CRITICAL PATH INC
EXHIBIT 10.5
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<TYPE>EX-10.5
<SEQUENCE>7
<FILENAME>f83504exv10w5.txt
<DESCRIPTION>EXHIBIT 10.5
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                                                                    Exhibit 10.5


                             STOCK PLEDGE AGREEMENT

            In order to secure payment of that certain May 8, 2002 promissory
note (the "Note") payable to Critical Path, Inc., a California corporation (the
"Company") having its corporate offices at 350 The Embarcadero, San Francisco,
CA 94105-1204, in the principal amount of One Million Seven Hundred Forty
Thousand Dollars ($1,740,000), which Note the Borrower delivered to exercise an
option to purchase shares of Company common stock, the Borrower hereby grants
the Company a security interest in, and assigns, transfers to and pledges with
the Company, the following securities and other property:

                  (i)   the 1,000,000 shares of Company common stock ("Common
Stock") delivered to and deposited with the Company as collateral for the
Note; and

                  (ii)  any and all new, additional or different securities or
other property subsequently distributed with respect to the shares identified in
subparagraph (i) that are to be delivered to and deposited with the Company
pursuant to the requirements of paragraph 3 of this Agreement; and

                  (iii) any and all other property and money that is delivered
to or comes into the possession of the Company pursuant to the terms and
provisions of this Agreement; and

                  (iv)  the proceeds of any sale, exchange or disposition of the
property and securities described in subparagraphs (i), (ii) or (iii) above.

            All securities, property and money to be assigned to, transferred to
and pledged with the Company shall be herein referred to as the "Collateral" and
shall be accompanied by one or more stock power assignments properly endorsed by
the Borrower. The Company shall hold the Collateral in accordance with the
following terms and provisions:

            1.    Warranties. The Borrower hereby warrants that the Borrower is
the owner of the Collateral and has the right to pledge the Collateral and that
the Collateral is free from all liens, advance claims and other security
interests (other than those created hereby).

            2.    Rights and Powers.  The Company may, without obligation to
do so, exercise one or more of the following rights and powers with respect
to the Collateral:

                  (a)   accept in its discretion, but subject to the applicable
limitations of paragraphs 7(a), (c) and (d), other property of the Borrower in
exchange for all or part of the Collateral and release Collateral to the
Borrower to the extent necessary to effect such exchange, and in such event the
money, property or securities received in the exchange shall be held by the
Company as substitute security for the Note and all other indebtedness secured
hereunder;

                  (b)   perform such acts as are necessary to preserve and
protect the Collateral and the rights, powers and remedies granted with respect
to such Collateral by this Agreement; and



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                  (c)   transfer record ownership of the Collateral to the
Company or its nominee and receive, endorse and give receipt for, or collect by
legal proceedings or otherwise, dividends or other distributions made or paid
with respect to the Collateral, provided and only if there exists at the time an
outstanding event of default under paragraph 8 of this Agreement.

            Any action by the Company pursuant to the provisions of this
paragraph 2 may be taken without notice to the Borrower. Expenses reasonably
incurred in connection with such action shall be payable by the Borrower and
form part of the indebtedness secured hereunder as provided in paragraph 9.

            So long as there exists no event of default under paragraph 8 of
this Agreement, the Borrower may exercise all shareholder voting rights and be
entitled to receive any and all regular cash dividends paid on the Collateral.
Accordingly, until such time as an event of default occurs under this Agreement,
all proxy statements and other shareholder materials pertaining to the
Collateral shall be delivered to the Borrower at the address indicated below.

            Any cash sums that the Company may receive in the exercise of its
rights and powers under paragraph 2(b) above shall be applied to the payment of
the Note and any other indebtedness secured hereunder, in such order of
application as the Company deems appropriate. Any remaining cash shall be paid
over to the Borrower.

            3.    Duty to Deliver. Any new, additional or different securities
that may now or hereafter become distributable with respect to the Collateral by
reason of (i) any stock dividend, stock split or reclassification of the capital
stock of the Company, or (ii) any merger, consolidation or other reorganization
affecting the capital structure of the Company, shall, upon receipt by the
Borrower, be promptly delivered to and deposited with the Company as part of the
Collateral hereunder. Such securities shall be accompanied by one or more
properly-endorsed stock power assignments.

            4.    Care of Collateral. The Company shall exercise reasonable care
in the custody and preservation of the Collateral, but shall have no obligation
to initiate any action with respect to, or otherwise inform the Borrower of, any
conversion, call, exchange right, preemptive right, subscription right, purchase
offer or other right or privilege relating to or affecting the Collateral;
provided, however, that the Company will notify the Borrower of any such rights
of the Borrower to protect against adverse claims or to protect the Collateral
against the possibility of a decline in market value. The Company shall not be
obligated to take any action with respect to the Collateral requested by the
Borrower unless the request is made in writing and the Company determines that
the requested action will not unreasonably jeopardize the value of the
Collateral as security for the note and other indebtedness secured hereunder.

            The Company may at any time release and deliver all or part of the
Collateral to the Borrower, and the receipt thereof by the Borrower shall
constitute a complete and full acquittance for the Collateral so released and
delivered. The Company shall accordingly be discharged from any further
liability or responsibility for the Collateral, and the released Collateral
shall no longer be subject to the provisions of this Agreement. However, any and
all



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releases of the Collateral shall be effected in compliance with the applicable
limitations of paragraphs 7(a) and 7(c).

            5.    Payment of Taxes and Other Charges. The Borrower shall pay,
prior to the delinquency date, all taxes, liens, assessments and other charges
against the Collateral, and in the event of the Borrower's failure to do so, the
Company may at its election pay any or all of such taxes and charges without
contesting the validity or legality thereof. The payments so made shall become
part of the indebtedness secured hereunder and until paid shall bear interest at
the minimum per annum rate, compounded annually, required to avoid the
imputation of interest income to the Company and compensation income to the
Borrower under the federal tax laws.

            6.    Transfer of Collateral. In connection with the transfer or
assignment of the note (whether by negotiation, discount or otherwise), the
Company may transfer all or any part of the Collateral, and the transferee shall
thereupon succeed to all the rights, powers and remedies granted the Company
hereunder with respect to the Collateral so transferred. Upon such transfer, the
Company shall be fully discharged from all liability and responsibility for the
transferred Collateral.

            7.    Release of Collateral. Provided (i) all indebtedness secured
hereunder (other than payments not yet due and payable under the Note) shall at
the time have been paid in full or cancelled and (ii) there does not otherwise
exist any event of default under paragraph 8, the pledged shares of Common
Stock, together with any additional Collateral that may hereafter be pledged and
deposited hereunder, shall be released from pledge and returned to the Borrower
in accordance with the following provisions:

                  (a)   Upon payment or prepayment of principal under the Note,
together with payment of all accrued interest to date, one or more shares of
Common Stock held as Collateral hereunder shall (subject to the applicable
limitations of paragraphs 7(c) and (d) below) be released to the Borrower within
three (3) days after such payment or prepayment. The number of shares to be so
released shall be equal to the number obtained by multiplying (i) the total
number of shares of Common Stock held under this Agreement at the time of the
payment or prepayment, by (ii) a fraction of the numerator of which shall be the
amount of the principal paid or prepaid and the denominator of which shall be
the unpaid principal balance of the Note immediately prior to such payment or
prepayment. In no event, however, shall any fractional shares be released. In
addition, one or more shares of Common Stock held as Collateral hereunder shall
(subject to the applicable limitations of paragraphs 7(c) and (d) below) be
released to a stock broker designated in writing by the Borrower and acceptable
to the Company for the sole purpose of effecting an immediate sale of the
released shares and provided that such stock broker agrees to forward any
proceeds (up to the balance of principal and interest due under the Note)
directly to the Company to be used to satisfy the Note.

                  (b)   Any additional Collateral that may hereafter be pledged
and deposited with the Company (pursuant to the requirements of paragraph 3)
with respect to the shares of Common Stock pledged hereunder shall be released
at the same time the particular shares of Common Stock to which the additional
Collateral relates are to be released in accordance with the applicable
provisions of paragraph 7(a). Under no circumstances, however,



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shall any shares of Common Stock or any other Collateral be released if
previously applied to the payment of any indebtedness secured hereunder.

                  (c)   In no event, however, shall any shares of Common Stock
be released pursuant to the provisions of paragraphs 7(a) or 7(b) if, and to the
extent, the fair market value of the Common Stock and all other Collateral that
would otherwise remain in pledge hereunder after such release were affected
would be less than the unpaid balance of the Note (principal and accrued
interest).

                  (d)   In the event the securities constituting the Collateral
become "margin securities" (within the meaning of Regulation U of the Federal
Reserve Board), then the value of the Collateral securing the note shall not be
less than fifty percent (50%) of the current market value of such securities,
except to the extent the Plan Lender rules permit an exemption from the "maximum
loan value" rules of Regulation U. Accordingly, the number of shares to be
released pursuant to paragraph 7(a) or (b) shall be reduced to the extent
necessary to comply with Regulation U.

            8.    Events of Default.  The occurrence of one or more of the
following events shall constitute an event of default under this agreement:

                  (a)   the failure of the Borrower to pay the principal and
accrued interest when due under the Note;

                  (b)   the failure of the Borrower to perform a material
obligation imposed upon the Borrower by reason of this agreement; or

                  (c)   the breach of any warranty of the Borrower contained
in this agreement.

            Upon the occurrence of any such event of default, the Company may,
at its election, declare the Note and all other indebtedness secured hereunder
to become immediately due and payable and may exercise any or all of the rights
and remedies granted to a secured party under the provisions of the California
Uniform Commercial Code (as now or hereafter in effect), including (without
limitation) the power to dispose of the Collateral by public or private sale or
to accept the Collateral in full payment of the Note and all other indebtedness
secured hereunder.

            Any proceeds realized from the disposition of the Collateral
pursuant to the foregoing power of sale shall be applied first to the payment of
reasonable expenses incurred by the Company in connection with the disposition,
then to the payment of the Note and finally to any other indebtedness secured
hereunder. Any surplus proceeds shall be paid over to the Borrower. However, in
the event such proceeds prove insufficient to satisfy all obligations of the
Borrower under the Note, than the Borrower shall remain personally liable for
the resulting deficiency.

            9.    Other Remedies. The rights, powers and remedies granted to the
Company and Borrower pursuant to the provisions of this agreement shall be in
addition to all rights, powers and remedies granted to the Company and Borrower
under any statute or rule of



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law. Any forbearance, failure or delay by the Company or Borrower in exercising
any right, power or remedy under this agreement shall not be deemed to be a
waiver of such right, power or remedy. Any single or partial exercise of any
right, power or remedy under this agreement shall not preclude the further
exercise thereof, and every right, power and remedy of the Company and Borrower
under this agreement shall continue in full force and effect unless such right,
power or remedy is specifically waived by an instrument executed by the Company
or Borrower, as the case may be.

            10.   Costs and Expenses. All reasonable costs and expenses
(including reasonable attorneys fees) incurred by the Company in the exercise or
enforcement of any right, power or remedy granted it under this Agreement shall
become part of the indebtedness secured hereunder and shall constitute a
personal liability of the Borrower payable immediately upon demand and bearing
interest until paid at the Company's bank interest rate then being earned by the
Company on its deposits.

            11.   Applicable Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of California and shall be
binding upon the executors, administrators, heirs and assigns of the Borrower.

            12.   Arbitration. Any controversy between the parties hereto
involving the construction or application of any terms, covenants or conditions
of this Agreement or the Note, or any claims arising out of or relating to this
Agreement or the Note, or the breach hereof or thereof, will be submitted to and
settled by final and binding arbitration in San Francisco, California, in
accordance with the rules of the American Arbitration then in effect, and
judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. In the event of any arbitration under this
Agreement or the Note, the prevailing party shall be entitled to recover from
the losing party reasonable expenses, attorneys' fees, and costs incurred
therein or in the enforcement or collection of any judgment or award rendered
therein. The "prevailing party" means the party determined by the arbitrator to
have most nearly prevailed, even if such party did not prevail in all matters,
not necessarily the one in whose favor a judgment is rendered.



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            13.   Severability. If any provision of this Agreement is held to be
invalid under applicable law, then such provision shall be ineffective only to
the extent of such invalidity, and neither the remainder of such provision nor
any other provisions of this Agreement shall be affected thereby.

            IN WITNESS WHEREOF, this Agreement has been executed by the Borrower
on this 8 day of May, 2002.

                                        /s/ William McGlashan
                                        ________________________________________
                                        Signature of Borrower: William McGlashan

                                        Address:    350 The Embarcadero
                                                    San Francisco, CA 94105-1204



Agreed to and Accepted by:

CRITICAL PATH, INC.


By: /s/ Michael Zukerman
    __________________________________

Title: SVP & General Counsel
      _______________________________

Dated:  May 8, 2002



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