10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2006

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                      TO                     

COMMISSION FILE NUMBER 000-25674

SKILLSOFT PUBLIC LIMITED COMPANY

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

REPUBLIC OF IRELAND (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)	N/A (I.R.S. EMPLOYER IDENTIFICATION NO.)
107 NORTHEASTERN BOULEVARD NASHUA, NEW HAMPSHIRE (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)	03062 (ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (603) 324-3000

Not Applicable
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o      Accelerated filer þ      Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No þ

On November 30, 2006, the registrant had outstanding 108,862,823 Ordinary Shares (issued or issuable in exchange for the registrant’s outstanding American Depository Shares).

SKILLSOFT PLC

FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 31, 2006
INDEX

	PAGE NO.
PART I — FINANCIAL INFORMATION		3
Item 1. Condensed Consolidated Financial Statements (Unaudited):		3
Condensed Consolidated Balance Sheets as of October 31, 2006 and January 31, 2006		3
Condensed Consolidated Income Statements for the Three and Nine Months Ended October 31, 2006 and 2005		4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2006 and 2005		5
Notes to Condensed Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3. Quantitative and Qualitative Disclosure about Market Risk		26
Item 4. Controls and Procedures		26
PART II — OTHER INFORMATION		27
Item 1. Legal Proceedings		27
Item 1A. Risk Factors		27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		35
Item 3. Defaults Upon Senior Securities		36
Item 4. Submission of Matters to a Vote of Security Holders		36
Item 5. Other Information		37
Item 6. Exhibits		37
SIGNATURE		38
EXHIBIT INDEX		39
EX-10.1 Loan and Security Agreement, dated 7/23/04
EX-10.2 2002 Share Option Plan, as amended
EX-10.3 1996 Supplemental Stock Plan, as amended
EX-10.4 2001 Outside Director Option Plan, as amended.
EX-31.1 Section 302 Certification of C.E.O.
EX-31.2 Section 302 Certification of C.F.O.
EX-32.1 Section 906 Certification of C.E.O.
EX-32.2 Section 906 Certification of C.F.O.

2

PART I

ITEM 1. — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SKILLSOFT PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED, IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

	OCTOBER 31,			JANUARY 31,
	2006			2006
ASSETS
Current assets:
Cash and cash equivalents	$	50,393		$	51,937
Short-term investments		52,453			21,632
Restricted cash		4,704			5,039
Accounts receivable, net		47,641			85,681
Prepaid expenses and other current assets		13,705			22,006
Total current assets		168,896			186,295
Property and equipment, net		9,742			10,231
Intangible assets, net		3,268			8,711
Goodwill		85,092			93,929
Long-term investments		4,017			—
Deferred tax assets, net		694			694
Other assets		375			42
Total assets	$	272,084		$	299,902
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,453		$	3,819
Accrued expenses		41,449			53,795
Deferred revenue		98,077			136,699
Total current liabilities		142,979			194,313
Long term liabilities		2,694			3,317
Commitments and contingencies (Note 11)
Shareholders’ equity:
Ordinary shares, €0.11 par value: 250,000,000 shares authorized; 108,521,751 and 107,344,243 shares issued at October 31, 2006 and January 31, 2006, respectively		11,934			11,773
Additional paid-in capital		570,117			562,052
Treasury shares, at cost, 6,533,884 ordinary shares		(24,524	)		(24,524	)
Deferred compensation		—			(465	)
Accumulated deficit		(429,853	)		(445,814	)
Accumulated other comprehensive loss		(1,263	)		(750	)
Total shareholders’ equity		126,411			102,272
Total liabilities and shareholders’ equity	$	272,084		$	299,902

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

SKILLSOFT PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

(UNAUDITED, IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

	THREE MONTHS ENDED						NINE MONTHS ENDED
	October 31,						October 31,
	2006			2005			2006			2005
Revenue	$	57,135		$	53,901		$	167,521		$	160,833
Cost of revenue (1)		6,846			6,509			19,962			18,662
Gross profit		50,289			47,392			147,559			142,171
Operating expenses:
Research and development (1)		10,047			9,169			29,913			29,321
Selling and marketing (1)		21,983			20,546			68,375			65,641
General and administrative (1)		6,844			5,504			20,948			18,531
Legal settlements/(insurance recoveries)		—			—			—			(19,500	)
Amortization of intangible assets		1,152			2,285			5,443			6,838
Restructuring		25			226			47			813
Restatement — SEC investigation		114			507			434			1,591
Total operating expenses		40,165			38,237			125,160			103,235
Operating income		10,124			9,155			22,399			38,936
Other (expense)/income, net		(35	)		341			(67	)		727
Interest income		1,137			511			3,011			1,213
Interest expense		(69	)		(243	)		(205	)		(341	)
Loss on sale of assets, net		—			73			—			(608	)
Income before provision for income taxes		11,157			9,837			25,138			39,927
Provision for income taxes		4,073			4,154			9,176			8,833
Net income	$	7,084		$	5,683		$	15,962		$	31,094
Net income per share (Note 9):
Basic	$	0.07		$	0.06		$	0.16		$	0.30
Basic weighted average shares outstanding		101,763,654			100,663,757			101,446,427			103,055,159
Diluted	$	0.07		$	0.06		$	0.15		$	0.30
Diluted weighted average shares outstanding		104,724,685			101,540,690			103,887,852			103,726,562

(1) Share-based compensation included in cost of revenue and operating expenses:

	THREE MONTHS ENDED				NINE MONTHS ENDED
	October 31,				October 31,
	2006		2005		2006		2005
Cost of revenue	$	14	$	—	$	31	$	—
Research and development		151		47		818		140
Selling and marketing		269		164		1,646		511
General and administrative		404		8		1,657		24

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

SKILLSOFT PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED, IN THOUSANDS)

	NINE MONTHS ENDED
	OCTOBER 31,
	2006			2005
Cash flows from operating activities:
Net income	$	15,962		$	31,094
Adjustments to reconcile net income to net cash provided by operating activities -
Share-based compensation		4,152			675
Depreciation and amortization		4,502			3,790
Amortization of intangible assets		5,443			6,838
Recovery of bad debts reserves		(477	)		(772	)
Loss on disposition		—			608
Provision for income tax — non-cash		8,245			7,853
Changes in current assets and liabilities:
Accounts receivable		39,354			41,381
Prepaid expenses and other current assets		8,794			6,815
Accounts payable		(403	)		(2,644	)
Accrued expenses, including long-term liabilities		(13,190	)		(22,570	)
Deferred revenue		(40,043	)		(36,547	)
Net cash provided by operating activities		32,339			36,521
Cash flows from investing activities:
Deferred acquisition costs		(296	)		—
Purchases of property and equipment		(3,989	)		(4,157	)
Capitalized software development costs		—			(1,247	)
Purchases of investments		(74,843	)		(14,848	)
Maturity of investments		39,810			21,844
Release/(designation) of restricted cash		335			(4,415	)
Net cash used in investing activities		(38,983	)		(2,823	)
Cash flows from financing activities:
Exercise of share options		1,977			550
Proceeds from employee share purchase plan		2,561			2,210
Payments to acquire treasury shares		—			(22,000	)
Net cash provided by / (used in) financing activities		4,538			(19,240	)
Effect of exchange rate changes on cash and cash equivalents		562			(1,305	)
Net (decrease)/increase in cash and cash equivalents		(1,544	)		13,153
Cash and cash equivalents, beginning of period		51,937			34,906
Cash and cash equivalents, end of period	$	50,393		$	48,059

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

SKILLSOFT PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. THE COMPANY

SkillSoft^® PLC (the Company or SkillSoft) was incorporated in Ireland on August 8, 1989. The Company is a leading provider of e-learning and performance support solutions for global enterprises, government, education and small to medium-sized businesses. SkillSoft helps companies to maximize business performance through a combination of comprehensive e-learning content, online information resources, flexible learning technologies and support services.. SkillSoft PLC is the result of a merger between SmartForce PLC and SkillSoft Corporation on September 6, 2002 (the Merger).

2. BASIS OF PRESENTATION

The accompanying, unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such SEC rules and regulations. In the opinion of management, the condensed consolidated financial statements reflect all material adjustments (consisting only of those of a normal and recurring nature) which are necessary to present fairly the consolidated financial position of the Company as of October 31, 2006 and, the results of its operations for the three and nine months ended October 31, 2006 and 2005 and its cash flows for the nine months ended October 31, 2006 and 2005. These condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2006. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

3. CASH, CASH EQUIVALENTS, RESTRICTED CASH AND INVESTMENTS

The Company considers all highly liquid investments with original maturities of 90 days or less at the time of purchase to be cash equivalents. At October 31, 2006 and January 31, 2006, cash equivalents consisted mainly of commercial paper, short-term federal agency notes and money market funds. The Company considers the cash held in certificates of deposit with a commercial bank to secure certain facility leases and to secure funds to defend named, former and current executives, and board members of SmartForce PLC for actions arising out of the SEC investigation to be restricted cash. The Company accounts for its investments in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (SFAS No. 115). Under SFAS No. 115, securities that the Company does not intend to hold to maturity are reported at market value and are classified as available-for-sale. At October 31, 2006, the Company’s investments had an average remaining maturity of approximately 143 days or 4.8 months. These investments are classified as current assets or long-term investments in the accompanying condensed consolidated balance sheets based upon the period over which they will mature.

4. REVENUE RECOGNITION

The Company generates revenue from the license of products and services and from providing hosting/application service provider (ASP) services.

The Company follows the provisions of the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-2, “Software Revenue Recognition”, as amended by SOP 98-4 and SOP 98-9, to account for revenue derived pursuant to license agreements under which customers license the Company’s products and services. The pricing for the Company’s courses varies based upon the number of course titles or the courseware bundle licensed by a customer, the number of users within the customer’s organization and the length of the license agreement (generally one, two or three years). License agreements permit customers to exchange course titles, generally on the contract anniversary date. Additional product features, such as hosting and online mentoring services, are separately licensed for an additional fee.

6

The pricing for the Company’s SkillChoice multi-modal learning (SMML) licenses varies based on the content offering selected by the customer, the number of users within the customer’s organization and the length of the license agreement. A SMML license provides customers access to a full range of learning products including courseware, Referenceware^®, simulations, mentoring and prescriptive assessment.

A Referenceware license gives users access to a full Referenceware library within one or more Referenceware collections (examples of which include: ExecSummaries™, ExecBluePrints™, ITPro™, BusinessPro™, FinancePro™, EngineeringPro™, GovEssential™ and OfficeEssentials™) from Books24x7^® (Books). The pricing for the Company’s Referenceware licenses varies based on the collections specified by a customer, the number of users within the customer’s organization and the length of the license agreement.

The Company offers discounts from its ordinary pricing, and purchasers of licenses for a larger number of courses, larger user bases or longer periods of time generally receive discounts. Generally, customers may amend their license agreements, for an additional fee, to gain access to additional courses or product lines and/or to increase the size of its user base. The Company also derives revenue from hosting fees for clients that use its solutions on an ASP basis and from the provision of online mentoring services and professional services. In selected circumstances, the Company derives revenue on a pay-for-use basis under which some customers are charged based on the number of courses accessed by users. Revenue derived from pay-for-use contracts has been minimal to date.

The Company recognizes revenue ratably over the license period if the number of courses that a customer has access to is not clearly defined, available or selected at the inception of the contract, or if the contract has additional undelivered elements for which the Company does not have vendor specific objective evidence (VSOE) of the fair value of the various elements. This may occur if the customer does not specify all licensed courses at the outset, the customer chooses to wait for future licensed courses on a when and if available basis, the customer is given exchange privileges that are exercisable other than on the contract anniversaries, or the customer licenses all courses currently available and to be developed during the term of the arrangement. Nearly all of the Company’s contractual arrangements are recognized on a subscription or straight-line basis over the period of service.

The Company also derives revenue from extranet hosting/ASP services and online mentoring services. The Company recognizes revenue related to extranet hosting/ASP services and online mentoring services on a straight-line basis over the period the services are provided. Upfront fees are recorded over the contract period.

The Company generally bills the annual license fee for the first year of a multi-year license agreement in advance and license fees for subsequent years of multi-year license arrangements are billed on the anniversary date of the agreement. Occasionally, the Company bills customers on a quarterly basis. In some circumstances, the Company offers payment terms of up to six months from the initial shipment date or anniversary date for multi-year license agreements to its customers. To the extent that a customer is given extended payment terms (defined by the Company as greater than six months), revenue is recognized as cash becomes due, assuming all of the other elements of revenue recognition have been satisfied.

The Company typically recognizes revenue from resellers when both the sale to the end user has occurred and the collectibility of cash from the reseller is probable. With respect to reseller agreements with minimum commitments, the Company recognizes revenue related to the portion of the minimum commitment that exceeds the end user sales at the expiration of the commitment period provided the Company has received payment. If a definitive service period can be determined, revenue is recognized ratably over the term of the minimum commitment period, provided that cash has been received or collectibility is probable.

The Company provides professional services, including instructor led training, customized content, websites and implementation services. The Company typically recognizes professional service revenue as the services are performed.

The Company records reimbursable out-of-pocket expenses in both revenues and as a direct cost of revenues, as applicable, in accordance with Emerging Issues Task Force (EITF) Issue No. 01-14, “Income Statement Characterization of Reimbursements Received for “Out-of-Pocket” Expenses Incurred” (EITF 01-14).

7

The Company records as deferred revenue amounts that have been billed in advance for products or services to be provided. Deferred revenue includes the unamortized portion of revenue associated with license fees for which the Company has received payment or for which amounts have been billed and are due for payment in 90 days or less for resellers and 180 days or less for direct customers. In addition, deferred revenue includes amounts which have been billed and not collected for which revenue is being recognized ratably over the license period.

SkillSoft contracts often include an uptime guarantee for solutions hosted on the Company’s servers whereby customers may be entitled to credits in the event of non-performance. The Company also retains the right to remedy any non-performance event prior to issuance of any credit. Historically, the Company has not incurred substantial costs relating to this guarantee and the Company currently accrues for such costs as they are incurred. The Company reviews these costs on a regular basis as actual experience and other information becomes available; and should they become more substantial, the Company would accrue an estimated exposure and consider the potential related effects of the timing of recording revenue on its license arrangements. The Company has not accrued any costs related to these warranties in the accompanying consolidated financial statements.

5. ACCOUNTING FOR SHARE-BASED COMPENSATION

The Company has several share-based compensation plans under which employees, officers, directors and consultants may be granted options to purchase the Company’s ordinary shares, generally at the market price on the date of grant. The options become exercisable over various periods, typically four years and have a maximum term of up to ten years. As of October 31, 2006, 7,513,263 ordinary shares remain available for future grant under the Company’s share option plans. Please see Note 9 of the Notes to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K as filed with the SEC on April 13, 2006 for a detailed description of the Company’s share option plans.

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS Statement No. 123(R) (SFAS 123(R)), “Share-Based Payment,” which is a revision of SFAS Statement No. 123 (SFAS 123), “Accounting for Stock-Based Compensation.” SFAS 123(R) supersedes APB Opinion No. 25, (Opinion 25), “Accounting for Stock Issued to Employees”, and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the approach on SFAS 123(R) is similar to the approach described in SFAS 123. However, SFAS 123(R) requires all share-based payments to employees, including grants of employee share options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

SFAS 123(R) must be adopted for fiscal years starting after June 15, 2005. As a result, the Company adopted SFAS 123(R) on February 1, 2006.

As permitted by SFAS 123, the Company historically accounted for share-based payments to employees using Opinion 25’s intrinsic value method and, as such, generally recognized no compensation cost for employee share options. The Company has adopted the “modified prospective” method alternative outlined in SFAS 123(R). A “modified prospective” method is one in which compensation cost is recognized beginning with the effective date of SFAS 123(R) (a) based on the requirements of SFAS 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123(R) that remain unvested on the effective date. As a result, the Company is recognizing share-based compensation expense related to the portion of share option grants issued prior to the adoption of SFAS 123(R) which are continuing to vest in the current period, whose fair value was calculated utilizing a Black-Scholes Option Pricing Model. In addition, SFAS 123(R) requires companies to utilize an estimated forfeiture rate when calculating the expense for the period, whereas, SFAS 123 permitted companies to record forfeitures based on actual forfeitures, which was the Company’s historical policy under SFAS 123.

The share-based compensation expense reduced both basic and diluted earnings per share by $0.01 for the three months ended October 31, 2006 and both basic and diluted earnings per share by $0.04 for the nine months ended October 31, 2006. These results reflect share-based compensation expense of $0.8 million and no related tax benefit, due to the Company’s full valuation allowance on its U.S. deferred tax assets, for the three months ended October 31, 2006, and share-based compensation expense of $4.2 million and no related tax benefit for the nine months ended October 31, 2006. In accordance with the modified-prospective transition method of SFAS 123(R), results for prior periods have not been restated. As of October 31, 2006, there was $3.7 million of compensation expense

8

related to non-vested share awards that is expected to be recognized over a period of 3.92 years and a weighted-average period of 3.47 years.

Prior to adopting SFAS 123(R), the Company accounted for share-based compensation under Opinion 25. The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to the three and nine month periods ended October 31, 2005 (in thousands, except per share data).

	THREE MONTHS			NINE MONTHS
	ENDED OCTOBER 31,			ENDED OCTOBER 31,
	2005			2005
Net income —
As reported	$	5,683		$	31,094
Add: Share-based compensation expense recognized under Opinion 25		219			675
Less: Total share-based compensation expense determined under fair value based method for all awards		(4,063	)		(13,069	)
Pro forma net income	$	1,839		$	18,700
Basic and diluted net income per share —
As reported	$	0.06		$	0.30
Pro forma	$	0.02		$	0.18

In anticipation of the adoption of SFAS 123(R), in the fourth quarter of fiscal 2006, the Company’s Board of Directors approved the accelerated vesting of all currently outstanding unvested stock options previously awarded to employees effective January 13, 2006. This vesting acceleration did not extend to any options held by executive officers or directors. Vesting was accelerated for options to purchase approximately 1.7 million ordinary shares, or approximately 11% of the Company’s total outstanding share options at the time.

The decision to accelerate vesting of these options was made to avoid recognizing compensation cost related to these options in future statements of operations upon the adoption of SFAS 123(R). It is estimated that the maximum future compensation expense that would have been recorded in the Company’s income statements had the vesting of these options not been accelerated is approximately $9.1 million, including approximately $4.7 million of share-based compensation expense in the fiscal year ending January 31, 2007. The amounts were instead reflected in the Company’s pro-forma charge as presented in Note 2 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K as filed with the SEC on April 13, 2006.

The Company uses the Black-Scholes option pricing model to determine the weighted average fair value of options prior to and after adopting SFAS 123(R). The estimated fair value of employee share options is amortized to expense using the straight-line method over the vesting period. The weighted average information and assumptions used for the grants were as follows:

	THREE MONTHS ENDED						NINE MONTHS ENDED
	OCTOBER 31,						OCTOBER 31,
	2006			2005			2006			2005
Risk-free interest rates		4.56%-4.59	%		3.86% - 4.06	%		4.58% - 5.03	%		3.86% - 4.33	%
Expected dividend yield		—			—			—			—
Volatility factor		60	%		65	%		60	%		71	%
Expected lives	4 years			7 years			4 years			7 years
Weighted average fair value of options granted	$	3.19		$	2.60		$	3.02		$	2.65
Weighted average remaining contractual life of options outstanding	5.30 years			6.10 years			5.30 years			6.10 years

9

The Company’s assumed dividend yield of zero is based on the fact that it has never paid cash dividends and has no present intention to pay cash dividends. Since adoption of SFAS 123(R) on February 1, 2006, the expected share-price volatility assumption used by the Company has been based on a blend of implied volatility in conjunction with calculations of the Company’s historical volatility determined over a period commensurate with the expected life of its option grants. The implied volatility is based on exchange traded options of the Company’s share. The Company believes that using a blended volatility assumption will result in the best estimate of expected volatility. Prior to adoption of SFAS 123(R), the expected volatility was based on historical volatilities of the underlying share only. The assumed risk-free interest rate is the U.S. Treasury security rate with a term equal to the expected life of the option. The assumed expected life is based on company-specific historical experience. With regard to the estimate of the expected life, the Company considers the exercise behavior of past grants and the pattern of aggregate exercises. The Company looked at historical option grant cancellation and termination data in order to determine its assumption of forfeiture rate which was 11.6% as of October 31, 2006. Prior to the adoption of SFAS 123(R), forfeitures were not estimated at the time of award and adjustments were reflected in pro forma net income disclosures as forfeitures occurred.

For shares purchased under the 2004 Employee Share Purchase Plan (ESPP), the Company uses a Black-Scholes option-pricing model, with the following assumptions used for the two purchases made during the nine months ended October 31, 2006: assumed risk-free interest rates of 4.79% and 5.08%, an expected volatility factor of 39% and 32% and an expected life of six months, with the assumption that dividends will not be paid.

A summary of activity under the Company’s share option plans during the nine months ended October 31, 2006 was as follows:

						Weighted
						Average		Aggregate
				Weighted		Remaining		Intrinsic
				Average		Contractual		Value
Share Options	Shares			Exercise Price		Term (Years)		(in thousands)
Outstanding, January 31, 2006		16,239,090		$	7.73		5.99
Granted		1,034,000			5.98
Exercised		(554,513	)		3.57
Cancelled		(583,536	)		11.27
Outstanding, October 31, 2006		16,135,041		$	7.63		5.30	$	20,597
Exercisable, October 31, 2006		15,035,041		$	7.75		5.19	$	20,088
Vested and Expected to Vest, October 31, 2006 (1)		15,940,227		$	7.65		5.28	$	20,513

(1) This represents the number of vested options as of October 31, 2006 plus the number of unvested options as of October 31, 2006 expected to vest adjusted for an estimated forfeiture rate of 11.6%. The company recognizes expense incurred under SFAS 123(R) on a straight line basis. Due to the Company’s vesting schedule, expense is incurred on options that have not yet vested but which are expected to vest in a future period. The options for which expense has been incurred but have not yet vested are included above as options expected to vest.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing price of the shares on October 31, 2006 of $6.33 and the exercise price of each in-the-money option) that would have been received by the option holders had all option holders exercised their options on October 31, 2006.

The weighted average grant date fair value of options granted during the three and nine months ended October 31, 2006 was $3.19 and $3.02 per share, respectively. The total intrinsic value of options exercised during the three months ended October 31, 2006 and 2005 was approximately $451,000 and $32,000, respectively. The total intrinsic value of options exercised during the nine months ended October 31, 2006 and 2005 was approximately $1.3 million and $381,000, respectively. The total fair value of share options that vested or were expected to vest during the three months ended October 31, 2006 and 2005 was approximately $0.7 million and $3.8 million, respectively. The total fair value of share options that vested and expected to vest during the nine months ended October 31, 2006 and 2005 was approximately $3.6 million and $12.3 million, respectively.

10

6. SPECIAL CHARGES

MERGER AND EXIT COSTS

Activity in the Company’s merger and exit costs, which are included in accrued expenses (see Note 13) and long-term liabilities, was as follows (in thousands):

	EMPLOYEE
	SEVERANCE AND			CLOSEDOWN OF
	RELATED COSTS			FACILITIES			OTHER			TOTAL
Merger and exit accrual January 31, 2006	$	1,186		$	3,457		$	169		$	4,812
Payments made during the nine months ended October 31, 2006		(346	)		(1,154	)		(46	)		(1,546	)
Adjustments made to accrual during the nine months ended October 31, 2006		—			238			—			238
Merger and exit accrual October 31, 2006	$	840		$	2,541		$	123		$	3,504
Long-term obligation	$	—		$	1,570		$	—		$	1,570
Current obligation	$	840		$	971		$	123		$	1,934

The Company anticipates that the remainder of the merger and exit accrual will be paid out by October 2011 as follows (in thousands):

Year ended January 31,
2007 (remaining 3 months)	$	1,902
2008		551
2009		493
2010		518
2011		40
Total	$	3,504

RESTRUCTURING

Activity in the Company’s restructuring accrual, which are included in accrued expenses (see note 13) and long-term liabilities, was as follows (in thousands):

	FACILITY LEASE
	OBLIGATIONS
Total restructuring accrual as of January 31, 2006	$	1,987
Payments made during the nine months ended October 31, 2006		(362	)
Restructuring credits incurred during the nine months ended October 31, 2006		(191	)
Total restructuring accrual as of October 31, 2006	$	1,434
Long-term obligation	$	874
Current obligation	$	560

7. GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible assets are as follows (in thousands):

	OCTOBER 31, 2006						JANUARY 31, 2006
	GROSS				NET		GROSS				NET
	CARRYING		ACCUMULATED		CARRYING		CARRYING		ACCUMULATED		CARRYING
	AMOUNT		AMORTIZATION		AMOUNT		AMOUNT		AMORTIZATION		AMOUNT
Internally developed software/ courseware	$	28,257	$	27,618	$	639	$	28,257	$	23,414	$	4,843
Customer contracts		13,018		11,289		1,729		13,018		10,055		2,963
Trademarks and trade names		905		5		900		905		—		905
		42,180		38,912		3,268		42,180		33,469		8,711
Goodwill		85,092		—		85,092		93,929		—		93,929
	$	127,272	$	38,912	$	88,360	$	136,109	$	33,469	$	102,640

11

The change in goodwill at October 31, 2006 from the amount recorded at January 31, 2006 was due primarily to the Company’s utilization of the tax benefit of net operating loss carryforwards assumed as part of the Merger.

	Total
Gross carrying amount of goodwill, January 31, 2006	$	93,929
Utilization of tax benefit		(8,245	)
Other		(592	)
Gross carrying amount of goodwill, October 31, 2006	$	85,092

     Amortization expense related to intangible assets for the remainder of fiscal 2007 and the following fiscal years is expected to be as follows (in thousands):

	Amortization
Fiscal Year	Expense
2007	$	631
2008		1,625
2009		112
Total	$	2,368

The Company will be conducting its annual impairment test of goodwill for fiscal 2007 in the fourth quarter.

8. COMPREHENSIVE INCOME/(LOSS)

SFAS No. 130, “Reporting Comprehensive Income,” requires disclosure of all components of comprehensive income/(loss) on an annual and interim basis. Comprehensive income/(loss) is defined as the change in equity of a business enterprise during a period resulting from transactions, other events and circumstances related to non-owner sources. Comprehensive income for the three and nine months ended October 31, 2006 and 2005 was as follows (in thousands):

	THREE MONTHS ENDED						NINE MONTHS ENDED
	OCTOBER 31,						OCTOBER 31,
	2006			2005			2006			2005
Comprehensive income:
Net income	$	7,084		$	5,683		$	15,962		$	31,094
Other comprehensive income/(loss) —
Foreign currency adjustment		(147	)		(360	)		(613	)		187
Unrealized holding gains/(losses)		74			30			100			(9	)
Comprehensive income	$	7,011		$	5,353		$	15,449		$	31,272

Accumulated other comprehensive income as of October 31, 2006 and January 31, 2006 was as follows (in thousands):

	OCTOBER 31,			JANUARY 31,
	2006			2006
Unrealized holding gains/(losses)	$	85		$	(15	)
Foreign currency adjustment		(1,348	)		(735	)
Total accumulated other comprehensive loss	$	(1,263	)	$	(750	)

9. NET INCOME PER SHARE

Basic net income per share was computed using the weighted average number of shares outstanding during the period. Diluted net income per share was computed by giving effect to all dilutive potential shares outstanding. The weighted average number of shares outstanding used to compute basic net income per share and diluted net income per share was as follows:

12

	THREE MONTHS ENDED				NINE MONTHS ENDED
	OCTOBER 31,				OCTOBER 31,
	2006		2005		2006		2005
Basic weighted average shares outstanding		101,763,654		100,663,757		101,446,427		103,055,159
Effect of dilutive shares outstanding		2,961,031		876,933		2,441,425		671,403
Weighted average shares outstanding, as adjusted		104,724,685		101,540,690		103,887,852		103,726,562

The following share equivalents have been excluded from the computation of diluted weighted average shares outstanding for the three and nine months ended October 31, 2006 and 2005, respectively, as they would be anti-dilutive:

	THREE MONTHS ENDED				NINE MONTHS ENDED
	OCTOBER 31,				OCTOBER 31,
	2006		2005		2006		2005
Options to purchase shares		13,174,010		16,469,825		13,693,616		16,675,354

10. INCOME TAXES

The Company operates as a holding company with operating subsidiaries in several countries, and each subsidiary is taxed based on the laws of the jurisdiction in which it operates.

The Company has significant net operating loss (NOL) carryforwards, some of which are subject to potential limitations based upon the change in control provisions of Section 382 of the Internal Revenue Code.

The provision for income tax in the three and nine months ended October 31, 2006 was approximately $4.1 million and $9.2 million, respectively. Of these amounts, approximately $3.8 million and $8.2 million for the three and nine months ended October 31, 2006, respectively, relate to the expected utilization of acquired NOL carryforwards, which do not alleviate tax burden in the statement of income, and are recorded as an adjustment to goodwill. The $3.8 million and $8.2 million of utilized acquired NOL carryforwards do not require cash payments to the taxing authorities. In addition, there is income generated in foreign countries, which cannot be offset through NOL carryforwards.

The Company’s effective tax rates for the three months ended October 31, 2006 and 2005 were 36.5% and 42.2%, respectively, and for the nine months ended October 31, 2006 and 2005 were 36.5% and 22.1%, respectively, which were higher than the Irish statutory rate of 12.5%. For the three and nine months ended October 31, 2006, the higher effective rate was due primarily to earnings in higher tax jurisdictions outside of Ireland and the effects of SFAS 123(R). This tax rate was partially offset by the utilization of previously unrecognized NOL carryforwards. The Company’s effective tax rates for the three and nine months October 31, 2005 were higher than the Irish statutory rate primarily due to earnings in higher tax jurisdictions outside of Ireland. This tax rate was partially offset by a tax free gain from an insurance settlement benefit and the utilization of previously unrecognized NOL carryforwards.

11. COMMITMENTS AND CONTINGENCIES

On or about February 4, 2003, the SEC informed the Company that it is the subject of a formal order of private investigation relating to its November 19, 2002 announcement that it would restate the financial statements of SmartForce PLC for the period 1999 through June 2002. The Company understands that the SEC’s investigation concerns SmartForce’s financial disclosure and accounting during that period, other related matters, compliance with rules governing reports required to be filed with the SEC, and the conduct of those responsible for such matters. On June 2, 2005, the Boston District Office of the SEC informed the Company that it had made a preliminary determination to recommend that the SEC bring a civil injunctive action against the Company. Under the SEC’s rules, the Company is permitted to make a so-called Wells Submission in which the Company seeks to persuade the SEC that no such action should be commenced. If the Company cannot resolve the SEC’s potential claims by agreement, the Company intends to make such a submission. The Company continues to cooperate with the SEC in

13

this matter. At the present time the Company is unable to predict the outcome of this action and as such has not determined what, if any, impact it may have on its financial statements.

Six class action lawsuits have been filed against the Company and certain of its current and former officers and directors captioned: (1) Gianni Angeloni v. SmartForce PLC d/b/a SkillSoft, William McCabe and Greg Priest; (2) Ari R. Schloss v. SkillSoft PLC f/k/a SmartForce PLC, Gregory M. Priest, Patrick E. Murphy, David C. Drummond and William G. McCabe; (3) Joseph J. Bish v. SmartForce PLC d/b/a SkillSoft, Gregory M. Priest, William G. McCabe, David C. Drummond, John M. Grillos, John P. Hayes and Patrick E. Murphy; (4) Stacey Cohen v. SmartForce PLC d/b/a SkillSoft, William G. McCabe and Greg Priest; (5) Daniel Schmelz v. SmartForce PLC d/b/a SkillSoft, William G. McCabe and Greg Priest; and (6) John O’Donoghue v. SmartForce PLC d/b/a SkillSoft, William G. McCabe and Greg Priest. Each lawsuit was filed in the United States District Court for the District of New Hampshire. In March 2004, the Company reached a settlement of this litigation for total settlement payments of $30.5 million, with $15.25 million paid in August 2004 and the remaining $15.25 million expected to be paid in fiscal 2007. In July 2005, the Company received $19.5 million, which resulted from the final settlement with the insurance carriers regarding the 2002 securities class action lawsuit settlement of $30.5 million in March 2004 and the related litigation and SEC investigation. The Company recorded the aggregate settlement with the plaintiffs as a charge in its fiscal 2004 fourth quarter; and the settlement with its insurers was recorded in the fiscal 2006 second quarter.

12. DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE

The Company follows the provisions of SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information” (SFAS No. 131). SFAS No. 131 established standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to shareholders. SFAS No. 131 also established standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, when making decisions with respect to how to allocate resources and assess performance. The Company’s chief operating decision makers, as defined under SFAS No. 131, are the Chief Executive Officer and the Chief Financial Officer. The Company views its operations and manages its business as principally two operating segments — Multi-Modal Learning (MML) and Retail Certification. On April 29, 2005, the Company sold certain assets and transferred certain liabilities related to its Retail Certification business and incurred a $608,000 loss on disposition. The sale resulted in a reduction in Retail Certification revenue in fiscal quarters subsequent to the quarter ended April 30, 2005. That trend will continue for the remainder of fiscal 2007 when compared to fiscal 2006.

The following tables set forth the Company’s statements of operations for the three and nine months ended October 31, 2006 and 2005:

	Three Months Ended October 31, 2006
	Multi-Modal		Retail Certification		Combined
			(In thousands)
Revenue	$	55,888	$	1,247	$	57,135
Net income	$	7,063	$	21	$	7,084

	Three Months Ended October 31, 2005
	Multi-Modal		Retail Certification		Combined
			(In thousands)
Revenue	$	51,005	$	2,896	$	53,901
Net income	$	5,568	$	115	$	5,683

	Nine Months Ended October 31, 2006
	Multi-Modal		Retail Certification		Combined
			(In thousands)
Revenue	$	163,018	$	4,503	$	167,521
Net income	$	15,834	$	128	$	15,962

14

	Nine Months Ended October 31, 2005
	Multi-Modal		Retail Certification			Combined
			(In thousands)
Revenue	$	148,762	$	12,071		$	160,833
Net income/(loss)	$	32,138	$	(1,044	)	$	31,094

The Company attributes revenues to different geographical areas on the basis of the location of the customer. Revenues by geographical area for the three and nine month periods ended October 31, 2006 and 2005 were as follows (in thousands):

	THREE MONTHS ENDED				NINE MONTHS ENDED
	OCTOBER 31,				OCTOBER 31,
	2006		2005		2006		2005
Revenue:
United States	$	44,689	$	42,798	$	131,155	$	126,378
United Kingdom (UK)		6,651		5,284		18,972		16,562
Canada		2,347		2,400		7,062		6,787
Europe, excluding UK		491		1,214		1,532		4,122
Australia/New Zealand		2,177		1,940		6,473		5,621
Other		780		265		2,327		1,363
Total revenue	$	57,135	$	53,901	$	167,521	$	160,833

Long-lived tangible assets at international facilities are not significant.

13. ACCRUED EXPENSES

Accrued expenses in the accompanying condensed combined balance sheets consisted of the following (in thousands):

	OCTOBER 31, 2006		JANUARY 31, 2006
Accrued compensation and benefits	$	9,074	$	15,984
Course development fees		1,544		1,170
Professional fees		2,915		2,989
Accrued payables		385		1,254
Accrued miscellaneous taxes		273		395
Accrued merger related costs*		1,934		2,977
Sales tax payable/VAT payable		3,116		4,193
Accrued royalties		3,599		3,129
Accrued litigation settlements		15,250		17,040
Accrued restructuring		560		810
Other accrued liabilities		2,799		3,854
Total accrued expenses	$	41,449	$	53,795

* Includes $1,238 and $1,584 of accrued payroll taxes in October 31, 2006 and January 31, 2006, respectively.

14. LINE OF CREDIT

The Company has a $25 million line of credit with a bank, which expires on January 18, 2007. Under the terms of the line of credit, the bank holds a first security interest in all domestic business assets. All borrowings under the line of credit bear interest at the bank’s prime rate. The facility is subject to a commitment fee of $50,000 to secure the line of credit and unused commitment fees of 0.125% based upon the daily average of un-advanced amounts under the line of credit. In addition, the line of credit contains certain financial and non-financial covenants. The Company is currently in compliance with all covenants. Also, the line of credit provides that in the event of a Material Adverse Change (as defined in the line of credit), the lender has the ability to call amounts outstanding under the line of credit. As of October 31, 2006, there were no borrowings under the line of credit; however, the Company had an outstanding letter of credit of $15.5 million that reduced the availability under the line of credit. Letters of credit are subject to commission fees of 0.75% and administrative costs. The Company paid approximately $93,000 in letters of credit fees in the nine months ended October 31, 2006.

15

15. SHARE REPURCHASE PROGRAM

In fiscal 2005, the Company’s shareholders approved the repurchase by the Company of up to an aggregate of 7,000,000 ADSs. The Company repurchased 6,533,884 shares under this program through the fiscal year ended January 31, 2006. The program expired on March 24, 2006. On March 23, 2006, the Company’s shareholders approved the renewal and extension of the program and the repurchase by the Company of up to an aggregate of 3,500,000 ADSs. Currently, none of the shares under the renewed program have been repurchased. As a result, 3,500,000 are available for repurchase, subject to certain limitations, under the shareholder approved program. The current share repurchase program authorization expires on September 22, 2007.

16. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2006, the FASB issued Financial Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes”, which applies to all tax positions related to income taxes subject to SFAS No. 109 (SFAS 109), “Accounting for Income Taxes”. This includes tax positions considered to be “routine” as well as those with a high degree of uncertainty. FIN 48 utilizes a two-step approach for evaluating tax positions. Recognition (step one) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) is only addressed if step one has been satisfied (i.e., the position is more-likely-than-not to be sustained). Under step two, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis, that is more-likely-than-not to be realized upon ultimate settlement. FIN 48’s use of the term “more-likely-than-not” in steps one and two is consistent with how that term is used in SFAS 109 (i.e., a likelihood of occurrence greater than 50 percent).

Those tax positions failing to qualify for initial recognition are recognized in the first subsequent interim period in which they meet the more-likely-than-not standard, or are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statute of limitations. Derecognition of a tax position that was previously recognized would occur when a company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained. FIN 48 specifically prohibits the use of a valuation allowance as a substitute for derecognition of tax positions.

In addition, FIN 48 includes expanded disclosure requirements, which include a tabular rollforward of the beginning and ending aggregate, unrecognized tax benefits as well as specific detail related to tax uncertainties for which it is reasonably possible the amount of unrecognized tax benefit will significantly increase or decrease within twelve months. These disclosures are required in each annual reporting period unless a significant change occurs in an interim period.

FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company expects to adopt FIN 48 in its first quarter of fiscal 2008, which begins on February 1, 2007. Differences between the amounts recognized in the statements of financial position prior to the adoption of FIN 48 and the amounts reported after adoption should be accounted for as a cumulative-effect adjustment recorded to the beginning balance of retained earnings. The cumulative effect adjustment would not apply to those items that would not have been recognized in earnings, such as the effect of adopting FIN 48 on tax positions related to business combinations.

The Company is currently evaluating the impact of the adoption of FIN 48, but does not believe the adoption will have a material impact on its results of operation or financial position.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies to other accounting pronouncements that require or permit fair value measurements. The new guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods within those fiscal years. The Company is currently analyzing the effect, if any, SFAS No. 157 will have on the Company’s consolidated financial position and results of operations.

16

17. OTHER MATTERS

On October 25, 2006, the Company signed a definitive agreement to acquire NETg from The Thomson Corporation. Under the terms of the agreement, unanimously approved by the Board of Directors of SkillSoft and also by The Thomson Corporation, the Company will pay approximately $285 million to acquire NETg. The Company will pay the purchase price as follows: (i) $215,778,000 in cash in immediately available funds and (ii) either (A) 11,093,230 of the Company’s ordinary shares, (B) $69,221,760 in cash in immediately available funds or (C) a combination of cash and such of the Company’s ordinary shares having an aggregate value of $69,221,760. For purposes of issuing the Company’s ordinary shares pursuant to the definitive agreement, the parties have agreed that each Company ordinary share shall be deemed to have a value of $6.24. The definitive agreement provides that the Company will use its commercially reasonable efforts to raise equity financing prior to the closing of the transaction, if needed. If the Company obtains such equity financing or is able to obtain sufficient additional debt financing, the entire purchase price will be paid in cash. The acquisition is estimated to close in the first half of calendar 2007 (fiscal 2008). At closing, the Company expects to accrue for transaction and integration costs along with purchase accounting adjustments, including a reduction of deferred revenue and the recording of certain intangible assets, including goodwill.

On December 1, 2006, the Company received notification from the Pre-merger Office of the Federal Trade Commission of early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 for the proposed acquisition of Thomson NETg. The Company remains subject to customary closing conditions including the completion of audited financial statements by Thomson NETg.

On December 5, 2006, the Company’s compensation committee awarded 4.8 million options to five executives under the Company’s 2002 Stock Incentive Plan and will vest over of period of 4 years. Beginning in the fourth quarter of fiscal 2007 the company expects to incur approximately $1.0 million of expense under SFAS 123(R) per quarter as a result of this grant.

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Any statement in this Quarterly Report on Form 10-Q about our future expectations, plans and prospects, including statements containing the words “believes,” “anticipates,” “plans,” “expects,” “will” and similar expressions, constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including those set forth under Part II, Item 1A, “Risk Factors.”

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and notes appearing elsewhere in this Quarterly Report on Form 10-Q.

OVERVIEW

We are a leading provider of e-learning and performance support solutions for global enterprises, government, education and small to medium-sized businesses. SkillSoft helps companies to maximize business performance through a combination of comprehensive e-learning content, online information resources, flexible learning technologies and support services. Our multi-modal learning solutions support and enhance the speed and effectiveness of both formal and informal learning processes and integrate SkillSoft’s in-depth content resources, learning management system, virtual classroom technology and support services.

We derive revenue primarily from agreements under which customers license our products and purchase our services. The pricing for our courses varies based upon the number of course titles or the courseware bundle licensed by a customer, the number of users within the customer’s organization and the length of the license agreement (generally one, two or three years). Our agreements permit customers to exchange course titles, generally on the contract anniversary date. Additional services, such as hosting and online mentoring, are subject to additional fees.

Cost of revenue includes the cost of materials (such as storage media), packaging, shipping and handling, CD duplication, the cost of online mentoring and hosting services, royalties and certain infrastructure and occupancy expenses. We generally recognize these costs as incurred. Research and development expenses consist primarily of salaries and benefits, share-based compensation, certain infrastructure and occupancy expenses, fees to consultants

17

and course content development fees. We account for software development costs in accordance with Statement of Financial Accounting Standards (SFAS) No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,” which requires the capitalization of certain computer software development costs incurred after technological feasibility is established. In the fiscal year ended January 31, 2006, we capitalized approximately $1.7 million in software development costs of which $0.5 million was amortized in the nine months ended October 31, 2006. We did not capitalize any software development costs during the nine months ended October 31, 2006. Selling and marketing expenses consist primarily of salaries and benefits, share-based compensation, commissions, advertising and promotion expenses, travel expenses and certain infrastructure and occupancy expenses. General and administrative expenses consist primarily of salaries and benefits, share-based compensation, consulting and service expenses, legal expenses, audit and tax preparation costs, regulatory compliance costs and certain infrastructure and occupancy expenses.

Amortization of intangibles represents the amortization of intangible assets, such as customer value and content, from our acquisitions of Books and GoTrain Corp. (GoTrain) and the Merger, as well as the amortization of those assets capitalized under SFAS No. 86.

Restructuring primarily consists of charges associated with international restructuring activities as well as activities related to our fiscal 2005 content development restructuring.

Restatement — SEC investigation primarily consists of charges related to the ongoing SEC investigation relating to the restatement of SmartForce’s financial statements for 1999, 2000, 2001 and the first two quarters of 2002.

BUSINESS OUTLOOK

In the three and nine months ended October 31, 2006, we generated revenue of $57.1 million and $167.5 million, respectively, as compared to $53.9 million and $160.8 million in the three and nine months ended October 31, 2005, respectively. We reported net income in the three and nine months ended October 31, 2006 of $7.1 million and $16.0 million, respectively, as compared to $5.7 million and $31.1 million in the three and nine months ended October 31, 2005, respectively. The nine months ended October 31, 2005 included a $19.5 million benefit from a settlement with our insurance carriers related to our settlement of the 2002 securities class action litigation. We continue to find ourselves in a challenging business environment due to (i) the overall market adoption rate for e-learning solutions remaining relatively slow, (ii) budgetary constraints on information technology (IT) spending by our current and potential customers and (iii) price competition from a broad array of competitors in the learning market generally. Despite these challenges, we have seen some stability in the marketplace and our core business has performed in accordance with our expectations. Our recent revenue growth and our growth prospects are strongest in our product lines focused on or bundled with informal learning, such as those available from our Books24x7 subsidiary. As a result, we have increased our sales and marketing investment related to those product lines to help capitalize on the recent growth and potential continued growth for informal learning related products. We have also invested aggressively in research and development in those areas to accelerate the time by which our planned new products will be available to our customers.

In the fourth quarter of fiscal 2005, we restructured our content development organization to more efficiently manage costs and capitalize further on the flexibility inherent in our existing outsourcing model. The goal of the restructuring was to enable us to meet our existing content production targets at a reduced cost and with greater flexibility with respect to the product offerings in which we elect to make investments. The restructuring involved the elimination of 119 jobs in Dublin, Ireland and 12 in Nashua, New Hampshire within our research and development organization as well as facilities consolidation in Dublin. We shifted the remainder of our IT skills content development activities to our outsourcing suppliers, while continuing to maintain project management and quality control internally. This same restructuring included a reduction of an additional 15 jobs in Nashua, New Hampshire for a rightsizing of our inside sales operation and 9 jobs in Germany related to the shutdown of our German facility. As a result, we incurred restructuring charges related to payments to terminated employees, facilities consolidation and the repayment of grants previously awarded by Irish agencies. These charges totaled approximately $13.0 million and were incurred in the fourth quarter of fiscal 2005. We believe that the restructuring has resulted in content development cost savings which afforded us more flexibility to reinvest in an outsourcing model for other research and development initiatives and to increase profitability of the organization.

18

In the first quarter of fiscal 2006, in order to more fully focus on the MML business (which includes informal learning), we sold certain assets of our retail IT certification business, SmartCertify (the “Retail Certification” business). The Retail Certification business was focused on direct-to-consumer business and contributed less revenue than expected. This action has allowed us to fully focus our attention and resources on our core enterprise business. We maintain the customer contracts in place on April 28, 2005 and will service those contracts until the contractual obligations have been fulfilled. We have been recognizing revenue from the deferred revenue balance related to direct-to-consumer business over the 18 to 24 months subsequent to the date of sale. Substantially all of the sales, marketing and administrative costs of our Retail Certification business were eliminated. We maintain a reseller arrangement with the acquiring organization.

During fiscal 2007, we continue to focus on revenue and earnings growth primarily by acquiring new customers, continuing to execute on our new product and telesales distribution initiatives, and by making a higher priority the evaluation of merger and acquisition opportunities that could contribute to our long-term objectives. As a result of this focus on October 25, 2006 we signed a definitive agreement to acquire NETg from The Thomson Corporation. The acquisition is expected to add to our existing offerings through the addition of complementary NETg offerings in live virtual instructor-led training, blended learning, content authoring/learning content management services technology, learning content and custom development services. The acquisition supports our overall strategy to continually increase the quality, breadth and flexibility of the learning solutions we can make available to our corporate, government, education and small-to-medium size business customers. Also, the addition of NETg’s capabilities will strengthen our ability to compete for a greater share of the $13.2 billion corporate training market that includes many larger players with more comprehensive product offerings.

CRITICAL ACCOUNTING POLICIES

We believe that our critical accounting policies are those related to revenue recognition, amortization of intangible assets and impairment of goodwill, share-based compensation, deferral of commissions, restructuring charges, legal contingencies and income taxes. We believe these accounting policies are particularly important to the portrayal and understanding of our financial position and results of operations and require application of significant judgment by our management. In applying these policies, management uses its judgment in making certain assumptions and estimates. Our critical accounting policies are more fully described under the heading “Critical Accounting Policies” and in Note 2 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K as filed with the SEC on April 13, 2006. The policies set forth in our Form 10-K have not changed, except that the critical accounting policy for share-based compensation, which is discussed in our quarterly report on Form 10-Q for the quarter ended July 31, 2006, has been modified since the filing of our Form 10-K as a result of the adoption of SFAS 123(R) on February 1, 2006.

RESULTS OF OPERATIONS

THREE MONTHS ENDED OCTOBER 31, 2006 VERSUS THREE MONTHS ENDED OCTOBER 31, 2005

	DOLLAR			THREE MONTHS ENDED OCTOBER 31,
	INCREASE/(DECREASE)			PERCENT CHANGE
	2005/2006			INCREASE/(DECREASE)			PERCENTAGE OF REVENUE
	(IN THOUSANDS)			2005/2006			2006†			2005†
Revenue	$	3,234			6	%		100	%		100	%
Cost of revenue		337			5	%		12	%		12	%
Gross margin		2,897			6	%		88	%		88	%
Operating expenses:
Research and development		878			10	%		18	%		17	%
Selling and marketing		1,437			7	%		38	%		38	%
General and administrative		1,340			24	%		12	%		10	%
Amortization of intangible assets		(1,133	)		(50	%)		2	%		4	%
Restructuring		(201	)		(89	%)		—			—
Restatement — SEC investigation		(393	)		(78	%)		—			1	%
Total operating expenses		1,928			5	%		70	%		71	%

19

	DOLLAR			THREE MONTHS ENDED OCTOBER 31,
	INCREASE/(DECREASE)			PERCENT CHANGE
	2005/2006			INCREASE/(DECREASE)			PERCENTAGE OF REVENUE
	(IN THOUSANDS)			2005/2006			2006†			2005†
Operating income		969			11	%		18	%		17	%
Other income/(expense) , net		(376	)		*			—			1	%
Interest income		626			123	%		2	%		1	%
Interest expense		174			(72	%)		—			—
Loss on sale of assets, net		(73	)		*			—			—
Income before provision for income taxes		1,320			13	%		20	%		18	%
Provision for income taxes		(81	)		(2	%)		7	%		8	%
Net income	$	1,401			25	%		12	%		11	%

*	Not meaningful
†	Does not add due to rounding

REVENUE

	THREE MONTHS ENDED OCTOBER 31,
(IN THOUSANDS)	2006		2005		CHANGE
Revenue:
Multi-Modal Learning	$	55,888	$	51,005	$	4,883
Retail Certification		1,247		2,896		(1,649	)
Total	$	57,135	$	53,901	$	3,234

In the three months ended April 30, 2005, we sold certain assets related to SmartCertify, our Retail Certification business. The sale resulted in a reduction in revenue of $1.6 million in our Retail Certification business for the three months ended October 31, 2006 as compared to the three months ended October 31, 2005. This reduction was more than offset by a 10% increase in MML revenue from our informal learning product lines and additional reseller revenues. We expect revenues from our Retail Certification business to be approximately $5.0 million in fiscal 2007 as compared to $14.3 million in fiscal 2006. We expect this decrease in revenue to be offset in fiscal 2007 by increased MML revenue generated from existing customers and new business.

	THREE MONTHS ENDED OCTOBER 31,
(IN THOUSANDS)	2006		2005		CHANGE
Revenue:
United States	$	44,689	$	42,798	$	1,891
International		12,446		11,103		1,343
Total	$	57,135	$	53,901	$	3,234

Revenue increased by 4% and 12% in the United States and internationally, respectively, in the three months ended October 31, 2006 as compared to the three months ended October 31, 2005 as a result of increased MML revenue, which was partially offset by the decrease in Retail Certification revenue as discussed above.

We exited the fiscal year ended January 31, 2006 with non-cancelable backlog of approximately $171 million as compared to $168 million at January 31, 2005. This amount is calculated by combining the amount of deferred revenue at our fiscal year end with the amounts to be added to deferred revenue throughout the next twelve months as a result of committed customer contracts and determining how much of these amounts are scheduled to amortize into revenue during fiscal 2007. The amount scheduled to amortize into revenue during fiscal 2007 is disclosed as “backlog” as of January 31, 2006. Amounts to be added to deferred revenue during fiscal 2007 include subsequent installment billings for ongoing contract periods as well as billings for new or continuing contracts. As a result of the previously described sale of certain assets related to SmartCertify, the balance of non-cancelable backlog at January 31, 2006 reflects a reduction of approximately $10.6 million in SmartCertify backlog when compared to January 31, 2005, and SmartCertify will not contribute new contracts during fiscal 2007. We have included this non-GAAP disclosure due to the fact that it is directly related to our subscription based revenue recognition policy. This is a key business metric, which factors into our forecasting and planning activities and provides visibility into fiscal 2007 revenue.

20

COSTS AND EXPENSES

The increase in cost of revenue in the three months ended October 31, 2006 versus the three months ended October 31, 2005 was primarily due to increased revenue from our royalty bearing Books 24x7 Referenceware product line.

The increase in research and development expenses in the three months ended October 31, 2006 versus the three months ended October 31, 2005 was primarily due to an increase of $0.7 million in compensation and benefit expense, which included an increase in share-based compensation expense of $0.1 million. We also incurred an increase in depreciation expense of $0.1 million. In fiscal 2007, we anticipate that research and development expenses will be between 18% and 19% of revenue.

The increase in selling and marketing expenses in the three months ended October 31, 2006 versus the three months ended October 31, 2005 was primarily due to an increase in compensation expense and payroll benefits of $1.0 million, which included an increase in share-based compensation expense of $0.1 million and $0.3 million of additional investment in our direct sales force focusing on acquiring new customers. We also incurred $0.3 million of additional investment in our marketing programs. In fiscal 2007, we anticipate that selling and marketing expenses will be between 40% and 41% of revenue.

The increase in general and administrative expenses in the three months ended October 31, 2006 versus the three months ended October 31, 2005 was primarily due an increase in compensation and benefit expense of $0.8 million, which included an increase in share-based compensation expense of $0.4 million. We also incurred increased consulting costs related to our business systems software development of $0.5 million. In fiscal 2007, we anticipate that general and administrative expense will be between 12% and 13% of revenue.

The decrease in amortization of intangible assets in the three months ended October 31, 2006 versus the three months ended October 31, 2005 was primarily due to certain assets becoming fully amortized and no material additions to intangible assets.

OTHER INCOME/(EXPENSE), NET

The change in other income/(expense), net in the three months ended October 31, 2006 versus the three months ended October 31, 2005 was primarily due to foreign currency fluctuations. Due to our multi-national operations, our business is subject to fluctuations based upon changes in the exchange rates between the currencies used in our business.

INTEREST INCOME

The increase in interest income in the three months ended October 31, 2006 versus the three months ended October 31, 2005 was primarily due to more funds being available for investment and higher interest rates on our cash and cash equivalents and investments.

PROVISION FOR INCOME TAXES

We are using an effective tax rate of 36.5% for fiscal 2007 compared to 22.0% for fiscal year 2006. The increase in the rate reflects both nontaxable insurance proceeds received in fiscal 2006 and the Company’s increased utilization of acquired NOL carryforwards in the U.S. in fiscal 2007 (as opposed to operational NOL carryforwards in fiscal 2006). For the three months ended October 31, 2006, the effective rate was higher than the Irish statutory rate of 12.5% due primarily to earnings in higher tax jurisdictions outside of Ireland and the effects of SFAS 123(R). This tax rate was partially offset by the utilization of previously unrecognized NOL carryforwards.

21

NINE MONTHS ENDED OCTOBER 31, 2006 VERSUS NINE MONTHS ENDED OCTOBER 31, 2005

	DOLLAR			NINE MONTHS ENDED OCTOBER 31,
	INCREASE/(DECREASE)			PERCENT CHANGE
	2005/2006			INCREASE/(DECREASE)			PERCENTAGE OF REVENUE
	(IN THOUSANDS)			2005/2006			2006			2005†
Revenue	$	6,688			4	%		100	%		100	%
Cost of revenue		1,300			7	%		12	%		12	%
Gross margin		5,388			4	%		88	%		88	%
Operating expenses:
Research and development		592			2	%		18	%		18	%
Selling and marketing		2,734			4	%		41	%		41	%
General and administrative		2,417			13	%		13	%		12	%
Amortization of intangible assets		(1,395	)		(20	%)		3	%		4	%
(Insurance recoveries)		19,500			*			—			(12	%)
Restructuring		(766	)		(94	%)		—			1	%
Restatement — SEC investigation		(1,157	)		(73	%)		—			1	%
Total operating expenses		21,925			21	%		75	%		64	%
Operating income		(16,537	)		(42	%)		13	%		24	%
Other income/(expense) , net		(794	)		*			—			—
Interest income		1,798			148	%		2	%		1	%
Interest expense		136			(40	%)		—			—
Loss on sale of assets, net		608			*			—			—
Income before provision for income taxes		(14,789	)		(37	%)		15	%		25	%
Provision for income taxes		343			4	%		5	%		5	%
Net income	$	(15,132	)		(49	%)		10	%		19	%

*	Not meaningful.
†	Does not add due to rounding

REVENUE

	NINE MONTHS ENDED OCTOBER 31,
(IN THOUSANDS)	2006		2005		CHANGE
Revenue:
Multi-Modal Learning	$	163,018	$	148,762	$	14,256
Retail Certification		4,503		12,071		(7,568	)
Total	$	167,521	$	160,833	$	6,688

The sale of certain assets related to SmartCertify, our Retail Certification business, resulted in a reduction in revenue of $7.6 million in our Retail Certification business for the nine months ended October 31, 2006 as compared to the nine months ended October 31, 2005. This reduction was more than offset by a 10% increase in MML revenue from our informal learning product lines and additional reseller revenues.

	NINE MONTHS ENDED OCTOBER 31,
(IN THOUSANDS)	2006		2005		CHANGE
Revenue:
United States	$	131,155	$	126,378	$	4,777
International		36,366		34,455		1,911
Total	$	167,521	$	160,833	$	6,688

Revenue increased by 4% and 6% in the United States and internationally, respectively, in the nine months ended October 31, 2006 as compared to the nine months ended October 31, 2005 due to the increased MML revenue which was offset by the decrease in Retail Certification revenue as discussed above.

COSTS AND EXPENSES

The increase in cost of revenue in the nine months ended October 31, 2006 versus the nine months ended October 31, 2005 was primarily due to increased revenue from our royalty bearing Books 24x7 Referenceware product line.

The increase in research and development expenses in the nine months ended October 31, 2006 versus the nine months ended October 31, 2005 was primarily due an increase in compensation and benefit expense of $1.6 million which included an increase in share-based compensation expense of $0.7 million. This was partially offset by a reduction of $1.2 million in outsourcing expense due to incremental costs incurred in the nine months ended October 31, 2005 to introduce the SkillSoft Dialogue product offering.

22

The increase in selling and marketing expenses in the nine months ended October 31, 2006 versus the nine months ended October 31, 2005 was primarily due to an increase in compensation and benefit expense of $5.3 million, which included $1.4 million of additional investment in our Books 24x7 sales force, $1.1 million increase in share-based compensation expense and $0.8 million of additional investment in our direct sales force targeted at acquiring new customers. We also incurred $0.8 million of additional investment in our marketing programs. These costs were partially offset by the reduction of $2.8 million of expenses resulting from the sale of certain assets related to SmartCertify at the end of our fiscal 2006 first quarter and a reduction of $1.0 million of outsourcing expense due to incremental cost incurred in the nine months ended October 31, 2005 to introduce the new SkillSoft Dialogue product line.

The increase in general and administrative expenses in the nine months ended October 31, 2006 versus the nine months ended October 31, 2005 was primarily due to an increase in compensation and benefit expense of $2.3 million, which included an increase in share-based compensation expense of $1.4 million. We also incurred increased consulting costs related to our business systems software development of $0.8 million and an increase in property tax of $0.5 million. These increases were partially offset by a decrease in accounting fees of $0.8 million and the reduction of $0.4 million of expense resulting from the sale of certain assets of SmartCertify at the end of our fiscal 2006 first quarter.

Within legal settlements/(insurance recoveries), we received an insurance settlement benefit of $19.5 million in the nine months ended October 31, 2005, which resulted from the final settlement with our insurance carriers regarding the 2002 securities class action lawsuit settlement of $30.5 million in March 2004 and the ongoing related litigation and SEC investigation.

The decrease in amortization of intangible assets in the nine months ended October 31, 2006 versus the nine months ended October 31, 2005 was primarily due to certain assets becoming fully amortized and no material additions to intangible assets.

The decrease in restructuring expenses in the nine months ended October 31, 2006 versus the nine months ended October 31, 2005 was due to the restructuring of our Retail Certification business in the three months ended April 30, 2005. We did not incur any significant restructuring charges in the nine months ended October 31, 2006.

OTHER INCOME/ (EXPENSE), NET

The change in other income/ (expense), net in the nine months ended October 31, 2006 versus the nine months ended October 31, 2005 was primarily due to foreign currency fluctuations. Due to our multi-national operations, our business is subject to fluctuations based upon changes in the exchange rates between the currencies used in our business.

INTEREST INCOME

The increase in interest income in the nine months ended October 31, 2006 versus the nine months ended October 31, 2005 was primarily due to more funds being available for investment and higher interest rates on our cash and cash equivalents and investments.

LOSS ON SALE OF ASSETS, NET

We recorded a loss of $608,000 in the nine months ended October 31, 2005. This loss is primarily the result of investment banking and professional fees associated with the sale of certain assets of the Retail Certification business.

PROVISION FOR INCOME TAXES

We are using an effective tax rate of 36.5% for fiscal 2007 compared to 22.0% for fiscal year 2006. The increase in the rate reflects both nontaxable insurance proceeds received in fiscal 2006 and the Company’s increased utilization of acquired NOL carryforwards in the U.S. in fiscal 2007 (as opposed to operational NOL carryforwards in fiscal

23

2006). For the nine months ended October 31, 2006, the effective rate was higher then the Irish statutory rate of 12.5% due primarily to earnings in higher tax jurisdictions outside of Ireland and the effects of SFAS 123(R). This tax rate was partially offset by a tax free gain from an insurance settlement benefit and the utilization of previously unrecognized NOL carryforwards.

LIQUIDITY AND CAPITAL RESOURCES

As of October 31, 2006, our principal source of liquidity was our cash and cash equivalents and short-term investments, which totaled $102.8 million. This compares to $73.6 million at January 31, 2006.

Net cash provided by operating activities of $32.3 million for the nine months ended October 31, 2006, was primarily due to net income of $16.0 million which reflects non-cash expenses of depreciation and amortization and amortization of intangible assets of $9.9 million, share-based compensation expense of $4.2 million, and non-cash income tax provision of $8.2 million. Net cash provided by operating activities was also a result of a decrease in prepaid expenses of $8.8 million and a reduction of accounts receivable of $39.4 million. These amounts were partially offset by a decrease in deferred revenue of $40.0 million as well as a decrease in accrued expenses and accounts payable of $13.2 million. The decreases in accounts receivable, deferred revenue and accrued expenses are primarily a result of the seasonality of our operations, with the fourth quarter of our fiscal year historically generating the most activity.

Net cash used in investing activities was $39.0 million for the nine months ended October 31, 2006, which includes the purchase of investments, net of maturities, generating a net cash outflow of approximately $35.0 million in the nine months ended October 31, 2006. In addition, purchases of capital assets, primarily related to additional investments in our hosting infrastructure, totaled approximately $4.0 million.

Net cash provided by financing activities was $4.5 million for the nine months ended October 31, 2006. This was the result of proceeds from the exercise of share options under our share option program and share purchases under our 2004 Employee Share Purchase Plan.

We had working capital of approximately $25.9 million as of October 31, 2006 and a working capital deficit of approximately $8.0 million as of January 31, 2006. The increase in our working capital was primarily due to our net income of $16.0 million which reflects depreciation and amortization and amortization of intangible assets of $9.9 million, share-based compensation expense of $4.2 million, and a non-cash provision for income tax of $8.2 million. Additionally, the increase included $4.5 million of proceeds from the exercise of share options and share purchases under our 2004 Employee Share Purchase Plan, which were partially offset by the purchase of long-term investments of $4.0 million and the purchase of property and equipment of $4.0 million.

We have a $25 million line of credit with a bank, which expires on January 18, 2007. Under the terms of the line of credit, the bank holds a first security interest in all domestic business assets. All borrowings under the line of credit bear interest at the bank’s prime rate. The facility is subject to a commitment fee of $50,000 to secure the line of credit and unused commitment fees of 0.125% based upon the daily average of un-advanced amounts under the line of credit. In addition, the line of credit contains certain financial and non-financial covenants. We are currently in compliance with all covenants. Also, the line of credit provides that in the event of a Material Adverse Change (as defined in the line of credit), the lender has the ability to call amounts outstanding under the line of credit. As of October 31, 2006, there were no borrowings under the line of credit; however, we had an outstanding letter of credit of $15.5 million that reduced the availability under the line of credit. Letters of credit are subject to commission fees of 0.75% and administrative costs. We paid approximately $93,000 in letters of credit fees in the nine months ended October 31, 2006.

As of January 31, 2006, we had U.S. federal net operating loss (NOL) carryforwards of approximately $313.0 million. These NOL carryforwards, which are subject to potential limitations based upon change in control provisions of Section 382 of the Internal Revenue Code, are available to reduce future taxable income, if any, through 2025. Included in the $313.0 million are approximately $181.0 million of U.S. NOL carryforwards that were acquired in the Merger and the purchase of Books. We will realize the benefits of these acquired NOL carryforwards through reductions to goodwill and non-goodwill intangibles. Also included in the $313.0 million at January 31, 2006 is approximately $28.0 million of NOL carryforwards in the United States resulting from

24

disqualifying dispositions. We will realize the benefit of these losses through increases to shareholder’s equity in the periods in which the losses are utilized to reduce tax payments. We also acquired $365,000 of U.S. tax credit carryforwards in the Merger and the purchase of Books. As with the acquired NOL carryforwards, we will realize the benefits of these credit carryforwards through reductions to goodwill and non-goodwill intangibles. Additionally, we had approximately $99.7 million of NOL carryforwards in jurisdictions outside of the U.S. If not utilized, these NOL carryforwards expire at various dates through the year ending January 31, 2025. In addition, included in the $99.7 million is approximately $61.1 million of NOL carryforwards in jurisdictions outside the U.S. acquired in the Merger and the purchase of Books. We will realize the benefits of these acquired NOL carryforwards through reductions to goodwill and non-goodwill intangibles We also had U.S. federal tax credit carryforwards of approximately $5.6 million at January 31, 2006.

We lease certain of our facilities and certain equipment and furniture under operating lease agreements that expire at various dates through 2023. Future minimum lease payments, net of estimated rentals, under these agreements are as follows (in thousands):

	Payments Due by Period
			Less Than		1-3		3-5		More Than
Contractual Obligations	Total		1 Year		Years		Years		5 Years
Operating Lease Obligations	$	20,244	$	5,062	$	6,652	$	2,213	$	6,317

We have no future contracted obligations related to long-term debt, capital leases or purchase obligations.

We have a remaining payout to be made in the fiscal year ending January 31, 2007 of $15.25 million relating to the settlement of the 2002 securities class action litigation described in Note 8(c) of the Notes to the Consolidated Financial Statements in our Form 10-K filed on April 13, 2006.

We expect to experience similar spending related to capital expenditures in the fiscal year ending January 31, 2007, as compared to the fiscal year ended January 31, 2006, and we will continue to invest in research and development and sales and marketing in order to execute our business plan and achieve expected revenue growth. To the extent that our execution of the business plan results in increased sales, we expect to experience corresponding increases in deferred revenue, cash flow and prepaid expenses. Capital expenditures for the fiscal year ending January 31, 2007 are expected to be approximately $7.0 million. We purchased 6,533,884 shares under our shareholder approved repurchase plan during fiscal 2005 and 2006. This plan expired on March 24, 2006 with 466,116 shares remaining available for repurchase under the original plan. Our shareholders have approved the renewal and extension of the plan, and as a result we currently have the ability to purchase, subject to certain limitations, up to 3,500,000 of our outstanding shares under the approved shareholder plan. Under the plan, there are limitations on our ability to purchase shares up to this level, which include, but are not limited to, the availability of distributable profits under Irish regulations and available cash. In addition, as a result of the definitive agreement we signed on October 25, 2006 to acquire NETg, we are currently restricted from repurchasing our shares. We also expect to incur additional restrictions in the future as a result of the financing arrangements we would execute as part of the agreement. We expect that the principal sources of funding for our operating expenses, capital expenditures, litigation settlement payments and other liquidity needs will be a combination of our available cash and cash equivalents and short-term investments, and funds generated from future cash flows from operating activities. We believe our current funds and expected cash flows from operating activities will be sufficient to fund our operations for at least the next 12 months. However, there are several items that may negatively impact our available sources of funds. In addition, our cash needs may increase due to factors such as unanticipated developments in our business or significant acquisitions (including NETg). The amount of cash generated from operations will be dependent upon the successful execution of our business plan. Although we do not foresee the need to raise additional capital, any unanticipated economic or business events could require us to raise additional capital to support operations.

EXPLANATION OF USE OF NON-GAAP FINANCIAL MEASURES

In addition to our audited financial results in accordance with United States generally accepted accounting principles (GAAP), to assist investors we may on occasion provide certain non-GAAP financial results as an alternative means to explain our periodic results. The non-GAAP financial results typically exclude non-cash or one-time charges or benefits.

25

Our management uses the non-GAAP financial results internally as an alternative means for assessing our results of operations. By excluding non-cash charges such as share-based compensation, amortization of purchased intangible assets, impairment of goodwill and purchased intangible assets, management can evaluate our operations excluding these non-cash charges and can compare its results on a more consistent basis to the results of other companies in our industry. By excluding charges such as restructuring charges (benefits) and insurance settlements (benefits), our management can compare our ongoing operations to prior quarters where such items may be materially different and to ongoing operations of other companies in our industry who may have materially different one-time charges. Our management recognizes that non-GAAP financial results are not a substitute for GAAP results, and believes that non-GAAP measures are helpful in assisting them in understanding and managing our business.

Our management believes that the non-GAAP financial results may also provide useful information to investors. Non-GAAP results may also allow investors and analysts to more readily compare our operations to prior financial results and to the financial results of other companies in the industry who similarly provide non-GAAP results to investors and analysts. Investors may seek to evaluate our business performance and the performance of our competitors as they relate to cash. Excluding one-time and non-cash charges may assist investors in this evaluation and comparisons.

We intend to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules and regulations.

ITEM 3. — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of October 31, 2006, we did not use derivative financial instruments for speculative or trading purposes.

INTEREST RATE RISK

Our general investing policy is to limit the risk of principal loss and to ensure the safety of invested funds by limiting market and credit risk. We currently use a registered investment manager to place our investments in highly liquid money market accounts and government-backed securities. All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Interest income is sensitive to changes in the general level of U.S. interest rates. Based on the short-term nature of our investments, we have concluded that there is no significant market risk exposure.

FOREIGN CURRENCY RISK

Due to our multi-national operations, our business is subject to fluctuations based upon changes in the exchange rates between the currencies in which we collect revenues or pay expenses and the U.S. dollar. Our expenses are not necessarily incurred in the currency in which revenue is generated, and, as a result, we are required from time to time to convert currencies to meet our obligations. These currency conversions are subject to exchange rate fluctuations, in particular changes to the value of the Euro, Canadian dollar, Australian dollar, New Zealand dollar, Singapore dollar, and pound sterling relative to the U.S. dollar, which could adversely affect our business and the results of operations. During the nine months ended October 31, 2006 and 2005, we incurred foreign currency exchange losses of $252,000 and $608,000, respectively.

ITEM 4. — CONTROLS AND PROCEDURES

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of October 31, 2006. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls

26

and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of October 31, 2006, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended October 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. — LEGAL PROCEEDINGS

Not applicable.

ITEM 1A. — RISK FACTORS

Investors should carefully consider the risks described below before making an investment decision with respect to shares of the Company.

While the following risk factors have been updated to reflect developments subsequent to the filing of our Annual Report on Form 10-K for the fiscal year ended January 31, 2006, there have been no material changes to the risk factors included in that report, except that the risk factor related to potential acquisitions has been revised to reflect risks related to our anticipated acquisition of NETg.

RISKS RELATED TO LEGAL PROCEEDINGS

IN CONNECTION WITH OUR RESTATEMENT OF THE HISTORICAL FINANCIAL STATEMENTS OF SMARTFORCE, CLASS ACTION LAWSUITS HAVE BEEN FILED AGAINST US AND ADDITIONAL LAWSUITS MAY BE FILED, AND WE ARE THE SUBJECT OF A FORMAL ORDER OF PRIVATE INVESTIGATION ENTERED BY THE SEC.

While preparing the closing balance sheet of SmartForce as at September 6, 2002, the date on which we closed our merger with SkillSoft Corporation (the Merger), certain accounting matters were identified relating to the historical financial statements of SmartForce (which, following the Merger, are no longer our historical financial statements). On November 19, 2002, we announced our intent to restate the SmartForce financial statements for 1999, 2000, 2001 and the first two quarters of 2002. We have settled several class action lawsuits that were filed following the announcement of the restatement.

We are the subject of a formal order of private investigation entered by the SEC. We may incur substantial costs in connection with the SEC investigation, which could cause a diversion of management time and attention. In addition, we could be subject to substantial penalties, fines or regulatory sanctions or claims by our former officers, directors or employees for indemnification of costs they may incur in connection with the SEC investigation, which could adversely affect our business and operating results.

On June 2, 2005, the Boston District Office of the SEC informed us that it had made a preliminary determination to recommend that the SEC bring a civil injunctive action against us. Under the SEC’s rules, we are permitted to make a so-called Wells Submission in which we seek to persuade the SEC that no such action should be commenced. In the event we are unable to resolve the SEC’s potential claims by agreement, we intend to make such a submission. We continue to cooperate with the SEC in this matter. At the present time we are unable to predict the outcome of this action and as such have not determined what, if any, impact it may have on our financial statements.

CLAIMS THAT WE INFRINGE UPON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS COULD RESULT IN COSTLY LITIGATION OR ROYALTY PAYMENTS TO THIRD PARTIES, OR REQUIRE US TO REENGINEER OR CEASE SALES OF OUR PRODUCTS OR SERVICES.

27

Third parties have in the past and could in the future claim that our current or future products infringe their intellectual property rights. Any claim, with or without merit, could result in costly litigation or require us to reengineer or cease sales of our products or services, any of which could have a material adverse effect on our business. Infringement claims could also result in an injunction in the use of our products or require us to enter into royalty or licensing agreements. Licensing agreements, if required, may not be available on terms acceptable to the combined company or at all.

From time to time we learn of parties that claim broad intellectual property rights in the e-learning area that might implicate our offerings. These parties or others could initiate actions against us in the future.

WE COULD INCUR SUBSTANTIAL COSTS RESULTING FROM PRODUCT LIABILITY CLAIMS RELATING TO OUR CUSTOMERS’ USE OF OUR PRODUCTS AND SERVICES.

Many of the business interactions supported by our products and services are critical to our customers’ businesses. Any failure in a customer’s business interaction or other collaborative activity caused or allegedly caused in the future by our products and services could result in a claim for substantial damages against us, regardless of our responsibility for the failure. Although we maintain general liability insurance, including coverage for errors and omissions, there can be no assurance that existing coverage will continue to be available on reasonable terms or will be available in amounts sufficient to cover one or more large claims, or that the insurer will not disclaim coverage as to any future claim.

WE COULD BE SUBJECTED TO LEGAL ACTIONS BASED UPON THE CONTENT WE OBTAIN FROM THIRD PARTIES OVER WHOM WE EXERT LIMITED CONTROL.

It is possible that we could become subject to legal actions based upon claims that our course content infringes the rights of others or is erroneous. Any such claims, with or without merit, could subject us to costly litigation and the diversion of our financial resources and management personnel. The risk of such claims is exacerbated by the fact that our course content is provided by third parties over whom we exert limited control. Further, if those claims are successful, we may be required to alter the content, pay financial damages or obtain content from others.

SOME OF OUR INTERNATIONAL SUBSIDIARIES HAVE NOT COMPLIED WITH REGULATORY REQUIREMENTS RELATING TO THEIR FINANCIAL STATEMENTS AND TAX RETURNS.

We operate our business in various foreign countries through subsidiaries organized in those countries. Due to our restatement of the historical SmartForce financial statements, some of our subsidiaries have not filed their audited statutory financial statements and have been delayed in filing their tax returns in their respective jurisdictions. As a result, some of these foreign subsidiaries may be subject to regulatory restrictions, penalties and fines and additional taxes.

RISKS RELATED TO THE OPERATION OF OUR BUSINESS

WE HAVE EXPERIENCED NET LOSSES IN THE PAST, AND WE MAY BE UNABLE TO MAINTAIN PROFITABILITY.

We recorded a net loss of $113.3 million for the fiscal year ended January 31, 2004, a net loss of $20.1 million for the fiscal year ended January 31, 2005 and net income of $35.2 million for the fiscal year ended January 31, 2006. While we achieved profitability in the fiscal year ending January 31, 2006 and the first three quarters of fiscal 2007, we cannot guarantee that our business will sustain profitability in any future period.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY. THIS LIMITS YOUR ABILITY TO EVALUATE HISTORICAL FINANCIAL RESULTS AND INCREASES THE LIKELIHOOD THAT OUR RESULTS WILL FALL BELOW MARKET ANALYSTS’ EXPECTATIONS, WHICH COULD CAUSE THE PRICE OF OUR ADSs TO DROP RAPIDLY AND SEVERELY.

28

We have in the past experienced fluctuations in our quarterly operating results, and we anticipate that these fluctuations will continue. As a result, we believe that our quarterly revenue, expenses and operating results are likely to vary significantly in the future. If in some future quarters our results of operations are below the expectations of public market analysts and investors, this could have a severe adverse effect on the market price of our ADSs.

Our operating results have historically fluctuated, and our operating results may in the future continue to fluctuate, as a result of factors, which include (without limitation):

• the size and timing of new/renewal agreements and upgrades;

• royalty rates;

• the announcement, introduction and acceptance of new products, product enhancements and technologies by us and our competitors;

• the mix of sales between our field sales force, our other direct sales channels and our telesales channels;

• general conditions in the U.S. or the international economy;

• the loss of significant customers;

• delays in availability of new products;

• product or service quality problems;

• seasonality — due to the budget and purchasing cycles of our customers, we expect our revenue and operating results will generally be strongest in the second half of our fiscal year and weakest in the first half of our fiscal year;

• the spending patterns of our customers;

• litigation costs and expenses, including the costs related to the restatement of the SmartForce financial statements;

• non-recurring charges related to acquisitions;

• growing competition that may result in price reductions; and

• currency fluctuations.

Most of our expenses, such as rent and most employee compensation, do not vary directly with revenue and are difficult to adjust in the short-term. As a result, if revenue for a particular quarter is below our expectations, we could not proportionately reduce operating expenses for that quarter. Any such revenue shortfall would, therefore, have a disproportionate effect on our expected operating results for that quarter.

OUR PROPOSED ACQUISITION OF NETG MAY FAIL TO CLOSE OR THERE COULD BE SUBSTANTIAL DELAYS AND COSTS BEFORE THE ACQUISITION IS COMPLETED.

On October 25, 2006 we entered into a definitive agreement to acquire NETg from The Thomson Corporation, for a purchase price of approximately $285 million. The acquisition is estimated to close in the first half of calendar 2007 (fiscal 2008). On December 1, 2006, we announced that we had received notification from the Pre-merger Office of the Federal Trade Commission of early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 for the proposed acquisition of Thomson NETg. Closing of the acquisition is subject to customary closing conditions, including the delivery by NETg of audited financial statements. If we are unable to complete the acquisition, we would have failed to realize the anticipated benefits of the acquisition and would have

29

devoted substantial financial resources and management attention without realizing any accompanying benefit. In such an event, our financial condition and results of operations could be materially adversely affected.

PAST AND FUTURE ACQUISITIONS, INCLUDING THE PROPOSED ACQUISITION OF NETG, MAY NOT PRODUCE THE BENEFITS WE ANTICIPATE AND COULD HARM OUR CURRENT OPERATIONS.

One aspect of our business strategy is to pursue acquisitions of businesses or technologies that will contribute to our future growth. As described above, on October 25, 2006 we entered into a definitive agreement to acquire NETg from The Thomson Corporation. However, we may not be successful in identifying or consummating future attractive acquisition opportunities. Moreover, any acquisitions we do consummate, including the proposed NETg acquisition, may not produce benefits commensurate with the purchase price we pay or our expectations for the acquisition. In addition, acquisitions, including the NETg acquisition, involve numerous risks, including:

• difficulties in integrating the technologies, operations, financial controls and personnel of the acquired company;

• difficulties in transitioning customers of the acquired company;

• diversion of management time and focus;

• the incurrence of unanticipated expenses associated with the acquisition or the assumption of unknown liabilities or unanticipated financial, accounting or other problems of the acquired company; and

• accounting charges related to the acquisition, including restructuring charges, write-offs of in-process research and development costs, and subsequent impairment charges relating to goodwill or other intangible assets acquired in the transaction.

DEMAND FOR OUR PRODUCTS AND SERVICES MAY BE ESPECIALLY SUSCEPTIBLE TO ADVERSE ECONOMIC CONDITIONS.

Our business and financial performance may be damaged by adverse financial conditions affecting our target customers or by a general weakening of the economy. Companies may not view training products and services as critical to the success of their businesses. If these companies experience disappointing operating results, whether as a result of adverse economic conditions, competitive issues or other factors, they may decrease or forego education and training expenditures before limiting their other expenditures or in conjunction with lowering other expenses.

INCREASED COMPETITION MAY RESULT IN DECREASED DEMAND FOR OUR PRODUCTS AND SERVICES, WHICH MAY RESULT IN REDUCED REVENUES AND GROSS PROFITS AND LOSS OF MARKET SHARE.

The market for corporate education and training solutions is highly fragmented and competitive. We expect the market to become increasingly competitive due to the lack of significant barriers to entry. In addition to increased competition from new companies entering into the market, established companies are entering into the market through acquisitions of smaller companies, which directly compete with us, and this trend is expected to continue. We may also face competition from publishing companies, vendors of application software and HR outsourcers, including those vendors with whom we have formed development and marketing alliances.

Our primary sources of direct competition are:

• third-party suppliers of instructor-led information technology, business, management and professional skills education and training;

• technology companies that offer learning courses covering their own technology products;

• suppliers of computer-based training and e-learning solutions;

• internal education, training departments and HR outsourcers of potential customers; and

30

• value-added resellers and network integrators.

Growing competition may result in price reductions, reduced revenue and gross profits and loss of market share, any one of which would have a material adverse effect on our business. Many of our current and potential competitors have substantially greater financial, technical, sales, marketing and other resources, as well as greater name recognition, and we expect to face increasing price pressures from competitors as managers demand more value for their training budgets. Accordingly, we may be unable to provide e-learning solutions that compare favorably with new instructor-led techniques, other interactive training software or new e-learning solutions.

WE RELY ON A LIMITED NUMBER OF THIRD PARTIES TO PROVIDE US WITH EDUCATIONAL CONTENT FOR OUR COURSES AND REFERENCEWARE, AND OUR ALLIANCES WITH THESE THIRD PARTIES MAY BE TERMINATED OR FAIL TO MEET OUR REQUIREMENTS.

We rely on a limited number of independent third parties to provide us with the educational content for a majority of our courses based on learning objectives and specific instructional design templates that we provide to them. We do not have exclusive arrangements or long-term contracts with any of these content providers. If one or more of our third party content providers were to stop working with us, we would have to rely on other parties to develop our course content. In addition, these providers may fail to develop new courses or existing courses on a timely basis. We cannot predict whether new content or enhancements would be available from reliable alternative sources on reasonable terms. In addition, our subsidiary, Books 24x7.com (Books) relies on third party publishers to provide all of the content incorporated into its Referenceware products. If one or more of these publishers were to terminate their license with us, we may not be able to find substitute publishers for such content. In addition, we may be forced to pay increased royalties to these publishers to continue our licenses with them.

In the event that we are unable to maintain or expand our current development alliances or enter into new development alliances, our operating results and financial condition could be materially adversely affected. Furthermore, we will be required to pay royalties to some of our development partners on products developed with them, which could reduce our gross margins. We expect that cost of revenues may fluctuate from period to period in the future based upon many factors, including the revenue mix and the timing of expenses associated with development alliances. In addition, the collaborative nature of the development process under these alliances may result in longer development times and less control over the timing of product introductions than for e-learning offerings developed solely by us. Our strategic alliance partners may from time to time renegotiate the terms of their agreements with us, which could result in changes to the royalty or other arrangements, adversely affecting our results of operations.

The independent third party strategic partners we rely on for educational content and product marketing may compete with us, harming our results of operations. Our agreements with these third parties generally do not restrict them from developing courses on similar topics for our competitors or from competing directly with us. As a result, our competitors may be able to duplicate some of our course content and gain a competitive advantage.

OUR SUCCESS DEPENDS ON OUR ABILITY TO MEET THE NEEDS OF THE RAPIDLY CHANGING MARKET.

The market for education and training software is characterized by rapidly changing technology, evolving industry standards, changes in customer requirements and preferences and frequent introductions of new products and services embodying new technologies. New methods of providing interactive education in a technology-based format are being developed and offered in the marketplace, including intranet and Internet offerings. In addition, multimedia and other product functionality features are being added to educational software. Our future success will depend upon the extent to which we are able to develop and implement products which address these emerging market requirements on a cost effective and timely basis. Product development is risky because it is difficult to foresee developments in technology, coordinate technical personnel and identify and eliminate design flaws. Any significant delay in releasing new products could have a material adverse effect on the ultimate success of our products and could reduce sales of predecessor products. We may not be successful in introducing new products on a timely basis. In addition, new products introduced by us may fail to achieve a significant degree of market acceptance or, once accepted, may fail to sustain viability in the market for any significant period. If we are

31

unsuccessful in addressing the changing needs of the marketplace due to resource, technological or other constraints, or in anticipating and responding adequately to changes in customers’ software technology and preferences, our business and results of operations would be materially adversely affected. We, along with the rest of the industry, face a challenging and competitive market for IT spending that has resulted in reduced contract value for our formal learning product lines. This pricing pressure is having a negative impact on revenue for these product lines and may have a continued or increased adverse impact in the future.

THE E-LEARNING MARKET IS A DEVELOPING MARKET, AND OUR BUSINESS WILL SUFFER IF E-LEARNING IS NOT WIDELY ACCEPTED.

The market for e-learning is a new and emerging market. Corporate training and education have historically been conducted primarily through classroom instruction and have traditionally been performed by a company’s internal personnel. Many companies have invested heavily in their current training solutions. Although technology-based training applications have been available for several years, they currently account for only a small portion of the overall training market.

Accordingly, our future success will depend upon the extent to which companies adopt technology-based solutions for their training activities, and the extent to which companies utilize the services or purchase products of third-party providers. Many companies that have already invested substantial resources in traditional methods of corporate training may be reluctant to adopt a new strategy that may compete with their existing investments. Even if companies implement technology-based training or e-learning solutions, they may still choose to design, develop, deliver or manage all or part of their education and training internally. If technology-based learning does not become widespread, or if companies do not use the products and services of third parties to develop, deliver or manage their training needs, then our products and service may not achieve commercial success.

NEW PRODUCTS INTRODUCED BY US MAY NOT BE SUCCESSFUL.

An important part of our growth strategy is the development and introduction of new products that open up new revenue streams for us. Despite our efforts, we cannot assure you that we will be successful in developing and introducing new products, or that any new products we do introduce will meet with commercial acceptance. The failure to successfully introduce new products will not only hamper our growth prospects but may also adversely impact our net income due to the development and marketing expenses associated with those new products.

THE SUCCESS OF OUR E-LEARNING STRATEGY DEPENDS ON THE RELIABILITY AND CONSISTENT PERFORMANCE OF OUR INFORMATION SYSTEMS AND INTERNET INFRASTRUCTURE.

The success of our e-learning strategy is highly dependent on the consistent performance of our information systems and Internet infrastructure. If our Web site fails for any reason or if it experiences any unscheduled downtimes, even for only a short period, our business and reputation could be materially harmed. We have in the past experienced performance problems and unscheduled downtime, and these problems could recur. We currently rely on third parties for proper functioning of computer infrastructure, delivery of our e-learning applications and the performance of our destination site. Our systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, break-ins, earthquake, financial patterns of hosting providers and similar events. Any system failures could adversely affect customer usage of our solutions and user traffic results in any future quarters, which could adversely affect our revenues and operating results and harm our reputation with corporate customers, subscribers and commerce partners. Accordingly, the satisfactory performance, reliability and availability of our Web site and computer infrastructure is critical to our reputation and ability to attract and retain corporate customers, subscribers and commerce partners. We cannot accurately project the rate or timing of any increases in traffic to our Web site and, therefore, the integration and timing of any upgrades or enhancements required to facilitate any significant traffic increase to the Web site are uncertain. We have in the past experienced difficulties in upgrading our Web site infrastructure to handle increased traffic, and these difficulties could recur. The failure to expand and upgrade our Web site or any system error, failure or extended down time could materially harm our business, reputation, financial condition or results of operations.

32

BECAUSE MANY USERS OF OUR E-LEARNING SOLUTIONS WILL ACCESS THEM OVER THE INTERNET, FACTORS ADVERSELY AFFECTING THE USE OF THE INTERNET OR OUR CUSTOMERS’ NETWORKING INFRASTRUCTURES COULD HARM OUR BUSINESS.

Many of our customer’s users access our e-learning solutions over the Internet or through our customers’ internal networks. Any factors that adversely affect Internet usage could disrupt the ability of those users to access our e-learning solutions, which would adversely affect customer satisfaction and therefore our business.

For example, our ability to increase the effectiveness and scope of our services to customers is ultimately limited by the speed and reliability of both the Internet and our customers’ internal networks. Consequently, the emergence and growth of the market for our products and services depends upon the improvements being made to the entire Internet as well as to our individual customers’ networking infrastructures to alleviate overloading and congestion. If these improvements are not made, and the quality of networks degrades, the ability of our customers to use our products and services will be hindered and our revenues may suffer.

Additionally, a requirement for the continued growth of accessing e-learning solutions over the Internet is the secure transmission of confidential information over public networks. Failure to prevent security breaches into our products or our customers’ networks, or well-publicized security breaches affecting the Internet in general could significantly harm our growth and revenue. Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in a compromise of technology we use to protect content and transactions, our products or our customers’ proprietary information in our databases. Anyone who is able to circumvent our security measures could misappropriate proprietary and confidential information or could cause interruptions in our operations. We may be required to expend significant capital and other resources to protect against such security breaches or to address problems caused by security breaches. The privacy of users may also deter people from using the Internet to conduct transactions that involve transmitting confidential information.

OUR RESTRUCTURING PLANS MAY BE INEFFECTIVE OR MAY LIMIT OUR ABILITY TO COMPETE.

In the fiscal year ended January 31, 2005, we recorded approximately $13.4 million of restructuring charges related to the reorganization of our content development organization as well as the shut down of our German facility. There are several risks inherent in these efforts to transition to a new cost structure. These include the risk that we will not be successful in maintaining profitability, and hence we may have to undertake further restructuring initiatives that would entail additional charges and create additional risks. In addition, there is the risk that cost-cutting initiatives will impair our ability to effectively develop and market products and remain competitive. Each of the above measures could have long-term effects on our business by reducing our pool of talent, decreasing or slowing improvements in our products, making it more difficult for us to respond to customers, limiting our ability to increase production quickly if and when the demand for our products increases and limiting our ability to hire and retain key personnel. These circumstances could cause our earnings to be lower than they otherwise might be.

WE DEPEND ON A FEW KEY PERSONNEL TO MANAGE AND OPERATE THE BUSINESS AND MUST BE ABLE TO ATTRACT AND RETAIN HIGHLY QUALIFIED EMPLOYEES.

Our success is largely dependent on the personal efforts and abilities of our senior management. Failure to retain these executives, or the loss of certain additional senior management personnel or other key employees, could have a material adverse effect on our business and future prospects. We are also dependent on the continued service of our key sales, content development and operational personnel and on our ability to attract, train, motivate and retain highly qualified employees. In addition, we depend on writers, programmers, Web designers and graphic artists. We may be unsuccessful in attracting, training, retaining or motivating key personnel. The inability to hire, train and retain qualified personnel or the loss of the services of key personnel could have a material adverse effect upon our business, new product development efforts and future business prospects.

CHANGES IN ACCOUNTING STANDARDS REGARDING STOCK OPTION PLANS COULD LIMIT THE DESIRABILITY OF GRANTING SHARE OPTIONS, WHICH COULD HARM OUR ABILITY TO ATTRACT AND RETAIN EMPLOYEES, AND COULD ALSO REDUCE OUR PROFITABILITY.

33

The Financial Accounting Standards Board has determined to require all companies to treat the value of share options granted to employees as an expense commencing in our first quarter of fiscal 2007. The Company adopted this accounting in the quarter ended April 30, 2006 and recorded approximately $4.2 million of share-based compensation expense for the nine months ended October 31, 2006. This change requires companies to record a compensation expense equal to the value of each share option granted. This expense will be spread over the vesting period of the share option. Due to the fact that we are required to expense share option grants, it could reduce the attractiveness of granting share options because the additional expense associated with these grants would reduce our profitability. However, share options are an important employee recruitment and retention tool, and we may not be able to attract and retain key personnel if we reduce the scope of our employee share option program. Accordingly, either our profitability, or our ability to use share options as an employee recruitment and retention tool would be adversely impacted.

OUR BUSINESS IS SUBJECT TO CURRENCY FLUCTUATIONS THAT COULD ADVERSELY AFFECT OUR OPERATING RESULTS.

Due to our multi-national operations, our operating results are subject to fluctuations based upon changes in the exchange rates between the currencies in which revenues are collected or expenses are paid. In particular, the value of the U.S. dollar against the euro and related currencies will impact our operating results. Our expenses will not necessarily be incurred in the currency in which revenue is generated, and, as a result, we will be required from time to time to convert currencies to meet our obligations. These currency conversions are subject to exchange rate fluctuations, and changes to the value of the euro, pound sterling and other currencies relative to the U.S. dollar could adversely affect our business and results of operations.

WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY RIGHTS. UNAUTHORIZED USE OF OUR INTELLECTUAL PROPERTY MAY RESULT IN DEVELOPMENT OF PRODUCTS OR SERVICES THAT COMPETE WITH OURS.

Our success depends to a degree upon the protection of our rights in intellectual property. We rely upon a combination of patent, copyright, and trademark laws to protect our proprietary rights. We have also entered into, and will continue to enter into, confidentiality agreements with our employees, consultants and third parties to seek to limit and protect the distribution of confidential information. However, we have not signed protective agreements in every case.

Although we have taken steps to protect our proprietary rights, these steps may be inadequate. Existing patent, copyright, and trademark laws offer only limited protection. Moreover, the laws of other countries in which we market our products may afford little or no effective protection of our intellectual property. Additionally, unauthorized parties may copy aspects of our products, services or technology or obtain and use information that we regard as proprietary. Other parties may also breach protective contracts we have executed or will in the future execute. We may not become aware of, or have adequate remedies in the event of, a breach. Litigation may be necessary in the future to enforce or to determine the validity and scope of our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Even if we were to prevail, such litigation could result in substantial costs and diversion of management and technical resources.

OUR NON-U.S. OPERATIONS ARE SUBJECT TO RISKS WHICH COULD NEGATIVELY IMPACT OUR FUTURE OPERATING RESULTS.

We expect that international operations will continue to account for a significant portion of our revenues. Operations outside of the United States are subject to inherent risks, including:

• difficulties or delays in developing and supporting non-English language versions of our products and services;

• political and economic conditions in various jurisdictions;

• difficulties in staffing and managing foreign subsidiary operations;

• longer sales cycles and account receivable payment cycles;

34

• multiple, conflicting and changing governmental laws and regulations;

• foreign currency exchange rate fluctuations;

• protectionist laws and business practices that may favor local competitors;

• difficulties in finding and managing local resellers;

• potential adverse tax consequences; and

• the absence or significant lack of legal protection for intellectual property rights.

Any of these factors could have a material adverse effect on our future operations outside of the United States, which could negatively impact our future operating results.

THE MARKET PRICE OF OUR ADSs MAY FLUCTUATE AND MAY NOT BE SUSTAINABLE.

The market price of our ADSs has fluctuated significantly since our initial public offering and is likely to continue to be volatile. In addition, in recent years the stock market in general, and the market for shares of technology stocks in particular, have experienced extreme price and volume fluctuations, which have often been unrelated to the operating performance of affected companies. The market price of our ADSs may continue to experience significant fluctuations in the future, including fluctuations that are unrelated to our performance. As a result of these fluctuations in the price of our ADSs, it is difficult to predict what the price of our ADSs will be at any point in the future, and you may not be able to sell your ADSs at or above the price that you paid for them.

OUR SALES CYCLE MAY MAKE IT DIFFICULT TO PREDICT OUR OPERATING RESULTS.

The period between our initial contact with a potential customer and the purchase of our products by that customer typically ranges from three to twelve months or more. Factors that contribute to our long sales cycle, include:

• our need to educate potential customers about the benefits of our products;

• competitive evaluations by customers;

• the customers’ internal budgeting and approval processes;

• the fact that many customers view training products as discretionary spending, rather than purchases essential to their business; and

• the fact that we target large companies, which often take longer to make purchasing decisions due to the size and complexity of the enterprise.

These long sales cycles make it difficult to predict the quarter in which sales may occur. Delays in sales could cause significant variability in our revenues and operating results for any particular period.

OUR BUSINESS COULD BE ADVERSELY AFFECTED IF OUR PRODUCTS CONTAIN ERRORS.

Software products as complex as ours contain known and undetected errors or “bugs” that result in product failures. The existence of bugs could result in loss of or delay in revenues, loss of market share, diversion of product development resources, injury to reputation or damage to efforts to build brand awareness, any of which could have a material adverse effect on our business, operating results and financial condition.

ITEM 2. — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Not applicable.

35

ITEM 3. — DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We held our 2006 annual general meeting of shareholders (the “AGM”) on September 28, 2006. Under the terms of our arrangements with The Bank of New York, The Bank of New York is entitled to vote or cause to be voted all of our ordinary shares represented by ADSs on behalf of, and in accordance with the instructions received from, the ADS holders. Two individual shareholders and our Chairman of the meeting as proxy were present for the vote through the meeting along with our auditor. And a third individual shareholder was present for part of the meeting. Voting was conducted on a show of hands in accordance with Irish law. There were no broker non-votes or votes withheld with respect to any matter submitted to a vote of the ordinary shareholders at the AGM.

The following is a brief description of each matter submitted to a vote of the ordinary shareholders and a summary of the votes tabulated with respect to each such matter at the AGM, as well as a summary of the votes cast by The Bank of New York based on the ADR facility:

     (1) Receipt and consolidation of the consolidated financial statements for the fiscal year ended January 31, 2006 and the Report of Directors and Auditors thereon.

	Votes “FOR”		“AGAINST”		“ABSTAIN”
Ordinary Shareholders		3		0		0
ADS Holders		108,254,090		9,251		5,535

     (2) Re-election of P. Howard Edelstein, who retired by rotation, as a director.

	Votes “FOR”		“AGAINST”		“ABSTAIN”
Ordinary Shareholders		3		0		0
ADS Holders		108,215,288		43,253		10,335

The term of office of Charles Moran, Stewart K.P. Gross, James Krzywicki, William Meagher and Ferdinand von Prondyniski continued after the AGM.

     (3) Authorization of the Audit Committee of the Board of Directors to fix the remuneration of our auditor for the fiscal year ending January 31, 2007.

	Votes “FOR”		“AGAINST”		“ABSTAIN”
Ordinary Shareholders		3		0		0
ADS Holders		108,253,827		12,251		2,798

     (4) Amendment of the 2002 share option plan to increase the total number of shares reserved for issuance thereunder by 1,400,000 ordinary shares of €0.11 each (to 8,850,000 ordinary shares of €0.11 each) to be effected through a reallocation of shares available for grant under the 1996 supplemental stock plan, resulting in an amendment to such plan to reduce the shares issuable thereunder by an aggregate of 1,400,000 ordinary shares.

	Votes “FOR”		“AGAINST”		“ABSTAIN”
Ordinary Shareholders		3		0		0
ADS Holders		94,074,982		14,186,151		7,743

36

     (5) Authorization of the Board of Directors to allot relevant securities of SkillSoft up to an amount equal to but not exceeding our authorized but unissued share capital.

	Votes “FOR”		“AGAINST”		“ABSTAIN”
Ordinary Shareholders		4		0		0
ADS Holders		108,147,066		74,405		47,405

     (6) Authorization of the Board of Directors to allot equity securities of SkillSoft as if section 23(1) of the Companies (Amendment) Act, 1983 did not apply to any such allotment.

	Votes “FOR”		“AGAINST”		“ABSTAIN”
Ordinary Shareholders		4		0		0
ADS Holders		104,197,512		4,022,095		49,269

ITEM 5. — OTHER INFORMATION

On October 18, 2006, we amended the Loan and Security Agreement, dated July 23, 2004, as amended, among Silicon Valley Bank, SkillSoft Corporation, SmartCertify Direct Inc. and Books24x7.com, Inc. to extend the maturity date of our revolving line of credit from October 20, 2006 to January 18, 2007.

ITEM 6. — EXHIBITS

See the Exhibit Index attached hereto.

37

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SKILLSOFT PUBLIC LIMITED COMPANY
Date: December 8, 2006	By:	/s/ Thomas J. McDonald
		Thomas J. McDonald
		Chief Financial Officer

38

EXHIBIT INDEX

2.1	Stock and Asset Purchase Agreement among T.N.H. France SARL, T.N.H. Holdings GmbH, The Thomson Corporation (Australia) Pty Ltd, Thomson Information and Solutions Limited, Thomson Global Resources, Thomson Learning Inc., Thomson Learning Inc., SkillSoft PLC and SkillSoft Corporation, dated October 25, 2006 (Incorporated by reference to Exhibit 2.1 to SkillSoft PLC’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on October 26, 2006 (File No. 000-25674)).
10.1	Loan and Security Agreement, dated July 23, 2004, as amended, by and between Silicon Valley Bank, SkillSoft Corporation, SmartCertify Direct Inc. and Books24x7.com, Inc.
10.2	2002 Share Option Plan, as amended.
10.3	1996 Supplemental Stock Plan, as amended.
10.4	2001 Outside Director Option Plan, as amended.
31.1	Certification of SkillSoft PLC’s Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15(d)-14(a) under the Securities Exchange Act of 1934.
31.2	Certification of SkillSoft PLC’s Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15(d)-14(a) under the Securities Exchange Act of 1934.
32.1	Certification of SkillSoft PLC’s Chief Executive Officer pursuant to Rule 13a-14(b)/Rule 15d-14(b) under the Securities Exchange Act of 1934, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of SkillSoft PLC’s Chief Financial Officer pursuant to Rule 13a-14(b)/Rule 15d-14(b) under the Securities Exchange Act of 1934, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

39

EX-10.1

                                                               Exhibit 10.01

                           LOAN AND SECURITY AGREEMENT

      THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of July 23,
2004, between SILICON VALLEY BANK, a California chartered bank, with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054
and with a loan production office located at One Newton Executive Park, Suite
200, 2221 Washington Street, Newton, Massachusetts 02462, doing business under
the name "Silicon Valley East" ("Bank") and SKILLSOFT CORPORATION, a Delaware
corporation ("SkillSoft"), SMARTCERTIFY DIRECT INC., a Florida corporation
("SmartCertify"), and BOOKS24X7.COM, INC., a Massachusetts corporation ("Books")
(SkillSoft, SmartCertify, and Books are hereinafter jointly, severally and
collectively referred to as "Borrower") provides the terms on which Bank shall
lend to Borrower and Borrower shall repay Bank. In consideration of the mutual
covenants contained herein and benefits to be derived herefrom, the parties
agree as follows::

      WHEREAS, each Borrower has requested that Bank establish the loan
arrangement as set forth herein; and

      WHEREAS, each Borrower requests that as a convenience to that Borrower,
such loans as may be made hereunder shall be directed to the Agent which will,
in turn, distribute the proceeds thereof to the respective Borrower;

      NOW THEREFORE, as an additional inducement for Bank to establish the loan
arrangement and to direct such loans as may be made hereunder to the Agent, as
described above, each Borrower covenants and agrees as follows:

      1     ACCOUNTING AND OTHER TERMS

      1.1   ACCOUNTING AND OTHER TERMS. Accounting terms not defined in this
Agreement shall be construed following GAAP. Calculations and determinations
must be made following GAAP. The term "financial statements" includes the notes
and schedules. The terms "including" and "includes" always mean "including (or
includes) without limitation," in this or any Loan Document. Capitalized terms
in this Agreement shall have the meanings set forth in Article 13. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meaning provided by the Code, to the extent such terms are defined therein.

      1.2   DESIGNATION OF AGENT. Each Borrower hereby designates Skillsoft
(hereinafter, the "Agent") as the agent of that Borrower to discharge the duties
and responsibilities of Agent as provided herein.

      1.3   OPERATION OF BORROWING. Except as otherwise provided in this
Article, loans and advances hereunder shall be requested solely by Agent as
agent for each Borrower. Each Borrower shall be directly indebted to Bank for
each advance distributed to Agent, together with all accrued interest thereon,
as if that amount had been advanced directly by Bank to such Borrower. Bank
shall have no responsibility to inquire as to the distribution of loans and
advances made by Bank through Agent as described herein.

      1.4   CONTINUATION OF AUTHORITY OF AGENT. The authority of Agent to
request loans on behalf of, and to bind, the Borrowers, shall continue unless
and until Bank actually receives written notice of the termination of such
authority.

      2     LOAN AND TERMS OF PAYMENT

      2.1   PROMISE TO PAY. Borrower hereby unconditionally promises to pay Bank
the unpaid principal amount of all Credit Extensions and interest on the unpaid
principal amount of the Credit Extensions as and when due in accordance with
this Agreement.

      2.1.1 REVOLVING ADVANCES.

                  (a)   Availability. Bank shall make Advances not exceeding the
   Revolving Line minus (i) the amount of all outstanding Letters of Credit
   (including drawn but unreimbursed Letters of Credit), minus (ii)



   the FX Reserve, and minus (iii) the aggregate outstanding Advances hereunder
   (including any Cash Management Services). Amounts borrowed under this Section
   may be repaid and reborrowed during the term of this Agreement.

                  (b)   Borrowing Procedure. To obtain an Advance, Borrower must
   notify Bank (which notice shall be irrevocable) by facsimile or telephone by
   3:00 p.m. Eastern time on the Business Day the Advance is to be made. If such
   notification is by telephone, Borrower must promptly confirm the notification
   by delivering to Bank a completed Payment/Advance Form in the form attached
   as EXHIBIT B. Bank shall credit Advances to Borrower's deposit account. Bank
   may make Advances under this Agreement based on instructions from a
   Responsible Officer or his or her designee or without instructions if the
   Advances are necessary to meet Obligations which have become due. Bank may
   rely on any telephone notice given by a person whom Bank believes is a
   Responsible Officer or designee. Borrower shall indemnify Bank for any loss
   Bank suffers due to such reliance, except as a direct result of the gross
   negligence or willful misconduct by Bank.

                  (c)   Interest Rate. The principal amounts outstanding under
   the Revolving Line shall accrue interest at a per annum rate equal to the
   Prime Rate, which interest shall be payable monthly.

                  (d)   Termination; Repayment. The Revolving Line terminates on
   the Revolving Line Maturity Date, when the principal amount of all Advances,
   the unpaid interest thereon, and all other Obligations relating to the
   Revolving Line shall be immediately due and payable.

      2.1.2 LETTERS OF CREDIT SUBLIMIT.

                  (a)   Bank shall issue or have issued Letters of Credit for
   Borrower's account not exceeding the Revolving Line minus (i) the outstanding
   principal balance of any Advances (including any Cash Management Services),
   minus (ii) the amount of all Letters of Credit (including drawn but
   unreimbursed Letters of Credit), plus an amount equal to any Letter of Credit
   Reserves. The face amount of outstanding Letters of Credit (including drawn
   but unreimbursed Letters of Credit and any Letter of Credit Reserve) may not
   exceed Seventeen Million Five Hundred Thousand Dollars ($17,500,000.00). Each
   Letter of Credit may have an expiry date after the Revolving Maturity Date
   provided Borrower's Letter of Credit reimbursement obligation shall be
   secured by cash on terms acceptable to Bank on and after (i) the Maturity
   Date of the Revolving Line, or (ii) the occurrence of an Event of Default
   hereunder. All Letters of Credit shall be in form and substance acceptable to
   Bank in its sole discretion, and shall be subject to the terms and conditions
   of Bank's standard Application and Letter of Credit Agreement ("Letter of
   Credit Application"). Borrower agrees to execute any further documentation in
   connection with the Letters of Credit as Bank may reasonably request.

                  (b)   The obligation of Borrower to immediately reimburse Bank
   for drawings made under Letters of Credit shall be absolute, unconditional
   and irrevocable, and shall be performed strictly in accordance with the terms
   of this Agreement and such Letters of Credit, and such Letter of Credit
   Application. Borrower shall indemnify, defend, protect, and hold Bank
   harmless from any loss, cost, expense or liability, including, without
   limitation, reasonable attorneys' fees, arising out of or in connection with
   any Letters of Credit, except for any loss, cost, expense or liability
   arising from Bank's gross negligence or willful misconduct.

                  (c)   Borrower may request that Bank issue a Letter of Credit
   payable in a currency other than United States Dollars. If a demand for
   payment is made under any such Letter of Credit, Bank shall treat such demand
   as an Advance to Borrower of the equivalent of the amount thereof (plus fees
   and charges in connection therewith such as wire, cable, SWIFT or similar
   charges) in United States currency at the then prevailing rate of exchange in
   San Francisco, California, for sales of that other currency for transfer to
   the country of which it is the currency.

                  (d)   Upon the issuance of any letter of credit payable in a
   currency other than United States Dollars, Bank shall create a reserve (the
   "Letter of Credit Reserve") under the Revolving Line for letters of credit
   against fluctuations in currency exchange rates, in an amount equal to ten
   percent (10%) of the face amount of such letter of credit. The amount of such
   reserve may be amended by Bank from time to time to account for fluctuations
   in the exchange rate. The availability of funds under the Revolving Line
   shall be reduced by the amount of such reserve for as long as such letter of
   credit remains outstanding.

                                      -2-


      2.1.3 FOREIGN EXCHANGE SUBLIMIT. The Borrower may enter into foreign
exchange forward contracts with the Bank up to a maximum amount of One Million
Dollars ($1,000,000.00) under which Borrower commits to purchase from or sell to
Bank a set amount of foreign currency more than one (1) business day after the
contract date (the "FX Forward Contract"). Bank shall subtract 10% of each
outstanding FX Forward Contract (the "F/X Reserve") from the foreign exchange
sublimit. The total FX Forward Contracts at any one time may not exceed 10 times
the amount of the FX Reserve. Bank may terminate the FX Forward Contracts if an
Event of Default occurs. The Obligations of Borrower relating to this section
may not exceed the Revolving Line minus (i) the amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit), minus
(ii) the FX Reserve, and minus (iii) the aggregate outstanding Advances
hereunder (including any Cash Management Services).

      2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT. Borrower may use up to Seventeen
Million Five Hundred Thousand Dollars ($17,500,000.00) for the Bank's Cash
Management Services (the "Cash Management Services Sublimit"), which may include
merchant services, direct deposit of payroll, business credit card, and check
cashing services identified in the various cash management services agreements
related to such Cash Management Services (the "Cash Management Services"). Such
aggregate amounts utilized under the Cash Management Services Sublimit shall at
all times reduce the amount otherwise available for Credit Extensions under the
Revolving Line. Any amounts Bank pays on behalf of Borrower or any amounts that
are not paid by Borrower for any Cash Management Services will be treated as
Advances under the Revolving Line and will accrue interest at the interest rate
applicable to Advances.

      2.1.5 UNDISBURSED CREDIT EXTENSIONS. The Bank's obligation to lend the
undisbursed portion of the Credit Extensions shall terminate if, there has been
a Material Adverse Change or there has been any material adverse deviation by
Borrower from the most recent business plan of Borrower presented to and
accepted by Bank prior to the execution of this Agreement.

      2.2   INTEREST RATE.

                  (a)   Default Rate. After an Event of Default, Obligations
   shall bear interest at four percent (4.0%) above the rate effective
   immediately before the Event of Default.

                  (b)   Adjustment to Interest Rate. The applicable interest
   rate hereunder shall increase or decrease when the Prime Rate changes.

                  (c)   360-Day Year. Interest is computed on the basis of a 360
   day year for the actual number of days elapsed.

                  (d)   Debit of Accounts. Bank may debit any of Borrower's
   deposit accounts, including Account Number __________, for principal and
   interest payments when due, or any other amounts Borrower owes Bank, when
   due. Bank shall promptly notify Borrower after it debits Borrower's accounts.
   These debits shall not constitute a set-off.

                  (e)   Payments. Interest is payable monthly on the first
   calendar day of each month. Payments received after 12:00 noon Eastern time
   are considered received at the opening of business on the next Business Day.
   When a payment is due on a day that is not a Business Day, the payment is due
   the next Business Day and additional fees or interest, as applicable, shall
   continue to accrue.

      2.3   FEES. Borrower shall pay to Bank:

                  (a)   Commitment Fee. A fully earned, non-refundable
   commitment fee of Fifty Thousand Dollars ($50,000.00) due and payable on the
   Closing Date; and

                  (b)   Letter of Credit Fee. The Borrower shall pay the Bank's
   customary fees and expenses for the issuance or renewal of Letters of Credit,
   including, without limitation, a Letter of Credit Fee of three-quarters of
   one percent (0.75%) per annum of the face amount of each Letter of Credit
   issued, upon the issuance or renewal of such Letter of Credit by the Bank;
   and

                                      -3-


                  (c)   Unused Revolving Line Facility Fee. In addition to the
   foregoing, as compensation for the Bank's maintenance of sufficient funds
   available for such purpose, the Bank shall have earned a fee (the "Unused
   Revolving Line Facility Fee"), which fee shall be paid quarterly, in arrears,
   on a calendar year basis, in an amount equal to one-eighth of one percent
   (0.125%) per annum of the average unused portion of the Revolving Line, as
   determined by the Bank. For purposes hereof, any Letter of Credit Reserve and
   any F/X Reserve held or in place for any calendar year shall constitute a
   utilization of the Revolving Line. The Borrower shall not be entitled to any
   credit, rebate or repayment of any Unused Revolving Line Facility Fee
   previously earned by the Bank pursuant to this Section notwithstanding any
   termination of the within Agreement, or suspension or termination of the
   Bank's obligation to make loans and advances hereunder; and

                  (d)   Bank Expenses. All Bank Expenses (including reasonable
   attorneys' fees and expenses) incurred through and after the Closing Date,
   when due.

      3     CONDITIONS OF LOANS

      3.1   CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The Bank's
obligation to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, such documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate, including, without limitation, subject
to the condition precedent that Bank shall have received, in form and substance
satisfactory to Bank, the following:

                  (a)   this Agreement;

                  (b)   a certificate of the Secretary of Borrower with respect
   to articles, bylaws, incumbency and resolutions authorizing the execution and
   delivery of this Agreement;

                  (c)   Negative Pledge Agreement covering Intellectual
   Property;

                  (d)   Perfection Certificates by Borrower and Skillsoft
   Finance Limited;

                  (e)   landlord's waiver;

                  (f)   a legal opinion of Borrower's counsel (authority and
   enforceability), in form and substance acceptable to Bank;

                  (g)   Unconditional Guaranty by Skillsoft Finance Limited;

                  (h)   Pledge/Security Agreement for depository/investment
   accounts by Skillsoft Finance Limited;

                  (i)   Unconditional Guaranty by Skillsoft Plc;

                  (j)   UCC financing statement filing authorization;

                  (k)   Account Control Agreement/ Investment Account Control
   Agreement by SkillSoft Finance Limited;

                  (l)   insurance certificates;

                  (m)   payment of the fees and Bank Expenses then due specified
   in Section 2.3 hereof;

                  (n)   Certificates of Foreign Qualification (if applicable);

                  (o)   Certificates of Good Standing/Legal Existence; and

                                      -4-


                  (p)   such other documents, and completion of such other
   matters, as Bank may reasonably deem necessary or appropriate.

      3.2   CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. Bank's obligations to
make each Credit Extension, including the initial Credit Extension, is subject
to the following:

                  (a)   timely receipt of any Payment/Advance Form; and

                  (b)   the representations and warranties in Section 5 shall be
   true in all material respects on the date of the Payment/Advance Form and on
   the effective date of each Credit Extension and no Event of Default shall
   have occurred and be continuing, or result from the Credit Extension. Each
   Credit Extension is Borrower's representation and warranty on that date that
   the representations and warranties in Section 5 remain true in all material
   respects.

      4     CREATION OF SECURITY INTEREST

      4.1   GRANT OF SECURITY INTEREST. Borrower hereby grants Bank, to secure
the payment and performance in full of all of the Obligations and the
performance of each of Borrower's duties under the Loan Documents, a continuing
security interest in, and pledges and assigns to the Bank, the Collateral,
wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof. Borrower warrants and represents that the
security interest granted herein shall be a first priority security interest in
the Collateral. Bank may place a "hold" on any deposit account pledged as
Collateral.

Except as noted on the Perfection Certificate, Borrower is not a party to, nor
is bound by, any material license or other agreement with respect to which the
Borrower is the licensee that prohibits or otherwise restricts Borrower from
granting a security interest in Borrower's interest in such license or agreement
or any other property. Borrower shall not enter into, or become bound by, any
such material license or agreement which is reasonably likely to have a material
impact on Borrower's business or financial condition, unless Borrower provides
Bank with written notice within thirty (30) Business Days after entering into
such agreement. Borrower shall take such steps as Bank requests to obtain the
consent of, or waiver by, any person whose consent or waiver is necessary for
all such licenses or contract rights to be deemed "Collateral" and for Bank to
have a security interest in it that might otherwise be restricted or prohibited
by law or by the terms of any such license or agreement, whether now existing or
entered into in the future

If the Agreement is terminated, Bank's lien and security interest in the
Collateral shall continue until Borrower fully satisfies its Obligations. If
Borrower shall at any time, acquire a commercial tort claim, Borrower shall
promptly notify Bank in a writing signed by Borrower of the brief details
thereof and grant to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance satisfactory to Bank.

      4.2   AUTHORIZATION TO FILE FINANCING STATEMENTS. Borrower hereby
authorizes Bank to file financing statements, without notice to Borrower, with
all appropriate jurisdictions in order to perfect or protect Bank's interest or
rights hereunder, including a notice that any disposition of the Collateral, by
either the Borrower or any other Person, shall be deemed to violate the rights
of the Bank under the Code.

      5     REPRESENTATIONS AND WARRANTIES

      Borrower represents and warrants as follows:

      5.1   DUE ORGANIZATION AND AUTHORIZATION. Borrower is duly existing and in
good standing in its state of formation and qualified and licensed to do
business in, and in good standing in, any state in which the conduct of its
business or its ownership of property requires that it be qualified except where
the failure to do so could not reasonably be expected to cause a Material
Adverse Change. In connection with this Agreement, the Borrower delivered to the
Bank a certificate signed by the Borrower and entitled "Perfection Certificate".
The Borrower represents and warrants to the Bank that: (a) the Borrower's exact
legal name is that indicated on the Perfection Certificate and on the signature
page hereof; and (b) the Borrower is an organization of the type, and is
organized in the jurisdiction, set forth in the Perfection Certificate; and (c)
the Perfection Certificate accurately sets

                                      -5-


forth the Borrower's organizational identification number or accurately states
that the Borrower has none; and (d) the Perfection Certificate accurately sets
forth the Borrower's place of business, or, if more than one, its chief
executive office as well as the Borrower's mailing address if different, and (e)
all other information set forth on the Perfection Certificate pertaining to the
Borrower is accurate and complete. If the Borrower does not now have an
organizational identification number, but later obtains one, Borrower shall
forthwith notify the Bank of such organizational identification number.

      The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's organizational documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which or by
which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.

      5.2   COLLATERAL. Borrower has good title to the Collateral, free of Liens
except Permitted Liens. Borrower has no deposit account, other than the deposit
accounts with Bank and deposit accounts described in the Perfection Certificate
delivered to the Bank in connection herewith. The Collateral is not in the
possession of any third party bailee (such as a warehouse). Except as hereafter
disclosed to the Bank in writing by Borrower, none of the components of the
Collateral shall be maintained at locations other than as provided in the
Perfection Certificate. In the event that Borrower, after the date hereof,
intends to store or otherwise deliver any portion of the Collateral to a bailee,
then Borrower will first receive the written consent of Bank and such bailee
must acknowledge in writing that the bailee is holding such Collateral for the
benefit of Bank.

      5.3   LITIGATION. Except as shown on SCHEDULE 5.3 attached hereto, there
are no actions or proceedings pending or, to the knowledge of Borrower's
Responsible Officers or legal counsel, threatened by or against Borrower or any
Subsidiary in which an adverse decision could reasonably be expected to cause a
Material Adverse Change. Listed on Schedule 5.3 is a summary of all outstanding
litigation and agreed upon settlements and cash payments in connection with
same.

      5.4   NO MATERIAL DEVIATION IN FINANCIAL STATEMENTS. All consolidated
financial statements for Borrower and any Subsidiary delivered to Bank fairly
present in all material respects Borrower's consolidated financial condition and
Borrower's consolidated results of operations. There has not been any material
deterioration in Borrower's consolidated financial condition since the date of
the most recent financial statements submitted to Bank.

      5.5   SOLVENCY. The fair salable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities; and
Borrower is able to pay its debts (including trade debts) as they mature.

      5.6   REGULATORY COMPLIANCE. Borrower is not an "investment company" or a
company "controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors). Borrower has complied in all material respects with the Federal
Fair Labor Standards Act. Borrower has not violated any laws, ordinances or
rules, the violation of which could reasonably be expected to cause a Material
Adverse Change. None of Borrower's or any Subsidiary's properties or assets has
been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge,
by previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each Subsidiary has
timely filed all required tax returns and paid, or made adequate provision to
pay, all material taxes, except those being contested in good faith with
adequate reserves under GAAP. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all government authorities that are necessary to
continue its business as currently conducted except where the failure to make
such declarations, notices or filings would not reasonably be expected to cause
a Material Adverse Change.

      5.7   SUBSIDIARIES. Except as provided in the Perfection Certificates,
Borrower does not own any stock, partnership interest or other equity securities
except for Permitted Investments.

      5.8   FULL DISCLOSURE. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank
taken together with all such written certificates and written statements given
to Bank contains any untrue statement of a material fact or omits to state a
material fact necessary to make the

                                      -6-


statements contained in the certificates or statements not misleading (it being
recognized by Bank that the projections and forecasts provided by Borrower in
good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected or forecasted results).

      6     AFFIRMATIVE COVENANTS

      Borrower shall do all of the following:

      6.1   GOVERNMENT COMPLIANCE. Borrower shall maintain its and all
Subsidiaries' legal existence and good standing in its jurisdiction of formation
and maintain qualification in each jurisdiction in which the failure to so
qualify would reasonably be expected to cause a Material Adverse Change on
Borrower's business or operations. Borrower shall comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change.

      6.2   FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.

                  (a)   Borrower shall deliver to Bank: (i) as soon as
   available, but no later than forty-five days after the last day of each
   quarter a company prepared consolidated balance sheet and income statement
   (10-Q) covering Borrower's consolidated operations during the period
   certified by a Responsible Officer and in a form acceptable to Bank, (ii) as
   soon as available, but no later than forty-five days after the last day of
   each quarter, a company prepared consolidating balance sheet and income
   statement covering Borrower's consolidating operations during the period
   certified by a Responsible Officer and in a form acceptable to Bank, (iii) as
   soon as available, but no later than ninety (90) days after the last day of
   Borrower's fiscal year, audited consolidated financial statements (10-K)
   prepared under GAAP, consistently applied, together with an unqualified
   opinion on the financial statements from an independent certified public
   accounting firm reasonably acceptable to Bank; (iv) a prompt report of any
   legal actions pending or to Borrower's knowledge threatened against Borrower
   or any Subsidiary that could result in damages or costs to Borrower or any
   Subsidiary of Five Hundred Thousand Dollars ($500,000.00) or more; and (v)
   other financial information reasonably requested by Bank.

                  (b)   Borrower shall deliver to Bank with the quarterly and
   annual financial statements a Compliance Certificate signed by a Responsible
   Officer in the form of EXHIBIT C.

      6.3   INTENTIONALLY DELETED.

      6.4   TAXES. Borrower shall make, and cause each Subsidiary to make,
timely payment of all material federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting in good faith,
with adequate reserves maintained in accordance with GAAP) and will deliver to
Bank, on demand, appropriate certificates attesting to such payments.

      6.5   INSURANCE. Borrower shall keep its business and the Collateral
insured for risks and in amounts, and as Bank may reasonably request. Insurance
policies shall be in a form, with companies, and in amounts that are
satisfactory to Bank. All property policies shall have a lender's loss payable
endorsement showing Bank as an additional loss payee and all liability policies
shall show the Bank as an additional insured and all policies shall provide that
the insurer must give Bank at least twenty (20) days notice before canceling its
policy. At Bank's request, Borrower shall deliver certified copies of policies
and evidence of all premium payments. Proceeds payable under any policy shall,
at Bank's option, be payable to Bank on account of the Obligations.

      6.6   ACCOUNTS. Each Borrower shall maintain an operating account with the
Bank. In addition, the Borrower and Guarantors shall, at all times, maintain
investment accounts with the Bank in an amount of at least Thirty Million
Dollars ($30,000,000.00). In the event, Borrower and Guarantors maintain less
than Thirty Million Dollars ($30,000,000.00) with Bank, for three (3)
consecutive Business Days, Borrower and Guarantors may pay such fees and
expenses as Bank shall determine, in its reasonable discretion based upon the
loss of income resulting from the Borrower's failure to maintain such amounts
(the "Additional Fees"). The failure of Borrower to maintain such amounts shall
not constitute an Event of Default.

                                      -7-


      6.7   FINANCIAL COVENANTS.

            (a)   ADJUSTED QUICK RATIO. Borrower, on a consolidated basis, shall
      maintain, as of the last day of each quarter a ratio of Quick Assets to
      Current Liabilities of at least: (i) 1.75 to 1.0 as of the quarter ending
      July 31, 2004, and (ii) 2.0 to 1.0 as of the quarter ending October 31,
      2004 and as of the last day of each quarter thereafter.

            (b)   MINIMUM QUARTERLY PROFITABILITY (NET INCOME). Net Income of
      Borrower, on a consolidated basis, of at least: (i) Zero Dollars ($0.00)
      as of the quarter ending July 31, 2004, (ii) Two Million Dollars
      ($2,000,000.00) as of the quarter ending October 31, 2004, (iii) Six
      Million Five Hundred Thousand Dollars ($6,500,000.00) as of the quarter
      ending January 31, 2005, and (iv) as of the quarter ending April 30, 2005,
      and as of the last day of each quarter thereafter, the greater of: (a)
      fifty percent (50.0%) of the projected net income on the operating plan
      dated ___________, as submitted to the Bank, and (b) Two Million Dollars
      ($2,000,000.00).

      6.8   FURTHER ASSURANCES. Borrower shall execute any further instruments
and take further action as Bank reasonably requests to perfect or continue
Bank's security interest in the Collateral or to effect the purposes of this
Agreement.

      7     NEGATIVE COVENANTS

      Borrower shall not do any of the following without the Bank's prior
written consent which shall not be unreasonably withheld.

      7.1   DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, except for Transfers (i) of Inventory
in the ordinary course of business; (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; or (iii) of worn-out or obsolete Equipment.

      7.2   CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrower or reasonably related thereto,
or have a material change in its ownership (other than by the sale of Borrower's
equity securities in a public offering), or management such that any two (2) of
the four (4) individuals: Charles Moran, Thomas McDonald, Jerald A. Nine, and
Mark Townsend are not longer actively involved in the management of the company
and replacements, reasonably satisfactory to the Bank are not made within sixty
(60) days thereof. Borrower shall not: (i) relocate its chief executive office,
or (ii) change its jurisdiction of organization, or (iii) change its
organizational structure or type, or (iv) change its legal name, or (v) change
any organizational number (if any) assigned by its jurisdiction of organization,
unless Borrower provides Bank with written notice with fifteen (15) days
thereafter.

      7.3   MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person. Notwithstanding the foregoing,
Bank's consent shall not be required for acquisitions by the Borrower of all or
substantially all of the capital stock or assets of another Person, provided the
total cash consideration paid for such acquisitions (including indebtedness
assumed) is not more than Ten Million Dollars ($10,000,000.00), in the
aggregate, during any fiscal year, provided further that: (i) no Event of
Default has occurred and is continuing or would exist after giving effect to the
transactions, and (ii) the Borrower is the surviving legal entity. A Subsidiary
may merge or consolidate into another Subsidiary or into Borrower.

      7.4   INDEBTEDNESS. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.

      7.5   ENCUMBRANCE. Create, incur, or allow any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein. The Collateral may also be subject to Permitted Liens.

                                      -8-


      7.6   DISTRIBUTIONS; INVESTMENTS. (i) Directly or indirectly acquire or
own any Person (except as provided in Section 7.3 hereof), or make any
Investment in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so; or (ii) pay any dividends or make any distribution or
payment or redeem, retire or purchase any capital stock.

      7.7   TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower, except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-affiliated Person.
Notwithstanding the foregoing, for any twelve (12) month period, the aggregate
net cash outlay by the Borrower to its Affiliates (other than by a Borrower to
another Borrower) shall not exceed Ten Million Dollars ($10,000,000.00).

      7.8   SUBORDINATED DEBT. Make or permit any payment on any Subordinated
Debt, except under the terms of the Subordinated Debt, or amend any provision in
any document relating to the Subordinated Debt, without Bank's prior written
consent.

      7.9   COMPLIANCE. Become an "investment company" or a company controlled
by an "investment company", under the Investment Company Act of 1940 or
undertake as one of its important activities extending credit to purchase or
carry margin stock, or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on Borrower's business or operations or would reasonably be
expected to cause a Material Adverse Change, or permit any of its Subsidiaries
to do so.

      8     EVENTS OF DEFAULT

      Any one of the following is an Event of Default:

      8.1   PAYMENT DEFAULT. Borrower fails to pay any of the Obligations within
three (3) Business Days after their due date. During such three (3) Business Day
period the failure to cure the default shall not constitute an Event of Default
(but no Credit Extension shall be made during such period);

      8.2   COVENANT DEFAULT. (i) Borrower fails or neglects to perform any
obligation in Section 6 or violates any covenant in Section 7; or (ii) Borrower
fails or neglects to perform, keep, or observe any other material term,
provision, condition, covenant or agreement contained in this Agreement, any
Loan Documents, or in any present or future agreement between Borrower and Bank
and as to any default under such other material term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within
ten (10) days after the occurrence thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional period (which shall not in any case exceed thirty (30)
days) to attempt to cure such default, and within such reasonable time period
the failure to cure the default shall not be deemed an Event of Default (but no
Credit Extensions shall be made during such cure period). Grace periods provided
under this section shall not apply, among other things, to financial covenants
or any other covenants that are required to be satisfied, completed or tested by
a date certain;

      8.3   MATERIAL ADVERSE CHANGE. A Material Adverse Change occurs;

      8.4   ATTACHMENT. (i) Any material portion of Borrower's assets is seized
or comes into possession of a trustee or receiver and such action is not removed
in ten (10) days; (ii) any material portion of Borrower's assets is attached or
levied on and the attachment, or levy is not removed in thirty (30) days (iii)
the service of process upon the Borrower seeking to attach, by trustee or
similar process, any funds of the Borrower on deposit with the Bank, or any
entity under control of Bank (including a subsidiary); (iv) Borrower is
enjoined, restrained, or prevented by court order from conducting a material
part of its business; (v) a judgment or other claim becomes a Lien on a material
portion of Borrower's assets; or (vi) a notice of lien, levy, or assessment is
filed against any of Borrower's assets by any government agency and not paid
within ten (10) days after Borrower receives notice. These are not Events of
Default if stayed or if a bond is posted pending contest by Borrower (but no
Credit Extensions shall be made during the cure period);

                                      -9-


      8.5   INSOLVENCY. (i) Borrower is unable to pay its debts (including trade
debts) as they become due or otherwise becomes insolvent; (ii) Borrower begins
an Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against
Borrower and not dismissed or stayed within forty-five (45) days (but no Credit
Extensions shall be made before any Insolvency Proceeding is dismissed);

      8.6   OTHER AGREEMENTS. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in the acceleration
of the maturity of any Indebtedness in an amount in excess of Five Hundred
Thousand Dollars ($500,000) or that could result in a Material Adverse Change;

      8.7   JUDGMENTS. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least Five Hundred Thousand
Dollars ($500,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of twenty (20) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment);

      8.8   MISREPRESENTATIONS. If Borrower or any Person acting for Borrower
makes any material misrepresentation or material misstatement now or later in
any warranty or representation in this Agreement or in any writing delivered to
Bank or to induce Bank to enter this Agreement or any Loan Document;

      8.9   GUARANTY. (i) Any guaranty of any Obligations terminates or ceases
for any reason to be in full force; or (ii) any Guarantor does not perform any
obligation or covenant under any guaranty of the Obligations; or (iii) any
material misrepresentation or material misstatement exists now or later in any
warranty or representation in any guaranty of the Obligations or in any
certificate delivered to Bank in connection with the guaranty; or (iv) any
circumstance described in Section 7, or Sections 8.4, 8.5 or 8.7 occurs to any
Guarantor, or (v) the liquidation, winding up, termination of existence, or
insolvency of any Guarantor.

      9     BANK'S RIGHTS AND REMEDIES

      9.1   RIGHTS AND REMEDIES. When an Event of Default occurs and continues
Bank may, without notice or demand, do any or all of the following:

                  (a)   Declare all Obligations immediately due and payable (but
   if an Event of Default described in Section 8.5 occurs all Obligations are
   immediately due and payable without any action by Bank);

                  (b)   Stop advancing money or extending credit for Borrower's
   benefit under this Agreement or under any other agreement between Borrower
   and Bank;

                  (c)   Demand that the Borrowers (i) deposit cash with Bank in
   an amount equal to the aggregate amount of any Letters of Credit remaining
   undrawn, as collateral security for the repayment of any future drawings
   under such Letters of Credit, and the Borrower shall forthwith deposit and
   pay such amounts, and (ii) pay in advance all Letter of Credit fees scheduled
   to be paid or payable over the remaining term of any Letters of Credit;

                  (d)   Settle or adjust disputes and claims directly with
   account debtors for amounts, on terms and in any order that Bank considers
   advisable and notify any Person owing Borrower money of Bank's security
   interest in such funds and verify the amount of such account;

                  (e)   Make any payments and do any acts it considers necessary
   or reasonable to protect its security interest in the Collateral. Borrower
   shall assemble the Collateral if Bank requests and make it available as Bank
   designates. Bank may enter premises where the Collateral is located, take and
   maintain possession of any part of the Collateral, and pay, purchase,
   contest, or compromise any Lien which appears to be prior or superior to its
   security interest and pay all expenses incurred. Borrower grants Bank a
   license to enter and occupy any of its premises, without charge, to exercise
   any of Bank's rights or remedies;

                  (f)   Apply to the Obligations any (i) balances and deposits
   of Borrower it holds, or (ii) any amount held by Bank owing to or for the
   credit or the account of Borrower;

                                      -10-


                  (g)   Ship, reclaim, recover, store, finish, maintain, repair,
   prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby
   granted a non-exclusive, royalty-free license or other right to use, without
   charge, Borrower's labels, patents, copyrights, mask works, rights of use of
   any name, trade secrets, trade names, trademarks, service marks, and
   advertising matter, or any similar property as it pertains to the Collateral,
   in completing production of, advertising for sale, and selling any Collateral
   and, in connection with Bank's exercise of its rights under this Section,
   Borrower's rights under all licenses and all franchise agreements inure to
   Bank's benefit;

                  (h)   Place a "hold" on any account maintained with Bank
   and/or deliver a notice of exclusive control, any entitlement order, or other
   directions or instructions pursuant to any control agreement or similar
   agreements providing control of any Collateral; and

                  (i)   Exercise all rights and remedies and dispose of the
   Collateral according to the Code.

      9.2   POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, to be effective upon the occurrence and during the
continuance of an Event of Default, to: (i) endorse Borrower's name on any
checks or other forms of payment or security; (ii) sign Borrower's name on any
invoice or bill of lading for any Account or drafts against account debtors;
(iii) settle and adjust disputes and claims about the Accounts directly with
account debtors, for amounts and on terms Bank determines reasonable; (iv) make,
settle, and adjust all claims under Borrower's insurance policies; and (v)
transfer the Collateral into the name of Bank or a third party as the Code
permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign
Borrower's name on any documents necessary to perfect or continue the perfection
of any security interest regardless of whether an Event of Default has occurred
until all Obligations have been satisfied in full and Bank is under no further
obligation to make Credit Extensions hereunder. Bank's foregoing appointment as
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.

      9.3   ACCOUNTS NOTIFICATION/COLLECTION. In the event that an Event of
Default occurs and is continuing, Bank may notify any Person owing Borrower
money of Bank's security interest in the funds and verify and/or collect the
amount of the Account. After the occurrence of an Event of Default, any amounts
received by Borrower shall be held in trust by Borrower for Bank, and, if
requested by Bank, Borrower shall immediately deliver such receipts to Bank in
the form received from the account debtor, with proper endorsements for deposit.

      9.4   BANK EXPENSES. Any amounts paid by Bank as provided herein shall
constitute Bank Expenses and are immediately due and payable, and shall bear
interest at the then applicable rate and be secured by the Collateral. No
payments by Bank shall be deemed an agreement to make similar payments in the
future or Bank's waiver of any Event of Default.

      9.5   BANK'S LIABILITY FOR COLLATERAL. So long as the Bank complies with
reasonable banking practices regarding the safekeeping of collateral, the Bank
shall not be liable or responsible for: (a) the safekeeping of the Collateral;
(b) any loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or
other Person. Borrower bears all risk of loss, damage or destruction of the
Collateral.

      9.6   REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements are cumulative. Bank has
all rights and remedies provided under the Code, by law, or in equity. Bank's
exercise of one right or remedy is not an election, and Bank's waiver of any
Event of Default is not a continuing waiver. Bank's delay is not a waiver,
election, or acquiescence. No waiver hereunder shall be effective unless signed
by Bank and then is only effective for the specific instance and purpose for
which it was given.

      9.7   DEMAND WAIVER. Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by Bank on which
Borrower is liable.

      10    NOTICES

                                      -11-


      All notices or demands by any party to this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile at the addresses listed below. Either Bank or Borrower may
change its notice address by giving the other party written notice.

            If to Borrower:           SkillSoft Corporation
                                      SmartCertify Direct, Inc.
                                      Books24x7.com, Inc.
                                      107 Northeastern Boulevard
                                      Nashua, New Hampshire 03062
                                      Attn: Mr. Anthony P. Amato
                                      Fax: (603) 821-5643

            If to Bank:               Silicon Valley Bank
                                      One Newton Executive Park, Suite 200
                                      2221 Washington Street
                                      Newton, Massachusetts  02462
                                      Attn: Irina Case
                                      Fax: (617) 969-4395

            with a copy to:           Riemer & Braunstein LLP
                                      Three Center Plaza
                                      Boston, Massachusetts 02108
                                      Attn: David A. Ephraim, Esquire
                                      FAX: (617) 880-3456

      11    CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

      Massachusetts law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Massachusetts; provided, however, that if for
any reason Bank cannot avail itself of such courts in the Commonwealth of
Massachusetts, Borrower accepts jurisdiction of the courts and venue in Santa
Clara County, California. NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR
APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE
BANK'S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.

BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

      12    GENERAL PROVISIONS

      12.1  SUCCESSORS AND ASSIGNS. This Agreement binds and is for the benefit
of the successors and permitted assigns of each party. Borrower may not assign
this Agreement or any rights or Obligations under it without Bank's prior
written consent which may be granted or withheld in Bank's discretion. Bank has
the right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits under this Agreement, the Loan Documents
or any related agreement.

      12.2  INDEMNIFICATION. Borrower hereby indemnifies, defends and holds the
Bank and its directors, officers, employees and agents harmless against: (a) all
obligations, demands, claims, and liabilities asserted by any

                                      -12-


other party in connection with the transactions contemplated by the Loan
Documents, except for losses caused by Bank's gross negligence or willful
misconduct; and (b) all losses or Bank Expenses incurred, or paid by Bank from,
following, or consequential to transactions between Bank and Borrower (including
reasonable attorneys' fees and expenses), except for losses caused by Bank's
gross negligence or willful misconduct.

      12.3  RIGHT OF SET-OFF. Borrower and any guarantor hereby grant to Bank, a
lien, security interest and right of setoff as security for all Obligations to
Bank, whether now existing or hereafter arising upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of the Bank
(including a Bank subsidiary) or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower and any guarantor even though unmatured
and regardless of the adequacy of any other collateral securing the Obligations.
ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND
IRREVOCABLY WAIVED.

      12.4  TIME OF ESSENCE. Time is of the essence for the performance of all
Obligations in this Agreement.

      12.5  SEVERABILITY OF PROVISION. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.

      12.6  AMENDMENTS IN WRITING; INTEGRATION. All amendments to this Agreement
must be in writing signed by both Bank and Borrower. This Agreement and the Loan
Documents represent the entire agreement about this subject matter, and
supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.

      12.7  COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, constitute
one Agreement.

      12.8  SURVIVAL. All covenants, representations and warranties made in this
Agreement continue in full force while any Obligations remain outstanding. The
obligation of Borrower in Section 12.2 to indemnify Bank shall survive until the
statute of limitations with respect to such claim or cause of action shall have
run.

      12.9  CONFIDENTIALITY. In handling any confidential information, Bank
shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Bank's
subsidiaries or affiliates in connection with their business with Borrower; (ii)
to prospective transferees or purchasers of any interest in the Credit
Extensions (provided, however, Bank shall use commercially reasonable efforts in
obtaining such prospective transferee's or purchaser's agreement to the terms of
this provision); (iii) as required by law, regulation, subpoena, or other order,
(iv) as required in connection with Bank's examination or audit; and (v) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (a) is in the public
domain or in Bank's possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (b) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.

      12.10 BORROWER LIABILITY. Each Borrower hereunder shall be obligated to
repay all Credit Extensions made hereunder, regardless of which Borrower
actually receives said Credit Extension, as if each Borrower hereunder directly
received all Credit Extensions.

      12.11 SUBROGATION AND SIMILAR RIGHTS. Notwithstanding any other provision
of this Agreement or other related document, until the payment in full of the
Credit Extensions and termination of this Agreement, each Borrower irrevocably
waives all rights that it may have at law or in equity (including, without
limitation, any law subrogating the Borrower to the rights of Bank under the
Loan Documents) to seek contribution, indemnification or any other form of
reimbursement from any other Borrower, or any other Person now or hereafter
primarily or

                                      -13-


secondarily liable for any of the Obligations, for any payment made by the
Borrower with respect to the Obligations in connection with the Loan Documents
or otherwise and all rights that it might have to benefit from, or to
participate in, any security for the Obligations as a result of any payment made
by the Borrower with respect to the Obligations in connection with the Loan
documents or otherwise. Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this Section shall be
modified to the extent necessary to comply with this Section. If any payment is
made to a Borrower in contravention of this Section, such Borrower shall hold
such payment in trust for Bank and such payment shall be promptly delivered to
Bank for application to the Obligations, whether matured or unmatured.

      13    DEFINITIONS

      13.1  DEFINITIONS. In this Agreement:

      "ACCOUNTS" as accounts as defined under the Code.

      "ADDITIONAL FEES" is defined in Section 6.6.

      "ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Revolving Line.

      "AFFILIATE" is a Person that owns or controls directly or indirectly the
Person, any Person that controls or is controlled by or is under common control
with the Person, and each of that Person's senior executive officers, directors,
partners and, for any Person that is a limited liability company, that Person's
managers and members.

      "AGENT" is defined in Section 1.2.

      "BANK EXPENSES" are all audit fees and expenses (after the occurrence of
an Event of Default) and reasonable costs or expenses (including reasonable
attorneys' fees and expenses) for preparing, negotiating, defending and
enforcing the Loan Documents (including appeals or Insolvency Proceedings).

      "BORROWER'S BOOKS" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or storage or any
equipment containing the information.

      "BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.

      "CASH MANAGEMENT SERVICES" is defined in Section 2.1.4.

      "CASH MANAGEMENT SERVICES SUBLIMIT" is defined in Section 2.1.4.

      "CLOSING DATE" is the date of this Agreement.

      "CODE" is the Uniform Commercial Code as adopted in Massachusetts, as
amended and as may be amended and in effect from time to time.

      "COLLATERAL" is any and all properties, rights and assets of the Borrower
granted by the Borrower to Bank or arising under the Code, now, or in the
future, in which the Borrower obtains an interest, or the power to transfer
rights, in the property described on EXHIBIT A.

      "CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the

                                      -14-


primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.

      "CREDIT EXTENSION" is each Advance, Letter of Credit, F/X Forward Contract
or any other extension of credit by Bank for Borrower's benefit.

      "CURRENT LIABILITIES" are as defined in accordance with GAAP, plus all
obligations and liabilities of Borrower to Bank (excluding undrawn Letters of
Credit), less Deferred Revenue.

      "DEFERRED REVENUE" is all amounts received or invoiced in advance of
performance under contracts and not yet recognized as revenue.

      "ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.

      "FX FORWARD CONTRACT" is defined in Section 2.1.3.

      "FX RESERVE" is defined in Section 2.1.3.

      "GAAP" is generally accepted accounting principles.

      "GUARANTOR" is SkillSoft Finance Limited and SkillSoft Plc, or any future
guarantor of the Obligations.

      "INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.

      "INSOLVENCY PROCEEDING" is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

      "INTELLECTUAL PROPERTY": is any copyright rights, copyright applications,
copyright registrations and like protections in each work of authorship and
derivative work, whether published or unpublished, now owned or later acquired;
any patents, trademarks, service marks and applications therefor; any trade
secret rights, including any rights to unpatented inventions, now owned or
hereafter acquired.

      "INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.

      "INVESTMENT" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.

      "LETTER OF CREDIT" means a letter of credit or similar undertaking issued
by Bank pursuant to Section 2.1.2.

      "LETTER OF CREDIT RESERVE" has the meaning set forth in Section 2.1.2.

      "LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

      "LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.

                                      -15-


      "MATERIAL ADVERSE CHANGE" is: (i) A material impairment in the perfection
or priority of Bank's security interest in the Collateral or in the value of
such Collateral; (ii) a material adverse change in the business, operations, or
condition (financial or otherwise) of the Borrower; or (iii) a material
impairment of the prospect of repayment of any portion of the Obligations; or
(iv) when Bank determines, based upon information available to it and in its
reasonable judgment, that there is a substantial likelihood that Borrower shall
fail to comply with one or more of the financial covenants in Section 6 during
the next succeeding financial reporting period.

      "NET INCOME" is defined in accordance with GAAP.

      "OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit, cash
management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.

      "PERFECTION CERTIFICATE" are those certain perfection certificates
delivered to the Bank by each Borrower.

      "PERMITTED INDEBTEDNESS" is:

                  (a)   Borrower's indebtedness to Bank under this Agreement or
            the Loan Documents;

                  (b)   Indebtedness existing on the Closing Date and shown on
            the Perfection Certificate;

                  (c)   Subordinated Debt;

                  (d)   Indebtedness to trade creditors incurred in the ordinary
            course of business; and

                  (e)   Indebtedness secured by Permitted Liens; and

                  (f)   Extensions, refinancings, modifications, amendments and
            restatements of any items of Permitted Indebtedness (a) through (e)
            above, provided that the principal amount thereof is not increased
            or the terms thereof are not modified to impose more burdensome
            terms upon Borrower or its Subsidiary, as the case may be.

      "PERMITTED INVESTMENTS" are:

                  (a)   Investments shown on the Perfection Certificate and
            existing on the Closing Date;

                  (b)   (i) marketable direct obligations issued or
            unconditionally guaranteed by the United States or its agency or any
            state maturing within 1 year from its acquisition, (ii) commercial
            paper maturing no more than 1 year after its creation and having the
            highest rating from either Standard & Poor's Corporation or Moody's
            Investors Service, Inc., (iii) Bank's certificates of deposit issued
            maturing no more than 1 year after issue, (iv) any other investments
            administered through the Bank; and

                  (c)   transfers of cash or property to one or more Subsidiary
            of the Borrower, having a cash or fair market value, in the
            aggregate, of no more than [$__________________].

      "PERMITTED LIENS" are:

                  (a)   Liens existing on the Closing Date and shown on the
            Perfection Certificate or arising under this Agreement or other Loan
            Documents;

                                      -16-


                  (b)   Liens for taxes, fees, assessments or other government
            charges or levies, either not delinquent or being contested in good
            faith and for which Borrower maintains adequate reserves on its
            Books, if they have no priority over any of Bank's security
            interests;

                  (c)   Purchase money Liens (i) on Equipment acquired or held
            by Borrower incurred for financing the acquisition of the Equipment
            securing no more than Five Hundred Thousand Dollars ($500,000.00) in
            the aggregate amount outstanding, or (ii) existing on equipment when
            acquired, if the Lien is confined to the property and improvements
            and the proceeds of the equipment;

                  (d)   Leases or subleases and non-exclusive licenses or
            sublicenses granted in the ordinary course of Borrower's business,
            if the leases, subleases, licenses and sublicenses permit granting
            Bank a security interest; and

                  (e)   Liens incurred in the extension, renewal or refinancing
            of the indebtedness secured by Liens described in (a) through (d),
            but any extension, renewal or replacement Lien must be limited to
            the property encumbered by the existing Lien and the principal
            amount of the indebtedness may not increase.

      "PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

      "PRIME RATE" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.

      "QUICK ASSETS" is, on any date, the aggregate of Borrower's unrestricted
cash, cash equivalents, accounts receivable and investments with maturities of
fewer than 12 months determined according to GAAP.

      "RESPONSIBLE OFFICER" is each of the Chief Executive Officer, President,
Chief Financial Officer, Corporate Treasurer, and Controller of Borrower.

      "REVOLVING LINE" is an Advance or Advances of up to Twenty-Five Million
Dollars ($25,000,000.00).

      "REVOLVING LINE MATURITY DATE" is July 22, 2006.

      "SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (pursuant to a subordination agreement entered into
between the Bank, the Borrower and the subordinated creditor), on terms
acceptable to Bank.

      "SUBSIDIARY" is any Person, corporation, partnership, limited liability
company, joint venture, or any other business entity of which more than 50% of
the voting stock or other equity interests is owned or controlled, directly or
indirectly, by the Person or one or more Affiliates of the Person.

      "UNUSED REVOLVING LINE FACILITY FEE" is defined in Section 2.3(c).

                                      -17-


      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.

BORROWER:

SKILLSOFT CORPORATION (as Agent and Borrower)

By /s/ Thomas McDonald
   ------------------------------------------
Name: Thomas McDonald
Title: Executive Vice President, CFO

SMARTCERTIFY DIRECT, INC.

By /s/ Thomas McDonald
   ------------------------------------------
Name: Thomas McDonald
Title: CFO

BOOKS24X7.COM, INC.

By /s/ Thomas McDonald
   ------------------------------------------
Name: Thomas McDonald
Title: Treasurer

BANK:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST

By /s/ Michael D. Sinclair
   ------------------------------------------
Name: Michael D. Sinclair
Title: Vice President

SILICON VALLEY BANK

By /s/ Jacquelin Le
  -------------------------------------------
Name: Jacquelin Le
Title: Operations Supervisor
(Signed in Santa Clara County, California)

SILICON VALLEY BANK

By: /s/ Dominique Monbureau
   ------------------------------------------
Name: Dominique Monbureau
Title: Operations Supervisor
(Signed in Santa Clara County, California)

                                      S-1


                                    EXHIBIT A

      The Collateral consists of all right, title and interest of Borrower in
and to the following:

      All goods, equipment, inventory, contract rights or rights to payment of
money, license agreements, franchise agreements, general intangibles (including
payment intangibles), accounts (including health-care receivables), documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), commercial tort claims,
securities, and all other investment property supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

      All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

      The Collateral does not include:

      Any copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work, whether
published or unpublished, now owned or later acquired; any patents, trademarks,
service marks and applications therefor; any trade secret rights, including any
rights to unpatented inventions, now owned or hereafter acquired.
Notwithstanding the foregoing, the Collateral shall include all accounts,
license and royalty fees and other revenues, proceeds, or income arising out of
or relating to any of the foregoing intellectual property. To the extent a court
of competent jurisdiction holds that a security interest in any Intellectual
Property is necessary to have a security interest in any accounts, license and
royalty fees and other revenues, proceeds, or income arising out of or relating
to any of the foregoing Intellectual Property, then the Collateral shall,
effective as of the Closing Date, include the Intellectual Property, to the
extent necessary to permit perfection of the Bank's security interest in such
accounts, license and royalty fees and other revenues, proceeds, or income
arising out of or relating to any of the Intellectual Property.



                                    EXHIBIT B
                        LOAN PAYMENT/ADVANCE REQUEST FORM
                 DEADLINE FOR SAME DAY PROCESSING IS 3:00 E.S.T.

Fax To:  (617) 969-5965                              Date: _____________________

LOAN PAYMENT:

                         SkillSoft Corporation, as Agent

From Account #__________________________   To Account #_________________________
                  (Deposit Account #)                      (Loan Account #)

Principal $_____________________________   and/or Interest $____________________

All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone transfer request for an advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date:

AUTHORIZED SIGNATURE: __________________     Phone Number: _____________________

LOAN ADVANCE:

Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.

From Account #__________________________   To Account #_________________________
                  (Loan Account #)                        (Deposit Account #)

Amount of Advance $_____________________

All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone transfer request for an advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date:

AUTHORIZED SIGNATURE: __________________     Phone Number: _____________________

OUTGOING WIRE REQUEST

COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO BE
WIRED.

Deadline for same day processing is 3:00 pm, E.S.T.

Beneficiary Name: ______________________   Amount of Wire: $____________________

Beneficiary Bank: ______________________   Account Number: _____________________

City and State: ________________________

Beneficiary Bank Transit                   Beneficiary Bank Code (Swift, Sort,
  (ABA) #: _____________________________    Chip, etc.):_______________________
                                             (FOR INTERNATIONAL WIRE ONLY)

Intermediary Bank: _____________________   Transit (ABA) #: ____________________

For Further Credit to: _________________________________________________________

Special Instruction: ___________________________________________________________

By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).

Authorized Signature: __________________   2nd Signature (If Required): ________
Print Name/Title: ______________________   Print Name/Title: ___________________
Telephone # ____________________________   Telephone # _________________________



                                    EXHIBIT C
                             COMPLIANCE CERTIFICATE

TO:   SILICON VALLEY BANK
FROM: SKILLSOFT CORPORATION
      SMARTCERTIFY DIRECT INC.
      BOOKS 24X7

      The undersigned authorized officer of SkillSoft Corporation, SmartCertify
Direct Inc., and Books 24x7 certifies that under the terms and conditions of the
Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i)
Borrower is in complete compliance for the period ending _______________ with
all required covenants except as noted below and (ii) there are no Events of
Default, and all representations and warranties in the Agreement are true and
correct in all material respects on this date. Attached are the required
documents supporting the certification. The Officer certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.

      .PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.



            REPORTING COVENANT                           REQUIRED              COMPLIES
            ------------------                           --------              --------
                                                                         
Quarterly financial statements with CC          Quarterly within 45 days        Yes No
Annual (CPA Audited) with CC                    FYE within 90 days              Yes No
Quarterly Consolidated financial statements     Quarterly within 45 days        Yes No




       FINANCIAL COVENANT                 REQUIRED        ACTUAL        COMPLIES
       ------------------                 --------        ------        --------
                                                               
Maintain on a Quarterly  Basis:
 Minimum Quick Ratio                       _____*:1.0     ____:1.0       Yes No
 Minimum Net Income                       $_________*    $________       Yes No


* As set forth in Section 6.7 of the Agreement.

COMMENTS REGARDING EXCEPTIONS: See Attached.   BANK USE ONLY
Sincerely,                                     Received by: ____________________
SkillSoft Corporation (as Agent and Borrower)               AUTHORIZED SIGNER
                                               Date:     _______________________
_____________________________
SIGNATURE                                      Verified: _______________________
_____________________________                               AUTHORIZED SIGNER
TITLE                                          Date:     _______________________
_____________________________
DATE                                           Compliance Status:  Yes  No

Smartcertify Direct, Inc.

_____________________________
SIGNATURE

_____________________________
TITLE

_____________________________
DATE



Books 24x7

_____________________________
SIGNATURE

_____________________________
TITLE

_____________________________
DATE

                       FIRST LOAN MODIFICATION AGREEMENT

     The First Loan Modification Agreement (this "Loan Modification Agreement")
is entered into as of April 11, 2005, by and between SILICON VALLEY BANK, a
California-chartered bank, with its principal place of business at 3003 Tasman
Drive, Santa Clara, California 95054 and with a loan production office located
at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton,
Massachusetts 02462 ("Bank") and SKILLSOFT CORPORATION, a Delaware Corporation
("SkillSoft"), SMARTCERTIFY DIRECT INC., Florida corporation ("SmartCertify"),
and BOOKS24X7.COM, INC., a Massachusetts corporation ("Books") (SkillSoft,
SmartCertify, and Books are hereinafter jointly, severally and collectively
referred to as "Borrower").

1.   DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of July 23, 2004,
evidenced by, among other documents, a certain Loan and Security Agreement dated
as of July 23, 2004, between Borrower and Bank (as amended, the "Loan
Agreement"). Capitalized terms used but not otherwise defined herein shall have
the same meaning as in the Loan Agreement.

2.   DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").

Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the "Existing
Loan Documents".

3.   DESCRIPTION OF CHANGE IN TERMS.

     A.   Modifications to Loan Agreement.

          1    The Loan Agreement shall be amended by deleting the following
               provision appearing in Section 6.7(b) thereof:

                    "(b) MINIMUM QUARTERLY PROFITABILITY (NET INCOME). Net
                    Income of Borrower, on a consolidated basis, of at least:
                    (i) Zero Dollars ($0.00) as of the quarter ending July 31,
                    2004, (ii) Two Million Dollars ($2,000,000.00) as of the
                    quarter ending October 31, 2004, (iii) Six Million Five
                    Hundred Thousand Dollars ($6,500,000.00) as of the quarter
                    ending January 31, 2005, and (iv) as of the quarter ending
                    April 30, 2005, and as of the last day of each quarter
                    thereafter, the greater of: (a) fifty percent (50.0%) of the
                    projected net income on the operating plan, as submitted to
                    the Bank, and (b) Two Million Dollars ($2,000,000.00)."

               and inserting in lieu thereof the following:

                    "(b) MINIMUM QUARTERLY PROFITABILITY (NET INCOME/NET LOSS).
                    (i) Net Loss of Borrower, on a consolidated basis, not to
                    exceed: (A) One Million Dollars ($1,000,000.00) as of the
                    quarter ending April 30, 2005, and (ii) Net Income of
                    Borrower, on a consolidated basis, of at least: (A) One
                    Dollar ($1.00) as of the quarters ending July 31, 2005,
                    October 31, 2005, and January 31, 2006; and (B) the greater
                    of either (i) One Dollar ($1.00) or (ii) fifty (50.0%)
                    percent of the Borrower's board of director's approved
                    operating plan for Borrower for the quarter ending April 30,
                    2006, and as of the last day of each quarter thereafter."

          2    The Loan Agreement shall be amended by inserting the following
               definition to appear alphabetically in Section 13.1 thereof:

                    ""Net Loss" is defined in accordance with GAAP."

     B    Waivers

          1    Bank hereby waives Borrower's existing default under the Loan
               Agreement by virtue of Borrower's failure to comply with the
               financial covenant set forth in Section 6.7(b) thereof as of the
               quarter ended January 31, 2005. Bank's waiver of Borrower's
               compliance of said affirmative covenant shall apply only to the
               foregoing specific period.

4.   FEES. Borrower shall pay to Bank a modification fee equal to Three Thousand
Dollars ($3,000.00), which fee shall be due on the date hereof and shall be
deemed fully earned as of the date hereof. Borrower shall also reimburse Bank
for all legal fees and expenses incurred in connection with this amendment to
the Existing Loan Documents.

5.   RATIFICATION OF NEGATIVE PLEDGE AGREEMENT. Borrower hereby ratifies,
confirms and reaffirms, all and singular, the terms and conditions of a certain
Negative Pledge Agreement dated as of July 23, 2004, between Borrower and Bank,
and acknowledges, confirms and agrees that said Negative Pledge Agreement shall
remain in full force and effect.

6.   RATIFICATION OF PERFECTION CERTIFICATE. Borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and disclosures contained in a
certain Perfection Certificate dated as of July 23, 2004 between Borrower and
Bank, and acknowledges, confirms and agrees the disclosures and information
above Borrower provided to Bank in the Perfection Certificate has not changed,
as of the date hereof.

7.   CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

8.   RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.

9.   NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that
Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever
did have, any offsets, defenses, claims, or counterclaims against Bank, whether
known or unknown, at law or in equity, all of them are hereby expressly WAIVED
and Borrower hereby RELEASES Bank from any liability thereunder.

10.  CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Obligations pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. It is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.

11.  COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank.




     This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.

BORROWER:                                       BANK:

SKILLSOFT CORPORATION (as Agent and Borrower)   SILICON VALLEY BANK

By: /s/ Thomas J. McDonald                      By: /s/ Jacquelyn Le
    ----------------------------                   -----------------------------

Name: Thomas J. McDonald                        Name: Jacquelyn Le
      --------------------------                      --------------------------

Title: CFO                                      Title: Operations Supervisor
       -------------------------                       -------------------------




SMARTCERTIFY DIRECT, INC.

By: /s/ Thomas J. McDonald
    ----------------------------

Name: Thomas J. McDonald
      --------------------------

Title: CFO
       -------------------------




BOOKS24X7.COM, INC.

By: /s/ Thomas J. McDonald
    ----------------------------

Name: Thomas J. McDonald
      --------------------------

Title: CFO
       -------------------------

                       SECOND LOAN MODIFICATION AGREEMENT

         This Second Loan Modification Agreement (this "Loan Modification
Agreement") is entered into as of April 25, 2005, by and between SILICON VALLEY
BANK, a California-chartered bank, with its principal place of business at 3003
Tasman Drive, Santa Clara, California 95054 and with a loan production office
located at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton,
Massachusetts 02462 ("Bank") and SKILLSOFT CORPORATION, a Delaware Corporation
("SkillSoft"), SMARTCERTIFY DIRECT INC., Florida corporation ("SmartCertify"),
and BOOKS24X7.COM, INC., a Massachusetts corporation ("Books") (SkillSoft,
SmartCertify, and Books are hereinafter jointly, severally and collectively
referred to as "Borrower").

1.       DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of July 23, 2004,
evidenced by, among other documents, a certain Loan and Security Agreement dated
as of July 23, 2004, between Borrower and Bank, and as amended by a certain
First Loan Modification Agreement dated as of April 11, 2005, between Borrower
and Bank, (as amended, the "Loan Agreement"). Capitalized terms used but not
otherwise defined herein shall have the same meaning as in the Loan Agreement.

2.       DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by
the Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").

Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the "Existing
Loan Documents".

3.       DESCRIPTION OF CHANGE IN TERMS.

         A.      Modifications to Loan Agreement.

                 1    Bank hereby releases SmartCertify from the Obligations and
                      liabilities under the Loan Agreement and the Existing Loan
                      Documents (except that SmartCertify is not released from
                      any such Obligations and liabilities under any provision
                      of the Loan Agreement or Existing Loan Documents which by
                      its terms expressly survives termination thereof).

                 2    SkillSoft and Books hereby consent to the Bank's release
                      of SmartCertify, and Skillsoft and Books each acknowledges
                      and confirms that it remains fully liable under the Loan
                      Agreement and the Existing Loan Documents. SkillSoft and
                      Books each hereby agrees to pay and perform when due all
                      present and future indebtedness, liabilities and
                      Obligations of SkillSoft, SmartCertify, and Books under,
                      based upon, or arising out of the Loan Agreement, the
                      Existing Loan Documents and any instruments and agreements
                      relating thereto. SkillSoft and Books each agrees to
                      honor, perform and comply with, in all respects, all terms
                      and provisions of all of the Loan Agreement and the
                      Existing Loan Documents, to the same extent as though
                      SkillSoft and Books were the only borrowers. All present
                      and future Obligations of SmartCertify shall be deemed to
                      refer to all present and future obligations of SkillSoft
                      and Books. All references in the Loan Agreement and the
                      Existing Loan Documents to "Borrower" shall be deemed to
                      refer to SkillSoft and Books only.

4.       TERMINATION OF SECURITY INTEREST. Bank shall execute and deliver any
and all certificates, documents or other agreements that may be reasonably
necessary or desirable to effectuate the release of Bank's security interest in
the assets of SmartCertify, Inc., all at Borrower's sole cost and expense.

5.       FEES. Borrower shall also reimburse Bank for all legal fees and
expenses incurred in connection with this amendment to the Existing Loan
Documents.

6.       RATIFICATION OF NEGATIVE PLEDGE AGREEMENT. Borrower hereby ratifies,
confirms and reaffirms, all and singular, the terms and conditions of a certain
Negative Pledge Agreement dated as of July 23, 2004 between Borrower and Bank,
and acknowledges, confirms and agrees that said Negative Pledge Agreement shall
remain in full force and effect.

7.       RATIFICATION OF PERFECTION CERTIFICATE. Borrower hereby ratifies,
confirms and reaffirms, all and singular, the terms and disclosures contained in
a certain Perfection Certificate dated as of July 23, 2004 between Borrower and
Bank, and acknowledges, confirms and agrees the disclosures and information
above Borrower provided to Bank in the Perfection Certificate has not changed,
as of the date hereof.

8.       CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.

9.       RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.

10.      NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that
Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever
did have, any offsets, defenses, claims, or counterclaims against Bank, whether
known or unknown, at law or in equity, all of them are hereby expressly WAIVED
and Borrower hereby RELEASES Bank from any liability thereunder.

11.      CONTINUING VALIDITY. Borrower understands and agrees that in modifying
the existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Obligations pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. It is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.

12.      COUNTERSIGNATURE. This Loan Modification Agreement shall become
effective only when it shall have been executed by Borrower and Bank.


                  [Remainder of Page Intentionally Left Blank]

         This Loan Modification Agreement is executed as a sealed instrument
under the laws of the Commonwealth of Massachusetts as of the date first written
above.

BORROWER:                              BANK:

SKILLSOFT CORPORATION                  SILICON VALLEY BANK
(as Agent and Borrower)

By:  /s/ Thomas J. McDonald            By:   /s/ Jacquelyn Le
   ---------------------------------      -------------------------------------

Name:  Thomas J. McDonald              Name:  Jacquelyn Le
     -------------------------------        -----------------------------------

Title:  EVP & CFO                      Title:  Operations Supervisor
      ------------------------------         ----------------------------------


BOOKS24X7.COM, INC.

By:  /s/ Thomas J. McDonald
   ---------------------------------

Name:  Thomas J. McDonald
     -------------------------------

Title:  EVP & CFO
      ------------------------------





                        THIRD LOAN MODIFICATION AGREEMENT

     This Third Loan Modification Agreement (this "Loan Modification Agreement")
is entered into as of August 7, 2006, and effective as of July 22, 2006, by and
between SILICON VALLEY BANK, a California corporation, with its principal place
of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan
production office located at One Newton Executive Park, Suite 200, 2221
Washington Street, Newton, Massachusetts 02462 ("Bank") and SKILLSOFT
CORPORATION, a Delaware Corporation ("SkillSoft"), and BOOKS24X7.COM, INC., a
Massachusetts corporation ("Books") (SkillSoft and Books are hereinafter
jointly, severally, individually and collectively referred to as "Borrower").

1.   DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of July 23, 2004,
evidenced by, among other documents, a certain Loan and Security Agreement dated
as of July 23, 2004, between Borrower and Bank, and as amended by a certain
First Loan Modification Agreement dated as of April 11, 2005, and as further
amended by a certain Second Loan Modification Agreement dated as of April 25,
2005 (as amended, the "Loan Agreement"). Capitalized terms used but not
otherwise defined herein shall have the same meaning as in the Loan Agreement.


2.   DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").


Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the "Existing
Loan Documents".

3.   DESCRIPTION OF CHANGE IN TERMS.

     A. Modifications to Loan Agreement.


          1    The Loan Agreement shall be amended by deleting the following
               definition appearing in Section 13 thereof:


                    ""REVOLVING LINE MATURITY DATE" is July 22, 2006."


               and inserting in lieu thereof the following:

                    ""REVOLVING LINE MATURITY DATE" is October 20, 2006."


4.   FEES. Borrower shall pay to Bank a modification fee equal to $6,250.00,
which fee shall be due on the date hereof and shall be deemed fully earned as of
the date hereof. Borrower shall also reimburse Bank for all legal fees and
expenses incurred in connection with this amendment to the Existing Loan
Documents, in accordance with the terms set forth in the Existing Loan
Documents.


5.   RATIFICATION OF NEGATIVE PLEDGE AGREEMENT. Borrower hereby ratifies,
confirms and reaffirms, all and singular, the terms and conditions of a certain
Negative Pledge Agreement dated as of July 23, 2004, between Borrower and Bank,
and acknowledges, confirms and agrees that said Negative Pledge Agreement shall
remain in full force and effect.


6.   RATIFICATION OF PERFECTION CERTIFICATE. Borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and disclosures contained in a
certain Perfection Certificate dated as of July 23, 2004 between Borrower and
Bank, and acknowledges, confirms and agrees the disclosures and information
above Borrower provided to Bank in the Perfection Certificate has not changed,
as of the date hereof.





7.   CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.


8.   RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.


9.   NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that
Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever
did have, any offsets, defenses, claims, or counterclaims against Bank, whether
known or unknown, at law or in equity, all of them are hereby expressly WAIVED
and Borrower hereby RELEASES Bank from any liability thereunder.


10.  CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect, and
each party acknowledges that there are no defaults, violations or breaches of
the Existing Loan Documents arising solely because this Loan Modification
Agreement was signed after July 22, 2006. Bank's agreement to modifications to
the existing Obligations pursuant to this Loan Modification Agreement in no way
shall obligate Bank to make any future modifications to the Obligations. Nothing
in this Loan Modification Agreement shall constitute a satisfaction of the
Obligations. It is the intention of Bank and Borrower to retain as liable
parties all makers of Existing Loan Documents, unless the party is expressly
released by Bank in writing. No maker will be released by virtue of this Loan
Modification Agreement.


11.  COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank.





                  [Remainder of Page Intentionally Left Blank]



     This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.

                                               
BORROWER:                                          BANK:

SKILLSOFT CORPORATION (as Agent and Borrower)      SILICON VALLEY BANK

By: /s/ Thomas J. McDonald                         By: /s/ Michael J. Fell
   --------------------------------------             --------------------------

Name: Thomas J. McDonald                           Name: Michael J. Fell
     ------------------------------------               ------------------------

Title: CFO                                         Title: Relationship Manager
      -----------------------------------                -----------------------



BOOKS24X7.COM, INC.

By: /s/ Thomas J. McDonald
   --------------------------------------

Name: Thomas J. McDonald
     ------------------------------------

Title: CFO
      -----------------------------------











     The undersigned, SkillSoft Finance Ltd, hereby: (i) ratifies, confirms and
reaffirms, all and singular, the terms and conditions of (A) a certain Unlimited
Guaranty dated July 23, 2004 (the "Guaranty"), and (B) a certain Pledge
Agreement by Guarantor in favor of Bank dated July 23, 2004 (the "Pledge
Agreement"); (ii) acknowledges, confirms and agrees that the Guaranty and Pledge
Agreement shall remain in full force and effect and shall in no way be limited
by the execution of this Loan Modification Agreement, the transactions
contemplated hereby, or any other documents, instruments and/or agreements
executed and/or delivered in connection herewith; and (iii) acknowledges,
confirms and agrees that the obligations of Borrower to Bank under the Guaranty
include, without limitation, all Obligations of Borrower to Bank under the Loan
Agreement, as amended by this Loan Modification Agreement.



                                          SKILLSOFT FINANCE LTD.

                                          By: /s/ Thomas J. McDonald
                                             -----------------------------------

                                          Name: Thomas J. McDonald
                                               ---------------------------------

                                          Title: CFO
                                                --------------------------------





     The undersigned, Skillsoft Plc, hereby: (i) ratifies, confirms and
reaffirms, all and singular, the terms and conditions of a certain Unlimited
Guaranty dated July 23, 2004 (the "Guaranty"); (ii) acknowledges, confirms and
agrees that the Guaranty shall remain in full force and effect and shall in no
way be limited by the execution of this Loan Modification Agreement, the
transactions contemplated hereby, or any other documents, instruments and/or
agreements executed and/or delivered in connection herewith; and (iii)
acknowledges, confirms and agrees that the obligations of Borrower to Bank under
the Guaranty include, without limitation, all Obligations of Borrower to Bank
under the Loan Agreement, as amended by this Loan Modification Agreement.



                                          SKILLSOFT PLC

                                          By: /s/ Thomas J. McDonald
                                             -----------------------------------

                                          Name: Thomas J. McDonald
                                               ---------------------------------

                                          Title: CFO
                                                --------------------------------











                       FOURTH LOAN MODIFICATION AGREEMENT

     This Fourth Loan Modification Agreement (this "Loan Modification
Agreement") is entered into as of October 18, 2006, by and between SILICON
VALLEY BANK, a California corporation, with its principal place of business at
3003 Tasman Drive, Santa Clara, California 95054 and with a loan production
office located at One Newton Executive Park, Suite 200, 2221 Washington Street,
Newton, Massachusetts 02462 ("Bank") and SKILLSOFT CORPORATION, a Delaware
Corporation ("SkillSoft"), and BOOKS24X7.COM, INC., a Massachusetts corporation
("Books") (SkillSoft and Books are hereinafter jointly, severally, individually
and collectively referred to as "Borrower").

1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of July 23, 2004,
evidenced by, among other documents, a certain Loan and Security Agreement dated
as of July 23, 2004, between Borrower and Bank, and as amended by a certain
First Loan Modification Agreement dated as of April 11, 2005, and as amended by
a certain Second Loan Modification Agreement dated as of April 25, 2005, and as
further amended by a certain Third Loan Modification Agreement dated as of
August 7, 2006 (as amended, the "Loan Agreement"). Capitalized terms used but
not otherwise defined herein shall have the same meaning as in the Loan
Agreement.

2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").

Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Obligations shall be referred to as the "Existing
Loan Documents".

3. DESCRIPTION OF CHANGE IN TERMS.

     A.   Modifications to Loan Agreement.

          1    The Loan Agreement shall be amended by deleting the following
               definition appearing in Section 13 thereof:

                    ""REVOLVING LINE MATURITY DATE" is October 20, 2006."

               and inserting in lieu thereof the following:

                    ""REVOLVING LINE MATURITY DATE" is January 18, 2007."

4. FEES. Borrower shall pay to Bank a modification fee equal to $6,250.00, which
fee shall be due on the date hereof and shall be deemed fully earned as of the
date hereof. Borrower shall also reimburse Bank for all legal fees and expenses
incurred in connection with this amendment to the Existing Loan Documents, in
accordance with the terms set forth in the Existing Loan Documents.

5. RATIFICATION OF NEGATIVE PLEDGE AGREEMENT. Borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and conditions of a certain Negative
Pledge Agreement dated as of July 23, 2004, between Borrower and Bank, and
acknowledges, confirms and agrees that said Negative Pledge Agreement shall
remain in full force and effect.

6. RATIFICATION OF PERFECTION CERTIFICATE. Borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and disclosures contained in a
certain Perfection Certificate dated as of July 23, 2004 between Borrower and
Bank, and acknowledges, confirms and agrees the disclosures and information
above Borrower provided to Bank in the Perfection Certificate has not changed,
as of the date hereof.



7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.

8. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.

9. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that
Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever
did have, any offsets, defenses, claims, or counterclaims against Bank, whether
known or unknown, at law or in equity, all of them are hereby expressly WAIVED
and Borrower hereby RELEASES Bank from any liability thereunder.

10. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Obligations pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. It is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.

11. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank.

                  [Remainder of Page Intentionally Left Blank]



     This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.

BORROWER:                               BANK:

SKILLSOFT CORPORATION (as Agent and     SILICON VALLEY BANK
Borrower)


By: /Thomas J. McDonald/                By: /Michael J. Fell/
    ---------------------------------       ------------------------------------
Name: Thomas J. McDonald                Name: Michael J. Fell
Title: CFO                              Title: Relationship Manager


BOOKS24X7.COM, INC.


By: /Thomas J. McDonald/
    ---------------------------------
Name: Thomas J. McDonald
Title: CFO



     The undersigned, SkillSoft Finance Ltd, hereby: (i) ratifies, confirms and
reaffirms, all and singular, the terms and conditions of (A) a certain Unlimited
Guaranty dated July 23, 2004 (the "Guaranty"), and (B) a certain Pledge
Agreement by Guarantor in favor of Bank dated July 23, 2004 (the "Pledge
Agreement"); (ii) acknowledges, confirms and agrees that the Guaranty and Pledge
Agreement shall remain in full force and effect and shall in no way be limited
by the execution of this Loan Modification Agreement, the transactions
contemplated hereby, or any other documents, instruments and/or agreements
executed and/or delivered in connection herewith; and (iii) acknowledges,
confirms and agrees that the obligations of Borrower to Bank under the Guaranty
include, without limitation, all Obligations of Borrower to Bank under the Loan
Agreement, as amended by this Loan Modification Agreement.

                                        SKILLSOFT FINANCE LTD.


                                        By: /THOMAS J. MCDONALD/
                                            ------------------------------------
                                        Name: Thomas J. McDonald
                                        Title: CFO

     The undersigned, Skillsoft Plc, hereby: (i) ratifies, confirms and
reaffirms, all and singular, the terms and conditions of a certain Unlimited
Guaranty dated July 23, 2004 (the "Guaranty"); (ii) acknowledges, confirms and
agrees that the Guaranty shall remain in full force and effect and shall in no
way be limited by the execution of this Loan Modification Agreement, the
transactions contemplated hereby, or any other documents, instruments and/or
agreements executed and/or delivered in connection herewith; and (iii)
acknowledges, confirms and agrees that the obligations of Borrower to Bank under
the Guaranty include, without limitation, all Obligations of Borrower to Bank
under the Loan Agreement, as amended by this Loan Modification Agreement.

                                        SKILLSOFT PLC


                                        By: /Thomas J. McDonald/
                                            ------------------------------------
                                        Name: Thomas J. McDonald
                                        Title: CFO

EX-10.2

                                                                    EXHIBIT 10.2

                                  SKILLSOFT PLC
                             2002 SHARE OPTION PLAN

                          (Amended September 28, 2006)

     1. Purposes of the Plan. The purposes of this 2002 Share Option Plan are:

          -    to attract and retain the best available personnel for positions
               of substantial responsibility,

          -    to provide additional incentive to Employees, Inside Directors
               and Consultants, and

          -    to promote the success of the Company's business.

     Options granted under the Plan may be Incentive Share Options or
Nonstatutory Share Options, as determined by the Administrator at the time of
grant.

     2. Definitions. As used herein, the following definitions shall apply:

          (a) "Administrator" means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.

          (b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Ordinary Shares are listed or quoted and the applicable laws
of any foreign country or jurisdiction where Options are, or will be, granted
under the Plan and the laws of Ireland.

          (c) "Board " means the Board of Directors of the Company.

          (d) "Change in Control" means the occurrence of any of the following
events:

               (i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company's then outstanding voting securities; or

               (ii) The consummation of the sale or disposition by the Company
of all or substantially all of the Company's assets;

               (iii) A change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" means directors who either (A) are
Directors as of the effective date of the Plan, or (B) are elected, or nominated
for election, to the Board with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination (but will



not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company);or

               (iv) The consummation of a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or its parent) at least
fifty percent (50%) of the total voting power represented by the voting
securities of the Company or such surviving entity or its parent outstanding
immediately after such merger or consolidation.

          (e) "Code" means the Internal Revenue Code of 1986, as amended.

          (f) "Committee" means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.

          (g) "Company" means SkillSoft Public Limited Company, a public limited
company organized under the laws of Ireland.

          (h) "Consultant" means any natural person, including an advisor,
engaged by the company or a Parent or Subsidiary to render services to such
entity.

          (i) "Director" means a member of the Board.

          (j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.

          (k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Share Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, then three (3) months following the 91st day of
such leave any Incentive Share Option held by the Optionee shall cease to be
treated as an Incentive Share Option and shall be treated for tax purposes as a
Nonstatutory Share Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.

          (l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

          (m) "Fair Market Value" means, as of any date, the value of Ordinary
Shares determined as follows:

               (i) If the Ordinary Shares are listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the


                                        2



closing sales price for such Ordinary Shares (or the closing bid, if no sales
were reported) as quoted on such exchange or system on the date of determination
(or on the most recent market trading day if neither the closing sales price nor
the closing bid for the Ordinary Shares is quoted for the day of determination),
as reported in The Wall Street Journal or such other source as the Administrator
deems reliable;

               (ii) If the Ordinary Shares are regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share shall be the mean between the high bid and low asked prices for Ordinary
Shares on the day of determination (or on the most recent market trading day if
the bid and asked prices for the Ordinary Shares are not quoted for the day of
determination), as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or

               (iii) In the absence of an established market for Ordinary
Shares, the Fair Market Value shall be determined in good faith by the
Administrator.

          (n) "Incentive Share Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

          (o) "Inside Director" means a Director who is an Employee.

          (p) "Nonstatutory Share Option" means an Option not intended to
qualify as an Incentive Share Option.

          (q) "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Option. The Notice of Grant is
part of the Option Agreement.

          (r) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

          (s) "Option" means an option for Ordinary Shares granted pursuant to
the Plan.

          (t) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.

          (u) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.

          (v) "Optioned Share" means one of the Ordinary Shares subject to an
Option.

          (w) "Optionee" means the holder of an outstanding Option granted under
the Plan.


                                        3



          (x) "Ordinary Shares" means the Ordinary Shares and/or related
American Depository Shares of the Company.

          (y) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.

          (z) "Plan" means this 2002 Share Option Plan.

          (aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.

          (bb) "Section 16(b)" means Section 16(b) of the Exchange Act.

          (cc) "Service Provider" means an Employee, Inside Director or
Consultant.

          (dd) "Share" means a share of the Ordinary Shares, as adjusted in
accordance with Section 13 of the Plan.

          (ee) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.

     3. Ordinary Shares Subject to the Plan. Subject to the provisions of
Section 12 of the Plan, the maximum aggregate number of Ordinary Shares that may
be optioned and sold under the Plan is 8,850,000 Ordinary Shares. The Ordinary
Shares shall be authorized, but unissued Ordinary Shares.

     If an Option expires or becomes unexercisable without having been exercised
in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Ordinary Shares which were subject thereto shall become available
for future grant or sale under the Plan (unless the Plan has terminated);
provided, however, that Ordinary Shares that have actually been issued under the
Plan, upon exercise of an Option, shall not be returned to the Plan and shall
not become available for future distribution under the Plan.

     4. Administration of the Plan.

          (a) Procedure.

               (i) Multiple Administrative Bodies. Different Committees with
respect to different groups of Service Providers may administer the Plan.

               (ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.


                                        4



               (iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.

               (iv) Other Administration. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.

          (b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:

               (i) to determine the Fair Market Value;

               (ii) to select the Service Providers to whom Options may be
granted hereunder;

               (iii) to determine the number of Ordinary Shares to be covered by
each Option granted hereunder;

               (iv) to approve forms of agreement for use under the Plan;

               (v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the Ordinary Shares
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;

               (vi) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Ordinary Shares
covered by such Option shall have declined since the date the Option was
granted;

               (vii) to institute an Option Exchange Program;

               (viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;

               (ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of satisfying applicable foreign laws;

               (x) to modify or amend each Option (subject to Section 14(c) of
the Plan), including the discretionary authority to extend the post-termination
exercisability period of Options longer than is otherwise provided for in the
Plan;

               (xi) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option previously granted by
the Administrator;


                                        5



               (xii) to make all other determinations deemed necessary or
advisable for administering the Plan.

          (c) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options.

     5. Eligibility. Nonstatutory Share Options may be granted to Service
Providers. Incentive Share Options may be granted only to Employees.

     6. Limitations.

          (a) Each Option shall be designated in the Option Agreement as either
an Incentive Share Option or a Nonstatutory Share Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Ordinary Shares with respect to which Incentive Share Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Share Options. For purposes of this
Section 6(a), Incentive Share Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Ordinary Shares shall
be determined as of the time the Option with respect to such Ordinary Shares is
granted.

          (b) Neither the Plan nor any Option shall confer upon an Optionee any
right with respect to continuing the Optionee's relationship as a Service
Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.

          (c) The following limitations shall apply to grants of Options:

               (i) No Service Provider shall be granted, in any fiscal year of
the Company, Options to purchase more than 1,500,000 Ordinary Shares.

               (ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 500,000 Ordinary
Shares, which shall not count against the limit set forth in subsection (i)
above.

               (iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 12.

               (iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 12), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.

     7. Term of Plan. Subject to Section 18 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 14 of the Plan.


                                        6



     8. Term of Option. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Share Option, the term shall be up to ten
(10) years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Share Option granted to
an Optionee who, at the time the Incentive Share Option is granted, owns
Ordinary Shares representing more than ten percent (10%) of the total combined
voting power of all classes of Ordinary Shares of the Company or any Parent or
Subsidiary, the term of the Incentive Share Option shall be five (5) years from
the date of grant or such shorter term as may be provided in the Option
Agreement.

     9. Option Exercise Price and Consideration.

          (a) Exercise Price. The per share exercise price for the Ordinary
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

               (i) In the case of an Incentive Share Option (A) granted to an
Employee who, at the time the Incentive Share Option is granted, owns Ordinary
Shares representing more than ten percent (10%) of the voting power of all
classes of Ordinary Shares of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant, (B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.

               (ii) In the case of a Nonstatutory Share Option, the per Share
exercise price shall be determined by the Administrator, subject to compliance
with Applicable Laws. In the case of a Nonstatutory Share Option intended to
qualify as "performance-based compensation" within the meaning of Section 162(m)
of the Code, the per Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant.

               (iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction,
subject to compliance with Applicable Laws.

          (b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.

          (c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment, subject to compliance with Applicable Laws. In the case of an
Incentive Share Option, the Administrator shall determine the acceptable form of
consideration at the time of grant. Such consideration may consist entirely of:

               (i) cash;

               (ii) check;

               (iii) promissory note;


                                        7



               (iv) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;

               (v) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;

               (vi) any combination of the foregoing methods of payment; or

               (vii) such other consideration and method of payment for the
issuance of Ordinary Shares to the extent permitted by Applicable Laws.

     10. Exercise of Option.

          (a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be suspended during any unpaid leave
of absence. An Option may not be exercised for a fraction of a Share.

     An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the
Ordinary Shares with respect to which the Option is exercised. Full payment may
consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of (i) the Optionee, or
if requested by the Optionee, in the name of the Optionee and his or her spouse,
or in the name of a third party as the Optionee's nominee to hold the shares
issued on exercise on Optionee's behalf and subject to the Optionee's
directions. Until the Ordinary Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company), no right to vote or receive dividends or any other rights
as a Shareholder shall exist with respect to the Optioned Shares,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such Ordinary Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Shares are issued, except as provided in Section 12 of
the Plan.

     Exercising an Option in any manner shall decrease the number of Ordinary
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Ordinary Shares as to which the Option is
exercised.

          (b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested


                                        8



as to his or her entire Option, the Shares covered by the unvested portion of
the Option shall revert to the Plan. If, after termination, the Optionee does
not exercise his or her Option within the time specified by the Administrator,
the Option shall terminate, and the Ordinary Shares covered by such Option shall
revert to the Plan.

          (c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Ordinary Shares covered by the unvested portion of
the Option shall revert to the Plan. If, after termination, the Optionee does
not exercise his or her Option within the time specified herein, the Option
shall terminate, and the Ordinary Shares covered by such Option shall revert to
the Plan.

          (d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised following the Optionee's death within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of death (but in no event may the option be exercised later
than the expiration of the term of such Option as set forth in the Option
Agreement), by the Optionee's designated beneficiary, provided such beneficiary
has been designated prior to the Optionee's death in a form acceptable to the
Administrator. If no such beneficiary has been designated by the Optionee, then
such Option may be exercised by the personal representative of the Optionee's
estate or by the person(s) to whom the Option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution. In
the absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's death. If, at the
time of death, the Optionee is not vested as to his or her entire Option, the
Ordinary Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Ordinary Shares covered by such
Option shall revert to the Plan.

     11. Transferability of Options. Unless determined otherwise by the
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

     12. Adjustments Upon Changes in Capitalization, Merger or Change in
Control.

          (a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Ordinary Shares that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option and the number of Ordinary Shares as well as the price per Ordinary
Shares covered by each such outstanding Option shall be


                                        9



proportionately adjusted for any increase or decrease in the number of issued
Ordinary Shares resulting from a share split, reverse share split, share
dividend, combination or reclassification of the Ordinary Shares, or any other
increase or decrease in the number of issued Ordinary Shares effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of any class, or securities convertible into shares of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Ordinary Shares subject to an Option.

          (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Shares covered thereby, including Ordinary
Shares as to which the Option would not otherwise be exercisable. To the extent
it has not been previously exercised, an Option will terminate immediately prior
to the consummation of such proposed action.

          (c) Merger or Change in Control. In the event of a merger of the
Company with or into another corporation, or a Change in Control, each
outstanding Option shall be assumed or an equivalent option or right substituted
by the successor corporation or a Parent or Subsidiary of the successor
corporation. In the event that the successor corporation refuses to assume or
substitute for the Option, the Optionee shall fully vest in and have the right
to exercise the Option as to all of the Optioned Shares, including Ordinary
Shares as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option shall terminate upon the expiration of such period.

     For the purposes of this subsection (c), the Option shall be considered
assumed if, following the merger or Change in Control, the option or right
confers the right to purchase or receive, for each Share subject to the Option
immediately prior to the merger or Change in Control, the consideration (whether
Ordinary Shares, cash, or other securities or property) received in the merger
or Change in Control by holders of Ordinary Shares for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Ordinary Shares); provided, however, that if such consideration
received in the merger or Change in Control is not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received upon the
exercise of the Option, for each Share subject to the Option, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Ordinary Shares in
the merger or Change in Control.


                                       10



     13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.

     14. Amendment and Termination of the Plan.

          (a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.

          (b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.

          (c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.

     15. Conditions Upon Issuance of Shares.

          (a) Legal Compliance. Ordinary Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Ordinary Shares shall comply with Applicable Laws and shall
be further subject to the approval of counsel for the Company with respect to
such compliance.

          (b) Investment Representations. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Ordinary Shares are being
purchased only for investment and without any present intention to sell or
distribute such Ordinary Shares if, in the opinion of counsel for the Company,
such a representation is required.

     16. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Ordinary Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Ordinary Shares as to which such
requisite authority shall not have been obtained.

     17. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Ordinary Shares as shall
be sufficient to satisfy the requirements of the Plan.

     18. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.


                                       11

EX-10.3

                                                                    EXHIBIT 10.3

********************************************************************************

                                     WARNING

 Granting options to directors and officers under this plan may violate NASD or
  stock exchange rules if the plan does not meet the broad based plan exemption
                            from shareholder approval

********************************************************************************

                                    SKILLSOFT

                          1996 SUPPLEMENTAL STOCK PLAN

                           (AS AMENDED SEPTEMBER 2006)

1.   Purposes of the Plan. The purposes of this Supplemental Stock Plan are to
     (i) attract and retain the best available personnel for positions of
     substantial responsibility, (ii) provide additional incentive to Employees,
     Directors and Consultants, and (iii) promote the success of the Company's
     business.

     Options granted under the Plan will be Nonstatutory Stock Options.

2.   Definitions. As used herein, the following definitions shall apply:

     (a)  "Administrator" means the Board or any of its Committees as shall be
          administering the Plan, in accordance with Section 4 of the Plan.

     (b)  "Applicable Laws" means the requirements relating to the
          administration of stock option plans under US state corporate laws, US
          federal and state securities laws, the Code, any stock exchange or
          quotation system on which the Ordinary Shares are listed or quoted and
          the applicable laws of any foreign country or jurisdiction where
          Options are, or will be, granted under the Plan.

     (c)  "Board" means the Board of Directors of the Company.

     (d)  "Code" means the Internal Revenue Code of 1986, as amended.

     (e)  "Committee" means a committee of Directors appointed by the Board in
          accordance with Section 4 of the Plan.

     (f)  "Ordinary Shares" means the Ordinary Shares and/or related American
          Depositary Shares of the Company.

     (g)  "Company" means SkillSoft, a limited liability company organized under
          the laws of the Republic of Ireland.

     (h)  "Consultant" means any person, including an advisor, engaged by the
          Company or a Parent or Subsidiary to render services to such entity.

     (i)  "Director" means a member of the Board.

     (j)  "Disability" means total and permanent disability as defined in
          Section 22(e)(3) of the Code.

     (k)  "Employee" means any person, including Officers, employed by the
          Company or any Parent or Subsidiary of the Company. A Service Provider
          shall not cease to be an Employee in the case of (i) any leave of
          absence approved by the Company or (ii) transfers between locations of
          the Company or between the Company, its Parent, any Subsidiary, or any
          successor. Neither service as a Director nor payment of a director's
          fee by the Company shall be sufficient to constitute "employment" by
          the Company.



     (l)  "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     (m)  "Fair Market Value" means, as of any date, the value of Ordinary
          Shares determined as follows:

               (i) If the Ordinary Shares are listed on any established stock
          exchange or a national market system, including without limitation the
          Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq
          Stock Market, its Fair Market Value shall be the closing sales price
          for such stock (or the closing bid, if no sales were reported) as
          quoted on such exchange or system on the day of determination (or on
          the most recent market trading day if neither the closing sales price
          nor the closing bid for the Ordinary Shares is quoted for the day of
          determination), as reported in The Wall Street Journal or such other
          source as the Administrator deems reliable;

               (ii) If the Ordinary Shares are regularly quoted by a recognized
          securities dealer but selling prices are not reported, the Fair Market
          Value of an Ordinary Share shall be the mean between the high bid and
          low asked prices for the Ordinary Shares on the day of determination
          (or on the most recent market trading day if the bid and asked prices
          for the Ordinary Shares are not quoted for the day of determination),
          as reported in The Wall Street Journal or such other source as the
          Administrator deems reliable;

               (iii) In the absence of an established market for the Ordinary
          Shares, the Fair Market Value shall be determined in good faith by the
          Administrator.

     (n)  "Notice of Grant" means a written or electronic notice evidencing
          certain terms and conditions of an individual Option grant. The Notice
          of Grant is part of the Option Agreement.

     (o)  "Officer" means a person who is an officer of the Company within the
          meaning of Section 16 of the Exchange Act and the rules and
          regulations promulgated thereunder.

     (p)  "Option" means a nonstatutory stock option granted pursuant to the
          Plan, that is not intended to qualify as an incentive stock option
          within the meaning of Section 422 of the Code and the regulations
          promulgated thereunder.

     (q)  "Option Agreement" means an agreement between the Company and an
          Optionee evidencing the terms and conditions of an individual Option
          grant. The Option Agreement is subject to the terms and conditions of
          the Plan.

     (r)  "Option Exchange Program" means a program whereby outstanding options
          are surrendered in exchange for options with a lower exercise price.

     (s)  "Optioned Stock" means the Ordinary Shares subject to an Option.

     (t)  "Optionee" means the holder of an outstanding Option granted under the
          Plan.

     (u)  "Parent" means a "parent corporation," whether now or hereafter
          existing, as defined in Section 424(e) of the Code.

     (v)  "Plan" means this 1996 Supplemental Stock Plan.

     (w)  "Service Provider" means an Employee including an Officer, Consultant
          or Director.

     (x)  "Share" means a share of the Ordinary Shares, as adjusted in
          accordance with Section 12 of the Plan.

     (y)  "Subsidiary" means a "subsidiary corporation", whether now or
          hereafter existing, as defined in Section 424(f) of the Code.


                                        2



3.   Shares Subject to the Plan. Subject to the provisions of Section 12 of the
     Plan, the maximum aggregate number of Ordinary Shares which may be optioned
     and sold under the Plan is 8,701,554 Ordinary Shares (which will be
     represented by 8,701,554 American Depositary Shares). The Shares may be
     authorized, but unissued, or reacquired Ordinary Shares.

     If an Option expires or becomes unexercisable without having been exercised
     in full, or is surrendered pursuant to an Option Exchange Program, the
     unpurchased Shares which were subject thereto shall become available for
     future grant or sale under the Plan (unless the Plan has terminated).

4.   Administration of the Plan.

     (a)  The Plan shall be administered by (A) the Board or (B) a Committee,
          which committee shall be constituted to satisfy Applicable Laws.

     (b)  Powers of the Administrator. Subject to the provisions of the Plan,
          and in the case of a Committee, subject to the specific duties
          delegated by the Board to such Committee, the Administrator shall have
          the authority, in its discretion:

          (i)  to determine the Fair Market Value of the Ordinary Shares;

          (ii) to select the Service Providers to whom Options may be granted
               hereunder;

          (iii) to determine whether and to what extent Options are granted
               hereunder;

          (iv) to determine the number of shares of Ordinary Shares to be
               covered by each Option granted hereunder;

          (v)  to approve forms of agreement for use under the Plan;

          (vi) to determine the terms and conditions, not inconsistent with the
               terms of the Plan, of any award granted hereunder. Such terms and
               conditions include, but are not limited to, the exercise price,
               the time or times when Options may be exercised (which may be
               based on performance criteria), any vesting acceleration or
               waiver of forfeiture restrictions, and any restriction or
               limitation regarding any Option or the shares of Ordinary Shares
               relating thereto, based in each case on such factors as the
               Administrator, in its sole discretion, shall determine;

          (vii) to reduce the exercise price of any Option to the then current
               Fair Market Value if the Fair Market Value of the Ordinary Shares
               covered by such Option shall have declined since the date the
               Option was granted;

          (viii) to institute an Option Exchange Program;

          (ix) to construe and interpret the terms of the Plan and awards
               granted pursuant to the Plan;

          (x)  to prescribe, amend and rescind rules and regulations relating to
               the Plan, including rules and regulations relating to sub-plans
               established for the purpose of qualifying for preferred tax
               treatment under foreign tax laws;

          (xi) to modify or amend each Option (subject to Section 14(b) of the
               Plan), including the discretionary authority to extend the
               post-termination exercisability period of Options longer than is
               otherwise provided for in the Plan;

          (xii) to authorize any person to execute on behalf of the Company any
               instrument required to effect the grant of an Option or
               previously granted by the Administrator;

          (xiii) to determine the terms and restrictions applicable to Options;


                                        3



          (xiv) to allow Optionees to satisfy withholding tax obligations by
               electing to have the Company withhold from the Shares to be
               issued upon exercise of an Option or Stock Purchase Right that
               number of Shares having a Fair Market Value equal to the amount
               required to be withheld. The Fair Market Value of the Shares to
               be withheld shall be determined on the date that the amount of
               tax to be withheld is to be determined. All elections by an
               Optionee to have Shares withheld for this purpose shall be made
               in such form and under such conditions as the Administrator may
               deem necessary or advisable; and

          (xv) to make all other determinations deemed necessary or advisable
               for administering the Plan.

     (c)  Effect of Administrator's Decision. The Administrator's decisions,
          determinations and interpretations shall be final and binding on all
          Optionees and any other holders of Options.

5.   Eligibility. Options may be granted to Service Providers; provided,
     however, that notwithstanding anything to the contrary contained in the
     Plan, Options may not be granted to Officers and Directors.

6.   Limitation. Neither the Plan nor any Option shall confer upon an Optionee
     any right with respect to continuing the Optionee's relationship as a
     Service Provider with the Company, nor shall they interfere in any way with
     the Optionee's right or the Company's right to terminate such relationship
     at any time, with or without cause.

7.   Term of Plan. The Plan shall become effective upon its adoption by the
     Board. It shall continue in effect for ten (10) years, unless sooner
     terminated under Section 14 of the Plan.

8.   Term of Option. The term of each Option shall be stated in the Option
     Agreement.

9.   Option Exercise Price and Consideration.

     (a)  Exercise Price. The per share exercise price for the Shares to be
          issued pursuant to exercise of an Option shall be determined by the
          Administrator.

     (b)  Waiting Period and Exercise Dates. At the time an Option is granted,
          the Administrator shall fix the period within which the Option may be
          exercised and shall determine any conditions which must be satisfied
          before the Option may be exercised.

     (c)  Form of Consideration. The Administrator shall determine the
          acceptable form of consideration for exercising an Option, including
          the method of payment. Such consideration may consist entirely of:

          (i)  cash;

          (ii) check;

          (iii) promissory note;

          (iv) other Shares which (A) in the case of Shares acquired upon
               exercise of an option, have been owned by the Optionee for more
               than six months on the date of surrender, and (B) have a Fair
               Market Value on the date of surrender equal to the aggregate
               exercise price of the Shares as to which said Option shall be
               exercised;

          (v)  consideration received by the Company under a cashless exercise
               program implemented by the Company in connection with the Plan;


                                        4



          (vi) a reduction in the amount of any Company liability to the
               Optionee, including any liability attributable to the Optionee's
               participation in any Company-sponsored deferred compensation
               program or arrangement;

          (vii) such other consideration and method of payment for the issuance
               of Shares to the extent permitted by Applicable Laws; or

          (viii) any combination of the foregoing methods of payment.

10.  Exercise of Option.

     a.   Procedure for Exercise; Rights as a Shareholder. Any Option granted
          hereunder shall be exercisable according to the terms of the Plan and
          at such times and under such conditions as determined by the
          Administrator and set forth in the Option Agreement. An Option may not
          be exercised for a fraction of a Share.

          An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of (i) the Optionee or,
if requested by the Optionee, in the name of the Optionee and his or her spouse,
or (ii) AIB Custodial Nominees Limited A/C BONY as Optionee's nominee to hold
the shares issued on exercise on Optionee's behalf and subject to Purchaser's
directions. (If selected, the share certificate shall be mailed at Optionee's
risk to AIB Custodial Nominees Limited, P.O. Box 518, IFSC Dublin 1, Ireland).
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.

          Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.

     (b)  Termination of Relationship as a Service Provider. If an Optionee
          ceases to be a Service Provider, other than upon the Optionee's death
          or Disability, the Optionee may exercise his or her Option, but only
          within such period of time as is specified in the Option Agreement,
          and only to the extent that the Option is vested on the date of
          termination (but in no event later than the expiration of the term of
          such Option as set forth in the Option Agreement). In the absence of a
          specified time in the Option Agreement, the Option shall remain
          exercisable for three (1) month following the Optionee's termination.
          If, on the date of termination, the Optionee is not vested as to his
          or her entire Option, the Shares covered by the unvested portion of
          the Option shall revert to the Plan. If, after termination, the
          Optionee does not exercise his or her Option within the time specified
          by the Administrator, the Option shall terminate, and the Shares
          covered by such Option shall revert to the Plan.

     (c)  Disability of Optionee. If an Optionee ceases to be a Service Provider
          as a result of the Optionee's Disability, the Optionee may exercise
          his or her Option within such period of time as is specified in the
          Option Agreement, to the extent the Option is vested on the date of
          termination (but in no event later than the expiration of the term of
          such Option as


                                        5



          set forth in the Option Agreement). In the absence of a specified time
          in the Option Agreement, the Option shall remain exercisable for
          twelve (12) months following the Optionee's termination. If, on the
          date of termination, the Optionee is not vested as to his or her
          entire Option, the Shares covered by the unvested portion of the
          Option shall revert to the Plan. If, after termination, the Optionee
          does not exercise his or her Option within the time specified herein,
          the Option shall terminate, and the Shares covered by such Option
          shall revert to the Plan.

     (d)  Death of Optionee. If an Optionee dies while a Service Provider, the
          Option may be exercised within such period of time as is specified in
          the Option Agreement (but in no event later than the expiration of the
          term of such Option as set forth in the Notice of Grant), by the
          Optionee's estate or by a person who acquires the right to exercise
          the Option by bequest or inheritance, but only to the extent that the
          Option is vested on the date of death. In the absence of a specified
          time in the Option Agreement, the Option shall remain exercisable for
          twelve (12) months following the Optionee's termination. If, at the
          time of death, the Optionee is not vested as to his or her entire
          Option, the Shares covered by the unvested portion of the Option shall
          immediately revert to the Plan. The Option may be exercised by the
          executor or administrator of the Optionee's estate or, if none, by the
          person(s) entitled to exercise the Option under the Optionee's will or
          the laws of descent or distribution. If the Option is not so exercised
          within the time specified herein, the Option shall terminate, and the
          Shares covered by such Option shall revert to the Plan.

     (e)  Buyout Provisions. The Administrator may at any time offer to buy out
          for a payment in cash or Shares, an Option previously granted based on
          such terms and conditions as the Administrator shall establish and
          communicate to the Optionee at the time that such offer is made.

11.  Non-Transferability of Options. Unless determined otherwise by the
     Administrator, an Option may not be sold, pledged, assigned, hypothecated,
     transferred, or disposed of in any manner other than by will or by the laws
     of descent or distribution and may be exercised, during the lifetime of the
     Optionee, only by the Optionee. If the Administrator makes an Option
     transferable, such Option shall contain such additional terms and
     conditions as the Administrator deems appropriate.

12.  Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
     Sale.

     (a)  Changes in Capitalization. Subject to any required action by the
          shareholders of the Company, the number of shares of Ordinary Shares
          covered by each outstanding Option, and the number of shares of
          Ordinary Shares which have been authorized for issuance under the Plan
          but as to which no Options have yet been granted or which have been
          returned to the Plan upon cancellation or expiration of an Option, as
          well as the price per share of Ordinary Shares covered by each such
          outstanding Option, shall be proportionately adjusted for any increase
          or decrease in the number of issued shares of Ordinary Shares
          resulting from a stock split, reverse stock split, stock dividend,
          combination or reclassification of the Ordinary Shares, or any other
          increase or decrease in the number of issued shares of Ordinary Shares
          effected without receipt of consideration by the Company; provided,
          however, that conversion of any convertible securities of the Company
          shall not be deemed to have been "effected without receipt of
          consideration." Such adjustment shall be made by the Board, whose
          determination in that respect shall be final, binding and conclusive.
          Except as expressly provided herein, no issuance by the Company of
          shares of stock of any class, or securities convertible into shares of
          stock of any class, shall affect, and no adjustment by reason thereof
          shall be


                                        6



          made with respect to, the number or price of shares of Ordinary Shares
          subject to an Option.

     (b)  Dissolution or Liquidation. In the event of the proposed dissolution
          or liquidation of the Company, the Administrator shall notify each
          Optionee as soon as practicable prior to the effective date of such
          proposed transaction. The Administrator in its discretion may provide
          for an Optionee to have the right to exercise his or her Option until
          ten (10) days prior to such transaction as to all of the Optioned
          Stock covered thereby, including Shares as to which the Option would
          not otherwise be exercisable. In addition, the Administrator may
          provide that any Company repurchase option applicable to any Shares
          purchased upon exercise of an Option shall lapse as to all such
          Shares, provided the proposed dissolution or liquidation takes place
          at the time and in the manner contemplated. To the extent it has not
          been previously exercised, an Option will terminate immediately prior
          to the consummation of such proposed action.

     (c)  Merger or Asset Sale. In the event of a merger of the Company with or
          into another corporation, or the sale of substantially all of the
          assets of the Company, each outstanding Option shall be assumed or an
          equivalent option or right substituted by the successor corporation or
          a Parent or Subsidiary of the successor corporation. In the event that
          the successor corporation refuses to assume or substitute for the
          Option, the Optionee shall fully vest in and have the right to
          exercise the Option as to all of the Optioned Stock, including Shares
          as to which it would not otherwise be vested or exercisable. If an
          Option becomes fully vested and exercisable in lieu of assumption or
          substitution in the event of a merger or sale of assets, the
          Administrator shall notify the Optionee in writing or electronically
          that the Option shall be fully vested and exercisable for a period of
          fifteen (15) days from the date of such notice, and the Option shall
          terminate upon the expiration of such period. For the purposes of this
          paragraph, the Option shall be considered assumed if, following the
          merger or sale of assets, the option or right confers the right to
          purchase or receive, for each Share of Optioned Stock, immediately
          prior to the merger or sale of assets, the consideration (whether
          stock, cash, or other securities or property) received in the merger
          or sale of assets by holders of Ordinary Shares for each Share held on
          the effective date of the transaction (and if holders were offered a
          choice of consideration, the type of consideration chosen by the
          holders of a majority of the outstanding Shares); provided, however,
          that if such consideration received in the merger or sale of assets is
          not solely Ordinary Shares of the successor corporation or its Parent,
          the Administrator may, with the consent of the successor corporation,
          provide for the consideration to be received upon the exercise of the
          Option, for each Share of Optioned Stock to be solely Ordinary Shares
          of the successor corporation or its Parent equal in fair market value
          to the per share consideration received by holders of Ordinary Shares
          in the merger or sale of assets.

13.  Grant. The date of grant of an Option shall be, for all purposes, the date
     on which the Administrator makes the determination granting such Option, or
     such other later date as is determined by the Administrator. Notice of the
     determination shall be provided to each Optionee within a reasonable time
     after the date of such grant.

14.  Amendment and Termination of the Plan.

     (a)  Amendment and Termination. The Board may at any time amend, alter,
          suspend or terminate the Plan.

     (b)  Effect of Amendment or Termination. No amendment, alteration,
          suspension or termination of the Plan shall impair the rights of any
          Optionee, unless mutually agreed otherwise between the Optionee and
          the Administrator, which agreement must be in


                                        7



          writing and signed by the Optionee and the Company. Termination of the
          Plan shall not affect the Administrator's ability to exercise the
          powers granted to it hereunder with respect to options granted under
          the Plan prior to the date of such termination.

15.  Conditions Upon Issuance of Shares.

     (a)  Legal Compliance. Shares shall not be issued pursuant to the exercise
          of an Option unless the exercise of such Option and the issuance and
          delivery of such Shares shall comply with Applicable Laws and shall be
          further subject to the approval of counsel for the Company with
          respect to such compliance.

     (b)  Investment Representations. As a condition to the exercise of an
          Option the Company may require the person exercising such Option to
          represent and warrant at the time of any such exercise that the Shares
          are being purchased only for investment and without any present
          intention to sell or distribute such Shares if, in the opinion of
          counsel for the Company, such a representation is required.

16.  Inability to Obtain Authority. The inability of the Company to obtain
     authority from any regulatory body having jurisdiction, which authority is
     deemed by the Company's counsel to be necessary to the lawful issuance and
     sale of any Shares hereunder, shall relieve the Company of any liability in
     respect of the failure to issue or sell such Shares as to which such
     requisite authority shall not have been obtained.

17.  Reservation of Shares. The Company, during the term of this Plan, will at
     all times reserve and keep available such number of Shares as shall be
     sufficient to satisfy the requirements of the Plan.


                                        8

EX-10.4

                                                                    EXHIBIT 10.4

                        SKILLSOFT PUBLIC LIMITED COMPANY

                        2001 OUTSIDE DIRECTOR OPTION PLAN
                       (as amended as of August 23, 2006)

1.   Purposes of the Plan. The purposes of this 2001 Outside Director Option
     Plan are to attract and retain the best available personnel for service as
     Outside Directors (as defined herein) of the Company, to provide additional
     incentive to the Outside Directors of the Company to serve as Directors,
     and to encourage their continued service on the Board.

     All options granted hereunder shall be nonstatutory stock options.

2.   Definitions. As used herein, the following definitions shall apply:

     (a)  "Attorney" means in relation to an Optionee a person who acquires the
          right to manage the Optionee's affairs generally as a result of the
          Optionee's Incapacity.

     (b)  "Board" means the Board of Directors of the Company.

     (c)  "Code" means the Internal Revenue Code of 1986, as amended.

     (d)  "Company" means SkillSoft Public Limited Company, a public limited
          company organized under the laws of the Republic of Ireland.

     (e)  "Director" means a member of the Board.

     (f)  "Disability" means total and permanent disability as defined in
          section 22(e)(3) of the Code.

     (g)  "Employee" means any person, including officers and Directors,
          employed by the Company or any Parent or Subsidiary of the Company.
          The payment of a Director's fee by the Company shall not be sufficient
          in and of itself to constitute "employment" by the Company.

     (h)  "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     (i)  "Fair Market Value" means, as of any date, the value of a Share
          determined as follows:

          (i)  If the Shares are listed on any established stock exchange or a
               national market system, including without limitation the Nasdaq
               National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
               Market, its Fair Market Value shall be the closing sales price
               for such Shares (or the closing bid, if no sales were reported)
               as quoted on such exchange or system for the day of determination
               (or for the most recent market trading day if neither the closing
               sales price nor the closing bid for the Shares is quoted for the
               day of determination) as reported in The Wall Street Journal or
               such other source as the Board deems reliable;



          (ii) If the Shares are regularly quoted by a recognized securities
               dealer but selling prices are not reported, the Fair Market Value
               of a Share shall be the mean between the high bid and low asked
               prices for the Shares for the day of determination (or for the
               most recent market trading day if the bid and asked prices for
               the Shares are not quoted for the day of determination), as
               reported in The Wall Street Journal or such other source as the
               Board deems reliable; or

          (iii) In the absence of an established market for the Shares, the Fair
               Market Value thereof shall be determined in good faith by the
               Board.

     (j)  "Incapacity" means, in relation to an Optionee who has a Disability,
          the inability to exercise an Option due to a medically determinable
          physical or mental impairment that has been proven to the satisfaction
          of the Board.

     (k)  "Inside Director" means a Director who is an Employee.

     (l)  "Option" means a share option granted pursuant to the Plan.

     (m)  "Optioned Shares" means Shares subject to an Option.

     (n)  "Optionee" means a Director who holds an Option.

     (o)  "Outside Director" means a Director who is not an Employee.

     (p)  "Parent" means a "parent corporation," whether now or hereafter
          existing, as defined in Section 424(e) of the Code.

     (q)  "Plan" means this 2001 Outside Director Option Plan.

     (r)  "Share" means an ordinary share of E0.11 each in the capital of the
          Company (each such ordinary share representing one American Depositary
          Share of the Company at the date hereof), as adjusted in accordance
          with Section 10 of the Plan.

     (s)  "Subsidiary" means a "subsidiary corporation," whether now or
          hereafter existing, as defined in Section 424(f) of the Internal
          Revenue Code of 1986.

3.   Shares Subject to the Plan. Subject to the provisions of Section 10 of the
     Plan, the maximum aggregate number of Shares which may be optioned and sold
     under the Plan is 750,000 Shares (the "Pool"). The Shares may be
     authorized, but unissued, or (subject to compliance with the Companies
     Acts, 1963 to 1999 of Ireland) reacquired.

     If an Option expires or becomes unexercisable without having been exercised
     in full, the unpurchased Shares which were subject thereto shall become
     available for future grant or sale under the Plan (unless the Plan has
     terminated). Shares that have actually been issued under the Plan shall not
     be returned to the Plan and shall not become available for future
     distribution under the Plan.


                                        2



4.   Administration and Grants of Options under the Plan.

     (a)  Procedure for Grants. All grants of Options to Outside Directors under
          this Plan shall be automatic and nondiscretionary and shall be made
          strictly in accordance with the following provisions:

          (i)  No person shall have any discretion to select which Outside
               Directors shall be granted Options or to determine the number of
               Shares to be covered by Options.

          (ii) Each Outside Director shall be automatically granted an Option to
               purchase 25,000 Shares (the "First Option") on the date on which
               the later of the following events occurs: (A) the effective date
               of this Plan, as determined in accordance with Section 6 hereof,
               or (B) the date on which such person first becomes an Outside
               Director, whether through election by the shareholders of the
               Company or appointment by the Board to fill a vacancy; provided,
               however, that an Inside Director who ceases to be an Inside
               Director but who remains a Director shall not receive a First
               Option.

          (iii) Each Outside Director shall be automatically granted an Option
               to purchase 10,000 Shares (a "Subsequent Option") on January 1 of
               each year provided he or she is then an Outside Director and if
               as of such date, he or she shall have served on the Board for at
               least the preceding six (6) months.

          (iv) The terms of a First Option granted hereunder shall be as
               follows:

               (A)  the term of the First Option shall be ten (10) years.

               (B)  the First Option shall be exercisable only while the Outside
                    Director remains a Director of the Company, except as set
                    forth in Sections 8 and 10 hereof.

               (C)  the exercise price per Share shall be one hundred percent
                    (100%) of the Fair Market Value per Share on the date of
                    grant of the First Option.

               (D)  subject to Section 10 hereof, the First Option shall become
                    exercisable as to 33.33% of the Shares subject to the First
                    Option on each anniversary of its date of grant, provided
                    that the Optionee continues to serve as a Director on all
                    such relevant dates. Notwithstanding the foregoing, in
                    connection with a First Grant, the vesting commencement date
                    shall be the date on which the individual was appointed by
                    the Board of Directors to serve as an Outside Director of
                    the Company or the date on which the Plan was approved by
                    the Board of Directors, whichever is later.


                                        3



          (v)  The terms of a Subsequent Option granted hereunder shall be as
               follows:

               (A)  the term of the Subsequent Option shall be ten (10) years.

               (B)  the Subsequent Option shall be exercisable only while the
                    Outside Director remains a Director of the Company, except
                    as set forth in Sections 8 and 10 hereof.

               (C)  the exercise price per Share shall be one hundred percent
                    (100%) of the Fair Market Value per Share on the date of
                    grant of the Subsequent Option.

               (D)  subject to Section 10 hereof, the Subsequent Option shall
                    become exercisable in full on the first anniversary of its
                    date of grant, provided that the Optionee continues to serve
                    as a Director on such relevant date.

          (vi) In the event that any Option granted under the Plan would cause
               the number of Shares subject to outstanding Options plus the
               number of Shares previously purchased under Options to exceed the
               Pool, then the remaining Shares available for Option grant shall
               be granted under Options to the Outside Directors on a pro rata
               basis. No further grants shall be made until such time, if any,
               as additional Shares become available for grant under the Plan
               through action of the Board or the shareholders to increase the
               number of Shares which may be issued under the Plan or through
               cancellation or expiration of Options previously granted
               hereunder.

5.   Eligibility. Options may be granted only to Outside Directors. All Options
     shall be granted automatically in accordance with the terms set forth in
     Section 4 hereof.

     The Plan shall not confer upon any Optionee any right with respect to
     continuation of service as a Director or nomination to serve as a Director,
     nor shall it interfere in any way with any rights which the Director or the
     Company may have to terminate the Director's relationship with the Company
     at any time.

6.   Term of Plan. The Plan shall become effective upon the earlier to occur of
     its adoption by the Board or its approval by the shareholders of the
     Company as described in Section 16 of the Plan. It shall continue in effect
     for a term of ten (10) years unless sooner terminated under Section 11 of
     the Plan.

7.   Form of Consideration. The consideration to be paid for the Shares to be
     issued upon exercise of an Option, including the method of payment, shall
     consist of (i) cash, (ii) check, (iii) consideration received by the
     Company under a cashless exercise program implemented by the Company in
     connection with the Plan, or (iv) any combination of the foregoing methods
     of payment.

8.   Exercise of Option.


                                        4



     (a)  Procedure for Exercise; Rights as a Shareholder. Any Option granted
          hereunder shall be exercisable at such times as are set forth in
          Section 4 hereof; provided, however, that no Options shall be
          exercisable until shareholder approval of the Plan in accordance with
          Section 16 hereof has been obtained.

          An Option may not be exercised for a fraction of a Share.

          An Option shall be deemed to be exercised when written notice of such
          exercise has been given to the Company in accordance with the terms of
          the Option by the person entitled to exercise the Option and full
          payment for the Shares with respect to which the Option is exercised
          has been received by the Company. Full payment may consist of any
          consideration and method of payment allowable under Section 7 of the
          Plan. Until the issuance (as evidenced by the appropriate entry on the
          books of the Company or of a duly authorized transfer agent of the
          Company) of the share certificate evidencing such Shares, no right to
          vote or receive dividends or any other rights as a shareholder shall
          exist with respect to the Optioned Share, notwithstanding the exercise
          of the Option. A share certificate for the number of Shares so
          acquired shall be issued to the Optionee or its nominee as soon as
          practicable after exercise of the Option. No adjustment shall be made
          for a dividend or other right for which the record date is prior to
          the date the share certificate is issued, except as provided in
          Section 10 of the Plan.

          Exercise of an Option in any manner shall result in a decrease in the
          number of Shares which thereafter may be available, both for purposes
          of the Plan and for sale under the Option, by the number of Shares as
          to which the Option is exercised.

     (b)  Termination of Continuous Status as a Director. Subject to Section 10
          hereof, in the event an Optionee's status as a Director terminates
          (other than upon the Optionee's death or Disability), the Optionee may
          exercise his or her Option, but only within three (3) months following
          the date of such termination, and only to the extent that the Optionee
          was entitled to exercise it on the date of such termination (but in no
          event later than the expiration of its ten (10) year term). To the
          extent that the Optionee was not entitled to exercise an Option on the
          date of such termination, and to the extent that the Optionee does not
          exercise such Option (to the extent otherwise so entitled) within the
          time specified herein, the Option shall terminate.

     (c)  Disability of Optionee. In the event Optionee's status as a Director
          terminates as a result of Disability, the Optionee or, in the event of
          Optionees's Incapacity, his or her Attorney, may exercise his or her
          Option, but only within twelve (12) months following the date of such
          termination, and only to the extent that the Optionee was entitled to
          exercise it on the date of such termination (but in no event later
          than the expiration of its ten (10) year term). To the extent that the
          Optionee was not entitled to exercise an Option on the date of
          termination, or if he or she does not exercise such Option (to the
          extent otherwise so entitled) within the time specified herein, the
          Option shall terminate.


                                        5



     (d)  Death of Optionee. In the event of an Optionee's death, the Optionee's
          estate or a person who acquired the right to exercise the Option by
          bequest or inheritance may exercise the Option, but only within twelve
          (12) months following the date of death, and only to the extent that
          the Optionee was entitled to exercise it on the date of death (but in
          no event later than the expiration of its ten (10) year term). To the
          extent that the Optionee was not entitled to exercise an Option on the
          date of death, and to the extent that the Optionee's estate or a
          person who acquired the right to exercise such Option does not
          exercise such Option (to the extent otherwise so entitled) within the
          time specified herein, the Option shall terminate.

9.   Non-Transferabilitv of Options. The Option may not be sold, pledged,
     assigned, hypothecated, transferred, or disposed of in any manner other
     than by will or by the laws of descent or distribution and may be
     exercised, during the lifetime of the Optionee, only by the Optionee or, in
     the event of the Optionee's Incapacity, by his or her Attorney.

10.  Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
     Sale.

     (a)  Changes in Capitalization. Subject to any required action by the
          shareholders of the Company, the number of Shares covered by each
          outstanding Option, the number of Shares which have been authorized
          for issuance under the Plan but as to which no Options have yet been
          granted or which have been returned to the Plan upon cancellation or
          expiration of an Option, as well as the price per Share covered by
          each such outstanding Option, and the number of Shares issuable
          pursuant to the automatic grant provisions of Section 4 hereof shall
          be proportionately adjusted for any increase or decrease in the number
          of issued Shares resulting from a reorganization, bonus issue,
          reclassification or the like, or any other increase or decrease in the
          number of issued Shares effected without receipt of consideration by
          the Company; provided, however, that conversion of any convertible
          securities of the Company shall not be deemed to have been "effected
          without receipt of consideration." Except as expressly provided
          herein, no issuance by the Company of shares of any class, or
          securities convertible into shares of any class, shall affect, and no
          adjustment by reason thereof shall be made with respect to, the number
          or price of Shares subject to an Option.

     (b)  Dissolution or Liquidation. In the event of the proposed dissolution
          or liquidation of the Company, the Board shall notify each Optionee
          as soon as practicable prior to the effective date of such proposed
          transaction. Each Optionee shall have the right to exercise his or her
          Option within fifteen (15) days prior to the proposed date of such
          transaction as to all of the Optioned Shares covered thereby. To the
          extent it has not been previously exercised, an Option will terminate
          immediately prior to the consummation of such proposed action.

     (c)  Merger or Asset Sale. In the event of a merger of the Company with or
          into another corporation or the sale of substantially all of the
          assets of the Company, outstanding Options may be assumed or
          equivalent options may be substituted by the successor corporation or
          a Parent or Subsidiary thereof (the "Successor Corporation"). If an
          Option is assumed or substituted for, the Option or


                                        6



          equivalent option shall continue to be exercisable as provided in
          Section 4 hereof for so long as the Optionee serves as a Director or a
          director of the Successor Corporation. If, at any time following such
          assumption or substitution, the Optionee's status as a Director or
          director of the Successor Corporation, as applicable, is terminated
          other than upon a voluntary resignation by the Optionee, the Option or
          substituted option shall become fully exercisable. Following such
          termination the Option or substituted option shall remain exercisable
          in accordance with Sections 8(b) through (d) above.

     If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.

     For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Optioned Share subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
shares, cash, or other securities or property) received in the merger or sale of
assets by holders of Shares for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares). If
such consideration received in the merger or sale of assets is not solely
ordinary shares (or their equivalent) of the Successor Corporation or its
Parent, the Board may, with the consent of the Successor Corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Optioned Share, to be solely ordinary shares (or their equivalent) of the
Successor Corporation or its Parent equal in fair market value to the per share
consideration received by holders of ordinary shares in the merger or sale of
assets.

11.  Amendment and Termination of the Plan.

     (a)  Amendment and Termination. The Board may at any time amend, alter,
          suspend, or discontinue the Plan, but no amendment, alteration,
          suspension, or discontinuation shall be made which would impair the
          rights of any Optionee under any grant theretofore made, without his
          or her consent. In addition, to the extent necessary and desirable to
          comply with any applicable law, regulation or stock exchange rule, the
          Company shall obtain shareholder approval of any Plan amendment in
          such a manner and to such a degree as required.

     (b)  Effect of Amendment or Termination. Any such amendment or termination
          of the Plan shall not affect Options already granted and such Options
          shall remain in full force and effect as if this Plan had not been
          amended or terminated.

12.  Time of Granting Options. The date of grant of an Option shall, for all
     purposes, be the date determined in accordance with Section 4 hereof.

13.  Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to
     the exercise of an Option unless the exercise of such Option and the
     issuance and delivery of such


                                        7



     Shares pursuant thereto shall comply with all relevant provisions of law,
     including, without limitation, the Securities Act of 1933, as amended, the
     Exchange Act, the rules and regulations promulgated thereunder, state
     securities laws, Irish law and the requirements of any stock exchange upon
     which the Shares may then be listed, and shall be further subject to the
     approval of counsel for the Company with respect to such compliance.

     As a condition to the exercise of an Option, the Company may require the
     person exercising such Option to represent and warrant at the time of any
     such exercise that the Shares are being purchased only for investment and
     without any present intention to sell or distribute such Shares, if, in the
     opinion of counsel for the Company, such a representation is required by
     any of the aforementioned relevant provisions of law.

     Inability of the Company to obtain authority from any regulatory body
     having jurisdiction, which authority is deemed by the Company's counsel to
     be necessary to the lawful issuance and sale of any Shares hereunder, shall
     relieve the Company of any liability in respect of the failure to issue or
     sell such Shares as to which such requisite authority shall not have been
     obtained.

14.  Reservation of Shares. The Company, during the term of this Plan, will at
     all times reserve and keep available such number of Shares as shall be
     sufficient to satisfy the requirements of the Plan.

15.  Option Agreement. Options shall be evidenced by written option agreements
     in such form as the Board shall approve.

16.  Shareholder Approval. The Plan shall be subject to approval by the
     shareholders of the Company within twelve (12) months after the date the
     Plan is adopted by the Board. Such shareholder approval shall be obtained
     in the degree and manner required under applicable state and federal law
     and any stock exchange rules.


                                        8

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Charles E. Moran, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of SkillSoft Public Limited Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 8, 2006

/s/ Charles E. Moran  

Charles E. Moran 

President and Chief Executive Officer 

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Thomas J. McDonald, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of SkillSoft Public Limited Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: December 8, 2006

/s/ Thomas J. McDonald  

Thomas J. McDonald 

Chief Financial Officer 

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of SkillSoft Public Limited Company (the “Company”) for the period ended October 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Charles E. Moran, Chief Executive Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

     (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: December 8, 2006

/s/ Charles E. Moran  

Charles E. Moran 

Chief Executive Officer 

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of SkillSoft Public Limited Company (the “Company”) for the period ended October 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Thomas J. McDonald, Chief Financial Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

     (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: December 8, 2006

/s/ Thomas J. McDonald  

Thomas J. McDonald 

Chief Financial Officer