<PAGE>
                                                                    Exhibit 10.7


                    SEPARATION AGREEMENT AND MUTUAL RELEASE

      This Separation Agreement and Mutual Release (the "Agreement") is entered
into as of July 21, 2002 by and between Critical Path, Inc., a California
corporation (the "Company"), and David C. Hayden ("Executive") (together "the
Parties"). This Agreement is effective only if it has been executed by the
Parties and the revocation period has expired as set forth in Sections 19(c) and
(d) below (the "Effective Date").

      WHEREAS, Executive was employed by the Company as Chairman and Executive
Chairman pursuant to the terms of a letter agreement dated August 1, 2001 and as
amended on February 12, 2002 (the "Letter Agreement");

      WHEREAS, the Parties have mutually agreed (i) to terminate their
employment relationship, (ii) that Executive has voluntarily resigned from the
Company's Board of Directors (the "Board") provided that this Agreement is
executed and (iii) that they will release each other from any and all claims as
of the Effective Date; and

      WHEREAS, the Parties have mutually agreed to treat the termination of
employment as eligible for payment of the separation benefits provided under the
Letter Agreement with the following modifications: (i) Executive will forfeit
his right to receive a $2,500,000 loan from the Company to exercise his stock
options in consideration of the extension of the period within which he may
exercise his stock options, (ii) the Company will pay the separation payment
provided for under the Letter Agreement in a lump sum and (iii) if there is a
corporate transaction prior to September 30, 2003, Executive will be eligible
for additional option vesting with all of the foregoing benefits subject to
Executive's compliance with additional post-termination obligations.

      NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Parties agree as follows:

      1.    TERMINATION OF EMPLOYMENT. Executive and the Company acknowledge and
agree that Executive's employment with the Company terminated by mutual
agreement effective as of the close of business on May 17, 2002 (the "SEPARATION
DATE") and that pursuant to that agreement Executive voluntarily resigned as an
employee and officer of the Company. For purposes of Executive's letter
agreement and stock options, such termination and resignation shall be deemed to
be a termination of employment by the Company without Cause. Provided this
Agreement is executed, Executive and the



                                      -1-
<PAGE>
Company further acknowledge and agree that Executive voluntarily resigned as
director of the Company as of the Separation Date.

      2.    SEPARATION BENEFITS. In consideration for the release of claims set
forth below and other obligations under this Agreement and in full satisfaction
of its obligations to Executive under the terms of the Letter Agreement, and
provided this Agreement is signed by Executive and not revoked under Section 19
herein, and further provided that Executive remains in full compliance with all
of his obligations to the Company under this Agreement, the Company agrees to
provide the separation benefits specified in Section 3 below to Executive.
Benefits previously provided to Executive shall not be subject to forfeiture
under this Section, but benefits that have not yet been provided (such as, for
example, Executive's ability to exercise his stock options in the future) and
the Company's obligations under this Agreement will be subject to cancellation
upon written notice to Executive of a material breach of Executive's obligations
or covenants followed by Executive's failure to cure such breach within 10 days
of notice. Upon written notice of such a breach, all separation benefits (and
the Company's obligations) shall be suspended pending the Company's
determination of whether Executive has cured the breach within the 10 day time
period. Except as set forth in Section 3(b), Executive acknowledges that as of
the Separation Date, Executive shall have no right, title or interest in or to
any other shares of the Company's capital stock or any other payments or
benefits under any other agreement (oral or written) or plan with the Company.

      3.    PAYMENTS AND BENEFITS.

            (a)   Consideration. As of the first day of the month following the
Effective Date, and in consideration of the release of Executive's claims
against the Company, the Company will pay to Executive a one time cash lump
payment of $350,000 after taking into account applicable income and employment
state and federal taxes (which the Company will pay) and assuming an aggregate
marginal tax rate of 45%.

            (b)   Stock Options. Executive's right to exercise all of his
Company stock options shall continue until 1:00pm PST on July 1, 2005. Any and
all such sales of the shares underlying Executive's options shall be made
pursuant to the Company-acknowledged Rule 10b5-1 trading plan that is provided
in Exhibit A to this Agreement except for any sales made in a manner consistent
with the Company's rights under Exhibits A and B. Exhibit A is a part of this
Agreement and shall be executed by Executive and will become effective only upon
the effectiveness of this Agreement. As of the Effective Date, Executive will
have a total of 6,168,000 vested options that are exercisable. Executive shall
not be



                                      -2-
<PAGE>
eligible for a loan from the Company to exercise any of his stock options
notwithstanding anything to the contrary in his Letter Agreement and/or stock
option agreements.

            (c)   Promissory Note. The Executive's promissory note (as amended
and restated on February 12, 2002) to pay the Company $1,950,000 plus interest
(the "Promissory Note") shall be amended and restated as provided in Exhibit B
(the "Second Restated Promissory Note") and such Second Restated Promissory Note
shall provide that the repayment due date will be extended until June 30, 2005,
provided, however, that prepayment of the loaned amounts shall occur upon the
exercise of the stock options as provided in the Second Restated Promissory
Note, and repayment can be accelerated by the Company upon a default (which
default conditions are specified in the Second Restated Promissory Note). The
loan, however, will not be defaulted for failure to pay interest annually or
before the expiration of the loan term. Exhibit B is a part of this Agreement
and it (and the accompanying Power of Attorney) shall be executed by Executive
and will become effective only upon the effectiveness of this Agreement.

            (d)   Benefits. The Company will directly pay for Executive's COBRA
costs through May 31, 2003. Executive will not accrue vacation time and will not
be eligible to participate in the Company's 401(k) plan, Employee Stock Purchase
Plan or any other Company benefit plan or program after the Separation Date.

            (e)   Change in Control. If there is an effective closing of a
Change in Control of the Company prior to September 30, 2003, then Executive's
remaining unvested stock options shall become immediately vested and be
exercisable until 1:00pm PST on September 30, 2003 and will be subject to the
Exhibit A Rule 10b5-1 trading plan. For purposes of this Agreement, a "Change in
Control" of the Company shall be defined as the occurrence of any one of the
following:

            (i)   The consummation of a merger or consolidation of the Company
            with or into another entity or any other corporate reorganization,
            if more than 50% of the combined voting power of the continuing or
            surviving entity's securities outstanding immediately after such
            merger, consolidation or other reorganization is owned by persons
            who were not shareholders of the Company immediately prior to such
            merger, consolidation or other reorganization;

            (ii)  The sale, transfer or other disposition of all or
            substantially all of the Company's assets;

            (iii) The dissolution, liquidation or winding up of the Company;

            (iv)  Any transaction as a result of which any person is the
            "beneficial owner" (as defined in Rule 13d-3 under the Securities
            Exchange Act of 1934), directly or indirectly, of securities of the
            Company representing at least 20% of the total voting power
            represented by the Company's then outstanding voting securities.
            For purposes of this




                                      -3-
<PAGE>

            Paragraph (iv), the term "person" shall have the same meaning as
            when used in sections 13(d) and 14(d) of the Securities Exchange Act
            of 1934 but shall exclude:

                  (A)   A trustee or other fiduciary holding securities under an
                  employee benefit plan of the Company or a subsidiary of the
                  Company;

                  (B)   A corporation owned directly or indirectly by the
                  shareholders of the Company in substantially the same
                  proportions as their ownership of the common stock of the
                  Company; and

                  (C)   The Company.

A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transactions.

            (f)   Legal Fees. The Company will pay the law firm of Bartko,
Zankel, Tarrant & Miller, Executive's legal counsel, for their legal fees
incurred in documenting this Agreement (not to exceed $50,000) provided that
such fees are reasonable and necessary and are fully documented to the Company
in itemized billing invoices and that such fees represent hourly charges for
time actually incurred at reasonable billing rates. The Company shall not pay
for any legal fees incurred after the Effective Date. The invoice(s) for such
fees must be sent to the Company within 45 days after the Effective Date. The
Company shall not withhold for any taxes for any payments made under this
Section 3(f).

      4.    CONFIDENTIAL INFORMATION. In addition to applicable law, Executive
agrees to continue to be bound by and comply with the Proprietary Information
and Inventions Agreement and the Mutual Agreement of Confidentiality that were
executed by and between Executive and the Company and these confidentiality
obligations shall survive the termination of this Agreement.

      5.    RESERVED SECTION.

      6.    CONFLICTING OBLIGATIONS. Executive certifies that Executive has no
outstanding agreement or obligation that is in conflict with any of the
provisions of this Agreement, or that would preclude Executive from complying
with the provisions hereof, and further certifies that Executive will not enter
into any such conflicting agreement.

      7.    NON-DISPARAGEMENT. Each party agrees not to make any unfavorable or
disparaging written or oral remarks about the other to third parties. However,
Executive acknowledges and agrees that the Company's non-disparagement
obligation pursuant to this Agreement shall extend solely to the actions of the
Company's current or future directors and officers and the Company employees
directly responsible for the Company's public relations and press releases
during the period of their service to




                                      -4-
<PAGE>
the Company. The Company agrees that its officers and directors will not direct
Company employees to make disparaging remarks about Executive. For purposes of
this Agreement, "Officers" are those persons meeting the definition provided
under Rule 16a-1(f) of the Securities Exchange Act of 1934 as amended.

      8.    ARBITRATION AND EQUITABLE RELIEF.

            (a)   Disputes. Except as provided in Section 8(c) below, the
Company and the Executive agree that any dispute or controversy arising under or
in conjunction with this Agreement will be settled exclusively by arbitration in
San Francisco, California. Any claim for arbitration shall be filed in writing
with the arbitrator selected by both Parties within 3 business days after either
party has notified the other in writing that it desires a dispute between them
to be settled by arbitration. In the event the Parties cannot agree on such
arbitrator within such three-day period, each party will select an arbitrator
and inform the other party in writing of such arbitrator's name and address
within two business days after the end of such three-day period and the two
arbitrators so selected will as soon thereafter as possible select a third
arbitrator; provided, however, that in the event of a failure by either party to
select an arbitrator and notify the other party of such selection within the
time period provided above, the arbitrator selected by the other party will be
the sole arbitrator of the dispute. The arbitration hearing will be held within
seven days (or as soon thereafter as possible) after the selection of the
arbitrator. Hearing procedures which will expedite the hearing may be ordered at
the arbitrator's discretion and the arbitrator may close the hearing in his or
her discretion after determining that he/she has heard sufficient evidence. The
decision of the arbitrator will be issued as expeditiously as possible and in no
event later than five business days after the hearing and the decision will be
binding upon the parties and judgment in accordance with that decision may be
entered in any court having jurisdiction therefor. Punitive damages will not be
awarded.

            (b)   Consent to Personal Jurisdiction. The arbitrator(s) will apply
California law to the merits of any dispute or claim, without deference to
conflicts of law rules. Executive hereby consents to the personal jurisdiction
of the state and federal courts located in California for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.

            (c)   Equitable Relief. The parties may apply to any court of
competent jurisdiction for a temporary restraining order, preliminary
injunction, or other interim or conservatory relief as necessary, without breach
of this arbitration agreement and without abridgment of the powers of the
arbitrator.



                                      -5-
<PAGE>
            (d)   Acknowledgment. EXECUTIVE HAS READ AND UNDERSTANDS THIS
AGREEMENT, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING
THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING
TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF, TO BINDING
ARBITRATION, EXCEPT AS PROVIDED IN SECTION 8(c), AND THAT THIS ARBITRATION
CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO
THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE RELATIONSHIP
BETWEEN THE PARTIES.

      9.    GOVERNING LAW. This Agreement will be governed by the internal
substantive laws, but not the choice of law rules, of the State of California.

      10.   ATTORNEY'S FEES. In any action brought by one of the parties to
enforce or interpret the provisions of this Agreement, the prevailing party will
be entitled to reasonable attorney's fees, in addition to any other relief to
which that party may be entitled under this Agreement.

      11.   ASSIGNMENT. This Agreement and all rights under this Agreement will
be binding upon and inure to the benefit of and be enforceable by the Parties
hereto and their respective owners, agents, officers, shareholders, employees,
directors, attorneys, subsidiaries, parents, affiliates, successors, personal or
legal representatives, executors, administrators, heirs, distributes, devisees,
legatees, and assigns. This Agreement is personal in nature, and neither of the
Parties to this Agreement will, without the written consent of the other, assign
or transfer this Agreement or any right or obligation under this Agreement to
any other person or entity; except that the rights and obligations of the
Company under this Agreement may be assigned (without the consent of the
Executive) to an entity which becomes the successor to the Company as the result
of a merger or other corporate reorganization or sale of substantially all the
assets to a successor which continues the business of the Company or any other
subsidiary of the Company, provided, that such assignment will not relieve the
Company of its obligations hereunder.

      12.   NOTICES. For purposes of this Agreement, notices and other
communications provided for in this Agreement will be in writing and will be
delivered personally or sent by United States certified mail, return receipt
requested, postage prepaid, addressed as follows:

      If to the Executive:    David C. Hayden

                                    [______]

                                      -6-

<PAGE>
      With a copy to:         John J. Bartko, Esq.
                              Bartko, Zankel, Tarrant & Miller, Professional
                              Corporation
                              900 Front Street #300
                              San Francisco, CA 94111


      If to the Company:      Critical Path, Inc.
                              350 The Embarcadero
                              San Francisco, CA 94105-1204
                              Attn: Board of Directors

or to such other address or the attention of such other person as the recipient
party has previously furnished to the other party in writing in accordance with
this Section 12. Such notices or other communications will be effective upon
delivery or, if earlier, three days after they have been mailed as provided
above.

      13.   INTEGRATION. This Agreement, this Agreement's Exhibits (the Rule
10b5-1 Trading Plan and the Second Amended and Restated Secured Promissory
Note), the Executive's stock option agreements with the Company (as amended by
this Agreement), the Proprietary Information and Inventions Agreement and the
Mutual Agreement of Confidentiality represent the entire agreement and
understanding between the parties as to the subject matter hereof and supersedes
all prior agreements (including but not limited to the Letter Agreement and
Promissory Note) whether written or oral. Except as amended herein, the
provisions contained in the Executive's stock option agreements remain in
effect.

      14.   MODIFICATION. This Agreement may only be amended in a writing signed
by Executive and the Chief Executive Officer of the Company. No waiver,
alteration, or modification of any of the provisions of this Agreement will be
binding unless in writing and signed by the party against whom enforcement of
the change or modification is sought. Failure or delay on the part of either
party hereto to enforce any right, power, or privilege hereunder will not be
deemed to constitute a waiver thereof. Additionally, a waiver by either party or
a breach of any promise hereof by the other party will not operate as or be
construed to constitute a waiver of any subsequent waiver by such other party.

      15.   RIGHT TO ADVICE OF COUNSEL. Executive acknowledges that he has had
the opportunity to fully review this Agreement and, if he so chooses, to consult
with counsel, and is fully aware of his rights and obligations under this
Agreement.



                                      -7-
<PAGE>
      16.   RELEASE OF EXECUTIVE. In exchange for Executive's promises set forth
herein, all of which are good and valuable consideration, the Company agrees to
and does hereby release and forever discharge Executive from any rights, claims,
actions and demands it has against Executive under, as a result of, or arising
out of Executive's prior employment as an employee pursuant to the Letter
Agreement, from any and all other rights, claims, actions, demands, causes of
action, obligations, attorneys' fees, costs, damages, and liabilities of
whatever kind or nature, in law or in equity that the Company may have and as of
the Separation Date (whether or not known) including but not limited to any
claims it may have under any other federal, state or local Constitution,
Statute, Ordinance and/or Regulation and/or those arising under common law
including but not limited to tort, express and/or implied contract and/or
implied contract, arising out of or, in any way, related to Executive's
employment or service as a director with the Company.

      17.   CIVIL CODE SECTION 1542. The Parties represent that they are not
aware of any claim by either of them other than the claims that are released by
this Agreement. The Parties also represent that they do not presently intend to
bring any claims on their own behalf or on behalf of any other person or entity
against any other person or entity referred to herein. Executive and the Company
acknowledge that they are familiar with the provisions of California Civil Code
Section 1542, which provides as follows:

                  A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
                  DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
                  EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
                  MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

Executive and the Company, being aware of said Code section, agree to expressly
waive any rights they may have thereunder, as well as under any other statute or
common law principles of similar effect.

      18.   EXECUTIVE'S COVENANTS.

            (a)   General. The Executive agrees that for all periods described
in this Agreement, he shall conduct himself reasonably with respect to the
Company and its employees, directors, shareholders, consultants, customers,
affiliates and agents. Executive shall also provide the Company with itemized
receipts for his business expenses incurred as of the Separation Date as soon as
practicable but in no event later than July 31, 2002.

            (b)   Reserved Section.



                                      -8-
<PAGE>
            (c)   Confidentiality of this Agreement. Executive agrees to use his
reasonable efforts to maintain in confidence the existence of this Agreement,
the contents and terms of this Agreement, and the consideration for this
Agreement (hereinafter collectively referred to as "Separation Information").
Executive hereto agrees to take every reasonable precaution to prevent
disclosure of any Separation Information to third parties, except for
disclosures required by law or necessary to effectuate the terms of this
Agreement.

            (d)   Cooperation. Executive shall fully cooperate in the defense of
any action brought by any third party against the Company that relates in any
way to Executive `s acts or omissions while employed by the Company or in the
defense of any action brought by any third party relating to litigation pending
against the Company as of the Separation Date.

            (e)   Company Resources. As of the execution of this Agreement,
Executive will no longer represent that he is an officer or employee or director
of the Company. As soon as practicable following execution of this Agreement,
Executive will return all Company property to the Company including but not
limited to Confidential Information, keys, computers, cell phones, pagers,
monitors, business cards, devices, records, data, notes, reports, proposals,
lists, correspondence, specifications, drawings, blueprints, sketches,
laboratory notebooks, flow charts, materials, equipment, other documents or
property, or copies or reproductions of any aforementioned items belonging to
the Company. Executive will also no longer utilize any Company property or enter
onto any Company premises without the prior written approval of the Company's
Chief Executive Officer. Executive further agrees to have no direct contact with
Company employees (other than the Chief Executive Officer or Elece Hemple)
during normal business hours except as specifically requested in writing by the
Company's Chief Executive Officer; provided, however, that Executive shall not
be deemed to have violated this provision if the contact was initiated by the
Company employee(s).

            (f)   Non-Solicitation. Executive agrees that until September 30,
2003, he shall not either directly or indirectly solicit, induce, recruit or
encourage any of the Company's employees (other than Elece Hemple) or
consultants to terminate their relationship with the Company, or attempt to
solicit, induce, recruit, encourage any of the Company's employees (other than
Elece Hemple) or consultants to terminate their relationship with the Company,
or attempt to solicit, induce, recruit, encourage or take away employees or
consultants of the Company, either for himself or for any other person or
entity. Further, Executive shall not attempt to negatively influence any of the
Company's



                                      -9-
<PAGE>
clients or customers from purchasing Company products or services or to solicit
or influence or attempt to influence any client, customer or other person either
directly or indirectly, to direct his or its purchase of products and/or
services to any person, firm, corporation, institution or other entity in
competition with the business of the Company.

            (g)   No Further Employment. Executive understands and agrees that
he is not entitled to any further or future employment with the Company or
further or future compensation and/or payments of any kind from the Company
other than those specifically provided for under this Agreement. Executive
warrants and represents that he shall not hereafter reapply for or otherwise
seek any position of employment with the Company and he shall not institute or
participate in any claim, action, lawsuit or proceeding against the Company for
any failure to employ or re-employ him after the Effective Date.

            (h)   Breach of Agreement. Executive acknowledges that upon material
breach of any provision of this Agreement, the Company would sustain irreparable
harm from such breach, and, therefore, Executive agrees that in addition to any
other remedies which the Company may have for any material breach of this
Agreement or otherwise, the Company shall be entitled to obtain equitable relief
including specific performance, injunctions and restraining the Executive from
committing or continuing any such violation of this Agreement. Executive further
agrees that if the Company ceases such obligations as a result of the
Executive's material breach of this Agreement, Executive's waiver and release
set forth in this Agreement shall remain in full force and effect at all times
in the future.

      19.   EXECUTIVE'S RELEASE OF CLAIMS. In exchange for the Company's
promises set forth herein, all of which are good and valuable consideration,
Executive hereby releases and forever discharges the Company of and from any and
all rights, claims, actions, demands, causes of action, obligations, attorneys'
fees, costs, damages, and liabilities of whatever kind or nature, in law or in
equity, that Executive may have (whether known or not known) (except for his
claims to indemnification to the extent permitted under the Company's bylaws or
pre-existing indemnification agreements or as permitted by California law or as
may be available to Executive under the Company's directors' and officers'
liability insurance coverage) and except as provided in this Agreement and the
Executive's stock option agreements (collectively, "Claims"), accruing to him as
of the Effective Date, that he has ever had, including but not limited to Claims
based on and/or arising under Title VII of the Civil Rights



                                      -10-
<PAGE>
Act of 1964, as amended, The Americans with Disabilities Act, The Family Medical
Leave Act, The Equal Pay Act, The Employee Retirement Income Security Act, The
Fair Labor Standards Act, and/or the California Fair Employment and Housing Act;
The California Constitution, The California Government Code, The California
Labor Code, The Industrial Welfare Commission's Orders, The Securities Act of
1933, The Securities Exchange Act of 1934 and any and all other Claims he may
have under any other federal, state or local Constitution, Statute, Ordinance
and/or Regulation; and all other Claims arising under common law including but
not limited to tort, express and/or implied contract and/or quasi-contract,
arising out of or, in any way, related to Executive's previous relationship with
the Company as an employee or director. Furthermore, Executive acknowledges that
he is waiving and releasing any rights he may have under the Age Discrimination
in Employment Act of 1967 ("ADEA"), as amended, and that this waiver and release
is knowing and voluntary. Executive acknowledges that the consideration given
for this waiver and release is in addition to anything of value to which
Executive was already entitled. Executive further acknowledges that he has been
advised by this writing that:

            (a)   he should consult with an attorney prior to executing this
                  Agreement;

            (b)   he has at least twenty-one (21) days within which to consider
                  this Agreement;

            (c)   he has up to seven (7) days following the execution of this
                  Agreement by the parties to revoke the Agreement; and

            (d)   this Agreement shall not be effective until the revocation
                  period in Section 19(c) has expired.

      The Company and Executive agree that the release set forth in this Section
19 shall be and remain in effect in all respects as a complete general release
as to the matters released.

      20.   LABOR CODE SECTION 206.5. Executive agrees that the Company has paid
to Executive his accrued salary and accrued vacation as of the Separation Date
and that these payments represent all such monies due to Executive through the
Effective Date. In light of the payment by the Company of all wages due, or to
become due to Executive, California Labor Code Section 206.5 is not applicable
to the Parties hereto. That section provides in pertinent part as follows:

                  No employer shall require the execution of any release of any
                  claim or right on account of wages due, or to become due, or
                  made as an advance on wages to be earned, unless payment of
                  such wages has been made.

      21.   SEVERABILITY.  Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement




                                      -11-
<PAGE>
is held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other jurisdiction,
but this Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been contained
herein.

      22.   COUNTERPARTS.  This Agreement may be executed in counterparts,
each of which will be deemed an original, and which together will be a single
instrument.

      23.   NO REPRESENTATIONS. Each party represents that it has had the
opportunity to consult with an attorney, and has carefully read and understands
the scope and effect of the provisions of this Agreement. Neither party has
relied upon any representations or statements made by the other party hereto
which are not specifically set forth in this Agreement.

      24.   AUTHORITY. The Company represents and warrants that the undersigned
has the authority to act on behalf of the Company and to bind the Company and
all who may claim through it to the terms and conditions of this Agreement.
Executive represents and warrants that he has the capacity to act on his own
behalf and on behalf of all who might claim through him to bind them to the
terms and conditions of this Agreement. Each Party warrants and represents that
there are no liens or claims of lien or assignments in law or equity or
otherwise of or against any of the claims or causes of action released herein.



                                      -12-
<PAGE>
      25.   VOLUNTARY EXECUTION OF AGREEMENT.  This Agreement is executed
voluntarily and without any duress or undue influence on the part or behalf
of the Parties hereto, with the full intent of releasing all claims.  The
Parties acknowledge that:

            (a)   They have read this Agreement;

            (b)   They have been represented in the preparation, negotiation,
                  and execution of this Agreement by legal counsel of their own
                  choice or that they have voluntarily declined to seek such
                  counsel;

            (c)   They understand the terms and consequences of this Agreement
                  and of the releases it contains;

            (d)   They are fully aware of the legal and binding effect of this
                  Agreement.

      IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the day and year first above written.


DAVID C. HAYDEN, EXECUTIVE                CRITICAL PATH, INC.

By: /s/ David Hayden                      By: /s/ William McGlashan
    __________________________________        __________________________________

Date: July 21, 2002                       Name: ________________________________


AGREED: STOREY HAYDEN                     Title: _______________________________

By: /s/ Storey Hayden                     Date: July 21, 2002
    __________________________________



                                      -13-
<PAGE>

                                    EXHIBIT A

                            RULE 10b5-1 TRADING PLAN


<PAGE>

                                    EXHIBIT B

               SECOND AMENDED AND RESTATED SECURED PROMISSORY NOTE


<PAGE>

                            RULE 10b5-1 TRADING PLAN

      This plan to sell the common shares (the "Sales Plan") of Critical Path,
Inc. (the "Issuer"), is hereby adopted as of July 21, 2002 by and between Issuer
and David C. Hayden (the "Seller"). This Sales Plan will become effective if and
only if the Separation Agreement and Mutual Release, entered into by and between
Issuer and Seller on July 21, 2002 (the "Separation Agreement") becomes
effective (the "Effective Date").

      WHEREAS, the Seller desires to establish this Sales Plan to facilitate the
sale of Seller's shares of common stock of the Issuer (the "Stock") in
compliance with Rule 10b5-1 under the Securities Exchange Act of 1934, as
amended, (the "Exchange Act") and to achieve an orderly disposition of Seller's
shares;

      WHEREAS, as of the Effective Date, the Seller holds vested options to
purchase up to 6,168,000 shares of Stock (the "Options");

      WHEREAS, as of the Effective Date, the Seller owes the Issuer $1,950,000
plus accrued interest pursuant to a Full Recourse Second Amended and Restated
Secured Promissory Note by and between Seller and Issuer dated as of July 21,
2002 (the "Promissory Note") in which Seller reaffirmed the security interest in
the Options and underlying shares that Seller had previously granted to Issuer;

      WHEREAS, Seller desires to use the proceeds from sales effected under this
Sales Plan (and outside the Sales Plan involving Seller's shares that were
acquired pursuant to the exercise of his stock options) to help pay the amounts
due under the Promissory Note;

      WHEREAS, the Stock is principally traded on the NASDAQ national market
system (the "Exchange");

      WHEREAS, Seller will select a qualified broker ("Broker") that will
perform the obligations of Broker under this Sales Plan and that such Broker
shall execute a counterpart signature to this Sales Plan and become a party to
this Sales Plan but that the failure of Seller to timely obtain a Broker shall
not invalidate this Sales Plan or the obligations of Seller under this Sales
Plan;

      NOW, THEREFORE, the Seller hereby agrees to the following:


<PAGE>

 1. PLANNED SALES FOR SELLER'S EMPLOYEE STOCK OPTION PLAN SHARES

            Seller shall effect a sale of 100,000 shares of Stock acquired
            pursuant to the exercise of the Options after the Effective Date
            through Broker at the then-prevailing market price(s) on the first
            business day of every week when the Exchange is open for trading
            provided that the pre-tax gain is at least $4.00 per share.

            The ordering of Seller's shares to be sold by Broker shall be
            accomplished in a manner such that the shares with the lowest Option
            per share exercise price shall be sold first in time. Broker shall
            promptly place (or have placed) market orders to sell as many of the
            above shares as possible during such applicable trading days. The
            Seller shall execute in advance all documentation required by Issuer
            and Broker so that the actions contemplated by this paragraph can be
            executed, if necessary, in a same day Option exercise/sale of shares
            transaction. The itemized schedule below shows Seller's Options and
            their exercise prices. All of the Options shown in the table below
            expire no later than 1:00pm PST July 1, 2005.

<TABLE>
            Option Grant Date      Per Share Exercise Price     # of Shares
            -----------------      ------------------------     -----------
<S>                                <C>                          <C>
            July 31, 2001                    $0.36               4,000,000
            Nov. 9, 2001                     $1.13               2,168,000
                                             -----               ---------
            Total                                                6,168,000
</TABLE>

            Additionally, if any of Seller's unvested stock options become
            vested as a result of an Issuer "Change in Control" (as defined in
            the Separation Agreement) prior to September 30, 2003, then such
            stock options shall also become subject to being sold under this
            Sales Plan (provided, however, that such additional stock options
            shall expire no later than 1:00pm PST on September 30, 2003). Any
            leftover, unsold shares from paragraph 1 after



                                      A-2
<PAGE>
            its respective trading period has passed shall be carried forward to
            be sold in the subsequent selling time periods in accordance with
            the trading instructions under this Sales Plan.

            The proceeds from any sales consummated under this Sales Plan (or
            outside this Sales Plan involving Seller's shares that were acquired
            pursuant to the exercise of his stock options) shall be first
            applied by the Broker to the Company to satisfy (i) the option
            exercise price, (ii) federal and state income and employment taxes
            payable on such amounts, (iii) the actual amount of the reasonable
            broker fees and commissions payable to unrelated third parties in
            connection with such exercise and (iv) the outstanding balance on
            the Promissory Note before the remainder (if any) is distributed to
            Seller (or any assigns or creditors of Seller). Except as otherwise
            specifically provided herein, all sales made under this Sales Plan
            shall be executed pursuant to the regular operating procedures of
            the Broker.

 2. EFFECTIVE DATE. This Sales Plan is effective as of the Effective Date with
    the first such possible sales under this Sales Plan commencing at least
    thirty (30) days after the Effective Date.

 3. CESSATION OF SALES. Sales under this Sales Plan shall be suspended upon
    either (i) the date that the Issuer or any other person publicly announces a
    tender or exchange offer with respect to the Stock, (ii) the date of a
    public announcement of a merger, acquisition, reorganization,
    recapitalization or comparable transaction affecting the securities of the
    Issuer as a result of which the Stock is exchanged or converted into shares
    of another company, (iii) the date on which Issuer receives notice of the
    commencement of any proceedings in respect of or triggered by Seller's
    bankruptcy or insolvency, or (iv) the date that an officer in Issuer's legal
    department notifies either Seller or Broker that sales under the Sales Plan
    are suspended pursuant to the Issuer's insider trading policy or any other
    Issuer policy in Issuer's sole discretion. No further sales shall be made
    under this Sales Plan after its suspension until Issuer notifies Broker and
    Seller that trading may resume under the Sales Plan.

 4. TERMINATION OF SALES PLAN. This Sales Plan shall terminate on the earlier
    of:



                                      A-3
<PAGE>

            (i)   the date that the Seller no longer holds any shares of Stock
                  or options to purchase Stock identified in paragraph 1 above;

            (ii)  the death of the Seller;

            (iii) the date that the principal and accrued interest under the
                  Promissory Note is paid in full to the Company and the
                  Promissory Note is thereby canceled;

            (iv)  the date that an officer in Issuer's legal department, in
                  Issuer's sole discretion, notifies either Seller or Broker
                  that this Sales Plan is terminated pursuant to the Issuer's
                  insider trading policy or any other Issuer policy; or

            (v)   1:00pm PST on July 1, 2005 (the "Expiration Date").

            No further sales shall be made under this Sales Plan after its
            termination.

 5. MARKET DISRUPTION OR OTHER RESTRICTIONS. Seller understands that Broker may
    not be able to effect a sale due to a market disruption or a legal,
    regulatory or contractual restriction applicable to the Broker. If any sale
    cannot be executed as required by paragraph 1, due to a market disruption, a
    legal, regulatory or contractual restriction applicable to the Broker or any
    other event, Seller understands that Broker shall effect such sale(s) as
    soon as practicable after the cessation or termination of such market
    disruption, applicable restriction or other event.

 6. SELLER REPRESENTATIONS. As of the Effective Date, Seller represents and
    warrants that Seller is not aware of material, nonpublic information with
    respect to the Issuer or any securities of the Issuer (including the Stock)
    that would serve as the basis for any sales made under this Sales Plan and
    is entering into this Sales Plan in good faith and not as part of a plan or
    scheme to evade the prohibitions of Rule 10b5-1. Seller agrees that he is
    fully aware of Issuer's insider trading policies and agrees to continue to
    fully comply with such insider trading policies while this Sales Plan is in
    effect. Seller agrees that Seller shall immediately notify Broker if the
    Seller becomes subject to a legal or regulatory restriction or undertaking
    that would prevent the Broker from making sales under this Sales Plan, and,
    in such a case, trading shall be immediately suspended under the Sales Plan
    and any resumption of trading shall not occur until an officer in Issuer's
    legal department has acknowledged that trading



                                      A-4
<PAGE>
    may resume under this Sales Plan. Seller further represents and warrants
    that except for the rights of the Issuer the Stock to be sold under this
    Sales Plan are owned free and clear by Seller (subject only to the
    compliance by Seller with the exercise provisions of the Options) and will
    be timely delivered to Broker for sales to be executed. While this Sales
    Plan is in effect, Seller also represents that, unless he first gives Issuer
    five business days advance written notice (in order that Issuer may elect to
    purchase from Seller the shares to be sold or to arrange a private sale to a
    third party on the same terms as Seller will be selling such shares), he
    will not sell (or pledge or hypothecate) any of the shares underlying the
    Options (or shares underlying the options that vest as a result of a Change
    in Control) except as provided under this Sales Plan, provided, however that
    this Sales Plan shall not in any way impact or hinder Issuer's rights to
    cancel the Options or require a same day Option exercise/sale of the
    underlying shares pursuant to the Promissory Note. Upon a public
    announcement of a prospective "Change in Control" of the Issuer (as defined
    in the Separation Agreement), the five business days notice obligation for
    Seller in the preceding sentence will not be applicable if the prospective
    acquirer of Issuer agrees in writing to waive such requirement.

 7. RULE 10b5-1 COMPLIANCE. It is the intent of this Sales Plan that it comply
    with the requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act and
    this Sales Plan shall be interpreted to comply with the requirements of Rule
    10b5-1(c). Seller represents and warrants that Seller shall not directly or
    indirectly seek to influence Broker with respect to how Broker performs its
    duties under this Sales Plan. Seller agrees that Seller shall not, directly
    or indirectly, communicate any information relating to the Stock or the
    Issuer to any employee of Broker or Issuer who is involved, directly or
    indirectly, in executing this Sales Plan at any time while this Sales Plan
    is in effect. Additionally, Seller shall not communicate with Broker about
    (i) any future sales to be executed under this Sales Plan and (ii) any
    pending sales while this Sales Plan is in effect.

 8. RULE 144 COMPLIANCE. If Seller is subject to Rule 144 under the Securities
    Act of 1933, as amended, then Seller agrees to fully comply with all
    applicable requirements under Rule 144 and Seller understands that Broker
    will conduct all sales in accordance with the Rule 144 manner of sale
    requirement and in no event shall Broker effect any sale if such sale would
    exceed the then applicable volume limitation under Rule 144, assuming
    Broker's sales under



                                      A-5
<PAGE>
    this Sales Plan are the only sales subject to that limitation. Seller agrees
    not to take, and agrees to cause any person or entity with which Seller
    would be required to aggregate sales of Stock pursuant to paragraph (a)(2)
    or (e) of Rule 144 not to take, any action that would cause the sales not to
    comply with Rule 144. Seller shall be responsible for making (but may
    request Broker to effect on Seller's behalf) all required Form 144 filings.

 9. EXCHANGE ACT COMPLIANCE. Seller shall make all filings, if any, required
    under Sections 13 and 16 of the Exchange Act and shall comply with all such
    laws and regulations of the Exchange Act.

10. INTEGRATION. This Sales Plan supersedes any prior automatic or formula-based
    sales plans and shall be governed by and construed in accordance with the
    laws of the State of California.

11. AMENDMENTS. This Sales Plan may be modified, amended or terminated by the
    Seller only by a writing signed by the Seller at a time when the Seller is
    able to make and does make all the representations and warranties specified
    in paragraph 6 and elsewhere in this Sales Plan and further provided that
    Issuer acknowledges such amendment in writing. The effective date of any
    amendment to this Sales Plan shall not occur until thirty (30) days after
    Issuer acknowledgement of the amendment pursuant to paragraph 12 and this
    pre-amended Sales Plan shall continue to be in effect during such sixty day
    period.

12. ISSUER ACKNOWLEDGEMENT. This Sales Plan (and any subsequent modifications or
    amendments under paragraph 11) is effective only if the Issuer provides
    written acknowledgement of the amended Sales Plan.

13. BROKER REPRESENTATIONS. By signing below, Broker represents to Seller and
    Issuer that Broker will be able to competently perform all of the duties for
    Broker that are set forth in this Sales Plan and also timely and accurately
    execute the transactions contemplated by this Sales Plan. Broker further
    agrees not to use any information about any planned sales under this Sales
    Plan in connection with purchases or sales of, or trading in, any securities
    of the Issuer, or derivative securities thereof, or provide other people
    with such information or recommend that other people buy or sell securities
    based upon such information. Broker agrees to promptly notify Seller and
    Issuer if at some point in the future, Broker is unable to perform its
    obligations under this Sales Plan.



                                      A-6
<PAGE>
14. ADJUSTMENTS. In the event of a subdivision of the outstanding Stock, a
    declaration of a dividend payable in Stock, a declaration of a dividend
    payable in a form other than Stock in an amount that has a material effect
    on the price of the Issuer's shares, a combination or consolidation of the
    outstanding Stock (by reclassification or otherwise) into a lesser number of
    shares of Stock, a recapitalization, a spin-off or a similar occurrence,
    then all prices, number of shares and number of options referenced in this
    Sales Plan shall be adjusted as appropriate and consistent with any
    adjustments that are made to other Issuer shareholders and optionees.

15. DISCLOSURE. Seller and Broker each agree that the Issuer, in its sole
    discretion, may publicly disclose the existence and terms of this Sales
    Plan.

16. COMMUNICATIONS. Seller and Broker agree that any communications or
    correspondence (or notices) between Seller and Broker with respect to this
    Sales Plan shall solely be in writing, with a copy of all such writings
    contemporaneously provided to Issuer by Seller, and such correspondence
    shall be deemed to have been duly received by the recipient as of the first
    business day following (a) transmission by a nationally recognized overnight
    delivery service or by registered or certified mail, postage prepaid or (b)
    transmission by a confirmed facsimile transmission or (c) electronic mail.
    All such correspondence shall be addressed to each recipient at their
    respective locations specified below on the signature page.

17. AUTHORIZATION. Seller and Broker each authorize Issuer's legal department
    and other insider trading personnel to take any necessary steps to ensure
    that this Sales Plan complies with all of Issuer's policies.

18. SELLER RELEASE AND INDEMNIFICATION. In consideration of entering into this
    Sales Plan, Seller agrees to fully and forever waive, release and discharge
    any and all claims, demands, or causes of action (including for related
    attorneys' fees and court and litigation costs and expenses), whether known
    or unknown, against Issuer or its predecessors, successors, or past or
    present subsidiaries, officers, directors, agents, employees and assigns,
    with respect to the following matter(s) that may arise under this Sales
    Plan: (i) any decision by the Issuer to suspend trading under this Sales
    Plan or terminate this Sales Plan, (ii) invasion of privacy, (iii) any
    failure or refusal of the Issuer to consent to a trade under this Sales
    Plan, or (iv) any issues or errors with respect to the adoption, operation,
    execution of trades or termination of this Sales Plan, (with all such
    matters collectively referred to as "Seller Released Matters"),



                                      A-7
<PAGE>
    and Seller further agrees to defend, indemnify and hold Issuer harmless from
    any liability that may arise from the Seller Released Matters.

19. BROKER LIMITED RELEASE AND INDEMNIFICATION. In consideration of entering
    into this Sales Plan, Broker agrees to fully and forever waive, release and
    discharge any and all claims, demands, or causes of action (including for
    related attorneys' fees and court and litigation costs and expenses),
    whether known or unknown, against Issuer or its predecessors, successors, or
    past or present subsidiaries, officers, directors, agents, employees and
    assigns (excluding however the Seller), with respect to any matter(s) that
    may arise under this Sales Plan to the extent that it is caused by Broker's
    "Culpable Conduct," which is defined as (i) Broker's errors of omission or
    commission or (ii) Broker's negligence or (iii) Broker's misconduct or
    misfeasance or (iv) Broker's failure to perform its obligations under this
    Plan (with all such matters collectively referred to as "Broker Released
    Matters"); excluding from the scope of such Broker Released Matters any
    matter, or any proportionate share of a matter, not caused by Broker's
    Culpable Conduct. Broker further agrees to defend, indemnify and hold Issuer
    harmless from any liability that may arise from the Broker Released Matters
    solely to the extent of any Broker's Culpable Conduct.

20. COUNTERPARTS. This Sales Plan may be executed in one or more counterparts,
    each of which shall be deemed to be an original, but all of which together
    shall constitute one and the same instrument.

                            [SIGNATURE PAGE FOLLOWS]



                                      A-8
<PAGE>
    IN WITNESS WHEREOF, the undersigned have executed this Sales Plan as of the
date first written above.


                                          ______________________________________
                                          DAVID C. HAYDEN
                                          PHONE
                                          FAX
                                          EMAIL


AGREED:
BROKER



______________________________________
Name:
Title:
ADDRESS
PHONE
FAX
EMAIL



ACKNOWLEDGED:

CRITICAL PATH, INC.



______________________________________
Name:
Title:
350 The Embarcadero
San Francisco, CA 94105-1204
PHONE
FAX
EMAIL



                                      A-9