UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

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þ		Definitive Proxy Statement
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o		Soliciting Material Pursuant to Section 240.14a-12

SKILLSOFT PUBLIC LIMITED COMPANY

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement)

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SKILLSOFT PUBLIC LIMITED COMPANY

 

(REGISTERED IN IRELAND — NO. 148294)

 

NOTICE OF ANNUAL GENERAL MEETING

 

Notice is Hereby Given that the ANNUAL GENERAL MEETING of SkillSoft Public Limited Company (the “Company”), a corporation organized under the laws of Ireland, will be held at the offices of Maples and Calder, Solicitors, 40 Lower Baggot Street, Dublin 2, Ireland on September 28, 2006, at 8:30 a.m., local time (the “Meeting”), for the purpose of transacting the following business:

 

ORDINARY BUSINESS

 

1.  To receive and consider the consolidated financial statements of the Company for the fiscal year ended January 31, 2006 and the Report of the Directors and Auditor thereon. (Resolution 1)

 

2.  To re-elect as a director P. Howard Edelstein, who retires by rotation and, being eligible, offers himself for re-election in accordance with the Company’s Articles of Association. (Resolution 2)

 

3.  To authorize the Audit Committee of the Board of Directors to fix the remuneration of the Company’s auditor for the fiscal year ending January 31, 2007. (Resolution 3)

 

SPECIAL BUSINESS

 

4.  To consider and, if thought fit, to pass the following resolution, which will be proposed as an ordinary resolution.

 

That the Company’s 2002 Share Option Plan (the “2002 Plan”) be and it is hereby amended, 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), which increase is being accomplished by decreasing the number of shares reserved for issuance under the Company’s 1996 Supplemental Stock Plan by said amount, and that the directors of the Company be and they are hereby authorized to do such acts and things as they may consider necessary or expedient to establish and carry into effect the increase in the number of shares available under the 2002 Plan. Please note that this proposal does not increase the total number of shares reserved for issuance under all stock plans. (Resolution 4)

 

5.  To consider and, if thought fit, to pass the following resolution, which will be proposed as an ordinary resolution.

 

That the directors of the Company be and they hereby are generally and unconditionally authorized to exercise all of the powers of the Company to allot relevant securities of the Company (within the meaning of Section 20 of the Companies (Amendment) Act, 1983) up to an amount equal to but not exceeding the authorized but unissued share capital of the Company as at the date of passing of this resolution provided that this authority shall expire at the close of business on September 27, 2011 unless previously renewed, varied or revoked by the Company in general meeting, except that the Company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the directors may allot relevant securities pursuant to any such offer or agreement as if the authority conferred hereby had not expired. (Resolution 5)

 

6.  To consider and, if thought fit, to pass the following resolution, which will be proposed as a special resolution.

 

That the directors of the Company be and they are hereby empowered pursuant to Section 24 of the Companies (Amendment) Act, 1983 to allot equity securities (within the meaning of Section 23 of the said Act) for cash pursuant to the authority to allot relevant securities conferred on the directors by Resolution 5 above as if subsection (1) of the said Section 23 did not apply to any such allotment, provided that this power shall expire at close of business on September 27, 2011 unless such power shall be renewed in accordance with and subject to the

provisions of the said Section 24, except that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the directors may allot equity securities pursuant to any such offer or agreement as if the power hereby conferred had not expired. (Resolution 6)

 

To conduct any other ordinary business of the Company as may properly come before the Meeting.

 

By Order of the Board

 

Charles E. Moran

Chief Executive Officer

 

August 30, 2006

 

Registered Office:

Belfield Office Park

Clonskeagh

Dublin 4

Ireland

NOTES:

 

1.  The foregoing items of business are more fully described and explained in the proxy statement accompanying this Notice — in particular, beginning on page 27. You are urged to read the proxy statement carefully.

 

2.  Those holders of ordinary shares whose names appear in the Register of Members of the Company (“Members”) on the date the proxy statement is dispatched to shareholders are entitled to receive notice of the Meeting or any adjournment of the Meeting. In addition, Members on the date of the Meeting are entitled to attend and vote at the Meeting and any adjournment of the Meeting.

 

3.  Holders of the Company’s American Depositary Shares (“ADSs”) may not vote at the Meeting; however, The Bank of New York, as depositary for the ordinary shares underlying and represented by the ADSs, has the right to vote all of the ordinary shares represented by ADSs, subject to certain limitations described in the proxy statement. Voting of the ADSs is more fully described in the proxy statement accompanying this Notice. The Bank of New York has set August 1, 2006, which is the same date as the record date set by the Company, as the record date for the determination of those holders of American Depositary Receipts representing such ADSs entitled to give instructions for the exercise of voting rights at the Meeting or any adjournment of the Meeting.

 

4.  A Member entitled to attend and vote at the Meeting may appoint a proxy or proxies to attend, speak and vote in his, her or its place. A proxy does not need to be a Member of the Company. To be valid, proxy forms must be deposited with the Company’s Registrars, Computershare Investor Services (Ireland) Limited, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland not later than 8:30 a.m. on September 26, 2006. A Member is not precluded from attending the Meeting and from speaking or voting at the Meeting even if the Member has completed a proxy form.

 

5.  The Register of Directors’ Interests and particulars of directors’ transactions in the share capital of the Company and its subsidiary companies required to be kept under section 59 of the Companies Act, 1990 will be available for inspection at the Meeting from 8:15 a.m. until the conclusion of the Meeting. Otherwise they will be available for inspection at the registered office of the Company during normal business hours on any weekday (Saturdays, Sundays and Irish public holidays excluded) from the date of this Notice until the date of the Meeting.

 

YOUR VOTE IS IMPORTANT

 

TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY FORM AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE POSTAGE PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON EVEN IF YOU HAVE RETURNED A PROXY.

 

TABLE OF CONTENTS

 

 

SKILLSOFT PUBLIC LIMITED COMPANY

Belfield Office Park
Clonskeagh
Dublin 4, Ireland

 

 

 

PROXY STATEMENT

 

 

 

The enclosed proxy is solicited on behalf of SkillSoft Public Limited Company (the “Company”) for use at the Annual General Meeting of Shareholders to be held on September 28, 2006 at the offices of Maples and Calder, Solicitors, 40 Lower Baggot Street, Dublin 2, Ireland at 8:30 a.m., local time, or at any adjournment of the Annual General Meeting, for the purposes set forth in the accompanying Notice of Annual General Meeting.

 

These proxy solicitation materials are being mailed on or about August 30, 2006 to ADS holders and to all ordinary shareholders entitled to attend and vote at the Annual General Meeting as of such date. A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2006, as filed with the Securities and Exchange Commission is being furnished with this proxy statement. Exhibits will be provided upon written request and payment of an appropriate processing fee to SkillSoft PLC, 107 Northeastern Boulevard, Nashua, New Hampshire 03062, Attn: Investor Relations.

 

Record Date for Holders of the Company’s Ordinary Shares.  Holders of the Company’s ordinary shares, or Members, whose names appear in the Register of Members maintained by the Company’s registrars, Computershare Investor Services (Ireland) Limited, on the date the proxy statement is mailed to Members are entitled to receive notice of the Annual General Meeting or any adjournment of the Annual General Meeting. In addition, any person who is a Member on the date of the Annual General Meeting is entitled to attend and vote at the Annual General Meeting and any adjournment of the Annual General Meeting.

 

Record Date for Holders of the Company’s ADSs.  The Bank of New York, as the registrar and transfer agent for the Company’s ADSs, as well as the depositary for the Company’s ordinary shares represented by the ADSs, has fixed the close of business on August 1, 2006, which date is the same as the record date set by the Company, as the record date for determining the ADS holders entitled to give instructions for the exercise of voting rights at the Annual General Meeting and any adjournment of the Annual General Meeting.

 

As of August 1, 2006, there were 108,149,659 of the Company’s ordinary shares, par value € 0.11 per share, issued and outstanding held by approximately 11 holders of record. As of August 1, 2006, there were 108,139,627 of the Company’s ADSs issued and outstanding. Each ADS represents one ordinary share. The ADSs are quoted on the NASDAQ National Market under the symbol “SKIL.” As of August 1, 2006, there were approximately 371 registered holders of the Company’s ADSs. The ordinary shares represented by the ADSs are owned of record by BNY (Nominees) Limited on behalf of The Bank of New York.

 

To conduct business at the Annual General Meeting, a quorum must be present. The Company’s Articles of Association provide that the presence at an Annual General Meeting, either in person or by proxy, of three (3) persons entitled to vote at the Annual General Meeting, and who together hold not less than one-third of the Company’s voting share capital in issue, each being a Member or a proxy for a Member or a duly authorized representative of a corporate Member, constitutes a quorum for the transaction of business. The Company will treat ordinary shares represented by a properly signed and returned proxy (including holders of shares who abstain or do not vote with respect to one or more of the matters presented for a vote) as present at the meeting for the purposes of determining the presence or absence of a quorum for the transaction of business.

 

Generally.  Votes may be given at the Annual General Meeting either personally or by proxy. Voting at the Annual General Meeting will be by a show of hands, unless a poll (a count of the number of shares voted) is duly demanded. On a show of hands, each shareholder present in person and every proxy shall have one vote, provided, that no individual shall have more than one vote, and, on a poll, each shareholder shall have one vote for each share of which he, she or it is the holder. Where there is a tie, whether on a show of hands or on a poll, the chair of the meeting is entitled to a casting vote in addition to any other vote he may have. A poll may, subject to the provisions of the Irish Companies Acts, be demanded by: (i) the chair of the meeting; (ii) at least three Members present (in person or by proxy) having the right to attend and vote at the meeting; (iii) any Member or Members present (in person or by proxy) representing in the aggregate not less than one-tenth of the total voting rights of all the Members having the right to attend and vote at the meeting; or (iv) a Member or Members present (in person or by proxy) holding the Company’s shares conferring the right to attend and vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right. On a poll, a person entitled to more than one vote need not use all his, her or its votes or cast all the votes he, she or it uses in the same way.

 

Proxies.  Ordinary shares represented by a properly signed and dated proxy will be voted at the Annual General Meeting in accordance with instructions indicated on the proxy. Proxies that are properly signed and dated but which do not contain voting instructions will be voted FOR approval of each of the proposals presented at the Annual General Meeting as more fully described in this proxy statement. Subject to any limitations imposed by law, a proxy holder may vote the proxy in his or her discretion as to any other matter which may properly come before the Annual General Meeting.

 

Abstentions.  The Company will count a properly executed proxy marked ABSTAIN as present for purposes of determining whether a quorum is present, but the shares represented by that proxy will not be voted at the Annual General Meeting. An abstention will not have an effect on the vote for any of the proposals to be voted upon at the meeting. Shares held by shareholders who abstain from voting as to a particular matter, and shares held in “street name” by brokers or nominees who indicate on their proxies that they do not have discretionary authority to vote such shares as to a particular matter, will not be counted as votes in favor of such matter and will also not be counted as votes cast on such matter. Accordingly, abstentions and “broker non-votes” will have no effect on proposals one through six to be acted on at the Annual General Meeting.

 

Generally.  Holders of ADSs may not vote at the Annual General Meeting. The Bank of New York has the right, subject to certain limitations set forth in the Deposit Agreements among the Company, The Bank of New York and the owners and beneficial owners of ADSs, to vote all of the Company’s ordinary shares represented by ADSs. Under the terms of the Deposit Agreements, however, The Bank of New York is required to cast its votes with

respect to those ordinary shares for which it receives instructions from the holders of the ADSs representing such ordinary shares in accordance with the instructions received.

 

Record Date; Notice of Annual General Meeting.  Under the terms of the Deposit Agreements, whenever The Bank of New York receives notice of any meeting of holders of ordinary shares, The Bank of New York is required to fix a record date, which shall be the record date, if any, established by the Company for the purpose of such meeting or, if different, as close to the date established by the Company as practicable, for the determination of the owners of ADSs who will be entitled to give instructions for the exercise of voting rights at any such meeting, subject to the provisions of the Deposit Agreements.

 

Upon receipt of notice of any of the Company’s meetings or the solicitation for consents or proxies from the holders of ordinary shares, The Bank of New York is required, if so requested in writing by the Company, as soon as practicable thereafter, to mail to all owners of ADSs a notice, the form of which shall be in the sole discretion of The Bank of New York, containing:

 

 

Voting of Ordinary Shares Underlying ADSs.  Upon the written request of an owner of ADSs on the record date, received on or before the date established by The Bank of New York for the purpose of such meeting, The Bank of New York will, insofar as practicable, vote or cause to be voted the number of ordinary shares represented by such ADSs in accordance with the instructions set forth in such request. Accordingly, pursuant to the Company’s Articles of Association and applicable Irish law, The Bank of New York will cause its authorized representative to attend each meeting of holders of ordinary shares and call for a poll as instructed for the purpose of effecting such vote. The Bank of New York will not vote or attempt to exercise the rights to vote that attach to the ordinary shares other than in accordance with such instructions or deemed instructions.

 

ADSs purchased by the Company or its subsidiaries under the current share purchase program cannot be voted.

 

Discretionary Proxies.  The Deposit Agreements provide that if no instructions are received by The Bank of New York from any owner of ADSs with respect to any of the ordinary shares represented by the ADSs on or before the date established by The Bank of New York for the purpose of such meeting, The Bank of New York will deem such owner of ADSs to have instructed The Bank of New York to give a discretionary proxy to a person designated by the Company with respect to such ordinary shares and The Bank of New York will give a discretionary proxy to a person designated by the Company to vote such ordinary shares, under circumstances and according to the terms as set forth in the Deposit Agreements. However, no such instructions will be deemed given and no such discretionary

proxy will be given if the Company notifies The Bank of New York, and the Company has agreed to provide such notice as promptly as practicable in writing, that the matter to be voted upon is one of the following:

 

 

 

Proposals one through five to be acted upon at the Annual General Meeting, which are (1) consideration of the consolidated financial statements of the Company for the fiscal year ended January 31, 2006 and the Report of the Directors and Auditor thereon, (2) voting on the re-election of a director, (3) authorization of the Audit Committee to fix the remuneration of the Company’s auditor, (4) approval of the increase in the number of shares reserved for issuance under the 2002 Plan and (5) authorization of directors to allot shares, are matters for which The Bank of New York may deem that instruction has been given for The Bank of New York to give a discretionary proxy to a person designated by the Company where no instruction is received. Therefore, The Bank of New York will give a discretionary proxy to a person designated by the Company to vote such ordinary shares for which no instruction has been given.

 

The sixth proposal to be acted upon at the Annual General Meeting, which relates to the disapplication of statutory pre-emption provisions is not a matter for which The Bank of New York may deem that instruction has been given for The Bank of New York to give a discretionary proxy to a person designated by the Company where no instruction is received. Therefore, with respect to this proposal, The Bank of New York will not give a discretionary proxy to a person designated by the Company to vote such ordinary shares unless it receives instructions to give such discretionary proxy.

 

Inspection of Reports.  The Bank of New York will make available for inspection by the owners of ADSs at its Corporate Trust Office any reports and communications, including any proxy soliciting material, received from the Company, which are both (a) received by The Bank of New York as the holder of the ordinary shares and (b) generally made available to the holders of ordinary shares by the Company. The Bank of New York will also send to the owners of ADSs copies of such reports when furnished by the Company pursuant to the Deposit Agreements.

 

The Company will pay the cost of preparing, assembling, printing and mailing the proxy statement, the Notice of Annual General Meeting of Shareholders and the enclosed form of proxy, as well as the cost of soliciting proxies relating to the Annual General Meeting. Following the original mailing of the proxies and other solicitation materials, the Company will request banks, brokers, dealers and voting trustees or other nominees, including The Bank of New York in the case of the ADSs, to solicit their customers who are owners of shares listed of record and names of nominees, and will reimburse them for reasonable out-of-pocket expenses of such solicitation.

 

In addition to solicitation by mail, directors, officers and key employees of the Company may solicit proxies in person or by telephone, telegram or other means of communications. These persons will receive no additional compensation for solicitation of proxies but may be reimbursed for reasonable out-of-pocket expenses.

 

You may revoke your proxy before it is voted by:

 

 

Computershare Investor Services (Ireland) Limited
P.O. Box 954
Heron House Corrig Road
Sandyforde Industrial Estate
Dublin 18, Ireland
Fax: +353 1 2163183

 

The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Maura Keyes
Fax: 212-571-3050

 

 

The following table sets forth certain information as of July 31, 2006 with respect to the beneficial ownership of the Company’s ADSs by:

 

 

The number of ADSs beneficially owned by each 5% shareholder, director or executive officer is determined under rules of the SEC. Under such rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and includes any ADSs representing the ordinary shares which the individual has the right to acquire on or before September 29, 2006 through the exercise of share options, and any reference in the footnotes to this table to shares subject to share options refers only to share options that are so exercisable. For purposes of computing the percentage of outstanding ADSs held by each person or entity, any shares which that person or entity has the right to acquire on or before September 29, 2006, are deemed to be outstanding but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, each person or entity has sole investment and voting power (or shares such power with his or her spouse) with respect to the shares set forth in the following table. The inclusion herein of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.

 

As of July 31, 2006, the Company had approximately 108,122,290 ordinary shares outstanding. The Company’s shareholders may elect to hold the outstanding securities of the Company in the form of ordinary

shares or ADSs. In addition, holders of options to purchase ordinary shares of the Company may, upon exercise of their options, elect to receive such ordinary shares in the form of ADSs. The 5% shareholders, directors and executive officers identified in the following table hold their outstanding securities in the form of ADSs.

 

 

 

 

The Company’s Board of Directors has long believed that good corporate governance is important to ensure that the Company is managed for the long-term benefit of its shareholders. This section describes the key corporate governance guidelines and practices that the Company has adopted. Complete copies of the corporate governance guidelines, committee charters and code of conduct described below are available on the Company’s website at www.skillsoft.com. Alternatively, you can request a copy of any of these documents by writing to SkillSoft Public Limited Company, c/o Investor Relations, 107 Northeastern Boulevard, Nashua, New Hampshire 03062.

 

The Board has adopted corporate governance guidelines to assist the Board in the exercise of its duties and responsibilities and to serve the best interests of the Company and its shareholders. Among the matters covered by these guidelines are:

 

 

The following is a list of the directors of the Company and certain information about their background.

 

Charles E. Moran, age 51, has served as the Company’s President and Chief Executive Officer since the Company’s merger with SkillSoft Corporation in September 2002. Mr. Moran is a founder of SkillSoft Corporation and served as its Chairman of the Board, President and Chief Executive Officer from January 1998 until September 2002.

 

Gregory M. Priest, age 42, was appointed Chairman of the Board of Directors in November 2000, and has held the position of Strategic Advisor with the Company since April 2005. Mr. Priest served as the Company’s Chief Strategy Officer from September 2002 to April 2005. Mr. Priest served as the Company’s President and Chief Executive Officer from December 1998 to September 2002. Mr. Priest has been a director since June 1996. Mr. Priest, who retires as a director of the Company by rotation at the 2006 Annual General Meeting, informed the Company’s Board of Directors that he will not seek re-election and will retire from the Company’s Board of Directors effective as of the date of the 2006 Annual General Meeting.

P. Howard Edelstein, age 51, has served as a director of the Company since the Company’s merger with SkillSoft Corporation in September 2002. Mr. Edelstein is currently an Executive in Residence with Radianz, Inc., an Internet Protocol (IP)-based networking company for the global financial services industry, and an Entrepreneur in Residence with Warburg Pincus LLC. Mr. Edelstein served as President and Chief Executive Officer of Radianz from July 2003 to January 2006. Mr. Edelstein served as an Entrepreneur in Residence with Warburg Pincus LLC from January 2002 to July 2003. Mr. Edelstein previously served as President and Chief Executive Officer of Thomson Financial ESG (now known as Omgeo), a provider of electronic commerce, transaction processing and information services to the international securities/trading community, from 1993 to 2001. Mr. Edelstein is also a director of PalmSource, a software developer for mobile information devices, and Alacra, a privately held financial information company.

 

Stewart K.P. Gross, age 46, has served as a director of the Company since the Company’s merger with SkillSoft Corporation in September 2002. Mr. Gross has served as Managing Director with Lightyear Capital LLC, a private equity firm concentrating on investments in the financial services industry since April 2005. Mr. Gross served as a director of SkillSoft Corporation from January 1998 to September 2002. Mr. Gross was a Managing Director of Warburg Pincus LLC, from July 1987 to December 2004. Mr. Gross is a director of BEA Systems, Inc., and Aldabra Acquisition Corporation. Mr. Gross is also a director of several privately held companies.

 

James S. Krzywicki, age 54, has served as a director of the Company since October 1998. Mr. Krzywicki has served as President and Chief Executive officer of Docutron Systems, Inc., a provider of web-based document management software solutions that work in small business environments and connect with enterprise objectives, since April 2004. Mr. Krzywicki was Vice President, Channel Services of Parametric Technology Corporation (“PTC”), a provider of software solutions for manufacturers for product development and improvement, from April 2003 to April 2004. Prior to joining PTC, Mr. Krzywicki served as President of North American Services of RoweCom, Inc. a provider of knowledge resource management and acquisition services, from October 1999 to February 2001, and as Chief Operating Officer from February 2001 to November 2001. In November 2001, RoweCom, Inc. was acquired by divine, inc., a premier integrated solution provider focused on the extended enterprise, and Mr. Krzywicki became Senior Vice President and General Manager, divine information services, and held this position until January 2003. Subsequently, RoweCom, Inc. filed for protection under Chapter 11 of the United States Bankruptcy Code in the United States District Court for the District of Massachusetts in January 2003.

 

William F. Meagher, Jr., age 67, has served as a director of the Company since March 2004. Mr. Meagher was the Managing Partner of the Boston Office of Arthur Andersen LLP (“Andersen”) from 1982 until 1995, and spent a total of 38 years with Andersen. Mr. Meagher was a member of the American Institute of Certified Public Accountants and the Massachusetts Society of Certified Public Accountants. Mr. Meagher is a trustee of Living Care Villages of Massachusetts, Inc. d/b/a North Hill and the Dana Farber Cancer Institute and the Greater Boston YMCA. Mr. Meagher also sits on the Board of Directors of Dover Saddlery, a direct marketer and a leading specialty retailer of equestrian products.

 

Ferdinand von Prondzynski, age 53, has served as a director of the Company since November 2001. Dr. von Prondzynski has been the President of Dublin City University, one of Ireland’s leading higher education institutions, since July 2000. From January 1991 to July 2000, Dr. von Prondzynski served as Professor of Law and Dean of the Faculty of Social Services, the University of Hull, UK.

 

There are no family relationships among any of the directors of the Company.

 

Under NASDAQ rules, the Company is required to have a majority of independent directors, and a director of the Company will only qualify as an “independent director” if, in the opinion of the Company’s Board of Directors, that person does not have a relationship which would interfere with the exercise of independent judgment in

carrying out the responsibilities of a director. Under the Corporate Governance Guidelines adopted by the Company in connection with the settlement of its securities class action litigation, the Board must propose nominees for election such that, should the shareholders elect those nominees, two-thirds of the members of the Company’s Board will be independent directors. The Corporate Governance Guidelines also include a heightened definition of independence for purposes of that requirement. The Company’s Board has determined that each of Messrs. Gross, Krzywicki and Meagher and Dr. von Prondzynski is an “independent director” as defined under Rule 4200(a)(15) of the NASDAQ Stock Market, Inc. Marketplace Rules and the Corporate Governance Guidelines. Messrs. Moran, Edelstein and Priest are not independent. Mr. Priest, who retires as a director of the Company by rotation at the 2006 Annual General Meeting, has informed the Company’s Board of Directors that he will not seek re-election and will retire from the board of directors effective as of the date of the 2006 Annual General Meeting.

 

The process followed by the Nominating and Corporate Governance Committee to identify and evaluate director candidates includes requests to Board members and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the Nominating and Corporate Governance Committee and the Board of Directors.

 

In considering whether to recommend any particular candidate for inclusion in the Board of Director’s slate of recommended director nominees, the Nominating and Corporate Governance Committee will apply the criteria set forth in the Company’s Corporate Governance Guidelines. These criteria include the candidate’s integrity, business acumen, knowledge of the Company’s business and industry, age, experience, diligence, conflicts of interest and the ability to act in the interests of all shareholders. In addition, the candidate must have experience in one of more of the following core competencies: business or management of complex and large consolidated companies or institutions; accounting or finance for complex and large consolidated companies or institutions; leadership, strategic planning or crisis response for complex and large consolidated companies or institutions; software development and e-learning industries; and other relevant areas identified by the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is a prerequisite for recommendation. The Company believes that the backgrounds and qualifications of its directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow the Board of Directors to fulfill its responsibilities.

 

Shareholders may recommend an individual to the Nominating and Corporate Governance Committee for consideration as a potential director by submitting the following information in writing to the Nominating and Corporate Governance Committee (i) the nominating shareholder’s name, address and number of ordinary shares or ADSs beneficially owned by the nominating shareholder, (ii) a description of any arrangements between the nominating shareholder and the recommended candidate, (iii) such information regarding the candidate as would be required to be included in a proxy statement regarding a director candidate, (iv) confirmation that the candidate is an independent director under the requirements set forth in the Company’s Corporate Governance Guidelines, (v) the consent of the recommended candidate to serve as a director if elected and (vi) a representation signed by the candidate that if elected, he or she will represent all shareholders in accordance with all applicable laws and the Company’s Memorandum and Articles of Association and will comply with all rules generally applicable to directors.

 

Nominating shareholders who wish to recommend any particular candidate for consideration must provide such written information to the Nominating and Corporate Governance Committee, c/o Investor Relations, SkillSoft Public Limited Company, 107 Northeastern Boulevard, Nashua, New Hampshire 03062 no less than 90 and no more than 150 days before the first anniversary of the Company’s preceding year’s Annual General Meeting. If the date of the next Annual General Meeting is advanced by more than 30 days from the preceding

year’s Annual General Meeting, then such written information must be provided no earlier than 150 days prior to such annual general meeting date and not later than the close of business on the later of the 90th day prior to such annual general meeting date and the 10th day following the day on which notice of the date of the annual general meeting was mailed or public disclosure of the date was made.

 

Assuming that appropriate biographical and background material has been provided on a timely basis, the Nominating and Corporate Governance Committee will evaluate shareholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows and applies for candidates submitted by others.

 

The Board of Directors has a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Each of these committees operates under a charter that has been approved by the Board of Directors. Current copies of each of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee charters are posted on the Investor Relations section of the Company’s website, www.skillsoft.com. In addition, a copy of the Audit Committee Charter is attached as Appendix A to this proxy statement.

 

The Board of Directors has determined that all of the members of each of these three standing committees are independent as defined under the rules of the Nasdaq Stock Market, including, in the case of all members of the Audit Committee, the independence requirements contemplated by Rule 10A-3 under the Exchange Act.

 

Audit Committee

 

The Audit Committee’s responsibilities include:

 

 

The current members of the Audit Committee are Messrs. Gross and Meagher (Chair) and Dr. von Prondzynski. The Board of Directors has determined that Mr. Meagher is an “audit committee financial expert” as defined in Item 401(h) of Regulation S-K. The Audit Committee met six times during the fiscal year ended January 31, 2006.

 

Compensation Committee

 

The Compensation Committee’s responsibilities include:

 

 

The current members of the Compensation Committee are Messrs. Gross (Chair) and Krzywicki. Mr. Edelstein was a member of the Compensation Committee prior to his resignation from the committee in December 2005. The Compensation Committee met twice during the fiscal year ended January 31, 2006.

 

Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee’s responsibilities include:

 

 

The current members of the Nominating and Corporate Governance Committee are Messrs. Gross (Chair), Krzywicki and Meagher and Dr. von Prondzynski. Mr. Edelstein was a member of the Nominating and Corporate Governance Committee during the fiscal year ended January 31, 2006 prior to his resignation from the committee in December 2005. The Nominating and Corporate Governance Committee met once during the fiscal year ended January 31, 2006.

 

The Board of Directors met eleven times during the fiscal year ended January 31, 2006, either in person or by teleconference. Each of the Company’s current directors attended at least 75% of the aggregate number of the Board

and committee meetings held during the fiscal year ended January 31, 2006 that he was eligible to attend as a director and committee member.

 

One director attended the 2005 Annual General Meeting. The Company’s Corporate Governance Guidelines provide that directors are expected to attend the Annual General Meeting of Shareholders.

 

The Board of Directors will give appropriate attention to written communications that are submitted by shareholders, and will respond if and as appropriate. The Chair of the Nominating and Corporate Governance Committee is primarily responsible for monitoring communications from shareholders and for providing copies or summaries of such communications to the other directors as he considers appropriate.

 

Under procedures approved by a majority of the independent directors, communications are forwarded to all directors if they relate to important substantive matters and include suggestions or comments that the Chair of the Nominating and Corporate Governance Committee considers to be important for the directors to know. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which the Company tends to receive repetitive or duplicative communications.

 

Shareholders who wish to send communications on any topic to the Board should address such communications to the Board of Directors, c/o Investor Relations, SkillSoft Public Limited Company, 107 Northeastern Boulevard, Nashua, New Hampshire 03062.

 

The Company has adopted a written Code of Business Conduct and Ethics (the “Code”) that applies to the Company’s directors, officers and employees, including its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Company has posted the Code on its website, which is located at www.skillsoft.com. In addition, the Company intends to post on its website all disclosures that are required by law or NASDAQ stock market listing standards.

 

At an Extraordinary General Meeting of shareholders held on March 23, 2006, the Company’s shareholders approved an ordinary resolution pursuant to the Company’s Articles of Association that fixed the annual fees to be paid to each director who is not an employee of the Company (each, an “Outside Director”) for their ordinary services as directors in each fiscal year of the Company. Pursuant to such ordinary resolution, no such annual ordinary remuneration shall be paid to directors who are also employees of the Company for their services as directors. Beginning with the fiscal year ending January 31, 2007, each Outside Director is paid cash compensation as follows:

 

 

Any director who is in office only for a portion of a fiscal year shall only be entitled to be paid a pro-rated portion of such remuneration reflecting such portion of the year during which he held office.

 

The Company reimburses directors for expenses in attending meetings of the Board and Committees. On December 22, 2005, the Company made a one-time payment in the amount of $500,000 to Howard Edelstein, a director of the Company, in recognition of Mr. Edelstein’s contributions in connection with the settlement of the Company’s litigation with NETg and its securities class action litigation. As a result of the payment to Mr. Edelstein, the Board determined that Mr. Edelstein is no longer an “independent director” as defined under Rule 4200(a)(15) of the NASDAQ Stock Market, Inc. Marketplace Rules and the Board accepted Mr. Edelstein’s resignation from each of the Compensation Committee and the Nominating and Corporate Governance Committee.

 

The Company currently has five Outside Directors, each of whom is eligible for cash remuneration as described above: P. Howard Edelstein, Stewart K.P. Gross, James S. Krzywicki, William F. Meagher, Jr. and Dr. Ferdinand von Prondzynski. Mr. Meagher is the chair of the Audit Committee and Mr. Gross is the chair of the Compensation Committee. As such, Messrs. Meagher and Gross will each be eligible to receive the additional $7,500 retainer described above.

 

In addition to the annual retainer and the payments referred to above, the Company grants Outside Directors compensation in the form of share options for their services as members of the Board of Directors. On initial election to the Board of Directors, each new non-employee director receives an option to purchase 25,000 ordinary shares (the “Initial Grant”) under the Company’s 2001 Outside Director Option Plan (the “Director Plan”). Each non-employee director who has been a director for at least six months receives an option to purchase 10,000 ordinary shares on January 1st of each year (the “Annual Grant”). All options granted under the Director Plan have a term of ten years and an exercise price equal to the fair market value of the ordinary shares on the date of grant. The Initial Grant becomes exercisable as to one-third of the shares subject to the option on each of the first three anniversaries of the date of grant, provided the non-employee director remains a director on such dates. The Annual Grant becomes fully exercisable on the first anniversary of the date of grant, provided the non-employee director remains a director on such date. Upon exercise of an option, the non-employee director may elect to receive his ordinary shares in the form of ADSs. After termination as a non-employee director, an optionee may exercise an option during the period set forth in his option agreement. If termination is due to death or disability, the option will remain exercisable for 12 months. In all other cases, the option will remain exercisable for a period of three months. However, an option may never be exercised later than the expiration of its ten-year term. A non-employee director may not transfer options granted under the Director Plan other than by will or the laws of descent and distribution. Only the non-employee director may exercise the option during his lifetime. In the event of the Company’s merger with or into another corporation or a sale of substantially all of the Company’s assets, the successor corporation may assume, or substitute a new option in place of, each option. If such assumption or substitution occurs, the options will continue to be exercisable according to the same terms as before the merger or sale of assets. Following such assumption or substitution, if a non-employee director is terminated other than by voluntary resignation, the option will become fully exercisable and generally will remain exercisable for a period of three months. If the outstanding options are not assumed or substituted for, the Board of Directors will notify each non-employee director that he has the right to exercise the option as to all shares subject to the option for a period of 30 days following the date of the notice. The option will terminate upon the expiration of the 30-day period. Unless terminated sooner, the Director Plan will automatically terminate in 2011. The Board of Directors has the authority to amend, alter, suspend, or discontinue the Director Plan, but no such action may adversely affect any grant previously made under the Director Plan.

 

On January 1, 2006, Messrs. Meagher, Edelstein, Gross and Krzywicki and Dr. von Prondzynski were each granted an option to purchase 10,000 ordinary shares at an exercise price of $5.50 per share. Each such option was in accordance with the terms of the Director Plan described above.

 

The Audit Committee has reviewed the Company’s audited financial statements for the fiscal year ended January 31, 2006 and has discussed these financial statements with the Company’s management and the Company’s independent auditor.

 

The Audit Committee has also received from, and discussed with, the Company’s independent auditor various communications that the Company’s independent auditor is required to provide to the Audit Committee, including the matters required to be discussed by the Statement on Auditing Standards 61 (Communication with Audit Committees).

 

The Company’s independent auditor also provided the Audit Committee with the written disclosures and the letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). The Audit Committee has discussed with the independent auditor its independence from the Company.

 

Based on its discussions with management and the independent auditor, and its review of the representations and information provided by management and the independent auditor, the Audit Committee recommended to the Company’s Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2006.

 

By the Audit Committee of
the Board of Directors of SkillSoft Public
Limited Company

 

Stewart K.P. Gross
William F. Meagher, Jr.
Ferdinand von Prondzynski

 

The following is a list of the executive officers of the Company and certain information about their background.

 

Charles E. Moran, age 51, has served as the Company’s President and Chief Executive Officer since the Company’s merger with SkillSoft Corporation in September 2002. Mr. Moran is a founder of SkillSoft Corporation and served as its Chairman of the Board, President and Chief Executive Officer from January 1998 until September 2002.

 

Jerald A. Nine, Jr., age 48, has served as the Company’s Chief Operating Officer since February 2004. Mr. Nine served as Executive Vice President, Global Sales & Marketing and General Manager, Content Solutions Division from the Company’s merger with SkillSoft Corporation in September 2002 to February 2004. Mr. Nine is a founder of SkillSoft Corporation and served as its Executive Vice President, Sales and Marketing and General Manager, Books Division from December 2001 to February 2004. From April 1998 to December 2001, Mr. Nine served as Vice President, Worldwide Sales and Marketing.

 

Thomas J. McDonald, age 56, has served as the Company’s Chief Financial Officer and Executive Vice President and Assistant Secretary since the Company’s merger with SkillSoft Corporation in September 2002. Mr. McDonald is a founder of SkillSoft Corporation and served as its Chief Financial Officer, Vice President, Operations, Treasurer and Secretary from February 1998 until the Company’s merger with SkillSoft Corporation in September 2002.

 

Mark A. Townsend, age 53, has served as the Company’s Executive Vice President, Technology since the Company’s merger with SkillSoft Corporation in September 2002. Mr. Townsend is a founder of SkillSoft Corporation and served as its Vice President, Product Development from January 1998 until the Company’s merger with SkillSoft Corporation in September 2002.

 

Colm M. Darcy, age 42, has served as the Company’s Executive Vice President, Content Development since the Company’s merger with SkillSoft Corporation in September 2002. From April 2002 to September 2002, Mr. Darcy served as the Company’s Executive Vice President, Research and Development. From January 2002 to April 7, 2002, Mr. Darcy served as Vice President of Solutions Management. From January 2001 to December 2001, Mr. Darcy served as Vice President, Strategic Alliances. From January 1999 to December 2000, he served as the Company’s Vice President, Content Solutions and from January 1997 to December 1998, he served as Director, Curriculum Development. Prior to joining the Company, Mr. Darcy held positions in Finance, Human Resources, Training and Information Technology in the Irish Government’s Department of Health and Child Welfare.

 

There are no family relationships among any of the executive officers of the Company.

 

Summary Compensation Table.  The following table sets forth the total compensation for the fiscal years ended January 31, 2004, 2005 and 2006 for the Company’s chief executive officer and the four other executive officers who were serving as executive officers on January 31, 2006 (the “Named Executive Officers”), as required under applicable rules of the SEC.

 

 

 

 

Share Option Grants Table.  The Company granted no share options or share appreciation rights during the fiscal year ended January 31, 2006 to the Named Executive Officers.

 

Fiscal Year-End Option Value Table.  The following table provides information with respect to share options exercised by the Named Executive Officers during the fiscal year ended January 31, 2006, and the number and value of unexercised share options held by each of the Named Executive Officers as of January 31, 2006.

 

 

 

The following table provides information about the ordinary shares authorized for issuance under the Company’s equity compensation plans as of January 31, 2006.

 

 

 

A description of the material terms of the 1996 Plan, the ForeFront 1996 Director Plan, the ForeFront 1996 Plan, the Knowledge Well 1998 Plan and the Knowledge Well Group 1998 Plan is included in Note 9 to the Company’s consolidated financial statements filed as part of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2006 and is incorporated herein by reference.

 

As indicated in the table above, as of January 31, 2006 under existing non-shareholder approved employee share plans, the Company had in excess of 5,100,000 shares available for future issuance. For ease of administration, and to avoid the loss of available shares under certain of the existing non-shareholder approved plans, some of which will expire by their terms in the near future, the Company decided to amend such plans to reduce the number of shares available for future issuance under those plans by an aggregate of 5,100,000 shares. In connection with such reduction, on March 23, 2006 at the Extraordinary General Meeting of Shareholders, the Company’s shareholders approved an amendment to the 2002 Plan increasing the number of shares reserved for issuance thereunder by 5,100,000 ordinary shares. This amendment did not increase the total number of shares that the Company has reserved for future grants under its equity plans.

 

The Company is proposing another amendment to the 2002 Plan to increase the shares reserved for issuance thereunder by an additional 1,400,000 ordinary shares to 8,850,000 ordinary shares. This amendment will not increase the total number of shares that the Company has reserved for future grants under its equity plans. As of July 31, 2006, the Company had in excess of 1,400,000 ordinary shares currently available for future issuance under its 1996 Supplemental Stock Plan. For ease of administration, and to avoid the loss of available shares under such plan upon its expiration in October 2006, the Company decided to amend such plan to reduce the number of shares available for future issuance under the 1996 Supplemental Stock Plan by an aggregate of 1,400,000, contingent on the approval of the amendment to the 2002 Plan (Resolution 4) by the shareholders. The amendment (Resolution 4) will be voted on by the Company’s shareholders at the Company’s Annual General Meeting to be held on September 28, 2006.

 

Charles E. Moran’s Employment Agreement.  In connection with the Company’s merger with SkillSoft Corporation, the Company entered into an employment agreement, effective on September 6, 2002, the date of completion of the merger, with Charles E. Moran, to employ Mr. Moran as the Company’s President and Chief Executive Officer. Mr. Moran’s employment agreement provides for a cash compensation plan that reflects the level established by the SkillSoft Corporation board of directors for the then current fiscal year. Specifically, Mr. Moran’s employment agreement provides that he will be paid a base salary of $225,000 per year to be reviewed for increases at least annually by the Company’s Board of Directors. Mr. Moran’s current base salary is $250,000. In addition, Mr. Moran will be entitled to receive an annual performance bonus based on performance metrics established by the Board of Directors. Mr. Moran’s employment is at-will, but if Mr. Moran’s employment is terminated without cause or if he resigns with good reason, each as defined in his employment agreement, he will be entitled to receive a payment equal to the sum of his base salary and target bonus for a period of one year after the date of termination. In addition, if Mr. Moran is terminated without cause or if he resigns with good reason, he may elect to continue vesting of the options granted to him for a period of one year after the date of termination, if he agrees to be bound by the non-solicitation and non-compete provisions contained in his employment agreement. The employment agreement also includes a covenant not to solicit employees and a covenant not to compete for a period extending until one year after the termination of his employment, if Mr. Moran’s termination is voluntary (other than for good reason) or the Company terminates him for cause.

 

Jerald A. Nine’s Employment Agreement.  In connection with the Company’s merger with SkillSoft Corporation, the Company entered into an employment agreement, effective on September 6, 2002, the date of completion of the merger, with Jerald A. Nine, to employ Mr. Nine as the Company’s Executive Vice-President, Content Solutions and General Manager Books Division. Mr. Nine’s employment agreement provides for a cash

compensation plan that reflects the level established by the SkillSoft Corporation Board of Directors for the then current fiscal year. Mr. Nine’s employment agreement provides that he will be paid a base salary of $200,000 per year to be reviewed for increases at least annually by the Board of Directors. Mr. Nine’s current base salary is $225,000. In addition, Mr. Nine will be entitled to receive an annual performance bonus based on performance metrics established by the Board of Directors. Mr. Nine’s employment is at-will, but if Mr. Nine’s employment is terminated without cause or if he resigns with good reason, as defined in his employment agreement, he will be entitled to receive a payment equal to the sum of his base salary plus the then maximum performance bonus for a period of one year. In addition, if Mr. Nine is terminated without cause or if he resigns with good reason, he may elect to continue vesting of the options granted to him for a period of one year. The employment agreement also includes a covenant not to solicit employees and a covenant not to compete for a period extending until one year after the termination of his employment if Mr. Nine’s termination is voluntary (other than for good reason) or the Company terminates him for cause.

 

Thomas J. McDonald’s Employment Agreement.  SkillSoft Corporation is a party to an employment agreement with Thomas J. McDonald, dated February 2, 1998. Under the terms of the employment agreement, Mr. McDonald is entitled to receive a base salary of $135,000, which may be increased in accordance with SkillSoft Corporation’s regular salary review practices. Mr. McDonald’s current base salary is $200,000. Mr. McDonald is also entitled to participate in any bonus plans that SkillSoft Corporation may establish for its senior executives. Either SkillSoft Corporation or Mr. McDonald may terminate the employment agreement at will for any reason upon three months’ prior notice in the case of termination by SkillSoft Corporation, or upon two months’ prior notice in the case of termination by Mr. McDonald. In addition, in the event of such a termination, Mr. McDonald’s stock options will continue to vest and be exercisable if he performs consulting services for SkillSoft Corporation of up to ten hours per week during the six months following termination.

 

Mark A. Townsend’s Employment Agreement.  SkillSoft Corporation is a party to an employment agreement with Mark A. Townsend, dated January 12, 1998. Under the terms of the employment agreement, Mr. Townsend is entitled to receive a base salary of $145,000, which may be increased in accordance with SkillSoft Corporation’s regular salary review practices. Mr. Townsend’s current base salary is $200,000. Mr. Townsend is also entitled to participate in any bonus plans that SkillSoft Corporation may establish for its senior executives. Either SkillSoft Corporation or Mr. Townsend may terminate the employment agreement at will for any reason upon three months’ prior notice in the case of termination by SkillSoft Corporation, or upon two months’ prior notice in the case of termination by Mr. Townsend. In addition, in the event of such a termination, Mr. Townsend’s stock options will continue to vest and be exercisable if he performs consulting services for SkillSoft Corporation of up to ten hours per week during the six months following termination.

 

Colm M. Darcy’s Employment Agreement.  In connection with the Company’s merger with SkillSoft Corporation, the Company entered into an employment agreement, effective on September 6, 2002, the date of completion of the merger, with Colm M. Darcy, to employ Mr. Darcy as the Company’s Executive Vice President, Content Development. Mr. Darcy’s employment agreement provides that he will be paid a base salary of $200,000 per year to be reviewed for increases at least annually by the Board of Directors. Mr. Darcy’s current base salary is $200,000. Pursuant to the employment agreement, on September 6, 2002, the Company granted Mr. Darcy an option to purchase an aggregate of 50,000 shares at an exercise price of $4.25 per share. The option grant vested as to 25% of the shares on September 6, 2003 and vests thereafter in 48 equal monthly installments on each monthly anniversary of the date of the grant. Mr. Darcy will also be reimbursed for certain supplemental travel expenses for him and his wife. In addition, Mr. Darcy will be entitled to receive relocation expense reimbursement in the event Mr. Darcy either relocates to Ireland at the Company’s request or returns there within three months after his employment is terminated without cause or if he resigns with good reason, each as defined in his employment agreement. Mr. Darcy’s employment is at-will, but if his employment is terminated without cause or if he resigns with good reason, he will be entitled to receive a payment equal to the sum of $75,000 plus his base salary for a

period of six months after the date of termination. In addition, if Mr. Darcy is terminated without cause or if he resigns with good reason, he may elect to continue vesting of the options granted to him for a period of six months after the date of termination, if he agrees to be bound by the nonsolicitation and noncompete provisions contained in his employment agreement. The employment agreement also includes a covenant not to solicit employees and a covenant not to compete for a period extending until the later of six months after the termination of his employment and September 6, 2006, if Mr. Darcy’s termination is voluntary (other than for good reason) or the Company terminates him for cause.

 

During the fiscal year ended January 31, 2006, the members of the Compensation Committee of the Company’s Board of Directors were Messrs. Krzywicki, Edelstein and Gross (Chair). Mr. Edelstein resigned from the Compensation Committee in December 2005. No executive officer of the Company has served as a director or member of the compensation committee of any other entity whose executive officers served as a director or member of the Company’s Compensation Committee.

 

This report is submitted by the Compensation Committee of the Board of Directors. During the fiscal year ended January 31, 2006, the Compensation Committee was responsible for reviewing and approving compensation matters concerning the executive officers and key employees of the Company and administering and granting options to the Company’s executive officers and employees under the Company’s stock plans and reviewing and approving compensation matters concerning the executive officers and key employees of the Company.

 

Overview and Philosophy.  The Company uses its compensation program to achieve the following objectives:

 

 

Compensation under the executive compensation program is comprised of cash compensation in the form of base salary, bonuses, and long-term incentive awards, generally in the form of share options. In addition, the compensation program includes various other benefits, including medical and insurance plans, the Company’s 401(k) Plan, the 2004 Employee Share Purchase Plan and other employee benefit plans, which plans are generally available to all employees of the Company.

 

The principal factors which the Compensation Committee considered with respect to each officer’s compensation package for the fiscal year ended January 31, 2006 are summarized below. The Board of Directors or the Compensation Committee may, however, in its discretion, apply different or additional factors in making decisions with respect to executive compensation in future years.

 

Base Salary.  Compensation levels for each of the Company’s officers, including the Chief Executive Officer, are generally set within the range of salaries that the Compensation Committee believes are paid to officers with comparable qualifications, experience and responsibilities at similar companies. In setting compensation levels, the Compensation Committee takes into account such factors as (i) the Company’s past performance and future expectations, (ii) individual performance and experience, (iii) past salary levels, which includes salaries paid historically by two different companies (SkillSoft PLC, formerly SmartForce PLC, and SkillSoft Corporation), and (iv) minimum salary levels set by employment agreements. The Compensation Committee does not assign relative

weights or ranking to these factors, but instead makes a determination based upon the consideration of all of these factors as well as the progress made with respect to the Company’s long-term goals and strategies.

 

Base salary, while reviewed annually, is only adjusted as deemed necessary by the Compensation Committee in determining total compensation for each officer. Base salary levels for each of the Company’s officers, other than the Chief Executive Officer, were also based in part upon evaluations and recommendations made by the Chief Executive Officer.

 

Equity Incentives.  The Compensation Committee believes that share ownership aligns officers’ interests with those of the shareholders. In addition, the Compensation Committee believes that equity ownership by officers helps to balance the short term focus of annual incentive compensation with a longer term view and may help to retain key executive officers. Long term incentive compensation, generally granted in the form of options, allows the officers to share in any appreciation in the value of the Company’s ADSs.

 

In making option grants, the Compensation Committee considers general corporate performance, individual contributions to the Company’s financial, operational and strategic objectives, the Chief Executive Officer’s recommendations, level of seniority and experience, existing levels of share ownership, previous grants of options, vesting schedules of options and the current share price.

 

Effective January 13, 2006, the Board of Directors approved the full acceleration of the vesting of all outstanding share options held by the Company’s employees, other than executive officers and directors. The decision to accelerate vesting of these options was made to avoid recognizing compensation cost related to these options in the Company’s future statements of operations upon the adoption of Statement of Financial Accounting Standards No.  123(R) “Share Based Payment” (SFAS 123(R)). The Board of Directors and the Compensation Committee continue to evaluate the optimal manner in which to use equity incentive compensation in the future in light of SFAS 123(R) and the Company’s personnel needs.

 

No options have been granted to executives since 2002. The Compensation Committee is contemplating making equity grants to executives during the current fiscal year.

 

Incentive Bonuses.  In the fiscal year ended January 31, 2006, the Compensation Committee approved executive compensation plans for each of Messrs. Moran, Nine, Darcy, Townsend and McDonald pursuant to which the executive management team were eligible to receive bonuses on a quarterly and annual basis based on the Company’s financial and operational performance. Executive management had the opportunity to earn bonuses on a quarterly basis during the fiscal year ended January 31, 2006 based on the Company achieving specified financial targets related to revenue and earnings per share objectives, and had an annual bonus opportunity tied to the Company achieving specified annual revenue and bookings targets. For the fiscal year ended January 31, 2006, the executive officers received bonuses ranging from 144% to 150% of their target bonuses. Please see “Executive Compensation — Summary Compensation Table” for the bonuses paid to the Company’s Named Executive Officers for the fiscal year ended January 31, 2006.

 

Other Benefits.  The Company also has various broad-based employee benefit plans. Executive officers may participate in these plans on the same terms as eligible, non-executive employees, subject to any legal limits on the amounts that may be contributed or paid to executive officers under these plans. The Company offers a share incentive plan and a 401(k) plan (including matching contributions by the Company), which allows employees to invest in a wide array of funds on a pre-tax basis. The Company also maintains insurance and other benefit plans for its employees, including executive officers of the Company.

 

Executive Compensation and Compensation of the Chief Executive Officer for the Fiscal Year Ended January 31, 2006.  Executive compensation for the fiscal year ended January 31, 2006 included base salary and the bonus opportunities set forth in the executive compensation plans. The Company’s President and Chief Executive Officer since September 6, 2002, Charles E. Moran, received an annual base salary of $250,000 during

the fiscal year ended January 31, 2006 and bonuses under the 2006 Executive Incentive Compensation Program totaling $395,314, or approximately 144% of his target bonus for the fiscal year ended January 31, 2006. The base salary is believed by the Compensation Committee to be at or below the range of salary levels received by executives in a similar capacity in companies of comparable size and stage of development.

 

Tax Deductibility of Executive Compensation.  Section 162(m) of the Internal Revenue Code of 1986, as amended, generally disallows a tax deduction to public companies for certain compensation in excess of $1 million paid to the company’s Chief Executive Officer and the four other most highly compensated executive officers. Certain compensation, including qualified performance-based compensation, will not be subject to the deduction limit if certain requirements are met. In general, the Company structures and administers its option plans in a manner intended to comply with the performance-based exception to Section 162(m). Nevertheless, there can be no assurance that compensation attributable to awards granted under the stock option plans will be treated as qualified performance-based compensation under Section 162(m). In addition, the Compensation Committee reserves the right to use its judgment to authorize compensation payments that may not be deductible when the Compensation Committee believes such payments are appropriate and in the best interests of the Company and its shareholders, after taking into consideration changing business conditions and the performance of its employees.

 

By the Compensation Committee of
the Board of Directors of SkillSoft Public
Limited Company

 

Stewart K.P. Gross
James S. Krzywicki

 

The following graph compares the cumulative total return on a percentage basis to shareholders of the Company’s ADSs from January 1, 2001 through January 31, 2006 to the cumulative return on (i) the NASDAQ National Market — U.S.; and (ii) the RDG Technology Composite Index. This graph assumes an investment of $100 on January 1, 2000 in the Company’s ADSs and in each of the other indices, and assumes dividends are reinvested. The measurement points are the last trading day of the fiscal year ended December 31, 2001 and the fiscal years ended January 31, 2003, 2004, 2005 and 2006. Shareholder returns over the indicated period should not be considered indicative of future shareholder returns.

 

COMPARISON OF 61 MONTH CUMULATIVE TOTAL RETURN*

AMONG SKILLSOFT PLC., THE NASDAQ STOCK MARKET (U.S.) INDEX

AND THE RDG TECHNOLOGY COMPOSITE INDEX

 

 

 

 

The consolidated financial statements of the Company for the fiscal year ended January 31, 2006 as prepared under Irish GAAP, together with the Report of the Directors and Auditor thereon (collectively, the “Irish GAAP Accounts”), will be presented to and considered by the meeting. The Irish GAAP Accounts are being mailed to the Company’s ordinary shareholders along with this proxy statement. The Board of Directors approved the Irish GAAP Accounts on or about August 25, 2006. The Irish GAAP Accounts are being presented to the shareholders at the Annual General Meeting to provide the shareholders an opportunity to consider the Irish GAAP Accounts and ask any relevant and appropriate questions of the representative of the Company’s independent auditor in attendance at the Annual General Meeting.

 

The affirmative vote of the holders of a majority of the ordinary shares represented, in person or by proxy, and voting at the Annual General Meeting is required to approve the presentation and consideration of the Irish GAAP Accounts. Unless otherwise instructed, the proxies will vote “FOR” this resolution. Please note, however, a vote “FOR” or “AGAINST” this resolution will have no effect on the approval of the Irish GAAP Accounts by the Board of Directors.

 

THE BOARD OF DIRECTORS RECOMMENDS

THAT YOU VOTE “FOR” PROPOSAL ONE

 

The Company’s Articles of Association provide that the Company may have up to a maximum number of seven (7) directors, which number may be changed by resolution of its shareholders. The Company currently has seven (7) directors.

 

At each Annual General Meeting of Shareholders, approximately one-third (1/3) of the existing directors must retire by rotation; however, each such director is eligible for re-election and, if re-elected, shall serve until the next rotation and until his successor is elected and qualified or until such director’s resignation, death or removal. In accordance with the Company’s Articles of Association, Gregory M. Priest and P. Howard Edelstein are now required to retire by rotation. Mr. Edelstein, being eligible, offers himself for re-election. Mr. Priest has informed the Company’s Board of Directors that he will not seek re-election and will retire from the board of directors effective as of the date of the 2006 Annual General Meeting. If Mr. Edelstein is re-elected as a director at the 2006 Annual General Meeting, the board of directors will have one vacancy, which may be filled by a vote of the board of directors or by the shareholders (provided certain nominating procedures are followed).

 

The affirmative vote of the holders of a majority of the ordinary shares represented, in person or by proxy, at the Annual General Meeting and voting on proposal two is required to approve the re-election of P. Howard Edelstein. Unless otherwise instructed, the proxies will vote “FOR” this resolution. Proxies can not be voted for more than one nominee for director.

 

THE BOARD OF DIRECTORS RECOMMENDS

THAT YOU VOTE “FOR” PROPOSAL TWO

 

The shareholders are being requested to authorize the Audit Committee to fix the remuneration of the Company’s auditor for the fiscal year ending January 31, 2007. United States legislation requires that the Audit Committee have the authority to fix the remuneration of the independent auditor. Ernst & Young (Ireland) has been the Company’s auditor for the purposes of the Irish Companies Acts 1963 to 2005 since September 10, 1993. Ernst & Young LLP audited and reported on the Company’s financial statements for the fiscal year ended January 31, 2006 prepared in accordance with U.S. Generally Accepted Accounting Principals (“GAAP”). Ernst & Young (Ireland) reviewed the audited financial statements for the fiscal year ended January 31, 2006 as part of their procedures related to their review and report on the Skillsoft PLC financial statements for the fiscal year ended January 31, 2006 prepared in accordance with Irish GAAP. A representative of Ernst & Young (Ireland) is expected to be present at the meeting and will have an opportunity to make a statement if he or she desires to do so and will also be available to respond to appropriate questions from shareholders.

 

The affirmative vote of the holders of a majority of the ordinary shares represented, in person or by proxy, at the Annual General Meeting and voting on proposal three is required to authorize the Audit Committee to fix the remuneration of the Company’s auditor. If the resolution is not passed by the affirmative vote of the holders of a majority of the ordinary shares represented, in person or by proxy, the Company will not be authorized to pay the Company’s auditor for the services. Unless otherwise instructed, the proxies will vote “FOR” this resolution.

 

THE BOARD OF DIRECTORS RECOMMENDS

THAT YOU VOTE “FOR” PROPOSAL THREE

 

The following table summarizes the fees of Ernst & Young, the Company’s independent registered public accounting firm, billed to the Company for each of the last two fiscal years:

 

 

 

 

The Audit Committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by the Company’s independent registered public accounting firm. This policy generally provides that the Company will not engage the Company’s independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the Audit Committee or the engagement is entered into pursuant to one of the pre-approval procedures described below.

 

From time to time, the Audit Committee may pre-approve specified types of services that are expected to be provided to us by the Company’s independent registered public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount.

 

The Audit Committee has also delegated to the Chair of the Audit Committee the authority to approve any audit or non-audit services to be provided to us by the Company’s independent registered public accounting firm. Any approval of services by the Chair of the Audit Committee pursuant to this delegated authority is reported on at the next meeting of the Audit Committee.

 

On August 1, 2006, the Board of Directors adopted, subject to shareholder approval at the Annual General Meeting, an amendment to the 2002 Plan increasing the total number of shares reserved for issuance by an additional 1,400,000 ordinary shares of €0.11 each (the “Additional Shares”) to an aggregate of 8,850,000 ordinary shares of €0.11 each. This amendment to reserve the Additional Shares will not increase the total number of shares that the Company has reserved for future grants under its equity plans and will enable the Company to continue to grant options to employees under the terms and conditions of the 2002 Plan. As of July 31, 2006, options to purchase 856,511 ordinary shares were outstanding under the 2002 Plan.

 

Under the Company’s 1996 Supplemental Stock Plan (the “1996 Plan”), the Company has in excess of 1,400,000 shares (the “1996 Plan Available Share Pool”) currently available for future issuance. For ease of administration, and to avoid the loss of available shares under the 1996 Plan which will expire by its terms in October 2006, the Company has decided to amend the 1996 Plan to reduce the 1996 Plan Available Share Pool by an aggregate of 1,400,000 shares, contingent upon shareholder approval of this amendment to the 2002 Plan.

 

On March 23, 2006, at the Extraordinary General Meeting of shareholders, the Company’s shareholders approved an amendment to the 2002 Plan increasing the number of shares reserved for issuance thereunder by 5,100,000 ordinary shares. This amendment did not increase the total number of shares reserved for future grants under the Company’s equity plans. The amendment was effected through a reallocation of shares available for grant under the Company’s other existing share option plans, resulting in amendments to the other plans to reduce the shares issuable thereunder by an aggregate of 5,100,000 ordinary shares.

 

The Board of Directors believes that the amendment proposed is necessary for the Company to remain competitive in its ability to attract and retain highly skilled employees, including executive officers. Accordingly, the Board of Directors believes that the amendment is essential to the Company’s continued growth and success. The Board of Directors believes that it is in the best interests of the Company and of the Company’s shareholders to approve the amendment to the 2002 Plan so that the Company may continue to provide ongoing incentives to its employees.

 

The affirmative vote of the holders of a majority of the ordinary shares represented, in person or by proxy, and voting on the proposal at the Annual General Meeting is required to approve the amendment to the 2002 Plan. Unless otherwise instructed, the proxies will vote “FOR” this resolution.

 

THE BOARD OF DIRECTORS RECOMMENDS

THAT YOU VOTE “FOR” PROPOSAL FOUR

 

The 2002 Plan was adopted by the Company’s Board of Directors in June 2002 and approved by its shareholders in July 2002. The 2002 Plan will terminate in June 2012, unless earlier terminated according to its terms.

The following summary of the 2002 Plan is qualified in its entirety by the specific language of the 2002 Plan, a copy of which is available to any shareholder upon written request to the Company’s Secretary.

 

Purpose of the 2002 Plan.  The purpose of the 2002 Plan is to attract and retain the best available personnel for positions of responsibility with the Company and to provide an additional incentive to the Company’s employees, including executive officers, and consultants.

 

Shares Subject to the 2002 Plan.  Prior to this amendment, the Board of Directors had reserved a maximum of 7,450,000 of the Company’s ordinary shares for issuance under the 2002 Plan. In the event that an option is not exercised within the periods set forth in an employee’s option agreement after such employee’s termination of employment, the ordinary shares covered by such option will revert to the pool.

 

Administration.  The 2002 Plan may be administered by the Board of Directors or a committee appointed by the Board of Directors (as applicable, the “Administrator”).

 

Eligibility.  The 2002 Plan provides for the grant of nonstatutory share options to employees (including directors who are also employees), and consultants of the Company and any parent or subsidiary of the Company. Incentive share options may be granted under the 2002 Plan only to employees (including directors who are also employees) of the Company or any parent or subsidiary of the Company. The Administrator, in its discretion, selects the employees, directors and consultants to whom options may be granted, the time or times at which options will be granted, and the number of shares subject to each such option.

 

Terms and Conditions of the Options.  Each option is evidenced by a share option agreement between the Company and the optionee, and is subject to the following additional terms and conditions:

 

(a) Term.  The term of an incentive share option may be no more than ten (10) years from the date of grant; provided that in the case of an incentive share option granted to a 10% shareholder, the term of the option may be no more than five (5) years from the date of grant. No option may be exercised after the expiration of its term.

 

(b) Exercise Price.  The Administrator determines the exercise price of options at the time the options are granted. The exercise price of an incentive share option may not be less than 100% of the fair market value of the ordinary shares on the date such option is granted; provided, however, the exercise price of an incentive share option granted to a 10% shareholder may not be less than 110% of the fair market value of the ordinary shares on the date such option is granted. The fair market value of the ordinary shares is generally determined with reference to the closing sale price for the ordinary shares (or the closing bid if no sales were reported) on the last market trading day prior to the date the option is granted.

 

(c) Exercise.  The Administrator determines when options become exercisable and may, in its discretion, accelerate the vesting of any outstanding option. Share options granted under the 2002 Plan generally vest and become exercisable over four years.

 

(d) Forms of Consideration.  Payment for ordinary shares issued upon exercise of an option may, depending on the terms of the option agreement, consist of cash, check, promissory note, cashless exercise, a reduction in the amount of any company liability to the optionee, any other form of consideration permitted by applicable law, or any combination thereof.

 

(e) Termination of Employment.  If an optionee’s employment or consulting relationship terminates for any reason (other than death or disability), then all options held by the optionee under the 2002 Plan expire on the earlier of (i) the date set forth in his or her option agreement, which is generally 30 days following such termination and (ii) the expiration date of such option. To the extent the option is exercisable at the time of such termination, the optionee may exercise all or part of his or her option at any time before termination.

(f) Death or Disability.  If an optionee’s employment or consulting relationship terminates as a result of death or disability, then all options held by such optionee under the 2002 Plan expire on the earlier of (i) the date set forth in his or her option agreement, which is generally 12 months following such termination or (ii) the expiration date of such option. The optionee (or the optionee’s estate or the person who acquires the right to exercise the option by bequest or inheritance), may exercise all or part of the option at any time before such expiration to the extent that the option was exercisable at the time of such termination.

 

(g) Nontransferability.  Options granted under the 2002 Plan are not transferable other than by will or the laws of descent and distribution, and may be exercised during the optionee’s lifetime only by the optionee.

 

(h) Other Provisions.  The share option agreement may contain other terms, provisions and conditions not inconsistent with the 2002 Plan as may be determined by the Administrator.

 

If the Company’s shares change by reason of any share split, reverse share split, share dividend, combination, reclassification or other similar change in the Company’s capital structure effected without the receipt of consideration, appropriate adjustments will be made in the number and class of shares of ordinary shares subject to the 2002 Plan, the number and class of shares of ordinary shares subject to any option outstanding under the 2002 Plan, and the exercise price of any such outstanding option.

 

In the event of a liquidation or dissolution of the Company, unexercised options will terminate. The Administrator may, in its discretion, provide that each optionee shall have the right to exercise all of the optionee’s options including those not otherwise exercisable, until the date ten (10) days prior to the consummation of the liquidation or dissolution.

 

In connection with any merger, consolidation, acquisition of assets or like occurrence involving the Company, each outstanding option will be assumed or an equivalent option substituted by the successor corporation. If the successor corporation refuses to assume the options or to substitute substantially equivalent options the optionee will have the right to exercise the option as to all the optioned shares, including shares not otherwise exercisable. In such event, the Administrator will notify the optionee that the option is fully exercisable for fifteen (15) days from the date of such notice and that the option terminates upon expiration of such period.

 

The Board may amend, alter, suspend or terminate the 2002 Plan, or any part thereof, at any time and for any reason. However, the Company must obtain shareholder approval for any amendment to the 2002 Plan to the extent necessary to comply with Section 162(m) and Section 422 of the Internal Revenue Code, or any similar rule or statute. No such action by the Board of Directors or shareholders may impair any option previously granted under the 2002 Plan without the written consent of the optionee.

 

The following is a summary of the United States federal income tax consequences that generally will arise with respect to options granted under the 2002 Plan. This summary is based on the United States federal tax laws in effect as of the date of this proxy statement. In addition, this summary assumes that all options are exempt from, or comply with, the rules under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) regarding nonqualified deferred compensation. Changes to these laws could alter the tax consequences described below.

 

Incentive Share Options.  A participant will not have income upon the grant of an incentive share option. Also, except as described below, a participant will not have income upon exercise of an incentive share option if the participant has been employed by the Company or its corporate parent or 50% or more-owned corporate subsidiary

at all times beginning with the option grant date and ending three months before the date the participant exercises the option. If the participant has not been so employed during that time, then the participant will be taxed as described below under “Nonstatutory Share Options.” The exercise of an incentive share option may subject the participant to the alternative minimum tax.

 

A participant will have income upon the sale of the share acquired under an incentive share option at a profit (if sales proceeds exceed the exercise price). The type of income will depend on when the participant sells the share. If a participant sells the share more than two years after the option was granted and more than one year after the option was exercised, then all of the profit will be long-term capital gain. If a participant sells the share prior to satisfying these waiting periods, then the participant will have engaged in a disqualifying disposition and a portion of the profit will be ordinary income and a portion may be capital gain. This capital gain will be long-term if the participant has held the share for more than one year and otherwise will be short-term. If a participant sells the share at a loss (sales proceeds are less than the exercise price), then the loss will be a capital loss. This capital loss will be long-term if the participant held the share for more than one year and otherwise will be short-term.

 

Nonstatutory Share Options.  A participant will not have income upon the grant of a nonstatutory share option. A participant will have compensation income upon the exercise of a nonstatutory share option equal to the value of the share on the day the participant exercised the option less the exercise price. Upon sale of the share, the participant will have capital gain or loss equal to the difference between the sales proceeds and the value of the share on the day the option was exercised. This capital gain or loss will be long-term if the participant has held the share for more than one year and otherwise will be short-term.

 

Tax Consequences to the Company.  There will be no tax consequences to the Company except that the Company will be entitled to a deduction when a participant has compensation income. Any such deduction will be subject to the limitations of Section 162(m) of the Code.

 

As of July 31, 2006, approximately 950 persons were eligible to receive options under the 2002 Plan, including the Company’s five executive officers, its employee directors and consultants. The granting of options under the 2002 Plan is discretionary, and the Company cannot now determine the number or type of options to be granted in the future to any particular person or group.

 

On July 31, 2006, the last reported sale price of the Company’s ADSs on the NASDAQ National Market was $5.79.

 

Under Section 20 of the Companies (Amendment) Act, 1983 of Ireland (the “1983 Act”), the board of directors of the Company may exercise the power to allot shares only if authorized to do so by either the Articles of Association or a resolution of the shareholders of the Company. In either case, any such authorization may only be for a period of five years. The Company’s board of directors is currently authorized to allot and issue the Company’s authorized and unissued shares and treasury shares until September 5, 2007. Resolution five proposes to renew this authority for a period of five years from the date of the Meeting so as to expire on September 27, 2011 unless previously revoked or renewed.

 

The affirmative vote of the holders of a majority of the outstanding ordinary shares represented and voting at the Annual General Meeting is required to approve this proposal. Unless otherwise instructed, the proxies will vote “FOR” this resolution.

 

THE BOARD OF DIRECTORS RECOMMENDS

THAT YOU VOTE “FOR” PROPOSAL FIVE

 

Unless disapplied, the board of directors’ authority under Section 20 to allot and issue securities is also subject to the requirement of Section 23 of the 1983 Act that any new equity shares to be allotted for cash must first be offered to existing shareholders on a pre-emptive basis. Section 24 of the 1983 Act authorizes the shareholders to disapply the Section 23 pre-emption requirement. Any such disapplication may only be for a period of five years. The Company’s shareholders have previously disapplied the Section 23 pre-emption requirement until September 5, 2007. Resolution six proposes to renew the disapplication of the Section 23 pre-emption requirement until September 27, 2011 unless previously revoked or renewed.

 

The affirmative vote of the holders of not less than three-fourths (i.e., seventy-five percent (75%)) of the outstanding ordinary shares represented and voting at the Annual General Meeting is required to approve this proposal. Unless otherwise instructed, the proxies will vote “FOR” this resolution. Please note that Resolution six is not a matter for which The Bank of New York may deem that instruction has been given to it to give a discretionary proxy to a person designated by the Company where no instruction is received. Accordingly, with respect to Resolution six, the Bank of New York will not give a discretionary proxy to a person designated by the Company to vote such ordinary shares unless it receives instructions to give such discretionary proxy from the owners of ADSs.

 

THE BOARD OF DIRECTORS RECOMMENDS

THAT YOU VOTE “FOR” PROPOSAL SIX

 

Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and holders of more than 10% of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership of the Company’s equity securities on a Form 3 and reports of changes in such ownership on a Form 4 or Form 5. Officers, directors and 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

 

Based solely on its review of copies of such filings by the Company’s directors and executive officers and 10% shareholders or written representations from certain of those persons, the Company believes that all filings required to be made by those persons during the fiscal year ended January 31, 2006 were timely made.

 

The Board of Directors knows of no other business which will be presented for consideration at the Annual General Meeting other than the proposals described above. However, if any other business is properly brought before the meeting, it is the intention of the persons named in the enclosed proxy to vote the shares covered by such proxy, to the extent permitted by the SEC’s proxy rules, in accordance with their best judgment on such matters.

 

Proposals of the Company’s shareholders that are intended for possible inclusion in the proxy statement and form of proxy relating to the Company’s 2007 Annual General Meeting of Shareholders must satisfy the conditions established by the SEC for such proposals and must be received at the Company’s U.S. headquarters located at 107 Northeastern Boulevard, Nashua, New Hampshire 03062 no later than May 1, 2007 or, if the Company changes the date of the 2007 Annual General Meeting by more than 30 days from the 2006 Annual General Meeting, a reasonable time before the Company mails its proxy materials for the 2007 Annual General Meeting.

 

If matters which shareholders wish to present for action at the 2007 Annual General Meeting of Shareholders (other than matters included in the Company’s proxy materials in accordance with Rule 14a-8 under the Exchange Act) are not received by the Company by July 16, 2007 or, if the Company changes the date of the 2007 Annual General Meeting by more than 30 days from the 2006 Annual General Meeting, a reasonable time before the Company mails its proxy materials, the proxies that management solicits for the meeting will have discretionary authority to vote on the shareholder’s proposal if it is properly brought before the meeting.

 

Some banks, brokers and other nominee record holders are participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of the Company’s proxy statement or annual report may have been sent to multiple shareholders in your household. The Company will promptly deliver a separate copy of either document to you if you contact the Company at the following address or phone number: SkillSoft Public Limited Company, 107 Northeastern Boulevard, Nashua, NH 03062 (603-324-3000). If you want to receive separate copies of the annual report and proxy statement in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact the Company at the above address and phone number.

 

By Order of the Board of Directors,

 

Charles E. Moran,

Chief Executive Officer

 

August 30, 2006

 

Appendix A

 

SKILLSOFT PLC

 

AMENDED AND RESTATED

AUDIT COMMITTEE CHARTER

 

 

The purpose of the Audit Committee is to assist the Board of Directors’ oversight of the Company’s accounting and financial reporting processes and the audits of the Company’s financial statements.

 

 

1. Number.  The Audit Committee shall consist of at least three members of the Board of Directors (the “Board”).

 

2. Independence.  Each member of the Audit Committee (i) except as otherwise permitted by the applicable NASDAQ rules, shall be “independent” as defined by NASDAQ rules, (ii) shall be an Independent Director as defined in the Company’s Corporate Governance Guidelines, (iii) shall meet the criteria for independence set forth in Rule 10A-3(b)(1) under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) (subject to the exemptions provided in Rule 10A-3(c)), and (iv) shall not have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the past three years.

 

In addition, a majority of the members of the Audit Committee shall consist of directors who joined the committee as a result of or after the merger of a subsidiary of the Company with SkillSoft Corporation in September 2002.

 

3. Financial Literacy.  Each member of the Audit Committee must be able to read and understand fundamental financial statements, including the Company’s balance sheet, income statement, and cash flow statement, and understand the accounting principles generally accepted in the United States that are relevant to the Company’s financial reporting, particularly those generally accepted accounting principles that affect revenue recognition by companies that sell or lease software licenses. In addition, at least one member must have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. Unless otherwise determined by the Board (in which case disclosure of such determination shall be made in the Company’s annual report filed with the SEC), at least one member of the Audit Committee shall be an “audit committee financial expert” (as defined by applicable SEC rules).

 

4. Chair.  Unless the Board elects a Chair of the Audit Committee, the Audit Committee shall elect a Chair by majority vote.

 

5. Compensation.  The compensation of Audit Committee members shall be as determined by the Board or the Compensation Committee. No member of the Audit Committee may receive, directly or indirectly, any consulting, advisory or other compensatory fee from the Company or any of its subsidiaries, other than fees paid in his or her capacity as a member of the Board or a committee of the Board.

 

6. Selection and Removal.  Members of the Audit Committee shall be appointed by the Board, upon the recommendation of the Nominating and Corporate Governance Committee. The Board may remove members of the Audit Committee from such Committee, with or without cause.

 

General

 

The Audit Committee shall serve as a channel of communication between the independent auditor and the Board and shall discharge its responsibilities and assess the information provided by the Company’s management and the Company’s auditor and reporting accountants (the “independent auditor”), in accordance with its business judgment. The Audit Committee shall have full access to all Company books and personnel. Management is responsible for the preparation, presentation, and integrity of the Company’s financial statements and for the appropriateness of the accounting principles and reporting policies that are used by the Company and for establishing and maintaining adequate internal control over financial reporting. The independent auditors are responsible for auditing the Company’s financial statements and the Company’s internal control over financial reporting and for reviewing the Company’s unaudited interim financial statements. The authority and responsibilities set forth in this Charter do not reflect or create any duty or obligation of the Audit Committee to plan or conduct any audit, to determine or certify that the Company’s financial statements are complete, accurate, fairly presented, or in accordance with generally accepted accounting principles or applicable law, or to guarantee the independent auditor’s report.

 

The Audit Committee shall cause the Company to refrain, without the approval of the Audit Committee, from hiring any partner or senior manager of the Company’s independent auditor within two years of that person’s performance of audit services for the Company.

 

Oversight of Independent Auditors

 

1. Selection.  The Audit Committee shall be solely and directly responsible for appointing, evaluating, retaining and, when necessary, terminating the engagement of the independent auditor. The Audit Committee may, in its discretion, seek stockholder ratification of the independent auditor it appoints. The independent auditor shall be rotated every five years, unless the Audit Committee determines, based upon its consideration of the information obtained through the Audit Committee activities described in this Charter, that not rotating independent auditing firms is in the Company’s best interests. This determination:

 

(A) shall be documented, setting forth the reasons therefor;

 

(B) shall be made after an independent auditing firm has performed three consecutive audits of the Company’s annual financial statements, beginning with the audit for the fiscal year ending January 31, 2005; and

 

(C) shall be repeated and documented every five years thereafter.

 

2. Independence.  The Audit Committee shall take, or recommend that the full Board take, appropriate action to oversee the independence of the independent auditor. In connection with this responsibility, the Audit Committee shall review at least annually the auditor’s independence, and obtain and review a formal written statement from the independent auditor describing all relationships between the independent auditor and the Company, including the disclosures required by Independence Standards Board Standard No. 1. The Audit Committee shall actively engage in dialogue with the independent auditor concerning any disclosed relationships or services that might impact the objectivity and independence of the independent auditor.

 

3. Compensation.  The Audit Committee shall have sole and direct responsibility for setting the compensation of the independent auditor. The Audit Committee shall review at least annually the independent auditor’s compensation. The Audit Committee is empowered, without further action by the Board, to cause the Company to pay the compensation of the independent auditor established by the Audit Committee.

4. Preapproval of Services.  The Audit Committee shall preapprove all audit services to be provided to the Company, whether provided by the principal auditor or other firms, and all other services (review, attest and non-audit) to be provided to the Company by the independent auditor; provided, however, that de minimis non-audit services may instead be approved in accordance with applicable SEC rules.

 

5. Oversight.  The independent auditor shall report directly to the Audit Committee, and the Audit Committee shall have sole and direct responsibility for overseeing the work of the independent auditor, including resolution of disagreements between Company management and the independent auditor regarding financial reporting.

 

(A) In connection with its oversight role, the Audit Committee shall, from time to time as appropriate, receive and consider the reports required to be made by the independent auditor regarding:

 

 

(B) The Audit Committee shall consider major changes and other major questions of choice respecting the appropriate auditing and accounting principles and practices, whether under generally accepted accounting principles or regulatory accounting principles, to be used in the preparation of the Company’s audited financial statements.

 

(C) The Audit Committee shall obtain and review, at least annually, a report by the Company’s independent auditor describing: the independent auditing firm’s internal quality control procedures; any material issues raised by the most recent internal quality-control review or peer review of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, with respect to one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (to assess the auditor’s independence) all relationships between the auditor and the Company.

 

(D) The Audit Committee shall review at least annually the proposed terms of independent auditor’s engagement.

 

Audited Financial Statements

 

6. Review and Discussion.  The Audit Committee shall review and discuss with the Company’s management and independent auditor the Company’s audited financial statements, including the matters about which Statement on Auditing Standards No. 61 (Codification of Statements on Auditing Standards, AU §380) requires discussion.

 

The Audit Committee shall meet separately with management and the Company’s independent auditor prior to the filing of each Form 10-K or Form 10-Q to discuss, among other things, the appropriateness of the Company’s accounting policies.

 

7. Recommendation to Board Regarding Financial Statements.  The Audit Committee shall review the Company’s annual financial statements, any certification, report, opinion, or review rendered by the independent auditor in connection with those financial statements, and any significant disputes between management and the independent auditor that arose in connection with the preparation of those financial

statements and consider whether it will recommend to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K.

 

8. Audit Committee Report.  The Audit Committee shall prepare an annual committee report for inclusion where necessary in the proxy or information statement of the Company relating to its annual meeting of security holders.

 

Review of Other Financial Disclosures

 

9. Independent Auditor Review of Interim Financial Statements.  The Audit Committee shall direct the independent auditor to use its best efforts to perform all reviews of interim financial information prior to disclosure by the Company of such information and to discuss promptly with the Audit Committee and the Chief Financial Officer any matters identified in connection with the auditor’s review of interim financial information which are required to be discussed by applicable auditing standards. The Audit Committee shall direct management to advise the Audit Committee in the event that the Company proposes to disclose interim financial information prior to completion of the independent auditor’s review of interim financial information.

 

Controls and Procedures

 

10. Oversight.  The Audit Committee shall consider, in consultation to the extent appropriate with the Company’s management and independent auditor, the adequacy of the Company’s internal control over financial reporting, disclosure controls and procedures and code of conduct. In particular, the Audit Committee shall:

 

(A) review the components of internal control, including control environment, risk assessment, control activities, information and communication, and monitoring, to determine that such components are designed to provide reasonable systems and processes to provide adequate financial reporting and compliance with corporate policies and legal and regulatory requirements.

 

(B) oversee internal control systems, including the creation, distribution and/or implementation of procedures for monitoring compliance and methods for disseminating information regarding such systems.

 

(C) in the event it becomes aware of any material departure from internal control programs:

 

(i) reasonably determine whether all appropriate corrective actions have been taken in response thereto;

 

(ii) review any management override of internal control programs, and take the steps necessary to reasonably determine that such action or override will not occur in the future without Board or committee approval; and

 

(iii) review the process for reporting deficiencies in the Company’s internal control structure to reasonably assure that appropriate senior Company employees are informed of any such deficiencies.

 

(D) review corrective actions taken by the Company when significant internal control problems are reported to the Board or the Audit Committee to reasonably determine whether such actions are sufficient under the circumstances.

(E) require and review periodic evaluations of the Company’s internal control structures to reasonably ensure that:

 

(i) components of the Company’s internal control are regularly evaluated;

 

(ii) such evaluations are performed by qualified personnel; and

 

(iii) such evaluations have reasonable scope and depth of coverage and are conducted with sufficient frequency.

 

(F) receive and review the reports of the Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Exchange Act.

 

11. Procedures for Complaints.  The Audit Committee shall establish procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

 

12. Related-Party Transactions.  The Audit Committee shall review all “related party transactions” (defined as transactions required to be disclosed pursuant to Item 404 of Regulation S-K) on an ongoing basis and all such transactions must be approved by the Audit Committee.

 

13. Additional Powers.  The Audit Committee shall have such other duties as may be delegated from time to time by the Board.

 

 

1. Meetings.  The Audit Committee shall meet as often as it deems necessary in order to perform its responsibilities and, in any event, at least four times per year. The Audit Committee may also act by unanimous written consent in lieu of a meeting. The Audit Committee shall periodically meet separately with: (i) the independent auditor; (ii) Company management; and (iii) the Company’s internal auditors. The Audit Committee shall keep such records of its meetings as it shall deem appropriate.

 

The Audit Committee shall meet, without the presence of any Company employees, at least annually with the Company’s independent auditor to review the results of each external audit of the Company, the audit report, any related management letter, and management’s responses to recommendations made by the independent auditor in connection with the audit.

 

2. Subcommittees.  The Audit Committee may form and delegate authority to one or more subcommittees (including a subcommittee consisting of a single member), as it deems appropriate from time to time under the circumstances. Any decision of a subcommittee to preapprove audit, review, attest or non-audit services shall be presented to the full Audit Committee at its next scheduled meeting.

 

3. Reports to Board.  The Audit Committee shall report regularly to the Board.

 

4. Review and Amendment of Charter.  At least annually, the Audit Committee shall review and reassess the adequacy of this Charter and recommend any proposed changes to the Board for approval. Any proposed amendment must be recommended to the Independent Directors by a vote of two-thirds of the members of the Nominating and Corporate Governance Committee and must then be approved by a vote of two-thirds of the Independent Directors.

5. Independent Advisors.  The Audit Committee is authorized, without further action by the Board, to engage such independent legal, accounting and other advisors as it deems necessary or appropriate to carry out its responsibilities. Such independent advisors may be the regular advisors to the Company. The Audit Committee is empowered, without further action by the Board, to cause the Company to pay the compensation of such advisors as established by the Audit Committee.

 

6. Investigations.  The Audit Committee shall have the authority to conduct or authorize investigations into any matters within the scope of its responsibilities as it shall deem appropriate, including the authority to request any officer, employee or advisor of the Company to meet with the Audit Committee or any advisors engaged by the Audit Committee.

 

7. Funding.  The Audit Committee is empowered, without further action by the Board, to cause the Company to pay the ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.

 

8. Annual Self-Evaluation.  At least annually, the Audit Committee shall evaluate its own performance.

 

As most recently updated by the Board of Directors on May 24, 2006.

Appendix B

SKILLSOFT PUBLIC LIMITED COMPANY (the “Company”)

THIS PROXY FOR THE ANNUAL GENERAL MEETING IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

     The undersigned Member of the Company, a public limited company incorporated under the laws of Ireland, hereby acknowledges receipt of the Notice of Annual General Meeting of Shareholders and proxy statement, dated August 30, 2006 and hereby appoints Ferdinand von Prondzynski and Jennifer M. Caldwell, and each of them, proxies and attorneys-in-fact, each with full power of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the Company’s Annual General Meeting to be held at 8.30 a.m. on September 28, 2006 at the offices of Maples and Calder, Solicitors, 40 Lower Baggot Street, Dublin 2, Ireland, and at any adjournments thereof, and to vote all shares which the undersigned would be entitled to vote if then and there personally present, on all matters set forth on the reverse side hereof and in their discretion upon such other matters as may properly come before the Annual General Meeting, including for the avoidance of doubt, any proposal to adjourn all or any matters proposed for consideration at the meeting.

NOTES:

1. A proxy may (i) vote on a show of hands or on a poll, (ii) demand or join in demanding a poll and (iii) speak at the Annual General Meeting.

2. In the case of a corporation, this form must be executed either under its Common Seal or under the hand of an officer or attorney duly authorized.

3. In the case of joint holders, the signature of any one of them will suffice, but the names of all joint holders should be shown. The vote of the senior joint holder who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members of the Company in respect of the joint holding.

4. To be effective, the proxy form and the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power or authority must be deposited with the Company’s Registrars, Computershare Investor Services (Ireland) Limited, P.O. Box 954, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland not less than 48 hours before the time appointed for the holding of the Annual General Meeting (i.e. 8.30am on September 26, 2006) or adjourned Annual General Meeting.

5. Any alterations made to this proxy form should be initialed.

6. On a poll a person entitled to more than one vote need not use all his, her or its votes or cast all the votes he, she or it uses in the same way.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY IN THE ENVELOPE PROVIDED.

x		PLEASE MARK VOTES AS IN THIS EXAMPLE.

THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” PROPOSALS 1 TO 6 SET FORTH BELOW AND AS SAID PROXIES DEEM APPROPRIATE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL GENERAL MEETING.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE FOLLOWING PROPOSALS:				For		Against		Abstain
1.		To receive and consider the consolidated financial statements of the Company for the fiscal year ended January 31, 2006 and the Report of the Directors and Auditor thereon.		o		o		o
2.		To re-elect as a director Mr. P. Howard Edelstein who retires by rotation.		o		o		o
3.		To authorize the Audit Committee to fix the remuneration of the Company’s auditor for the fiscal year ending January 31, 2007.		o		o		o
4.		To amend the Company’s 2002 Share Option Plan (“2002 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).		o		o		o
5.		To generally and unconditionally authorise the directors of the Company to allot relevant securities of the Company up to an amount equal to but not exceeding the authorised but unissued share capital of the Company.		o		o		o
6.		To empower the directors of the Company to allot equity securities of the Company as if Section 23(1) of the Companies Amendment Act, 1983 did not apply to any such allotment.		o		o		o

MARK HERE IFYOU PLAN TO ATTEND THE ANNUAL GENERAL MEETING		o		MARK HERE, AND INDICATE BELOW, FOR A CHANGE OF ADDRESS		o

Please sign exactly as name appears below. When shares are held by joint holders, the signature of any one of them will suffice, but the names of all joint holders should be shown. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, this form must be executed either under its Common Seal or under the hand of an officer or attorney duly authorized. If a partnership, please sign in partnership name by an authorized person.

Date:			,		2006					Date:			,		2006

Signature:						Signature:

(Print Name):						(Print Name):