UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA

Plaintiff, individually and on behalf of all other persons similarly situated, by her undersigned attorneys, for her Class Action Complaint, alleges upon personal knowledge as to herself and her own acts, and upon information and belief as to all other matters, based upon, inter alia, the investigation made by and through her attorneys, which investigation included, among other things, a review of the public documents and news releases of Critical Path, Inc. ("Critical Path" or the "Company").

NATURE OF THE ACTION

1. Plaintiff brings this action as a class action on behalf of herself and all other persons who purchased the common stock of Critical Path on the open market during the period April 20, 2000 through and including February 1, 2001 (the "Class Period"), to recover damages caused by defendants' violation of the federal securities laws. During the Class Period, defendants issued to the investing public materially false and misleading financial information concerning the Company's publicly reported revenues and earnings.

2. During the class period, the Company improperly recognized revenues for several transactions and based its revenue recognition upon falsified documentation. The Company had knowledge of the improper revenue recognition and failed to correct the misstatements. Failure to do so made the Defendants' statements about the Company false and misleading.

3. On February 2, 2001, prior to the opening of trading, Critical Path issued a press release announcing that it has commenced an investigation of certain financial reporting matters and that it has "placed two executives on leave." The Company went on to state that is has discovered "a number of transactions that put into question the company's financial results." Adams, Harkness & Hill analyst, Charles Trafton, was quoted by Bloomberg Business News as saying "This sounds like it's outright fraud. It sounds like there was a concerted effort to cook the books."

4. As a result of this announcement, the price of Critical Path shares fell roughly 61% from $10.07 to $3.94, causing substantial damage to Plaintiff and the Class.

JURISDICTION AND VENUE

5. The claims alleged herein arise under Sections 10(b) and 20 of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. § 78j(b) and 78t, and Rule 10b-5, 17 C.F.R. § 240.10b-5 promulgated thereunder.

6. The jurisdiction of this Court is based on Section 27 of the Exchange Act, 15 U.S.C. § 78aa and 28 U.S.C. § 1331.

7. Venue is proper in this District pursuant to Section 27 of the Exchange Act and 28 U.S.C. § 1391(b). Many of the acts alleged herein, including the dissemination to the investing public of the misleading statements and omissions at issue, occurred in substantial part in this District. Critical Path also has its principal place of business in this District.

8. In connection with the acts, transactions and conduct alleged herein, defendants used the means and instrumentalities of interstate commerce, including the United States mails, interstate telephone communications and the facilities of national securities exchanges and markets.

THE PARTIES

9. Plaintiff Wania Almadotter purchased shares of Critical Path common stock during the Class Period as set forth in the certification attached hereto.

10. Defendant Critical Path maintains its principal executive offices at 320 First Street, San Francisco, California 94105. The Company calls itself "the dominant global provider of complete end-to-end Internet messaging and collaboration solutions for wireless, Internet-centric, telecommunication and corporate businesses." Critical Path's common stock traded on the NASDAQ National Market System under the ticker symbol "CPTH."

11. Defendant Douglas Hickey ("Hickey") was, at all relevant times, the Company's Chief Executive Officer.

12. Defendant David Thatcher ("Thatcher") was, at all relevant times, the Company's President.

13. Defendant William Rinehart ("Rinehart") was, at all relevant times, the Company's Senior Vice President of Sales for the Americas.

14. Defendant Mark Rubash ("Rubash") was, at all relevant times, the Company's Executive Vice President and Chief Financial Officer.

15. Defendants Hickey, Thatcher, Rinehart, and Rubash are sometimes referred to herein as the Individual Defendants.

16. By reason of their positions with the Company, the Individual Defendants had access to internal Company documents, reports and other information, including adverse non-public information concerning the Company's services, financial condition, and future prospects, and attended management and/or board of director meetings. As a result of the foregoing, they were responsible for the truthfulness and accuracy of the Company's public reports and releases described herein.

17. Critical Path and the Individual Defendants, as officers and directors of a publicly held company, had a duty to promptly disseminate truthful and accurate information with respect to Critical Path and to promptly correct any public statements issued by or on behalf of the Company which had become false and misleading.

18. Each defendant knew or recklessly disregarded that the misleading statements and omissions complained of herein would adversely affect the integrity of the market for the Company's stock and would cause the price of the Company's stock to become artificially inflated. Each of the defendants acted knowingly or in such a reckless manner as to constitute a fraud and deceit upon plaintiff and the other members of the Class.

19. Defendants are liable, jointly and severally, as direct participants in and co-conspirators of, the wrongs complained of herein.

CLASS ACTION ALLEGATIONS

20. Plaintiff brings this action as a class action pursuant to Federal Rules of Civil Procedure 23(a) and (b)(3) on behalf of a class consisting of all persons who purchased Critical Path common stock during the period from April 20, 2000 through February 1, 2001 inclusive, and who suffered damages thereby (the "Class"). Excluded from the Class are the defendants, members of the defendants' families, any entity in which any defendant has a controlling interest or is a parent or subsidiary of or is controlled by the Company, and the officers, directors, employees, affiliates, legal representatives, heirs, predecessors, successors and assigns of any of the defendants.

21. The members of the Class are so numerous that joinder of all members is impracticable. While the exact number of Class members is unknown to the plaintiff at this time and can only be ascertained through appropriate discovery, the plaintiff believes there are, at a minimum, hundreds of members of the Class who traded during the Class Period. The Company had in excess of 73 million shares of its common stock outstanding as of February 1, 2001.

22. Common questions of law and fact exist as to all members of the Class and predominate over any questions affecting solely individual members of the Class. Among the questions of law and fact common to the Class are:

a) whether the federal securities laws were violated by defendants' acts as alleged herein;

b) whether Critical Path issued false and misleading statements during the Class Period;

c) whether the Individual Defendants caused Critical Path to issue false and misleading statements during the Class Period;

d) whether defendants acted knowingly or recklessly in issuing false and misleading statements;

e) whether the market prices of Critical Path securities during the Class Period were artificially inflated because of the defendants' conduct complained of herein; and

f) whether the members of the Class have sustained damages and, if so, what is the proper measure of damages.

35. Plaintiff's claims are typical of the claims of the members of the Class as plaintiff and members of the Class sustained damages arising out of defendants' wrongful conduct in violation of federal law as complained of herein.

36. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class actions and securities litigation. Plaintiff has no interests antagonistic to or in conflict with those of the Class.

37. A class action is superior to other available methods for the fair and efficient adjudication of the controversy since joinder of all members of the Class is impracticable. Furthermore, because the damages suffered by the individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for the Class members individually to redress the wrongs done to them. There will be no difficulty in the management of this action as a class action.

38. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on-the-market doctrine in that:

a) defendants failed to disclose material facts during the Class Period that would have corrected prior representations that became materially false and misleading as a result of subsequent events;

b) the omissions and misstatements were material;

c) the securities of the Company traded in an efficient market;

d) the misstatements and omissions alleged would tend to induce a reasonable investor to misjudge the value of the Company's securities; and

e) plaintiff and members of the Class purchased their Critical Path stock between the time the defendants failed to disclose material facts and the time the true facts were disclosed, without knowledge of the omitted facts.

39. Based upon the following, plaintiff and members of the Class are entitled to the presumption of reliance upon the integrity of the market.

DEFENDANTS' MATERIAL MISSTATEMENTS AND OMISSIONS

40. On April 20, 2000, Critical Path announced the results for its first fiscal quarter ending March 31, 2000. The Company's press release stated:

Revenues for the first quarter mark the largest quarter in Critical Path's history at $24.6 million, a 200 percent increase over revenue of $8.2 million in the previous quarter ended December 31, 1999, and more than a 2200 percent increase over revenue of $1.05 million for the same quarter of the prior year. The net loss for the quarter, excluding special charges was $16.8 million, or $0.33 per share, beating the First Call consensus estimate of a loss of $0.41 per share. During the corresponding quarter in 1999, the net loss, excluding special charges, was $5.4 million, or $0.77 per share. Including special charges, net loss for the first quarter ended March 31, 2000, was $76.9 million or a loss of $1.52 per share.

41. On May 15, 2000, Critical Path filed its Form 10-Q for the first fiscal quarter ending March 31, 2000 with the SEC, reporting substantially the same information as it reported in the April 20, 2000 press release. Defendant Rubash signed this Form 10-Q.

42. On July 19, 2000, Critical Path announced the results for its second fiscal quarter ending June 30, 2000. The Company's press release stated:

Revenue for the quarter reached $33.5 million, a 36 percent sequential increase over revenue of $24.6 million in the first quarter, and more than a

1,500 percent increase over revenue of $2.0 million in the same quarter of the prior year. The net loss for the quarter, excluding special charges, was $20.2 million, or $0.34 per share, compared with a net loss, excluding special charges, of $16.8 million, or $0.33 per share, in the first quarter this year, and a net loss of $6.9 million, or $0.21 per share, in the same

quarter a year ago. The Company also reported gross margin of $16.0 million, a 74 percent increase over gross margin of $9.2 million in the quarter ended March 31, 2000.

43. On August 14, 2000, Critical Path filed its Form 10-Q for the second fiscal quarter ending June 30, 2000 with the SEC, reporting substantially the same information as it reported in the July 19, 2000 press release. Defendant Rubash signed this Form 10-Q.

44. On October 19, 2000, Critical Path announced the results for its third fiscal quarter ending September 30, 2000. The Company's press release stated:

Revenue for the quarter reached nearly $45.0 million, a 34 percent sequential increase over revenue of $33.5 million in the second quarter, and an 815 percent increase over revenue of $4.9 million in the same quarter of the prior year. The net loss for the quarter, excluding special charges, was $8.7 million, or $0.14 per share, compared with a net loss, excluding special charges, of $20.2 million, or $0.34 per share, in the second quarter of this year, and a net loss of $6.2 million, or $0.17 per share, in the same quarter a year ago. The Company also reported gross margin, excluding special charges, of $25.3 million, a 58 percent increase over gross margin of $16.0 million in the quarter ended June 30, 2000.

45. On November 14, 2000, Critical Path filed its Form 10-Q for the third fiscal quarter ending September 30, 2000 with the SEC, reporting substantially the same information as it reported in the October 19, 2000 press release. Defendant Rubash signed this Form 10-Q.

46. On January 18, 2001, Critical Path announced the results for its fourth fiscal quarter ending December 31, 2000. The Company's press release stated:

Revenue for the quarter reached $52.0 million, a 16 percent sequential increase over revenue of $45.0 million in the third quarter of 2000, and a 534 percent increase over revenue of $8.2 million in the fourth quarter of 1999. The net loss for the quarter, excluding special charges, was $11.5 million, or $0.16 per share, compared with a net loss, excluding special charges, of $8.7 million, or $0.14 per share, in the third quarter of 2000, and a net loss of $11.0 million, or $0.26 per share, in the fourth quarter of 1999. The Company also reported gross profit, excluding special charges, of $29.1 million, a 15 percent increase over gross profit of $25.3 million in the third quarter of 2000.

47. The information stated in paragraphs 28 - 34 above was materially false and misleading and omitted facts when made in that the Defendants knew, or recklessly disregarded, that the Company's reported revenue and earnings were attributable to the improper recognition of revenue in violation of Generally Accepted Accounting Principals and SEC rules. In fact, Critical Path recently revealed that was investigating financial reporting matters related to "a number of transactions that put into question the company's financial results."

THE TRUTH EMERGES

48. Eventually, on February 2, 2001, Critical Path announced that its board has formed a special committee to investigate its net loss and revenue-recognition practices and that Defendants Thatcher and Rinehart have been placed on "administrative leave." Additionally, the Company said that, with respect to its fourth quarter, the net loss of $11.5 million, excluding special charges, and revenue of $52 million announced last month may have been "materially misstated." Significantly, Critical Path also announced that it "has discovered a number of transactions that put into question the company's financial results."

49. As a result of this announcement, the price of Critical Path shares fell roughly 61% from $10.07 to $3.94, causing substantial damage to Plaintiff and the Class.

VIOLATIONS OF GAAP

50. GAAP are those principles recognized by the accounting profession as the conventions, rules and procedures necessary to define accepted accounting practice at a particular time. SEC Regulation S-X (17 C.F.R. §210.4-01(a)(1)) states that financial statements filed with the SEC which are not prepared in compliance with GAAP are presumed to be misleading and inaccurate, despite footnote or other disclosure. Regulation S-X requires that interim financial statements must also comply with GAAP, with the exception that interim financial statements need not include disclosure which would be duplicative of disclosures accompanying annual financial statements. 17 C.F.R. §210.10-01(a).

51. The Individual Defendants caused Critical Path to falsify its reported financial results through its improper revenue recognition where Critical Path prematurely booked revenues on certain contracts.

52. GAAP, as set forth in FASB Statement of Concepts No. 5, provides the basic requirements for revenue to be recognizable: (1) revenue must have been earned; and (2) revenue must be realizable (collectible). See Concepts No. 5, 83.

53. Contrary to these representations and contrary to GAAP and SEC rules, during the Class Period, Critical Path improperly recognized revenue, according to the information Critical Path had at the time the revenue was recognized, the Company had not earned. Due to these accounting improprieties, the Company presented its financial results and statements in a manner that violated GAAP, including the following fundamental accounting principles:

(a) The principle that interim financial reporting should be based upon the same accounting principles and practices used to prepare annual financial statements was violated (APB No. 28, 10);

(b) The principle that financial reporting should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit and similar decisions was violated (FASB Statement of Concepts No. 1, 34);

(c) The principle that financial reporting should provide information about the economic resources of an enterprise, the claims to those resources, and effects of transactions, events and circumstances that change resources and claims to those resources was violated (FASB Statement of Concepts No. 1, 40);

(d) The principle that financial reporting should provide information about how management of an enterprise has discharged its stewardship responsibility to owners (stockholders) for the use of enterprise resources entrusted to it was violated. To the extent that management offers securities of the enterprise to the public, it voluntarily accepts wider responsibilities for accountability to prospective investors and to the public in general (FASB Statement of Concepts No. 1, 50);

(e) The principle that financial reporting should provide information about an enterprise's financial performance during a period was violated. Investors and creditors often use information about the past to help in assessing the prospects of an enterprise. Thus, although investment and credit decisions reflect investors' expectations about future enterprise performance, those expectations are commonly based at least partly on evaluations of past enterprise performance (FASB Statement of Concepts No. 1, 42);

(f) The principle that financial reporting should be reliable in that it represents what it purports to represent was violated. That information should be reliable as well as relevant is a notion that is central to accounting (FASB Statement of Concepts No. 2, 58-59);

(g) The principle of completeness, which means that nothing is left out of the information that may be necessary to insure that it validly represents underlying events and conditions was violated (FASB Statement of Concepts No. 2, 79); and

(h) The principle that conservatism be used as a prudent reaction to uncertainty to try to ensure that uncertainties and risks inherent in business situations are adequately considered was violated. The best way to avoid injury to investors

is to try to ensure that what is reported represents what it purports to represent (FASB Statement of Concepts No. 2, 95, 97).

54. Further, the undisclosed adverse information concealed by defendants during the Class Period is the type of information which, because of SEC regulations, regulations of the national stock exchanges and customary business practice, is expected by investors and securities analysts to be disclosed and is known by corporate officials and their legal and financial advisors to be the type of information which is expected to be and must be disclosed.

SCIENTER

55. Defendants Hickey, Thatcher, Rinehart, and Rubash caused Critical Path to engage in irregular accounting practices, and in turn caused Critical Path, to report artificially inflated financial results. The Individual Defendants knowingly, or in reckless disregard for the truth, caused Critical Path to engage in accounting irregularities.

56. Critical Path, acting through its officers, Hickey, Thatcher, Rinehart, and Rubash, knowingly or in reckless disregard for the truth, issued to the investing public financial statements, which contained materially false and misleading statements and artificially inflated earnings and assets. Each Individual Defendant had knowledge of Critical Path= problems and was motivated to conceal such problems. Each Individual Defendant sought to demonstrate that they could lead the Company successfully and generates the growth expected by the market.

FRAUDULENT SCHEME AND COURSE OF BUSINESS

57. Each defendant is liable for (i) making false statements, or (ii) failing to disclose adverse facts known to him/her about Critical Path. Defendants' fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of Critical Path publicly traded securities was a success, as it (i) deceived the investing public regarding Critical Path's prospects and business; (ii) artificially inflated the prices of Critical Path's publicly traded securities; and (iii) caused plaintiff and other members of the Class to purchase Critical Path publicly traded securities at inflated prices.

THE STATUTORY SAFE HARBOR DOES NOT APPLY

58. The statutory safe harbor provided for forward-looking statements under certain circumstances does not apply to any of the allegations that defendants failed to disclose material information they had an affirmative duty to disclose. The information defendants had a duty to disclose was not forward-looking, rather it concerned existing facts and events, including the Company's current financial condition.

COUNT I

VIOLATION OF SECTION 10(b) OF THE EXCHANGE ACT AND

RULE 10b-5 OF THE SECURITIES AND EXCHANGE COMMISSION

59. Plaintiff repeats and realleges each and every allegation contained in the foregoing paragraphs as if fully set forth herein.

60. This Count is asserted against all defendants and is based upon Section 10(b) of the 1934 Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder.

61. During the Class Period, defendants, singly and in concert, directly engaged in a common plan, scheme, and unlawful course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices, and courses of business which operated as a fraud and deceit upon Plaintiff and the other members of the Class, and failed to disclose material information in order to make the statements made, in light of the circumstances under which they were made, not misleading to Plaintiff and the other members of the Class. The purpose and effect of said scheme, plan, and unlawful course of conduct was, among other things, to induce Plaintiff and the other members of the Class to purchase Critical Path common stock during the Class Period at artificially inflated prices.

62. Throughout the Class Period, Critical Path acted through the Individual Defendants, whom it portrayed and represented to the financial press and public as its valid representatives. The willfulness, motive, knowledge, and recklessness of the Individual Defendants is therefore imputed to Critical Path, which is primarily liable for the securities law violations of the Individual Defendants while acting in their official capacity as a Company representative, or, in the alternative, which is liable for the acts of the Individual Defendants under the doctrine of respondent superior.

63. As a result of the failure to disclose material facts, the information the defendants disseminated to the investing public was materially false and misleading as set forth above, and the market price of Critical Path common stock was artificially inflated during the Class Period. In ignorance of the duty to disclose the false and misleading nature of the statements described above and the deceptive and manipulative devices and contrivances employed by said defendants, Plaintiff and the other members of the Class relied, to their detriment, on the integrity of the market price of the stock in purchasing Critical Path common stock. Had Plaintiff and the other members of the Class known the truth, they would not have purchased said shares or would not have purchased them at the inflated prices that were paid.

64. Plaintiff and the other members of the Class have suffered substantial damages as a result of the wrongs herein alleged in an amount to be proved at trial.

65. By reason of the foregoing, defendants directly violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder in that they: (a) employed devices, schemes, and artifices to defraud; (b) failed disclose material information; or (c) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon Plaintiff and the other members of the Class in connection with their purchases of Critical Path common stock during the Class Period.

COUNT II

VIOLATION OF SECTION 20(a)

OF THE EXCHANGE ACT

66. Plaintiff repeats and realleges each and every allegation contained in each of the foregoing paragraphs as if set forth fully herein.

67. The Individual Defendants, by virtue of their positions, stock ownership and/or specific acts described above, were, at the time of the wrongs alleged herein, controlling persons within the meaning of Section 20(a) of the 1934 Act.

68. The Individual Defendants had the power and influence and exercised the same to cause Critical Path to engage in the illegal conduct and practices complained of herein.

69. By reason of the conduct alleged in Count I of the Complaint, the Individual Defendants are liable for the aforesaid wrongful conduct, and are liable to Plaintiff and to the other members of the Class for the substantial damages which they suffered in connection with their purchases of Critical Path common stock during the Class Period.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff, on her own behalf and on behalf of the Class, prays for judgment as follows:

A.Declaring this action to be a proper class action and certifying Plaintiff as class representative under Rule 23 of the Federal Rules of Civil Procedure;

B.Awarding compensatory damages in favor of Plaintiff and the other members of the Class against all defendants, jointly and severally, for the damages sustained as a result of the wrongdoings of defendants, together with interest thereon;

C.Awarding Plaintiff the fees and expenses incurred in this action, including reasonable allowance of fees for Plaintiff's attorneys, and experts;

D. Granting extraordinary equitable and/or injunctive relief as permitted by law, equity and federal and state statutory provisions sued on hereunder, including attaching, impounding, imposing a constructive trust upon or otherwise restricting the proceeds of defendants' trading activities or their other assets so as to assure that Plaintiff has an effective remedy; and

E.Granting such other and further relief as the Court may deem just and proper.

JURY TRIAL DEMANDED

Plaintiff demands a jury trial of all issues so triable.

Date: February 5, 2001Respectfully submitted,

BERMAN DEVALERIO PEASE &

TABACCO, P.C.

By:

Christopher T. Heffelfinger

Joseph J. Tabacco, Jr.

425 California Street, Suite 205

San Francisco, California 94104

Telephone: (415) 433-3200

BERMAN DEVALERIO & PEASE, LLPJeffrey C. Block

Michael G. Lange

Chauncey D. Steele IV

One Liberty Square

Boston, Massachusetts 02109

Telephone: (617) 542-8300

Donald J. Enright

FINKELSTEIN, THOMPSON & LOUGHRAN

1055 Thomas Jefferson Street, N.W., Suite 601

Washington, DC 20007

Telephone: (202) 337-8000

Counsel for Plaintiff and the Class