Commtouch Settles Shareholder Class Action Litigation; Settlement to Be Fully Funded by Insurance Policy.

Business Editors/High-Tech Writers

MOUNTAIN VIEW, Calif.--(BUSINESS WIRE)--May 28, 2003

Commtouch (Nasdaq:CTCH), a developer and provider of proprietary enterprise anti-spam solutions, is pleased to announce that it has settled the shareholder class action lawsuit filed on behalf of shareholders against the company in early 2001. The litigation was initiated against the company and two members of management in response to the company's announcement that it had decided to restate earnings for the first three quarters of 2000, alleging violations of the antifraud provisions of the Securities Exchange Act of 1934.

Judge William H. Alsup of the United States District Court for the Northern District of California, presiding over the litigation, recently signed a preliminary order confirming the settlement terms, which call for the payment of $15 million to shareholders who are members of the class by virtue of their shareholdings in the company during the class period (April 19, 2000 through February 13, 2001). The settlement terms do not include any admission or finding of wrongdoing on the part of the company or individual defendants, who maintained their denials of improper behavior throughout the proceedings.

The settlement is being fully funded by Commtouch's Directors and Officers insurance policy.

Carolyn Chin, Chairman of the Board of Commtouch, commented: "We are relieved that this unfortunate episode is now behind us, and we can concentrate all of our attention on our anti-spam solutions - ASAP!(TM) - and the growth of the business. We very much appreciate all those who have stood by us during the difficult times."

Instructions for those who wish to participate in the shareholder class will be issued in due course.

About Commtouch

Commtouch Software Ltd. is a developer and provider of proprietary anti-spam solutions. The company's core technologies reflect its decade of experience as a leading vendor of email software applications and provider of global messaging services. Commtouch is headquartered in Netanya, Israel and its subsidiary, Commtouch Inc., is based in Mountain View, CA. The company was founded in 1991 and has been publicly traded since 1999 (Nasdaq:CTCH). To learn more about Commtouch's solutions, visit our web site at http://www.commtouch.com.

Note: Commtouch(R) is a registered trademark and ASAP!(TM) is a trademark of Commtouch Software Ltd. Other terms and product names in this document may be trademarks of others.

This press release contains forward-looking statements, including projections about our business, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For example, statements in the future tense, and statements including words such as "expect", "plan", "estimate", "anticipate", or "believe" are forward-looking statements. These statements are based on information available to us at the time of the release; we assume no obligation to update any of them. The statements in this release are not guarantees of future performance and actual results could differ materially from our current expectations as a result of numerous factors, including business conditions and growth or deterioration in the Internet market, commerce and the general economy both domestic as well as international; fewer than expected new-partner relationships; competitive factors including pricing pressures; technological developments, and products offered by competitors; availability of qualified staff for expansion; and technological difficulties and resource constraints encountered in developing new products as well as those risks described in the company's Annual Reports on Form 20-F and reports on Form 6-K, which are available through www.sec.gov.