent permitted by law, all that said Attorney shall lawfully
do or cause to be done by virtue hereof.

         IN WITNESS WHEREOF, this Power of Attorney is executed by Grantor this
_____________ day of _____________________.


                                             "GRANTOR"

                                             DAVID C. HAYDEN

                                              /s/ David Hayden
                                             __________________________________



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-15.1
<SEQUENCE>10
<FILENAME>f81657ex15-1.txt
<DESCRIPTION>EXHIBIT 15.1
<TEXT>
<PAGE>
                                                                    EXHIBIT 15.1



May 14, 2002

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Commissioners:

We are aware that our report dated May 8, 2002 on our review of interim
financial information of Critical Path, Inc. (the "Company") as of and for the
period ended March 31, 2002 and included in the Company's quarterly report on
Form 10-Q for the quarter then ended is incorporated by reference in the
Company's Registration Statements on Form S-8 (Nos. 333-63080, 333-51504,
333-44418, 333-40476, 333-36228, 333-95933, 333-95279, 333-87553) and on Form
S-3 (Nos. 333-39958, 333-38006, 333-38000, 333-36382).

Very truly yours,

/s/  PricewaterhouseCoopers LLP



</TEXT>
</DOCUMENT>
</SUBMISSION>
