APPENDIX A

You will be Executive Vice President, Worldwide Services and Support and Executive Vice President, Asia Pacific for the Company, reporting to Mark Ferrer, Chief Executive Officer, working out of the Company’s office in Washington, DC or from your home office. You will have responsibility for sales, services and support in the Asia Pacific region as well. This is an exempt position. As an executive officer, you will be covered by our standard form Indemnification Agreement as well as our Directors and Officers Liability Insurance.

You agree to the best of your ability that you will at all times loyally and conscientiously perform all of the duties and obligations required of you pursuant to the express and implicit terms hereof, and to the reasonable satisfaction of the Company. During the term of your employment, you further agree that you will devote all of your business time and attention to the business of the Company.

In connection with the commencement of your employment, the Company will recommend that the Compensation Committee of the Board of Directors grant you an option to purchase 350,000 shares of the Company’s Common Stock (“Shares”) with an exercise price equal to the closing price of Critical Path’s stock on the last trading day prior to the date of Grant. These Shares will vest over four years, with 12.5% vesting on your six-month anniversary with the Company, and 1/48^th of the original grant amount vesting monthly thereafter. Vesting will, of course, depend on your continued employment with the Company. These Shares will be subject to the terms of the applicable Company Stock Option Plan and the Stock Option Agreement between you and the Company. Following the consummation of the Company’s rights offering, the Company agrees in good faith to review and improve your equity position, taking into account the dilution associated with the rights offering and any additional grants given to other executive team member.

In the event of a Change of Control of the Company, any unvested Shares originally granted will vest immediately should your employment be terminated without Cause or if you terminate your employment for Good Reason, each such event occurring within six (6) months of such Change of Control, all as such terms are defined in Appendix A.

(a)    The complainant shall provide the other party with a written statement of the claim identifying any supporting witnesses or documents and the requested relief.

(b)    The respondent shall furnish a statement of the relief, if any, that it is willing to provide, and identify supporting witnesses or documents. If the matter is not resolved, the parties shall submit the dispute to nonbinding mediation, paid for by the Company, before a mediator to be selected by the parties.

(c)    If the matter is not resolved through mediation, the parties agree that the dispute shall be resolved by binding arbitration. If the parties are unable to jointly select an arbitrator, they will obtain a list of arbitrators in San Francisco County, California, from the Federal Mediation and Conciliation Service and select an arbitrator by striking names from that list.

(d)    The arbitrator shall have the authority to determine whether the conduct complained of in section (a) of this section violates the complainant’s rights and, if so, to grant any relief authorized by law; subject to the exclusions of section (g) below. The arbitrator shall not have the authority to modify, change, or refuse to enforce the terms of any employment agreement between the parties, or change any lawful policy or benefit plan.

(e)    The Company shall bear the costs of the arbitration if you prevail. If the Company prevails, you will pay half the cost of the arbitration or $500, whichever is less. Each party shall pay its own attorney’s fees, unless the arbitrator orders otherwise pursuant to applicable law.

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

(g)    The parties agree that the arbitration award shall be enforceable in any court having jurisdiction to enforce this agreement, so long as the arbitrator’s findings of fact are supported by substantial evidence on the whole and the arbitrator has not made errors of law; however, either party may bring an action in a court of competent jurisdiction regarding or related to inventions that you may claim to have developed prior to joining the Company, pursuant to California Labor Code Section 2870 (“Disputes Related to Inventions”). The parties further agree that for Disputes Related to Inventions which the parties have elected to submit to arbitration, each party retains the right to seek preliminary injunctive relief in court in order to preserve the status quo or prevent irreparable injury before the matter can be heard in arbitration.

ACCEPTED AND AGREED:

CRITICAL PATH, INC.

Mark Palomba

/s/ Mark Palomba

5/17/04