read the dam manaul:

PATH "dirname";
All files belonging to the script or level - bitmaps, sounds, entities etc. - will be first searched for in the work folder and then in the path given here.
Remarks:
Backslashes ("\") have to be given in C notation as double backslashes (e.g. "C:\\games").
Paths will be searched in the given sequence. Paths are relative to the current work folder. In order to be able to copy your project to different locations, use relative paths for all files belonging to your project, and absolute paths for all files that are on an absolute location on your hard disk (like template scripts).
Do not use special characters or spaces in your folder names.
Theoretically you can specify up to 32 PATH names, but it's better to stay well below that limit. Because each folder is searched in sequence until a given file is found, having lots of paths can remarkably increase the startup time,
LC Included scripts are not searched in the paths. They should be located in the work folder. Alternatively, their paths can be explicitely given in the #include statements.