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                                                                    EXHIBIT 10.3

                               SECURITY AGREEMENT

         SECURITY AGREEMENT (the "Agreement"), made this 24th day of June, 2003,
by and between SKILLSOFT CORPORATION, a Delaware corporation, having its
principal office at107 Northeastern Boulevard, Nashua, New Hampshire 03062 (the
"Debtor"), and FLEET NATIONAL BANK, a national banking association organized
under the laws of the United States of America with an address of Mail Stop NH
DE 01102A, 1155 Elm Street, Manchester, New Hampshire 03101, for and on behalf
of itself and, solely for purposes of securing the obligations described in
Section 2 (d) below, as agent for the corporate and bank affiliates of the FLEET
FINANCIAL GROUP, INC. (collectively, the "Secured Party").

                                   WITNESSETH:

         WHEREAS, pursuant to a Commercial Loan Agreement of even date (the
"Loan Agreement"), Secured Party has established in favor of Debtor and its
affiliate, SKILLSOFT PUBLIC LIMITED COMPANY, a company incorporated in Ireland
under number 148924, a certain revolving line of credit loan in the maximum
principal amount of up to Twenty-five Million Dollars ($25,000,000.00) (the
"Loan"), all as set forth and described in the Loan Agreement; and

         WHEREAS, the obligation of the Secured Party to make the Loan to the
Debtor and its affiliate is subject to the condition, among others, that the
Debtor shall execute and deliver this Agreement and grant the security interests
hereinafter described. Terms not otherwise defined herein shall have the
meanings ascribed to them in the Loan Agreement.

         NOW, THEREFORE, in consideration of the willingness of the Secured
Party to make the Loan to Debtor and its affiliate, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:

         1. Security Interest. As security for the Secured Obligations described
in Section 2 hereof, Debtor hereby grants to the Secured Party a first priority
security interest in and lien on all of the property and assets of the Debtor,
including, but not limited to the property and assets of the types described
below (hereinafter referred to collectively as the "Collateral"):

                  (a) All equipment, including machinery, office equipment,
         furniture, and motor vehicles, along with all other parts, tools,
         trade-ins, repairs, accessories, accessions, modifications, and
         replacements, whether now owned or subsequently acquired, constructed,
         or attached or added to, or placed in, the foregoing (collectively, the
         "Equipment");

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                  (b) All inventory, wherever located, including goods,
         merchandise and other personal property, held for sale, licensing, or
         lease or furnished or to be furnished under a contract of service, or
         constituting raw materials, work in process or materials used or
         consumed in the Debtor's business, or consigned to others or held by
         others for return to the Debtor, whether now owned or subsequently
         acquired or manufactured and wherever located (collectively, the
         "Inventory");

                  (c) All accounts and accounts receivable, including, without
         limitation, accounts, contracts, contract rights, license fees,
         royalties, chattel paper, instruments, rents, deposits, general
         intangibles, and any other obligations of any kind whether now existing
         or hereafter arising out of or in connection with the sale, licensing
         or lease of goods or intangibles, the rendering of services, or the
         granting of licenses, and all rights now or hereafter existing in and
         to all security agreements, notes, leases, licenses, franchises, supply
         agreements, and other contracts securing or otherwise relating to any
         such accounts, contracts, contract rights, chattel paper, instruments,
         rents, deposits, general intangibles, or obligations (any and all such
         accounts, contracts, contract rights, chattel paper, instruments,
         rents, deposits, general intangibles, and obligations being the
         "Receivables", and any and all such security agreements, notes, leases,
         licenses, franchises, supply agreements, and other contracts being the
         "Related Contracts");

                  (d) All general intangibles, including, but not limited to,
         corporate names, trade names, trademarks, trade secrets, copyrights,
         patents (issued and pending), inventions, books and records, customer
         lists, blue prints and plans, computer programs, tapes and related
         electronic data, processing software, and all corporate ledgers;

                  (e) All investment property, including, but not limited to,
         securities, whether certificated or uncertificated; securities
         entitlement; securities accounts; commodity contracts; and commodity
         accounts;

                  (f) That certain certificate of deposit number 000900331, and
         any successor or replacement certificates of deposit, issued by the
         Secured Party to the Debtor, as well as any securities account
         maintained by Debtor with the Secured Party; all securities maintained
         in such account; all other property, rights or interests of any
         description at any time issued or issuable as an addition to, or in
         substitution or exchange for, such securities; all securities
         entitlements of Debtor with respect to such account; and all current
         and future interest, dividends, distributions and other payments and
         benefits in whatever form with respect to the foregoing (collectively,
         including the certificates of deposit, the "Securities Account");

                  (g) Any and all additions, accessions, substitutions or
         replacements to or for any of the foregoing;

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                  (h) Any and all products and proceeds of any or all of the
         foregoing, including, without limitation, cash, cash equivalents, tax
         refunds and the proceeds of insurance policies providing coverage
         against the loss or destruction of or damage to any of the Collateral,
         or any indemnity, warranty, or guarantee payable by reason of loss or
         damage to or otherwise with respect to any of the Collateral (whether
         or not the Secured Party is the loss payee thereof);

                  (i) All of the Debtor's after-acquired property of the kinds
         and types described in paragraphs (a) - (h) herein;

                  (j) All records and data relating to any of the property
         described above, whether in the form of a writing, photograph,
         microfilm, microfiche, or electronic media, together with all of the
         Debtor's right, title, and interest in and to all computer software
         required to utilize, create, maintain and process any of such records
         or data or electronic media; and

also in (1) all checks, money, securities, bank accounts, deposit accounts, and
other accounts in the possession of or held by the Secured Party whether in the
name of the Debtor or in the name of the Secured Party, and (2) all other
property in which a security interest is granted by the Debtor to the Secured
Party pursuant to this Agreement.

In furtherance of the security interests granted in the Securities Account as
aforesaid, the Debtor hereby pledges to the Secured Party the Securities Account
and all proceeds thereof, and hereby grants Secured Party exclusive control
thereof, subject to the terms and conditions of this Agreement. The Debtor shall
not have any right to withdraw, or have use of, any of the securities maintained
in the Securities Account, or any interest, dividends, distributions or proceeds
thereof, provided that the Debtor may withdraw securities, interest, dividends,
or distributions from the Securities Account so long as the resulting value of
the Securities Account is not less than the Cash Collateral Amount then required
under the Loan Agreement.

Notwithstanding anything to the contrary in this Section 1 or otherwise, the
Collateral shall not include, and payment and performance of the Secured
Obligations shall not be secured by:

         (a)      any contract, agreement, license, lease, permit or franchise,
whose terms (i) would prohibit or restrict the creation by the Debtor of a
security interest in such contract, agreement, license, lease, permit or
franchise (or in any rights or property obtained by the Debtor under such
contract, agreement, license, lease, permit or franchise other than any right of
payment to Debtor thereunder); provided, however, that such provisions shall not
prohibit the security interests created by this Agreement from extending to the
proceeds of or rights of payment under such contract, agreement, license, lease
permit or franchise (or such rights or property); (ii) would give any other
party thereto the right to terminate its obligations thereunder or cause the
loss, forfeiture, termination or impairment of any material right or interest of
the Debtor thereunder; (iii) would permit such a grant of a security interest if
all necessary consents to such grant of a

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security interest have been obtained from the other parties thereto (it being
understood that the foregoing shall not be deemed to obligate the Debtor to
obtain such consents); or

         (b)      any rights or property to the extent that any laws applicable
to such rights or property prohibits or restricts the creation of a security
interest therein; provided, however, that such provisions shall not prohibit the
security interests created by this Agreement from extending to the proceeds of
or rights of payment to the Debtor under such rights or property (except to the
extent that any such law prohibits or restricts the creation of a security
interest in any of the foregoing). The foregoing provisions of subparagraphs (a)
and (b) shall in no event exclude from Collateral any Accounts (as defined in
the New Hampshire Uniform Commercial Code) arising under or in connection with
any such as contract, agreement, license, lease, permit, franchise, rights or
property.

         2. Secured Obligations. The security interest hereby granted shall
secure the following (the "Secured Obligations"):

                  (a) The Debtor's repayment of the principal amount of
         Twenty-five Million Dollars ($25,000,000.00), together with interest,
         late charges, and any other applicable charges, to the Secured Party
         pursuant to Debtor's and its affiliate's promissory note of near or
         even date made payable to the Secured Party;

                  (b) The Debtor's payment or performance of its obligations
         under the Loan Agreement and under the other Loan Documents (as
         defined, described and identified in the Loan Agreement, hereinafter
         the "Loan Documents"), as the same may be amended, modified, extended,
         renewed, replaced or restated;

                  (c) The payment of all other sums with interest and charges
         thereon advanced in accordance herewith to protect the validity,
         security, and priority of this Agreement, the Loan Agreement, or the
         Loan Documents;

                  (d) Any and all obligations arising under any foreign exchange
         contracts, interest rate swap, cap, floor or hedging agreements, or
         similar agreements with the Secured Party or any affiliate of Fleet
         Financial Group, Inc.; any and all obligation of the Debtor to the
         Secured Party arising under any credit cards issued by the Secured
         Party to the Debtor or its affiliate; and any and all obligations of
         the Debtor to the Secured Party out of or in connection with any
         Automated Clearing House ("ACH") Agreements relating to the processing
         of ACH transactions, together with all fees, expenses, charges and
         other amounts owing by or chargeable to the Debtor under all such
         contracts, agreements, and credit cards; and

                  (e) Any and all other indebtedness of Debtor to Secured Party
         of every kind and description, direct or indirect, absolute or
         contingent, due or to become due, regardless of how they arose, now
         existing or hereafter arising.


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Notwithstanding the foregoing provisions of this Section 2, "Secured
Obligations" shall not include any debts, liabilities or other obligations of
the Debtor to any third party which are acquired by Secured Party.

         3. Warranties and Representations of the Debtor. Debtor hereby makes
the following representations and warranties which shall survive the execution
and delivery of this Agreement and shall be continuing representations and
warranties as long as any Secured Obligation remains outstanding:

                  (a) All representations and warranties made in the Loan
         Agreement and the Loan Documents relating to the Debtor and the
         Collateral are true, accurate and complete in all material respects;

                  (b) The Debtor is organized under the laws of the State of
         Delaware and its principal place of business is located at the address
         first set forth above; the Debtor's executive offices and the office
         where its books and records are kept and are to be kept concerning the
         Receivables, Related Contracts and other Collateral are at the
         aforesaid address; and the Debtor currently has no other places of
         business except those set forth on Schedule I hereto and for the
         previous four (4) month period Debtor has had no other places of
         business except those set forth on Schedule I hereto;

                  (c) Other than as set forth on Schedule I, the Debtor conducts
         business only under and through the corporate, business and trade names
         first set forth above.

                  (d) No material authorization, approval or other action by,
         and no notice to or filing with, any governmental authority or other
         person is required either (i) for the grant by the Debtor of the
         security interests granted hereby or for the execution, delivery or
         performance of this Agreement by the Debtor, or (ii) for the perfection
         of or the exercise by the Secured Party of its respective rights and
         remedies hereunder, except the filing of financing statements or as
         previously obtained;

                  (e) The Debtor has good and marketable title to all of the
         Collateral pledged by it hereunder, free and clear of any liens,
         security interests, encumbrances or interests or claims of any other
         person or entity, except for the Permitted Encumbrances, and there are
         no sums owed with respect to the Collateral other than as disclosed on
         the Debtor's financial statements most recently delivered to the
         Secured Party;

                  (f) Upon the filing of UCC-1 financing statements being
         delivered at or prior to the execution hereof, the Secured Party will
         have a valid, perfected, first priority security interest in all of the
         Collateral which may be perfected by filing of financing statements
         (subject to Permitted Encumbrances);


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                  (g) Schedule III attached hereto sets forth the description
         and location of all Collateral of a value greater than $100,000 not
         located at the Debtor's principal place of business or at the locations
         listed on Schedule I, and

                  (h) Except as set forth on Schedule II, no effective financing
         statements or other similar instrument in effect covering all or any
         part of the Collateral is on file in any recording office, except as
         may have been filed in favor of Secured Party relating to this
         Agreement.

         4. Affirmative Covenants of the Debtor.

                  (a) The Debtor shall promptly notify and provide the Secured
         Party with a complete description of the opening of any new places of
         businesscontaining Collateral of a value of greater than $100,000.00,
         or, any change in its legal name or place of incorporation, , or any
         other act which would affect the financing statements filed by the
         Secured Party;

                  (b) Upon the request of Secured Party, the Debtor shall take
         all steps that are reasonably necessary or prudent to protect the
         security interests of the Secured Party in the Collateral;

                  (c) The Debtor shall defend the Collateral against the claims
         and demands of all persons which would have a Material Adverse Effect;

                  (d) The Debtor shall comply, in all material respects, with
         all governmental regulations applicable to the Collateral or any part
         thereof or to the operation of the Debtor's business except where
         failure to comply would not cause a Material Adverse Effect; provided,
         however, that the Debtor may contest any governmental regulation in any
         reasonable manner which shall not in the reasonable opinion of the
         Secured Party materially and adversely affect the Secured Party's
         rights or the first priority of its security interest in the Collateral
         (subject to Permitted Encumbrances);

                  (e) The Debtor shall pay promptly when due, all taxes,
         assessments and governmental charges or levies imposed upon the
         Collateral or in respect of its income or profits therefrom, except
         that no such amounts need be paid if (i) the validity thereof is being
         contested in good faith by appropriate proceedings, and (ii) such
         amounts are adequately reserved against in accordance with the
         generally accepted accounting principles;



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                  (f) The Debtor shall cause the Equipment to be maintained and
         preserved in reasonably good repair and working order, normal wear and
         tear excepted, and shall make all repairs, replacements, additions, and
         other improvements reasonably necessary to maintain the Equipment in
         such good condition, subject to obsolecence;

                  (g) The Debtor shall maintain Inventory reasonably sufficient
         to meet the needs of its business;

                  (h) Upon request of the Secured Party, the Debtor shall, with
         respect to any Collateral required to be titled, deliver all titles
         thereto to the Secured Party to be held by the Secured Party and Debtor
         shall make, execute, and deliver any and all applications, and take
         such other action to assure that the Secured Party is listed of record
         as the first priority and sole lienholder on all title certificates;.

                  (i) Debtor shall keep materially accurate and complete records
         listing and describing the Collateral, and when requested by Secured
         Party, Debtor shall give Secured Party information regarding the
         Collateral and setting forth the total value of the Inventory, the
         total value of the Equipment, the amount of the Receivables designating
         how many days the Receivables are from the date of invoice, the face
         value of any instruments, and any other information Secured Party may
         reasonably request. Secured Party shall have the right, at any time
         (but at reasonable intervals) during normal business hours and upon
         prior notice, to inspect the Collateral and to audit and make copies of
         any records or other writings which relate to the Collateral or the
         general financial condition of Debtor.;

                  (j) The Debtor shall advise the Secured Party promptly, in
         reasonable detail, (i) of any lien, security interest, encumbrance, or
         claim made or asserted against any of the Collateral in an amount in
         excess of $100,000.00, except for Permitted Encumbrances, (ii) of any
         material loss or depreciation in the value of the Collateral taken as a
         whole, and (iii) of the occurrence of any other material adverse effect
         on the aggregate value, enforceability or collectibility of the
         Collateral;

                  (k) The Debtor shall upon the request of the Secured Party
         give, execute, deliver and file or record in the proper governmental
         offices, any instrument, paper or document, including, but not limited
         to, one or more financing statements under the Uniform Commercial Code,
         reasonably satisfactory to the Secured Party, or take any action which
         the Secured Party reasonably may request in order to create, preserve,
         perfect, extend, continue, modify, terminate or otherwise effect any
         security interest granted pursuant hereto, or to enable the Secured
         Party to exercise or enforce any of its rights hereunder; and


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                  (l) The Debtor shall keep, and stamp or otherwise mark, any of
         its documents, instruments and chattel paper and its books and records
         relating to any of the Collateral in such manner as the Secured Party
         may reasonably require.

         5. Negative Covenants of the Debtor. Except as otherwise provided in
the Loan Agreement or in this Agreement, without the prior written consent of
the Secured Party, the Debtor shall not:

                  (a) Transfer, sell or assign any of the Collateral other than
         in the ordinary course of business or as otherwise permitted in the
         Loan Agreement;

                  (b) Allow or permit any other security interest or lien to
         attach to any of the Collateral other than the Permitted Encumbrances;

                  (c) File, authorize, or permit to be filed in any jurisdiction
         any financing statement relating to any of the Collateral unless the
         Secured Party is named as sole secured party or to the extent relating
         to the Permitted Encumbrances;

                  (d) Permit any of the Collateral to be levied upon under any
         legal process;

                  (e) Permit anything to be done that materially impairs the
         value of any of the Collateral taken as a whole; or

                  (f) Use the Collateral in material violation of any law or in
         any manner inconsistent with any policy of insurance thereon, except
         where such use would not materially impair the value of the Collateral
         taken as whole.

         6. Fixtures. It is the intention of the parties hereto that none of the
Collateral shall become fixtures. Without limiting the generality of the
foregoing, the Debtor will, if requested by the Secured Party, use reasonable
efforts to obtain waivers of lien, in form satisfactory to the Secured Party,
from each mortgagee or lessor of real property (other than the Secured Party) on
which any material amount of the Collateral is or is to be located.

         7. Insurance. Debtor shall, at its own expense, maintain insurance
covering the Collateral against such risks, with such insurers, in such form,
and in such amounts as shall from time to time be reasonably required by Secured
Party, but in any event, in such amounts and with such coverage as is customary
in Debtor's type of business. All casualty insurance policies shall be payable
in the event of loss to Secured Party to the extent of its interest. All
insurance policies shall provide for the insurer to endeavor to give Secured
Party thirty (30) days' written notice to Secured Party of cancellation and for
notice to Secured Party of any claims paid thereunder. Copies of all insurance
policies shall be furnished to Secured Party upon its request .. Secured Party
is hereby appointed as attorney irrevocable to take any or all of the following
actions upon and during the continuance of an Event of Default: to collect
return premiums,

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dividends and other amounts due on any casualty insurance policy and the
proceeds of such insurance, to settle any claims with the insurers in the event
of loss or damage to Collateral, to endorse settlement drafts and to cancel,
assign, or surrender any insurance policies. If any return premiums, dividends,
other amounts or proceeds are paid to Secured Party under such policies, Secured
Party may, at Secured Party's option, take either or both of the following
actions: (i) apply such return premiums, dividends, other amounts and proceeds
in whole or in part to the payment or satisfaction of any of the Secured
Obligations in whatever order Secured Party determines; or (ii) pay over such
return premiums, dividends, other amounts and proceeds in whole or in part to
Debtor for the purpose of repairing or replacing the Collateral destroyed or
damaged, any return premiums, dividends, other amounts and proceeds so paid over
by Secured Party to be secured by this Agreement, provided that Secured Party
agrees that, unless there is an occurrence and continuation of an Event of
Default, Debtor shall be entitled to use insurance proceeds for the repair or
replacement of Collateral in lieu of Secured Party's application of such funds
in repayment of the Secured Obligations.

         8. Receivables. Debtor agrees that Secured Party may communicate with
account debtors in order to verify the existence, amount, and terms of any
Receivables. Secured Party may notify account debtors of the security interests
established herein and require that after and during the continuance of an Event
of Default payments on Receivables be made directly to Secured Party, and upon
the request of Secured Party, Debtor shall notify account debtors and indicate
on all billings that payments and returns are to be made directly to Secured
Party. In furtherance of the foregoing, Debtor hereby appoints Secured Party
attorney irrevocable with full power, after and during the continuance of an
Event of Default, to collect, compromise, endorse, sell, or otherwise deal with
the Receivables or proceeds thereof and, subject to the rights of any third
parties, to perform the terms of any contract in order to create Receivables in
Secured Party's name or in the name of Debtor. This Agreement may be, but need
not be, supplemented, after and during the continuance of an Event of Default,
by separate assignments of Receivables and contract rights and, if such
assignments are given, the rights and security interests given thereby shall be
in addition to and not in limitation of the rights and security interests
granted by this Agreement.


         9. Events of Default. The following events shall be deemed "Events of
Default" hereunder:

                  (a) An Event of Default under the Loan Agreement or any of the
         Loan Documents;

                  (b) Debtor fails to observe or perform any covenant, warranty,
         or agreement required to be observed or performed by it under this
         Agreement and such failure is not cured in accordance with the cure
         provisions set forth in the Loan Agreement;



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                  (c) Debtor shall be in default under any obligation undertaken
         by Debtor which default has a material adverse effect on the ability of
         the Debtor to make payments of its Secured Obligations or on the
         adequacy of the Collateral taken as a whole as security for the Secured
         Obligations; or

                  (d) Uninsured loss, theft, damage, or destruction of any
         substantial portion of any of the Collateral which has a material
         adverse effect on the ability of the Debtor to make payments of its
         Secured Obligations or on the adequacy of the Collateral taken as a
         whole as security for the Secured Obligations.

         10. Rights and Remedies of Secured Party on Default. Upon and during
the continuance of the occurrence of any Event of Default, Secured Party shall
have, by way of example and not of limitation of any other rights available
under applicable law, the following rights and remedies:

                  (a) Secured Party may declare the Secured Obligations, or any
         of them, to be immediately due and payable without presentment, demand,
         protest or notice of any kind, all of which are hereby expressly
         waived;

                  (b) In addition to all other rights and remedies contained in
         this Agreement, the Loan Agreement, and in the Loan Documents, Secured
         Party may exercise the rights and remedies accorded Secured Party by
         the Uniform Commercial Code or by any other applicable law, all of
         which rights and remedies shall be cumulative and non-exclusive to the
         extent permitted by law;

                  (c) Subject to the rights of third parties and applicable law,
         Secured Party shall have the right to enter and/or remain upon the
         Premises of Debtor, or any other place or places where any of the
         Collateral is located and kept, without any obligation to pay rent to
         Debtor or others, and remove Collateral therefrom to the premises of
         the Secured Party or any agent of Secured Party for such time as
         Secured Party may desire in order to maintain, collect, sell and/or
         prepare the Collateral for sale, liquidation or collection;

                  (d) Secured Party may require the Debtor at Debtor's cost to
         assemble the Collateral and make it available to Secured Party at a
         place designated by Secured Party;

                  (e) Subject to the rights of third parties and applicable law,
         Secured Party may take possession of and use and operate the Collateral
         in the manner and for the purposes as set forth in Section 11
         hereinbelow;

                  (f) Subject to the rights of third parties and applicable law,
         Secured Party may sell, lease, or otherwise dispose of the Collateral
         as set forth in Section 12 hereinbelow;


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                  (g) Secured Party shall have the right to set-off, without
         notice to the Debtor, any and all deposits or other sums at any time or
         times credited or due from Secured Party to Debtor, whether in a
         special account (other than those established for, or for the benefit
         of, third parties) or other account or represented by a certificate of
         deposit (whether or not matured); which deposit and other sums shall at
         all times constitute additional security for the Secured Obligations;

                  (h) Subject to the rights of third parties and applicable law,
         Secured Party may perform any warranty, covenant or agreement which
         Debtor has failed to perform under this Agreement; and

                  (i) Subject to the rights of third parties and applicable law,
         Secured Party may take any other action which Secured Party deems
         reasonably necessary or desirable to protect the Collateral or the
         security interests granted herein.

         11. Rights of Secured Party to Use and Operate Collateral. Upon the
occurrence and during the continuance of any Event of Default, but subject to
the rights of any third parties and the provisions of the Uniform Commercial
Code or other applicable law, the Secured Party shall have the right and power
to take possession of all or any part of the Collateral, and to exclude the
Debtor and all persons claiming under the Debtor wholly or partly therefrom, and
thereafter to hold, store, and/or use, operate, manage and control the same.
Upon any such taking of possession, the Secured Party may, from time to time, at
the expense of the Debtor, make all such repairs, replacements, alterations,
additions and improvements to and of the Collateral as the Secured Party may
reasonably deem proper. In any such case, subject as aforesaid, the Secured
Party shall have the right to manage and control the Collateral and to carry on
the business and to exercise all rights and powers of the Debtor in respect
thereto as the Secured Party shall deem best, including the right to enter into
any and all such agreements with respect to the leasing and/or operation of the
Collateral or any part thereof as the Secured Party may see fit; and the Secured
Party shall be entitled to collect and receive all rents, issues, profits, fees,
revenues and other income of the same and every part thereof. Such rents,
issues, profits, fees, revenues and other income shall be applied to pay the
reasonable expenses of holding and operating the Collateral and of conducting
the business thereof, and of all maintenance, repairs, replacements,
alterations, additions and improvements, and to make all payments which the
Secured Party may be required or may elect to make, if any, for taxes,
assessments, insurance and other charges upon the Collateral or any part
thereof, and all other payments which the Secured Party may be required or
authorized to make under any provision of this Agreement (including reasonable
legal costs and attorneys' fees). The remainder of such rents, issues, profits,
fees, revenues and other income shall be applied to the payment of the Secured
Obligations in such order of priority as the Secured Party may determine in its
sole discretion and any surplus shall be returned to the Debtor. Without
limiting the generality of the foregoing, upon the occurrence and during the
continuance of an Event of Default the Secured Party shall have the right to
apply for and have a receiver appointed by a court of competent jurisdiction in
any action taken by the Secured Party to enforce its rights and remedies
hereunder in order to manage, protect and preserve the

                                     - 11 -
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Collateral and continue the operation of the business of the Debtor and to
collect all revenues and profits thereof and apply the same to the payment of
all expenses and other charges of such receivership including the compensation
of the receiver and to the payment of the Secured Obligations as aforesaid until
a sale or other disposition of such Collateral shall be finally made and
consummated.

         12. Rights of Secured Party to Sell Collateral. Subject to the rights
of third parties and applicable law, upon (10) days prior written notice by
registered or certified mail by Secured Party to Debtor at the address of the
Debtor set forth above (or at such other address or addresses as the Debtor
shall specify in writing by like notice to the Secured Party) of the time and
place of any intended disposition of Collateral, then Secured Party shall have
the right and power to sell, assign, lease, or otherwise dispose of the
Collateral from any business premises of the Debtor, either at public auction or
private sale, by liquidation sale or other disposition, or as if the sale was
being made in the ordinary course of Debtor's business, with or without notice
to the public that the said sale or disposition is for the benefit of the
Secured Party; provided, however, that if the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market (including, but not limited to, the securities maintained in
the Securities Account), then Secured Party shall have the right and power to
dispose of the Collateral without prior notice to Debtor and Debtor expressly
waives any rights to prior notice under such circumstances. The notices
described above shall be deemed to meet any requirement hereunder or under any
applicable law (including the Uniform Commercial Code) that reasonable
notification be given of the time and place of such sale or other disposition.
After deducting all reasonable costs and expenses of collection, storage,
custody, sale or other disposition and delivery (including reasonable legal
costs and attorneys' fees) and all other reasonable charges against the
Collateral, the residue of the proceeds of any such sale or disposition shall be
applied to the payment of the Secured Obligations in such order of priority as
the Secured Party may determine in its sole discretion and any surplus shall be
returned to the Debtor. In the event the proceeds of any sale, lease or other
disposition of the Collateral hereunder are insufficient to pay all of the
Secured Obligations in full, the Debtor will be liable for the deficiency,
together with interest thereon at the maximum rate provided in the Loan
Agreement and the cost and expenses of collection of such deficiency, including,
without limitation, reasonable fees of attorneys, experts, and agents, expenses
and disbursements.

         13. Attorney-in-Fact. The Debtor hereby irrevocably authorizes the
Secured Party at any time and from time to time to sign (if required) and file
in any appropriate filing office, wherever located, any financing statement that
(a) describes the Collateral in a manner consistent with Section 1 and (b)
contains any other information required by the Uniform Commercial Code of the
applicable jurisdiction for the sufficiency or filing office acceptance of any
financing statement, including (i) whether the Debtor is an organization, the
type of organization and any organization identification number issued to the
Debtor and, (ii) in the case of a financing statement filed as a fixture filing,
a sufficient description of real property to which the Collateral relates. The
Secured Party is hereby appointed the attorney-in-fact, with full power of
substitution, of the Debtor for the purpose of carrying out the provisions of
this Agreement and


                                     - 12 -
<PAGE>
taking any action and executing any instruments (including, without limitation,
financing or continuation statements, conveyances, assignments, and transfers)
which the Secured Party may reasonably deem necessary or advisable to accomplish
the purposes hereof, which appointment as attorney-in-fact is coupled with an
interest and is irrevocable. The Debtor shall indemnify and hold harmless the
Secured Party from and against any liability or damage which it may incur in the
exercise and performance, in good faith, of the Secured Party's powers and
duties as such attorney-in-fact, except for any liability or damage resulting
from Secured Party' gross negligence or willful misconduct.

         14. Waiver, etc. The Debtor hereby waives presentment, demand, notice,
protest and, except as is otherwise provided herein, all other demands and
notices in connection with this Agreement or the enforcement of the Secured
Party's rights hereunder or in connection with any Secured Obligations or any
Collateral. The Debtor further consents to and waives notice of the granting of
renewals, extensions of time for payment or other indulgences to the Debtor, or
subject to applicable law to any account debtor in respect of any Receivable, or
to substitution, release or surrender of any Collateral, addition or release of
persons primarily or secondarily liable on any Secured Obligation or on any
Receivable or other Collateral, or the acceptance of partial payments on any
Secured Obligation or on any account receivable or other Collateral and/or the
settlement or compromise thereof. No delay or omission on the part of the
Secured Party in exercising any right hereunder shall operate as a waiver of
such right or of any other right hereunder. Any waiver of any such right on any
one occasion shall not be construed as a bar to or waiver of any such right on
any such future occasion. Notwithstanding any other provision of this Agreement
or any of the other Loan Documents to the contrary, an Event of Default under
this Agreement or any of the other Loan Documents, shall be deemed continuing
until such time as such Event of Default is waived by the BANK in writing.

         15. Termination; Assignments, etc. This Agreement and the security
interest in the Collateral created hereby shall terminate when all of the
Secured Obligations have been paid, performed, and finally discharged in full,
and all commitment of the Secured Party with respect thereto have terminated. If
any of the Collateral shall be sold, transferred or otherwise disposed of by the
Debtor in a transaction permitted by the Loan Agreement, or if the Debtor
requests that the Secured Party release, or subordinate its security interest
in, any Collateral to the extent (but only to the extent) necessary to permit
the consummation of any other transaction not prohibited by any Loan Document,
then the Secured Party, at the request and sole expense of the Debtor, shall
execute and deliver to the Debtor all releases or other documents reasonably
necessary or desirable for the release of the security interests created hereby
on such Collateral. In the event of a sale or assignment by the Secured Party of
all or any of the Secured Obligations held by it, such Secured Party may assign
or transfer its rights and interests under this Agreement in whole or in part to
the purchaser or purchasers of such Secured Obligations, whereupon such
purchaser or purchasers shall become vested with all of the powers, rights, and
obligations of such Secured Party hereunder, and such Secured Party shall
thereafter be forever released and fully discharged from any liability or
responsibility hereunder, with respect to the rights and interests so assigned.


                                     - 13 -
<PAGE>

         16. Notices. All notices, requests, demands and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and shall be either mailed by certified mail, return receipt requested, or
delivered by overnight courier service, to the applicable party at the addresses
first set forth above, or, as to each party, at such other address as shall be
designated by such parties in a written notice to the other party complying as
to delivery with the terms of this Section. All such notices, requests, demands
and other communication shall be effective on the date of first attempted
delivery.

         17. Miscellaneous.

                  (a) The powers conferred on the Secured Party hereunder are
         solely to protect its interest in the Collateral and shall not impose
         any duty upon it to exercise any such powers. Except for the safe
         custody of any Collateral in its possession and the accounting for
         monies actually received by it hereunder, the Secured Party shall not
         have any duty as to any Collateral or as to the taking of any necessary
         steps to preserve any right of it or of the Debtor against other
         parties pertaining to any Collateral, except to the extent specifically
         required under applicable law. The foregoing is not intended to modify
         in any manner the obligation of the Secured Party to act in a
         commercially reasonable manner as required under the Uniform Commercial
         Code;

                  (b) No provision hereof shall be amended except by a writing
         signed by the Secured Party and the Debtor;

                  (c) Any provision of this Agreement which is prohibited or
         unenforceable shall be ineffective to the extent of such prohibition or
         unenforceability without invalidating the remaining provisions hereof;

                  (d) This Agreement shall be binding upon and shall inure to
         the benefit of the successors and assigns of the Secured Party and the
         Debtor;

                  (e) No delay, failure to enforce, or single or partial
         exercise on the part of the Secured Party in connection with any of its
         rights hereunder shall constitute an estoppel or waiver thereof, or
         preclude other or further exercises or enforcement thereof and no
         waiver of any default hereunder shall be a waiver of any subsequent
         default; and

                  (f) This Agreement shall be governed as to its validity,
         interpretation and effect in accordance with the laws of the State of
         New Hampshire.

                                     - 14 -
<PAGE>

SECURED PARTY AND DEBTOR MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF SECURED PARTY RELATING TO THE
ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THE LOAN DOCUMENTS, AND AGREE THAT
NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY
LAW, DEBTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. DEBTOR CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF SECURED PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SECURED PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR
SECURED PARTY TO ACCEPT THIS AGREEMENT AND MAKE THE LOANS.

         IN WITNESS WHEREOF, the undersigned have set their hands and seals and
enter into this Agreement all as of the day and year first above written.

                                           DEBTOR

                                           SKILLSOFT CORPORATION

/s/ Kenneth R. Sheldon                     By:  /s/ Thomas J. McDonald
----------------------------------------      --------------------------------
Witness                                    Name:  Thomas J. McDonald
                                           Title: Chief Financial Officer

                                     - 15 -
<PAGE>

                                           SECURED PARTY

                                           FLEET NATIONAL BANK
                                           (for and on behalf of itself
                                           and, solely for purposes of securing
                                           the obligations described in
                                           Section 2 (d) above, as agent of the
                                           FleetBoston Financial Group, Inc.
                                           affiliates)

/s/ Curtis W. Little Jr.                   By:  /s/ Kenneth R. Sheldon
----------------------------------------      ---------------------------------
Witness                                       Kenneth R. Sheldon, Vice President

                                     - 16 -
<PAGE>

                               SECURITY AGREEMENT

                                   SCHEDULE I

                        List of Other Business Locations

107 Northeastern Blvd., Nashua, NH 03062

20 Industrial Park Drive, Nashua, NH 03062

100 River Ridge Drive, Norwood, MA 02062

8862 Country Road 4028, Kemp, TX 75143

11 High Street, Newton, NJ 07860

21 Alexander Road, Billerica, MA 01821 (MCI location)

4700 Old Ironside Drive, Santa Clara, CA 95054 (Qwest location)

Certain employees of the Debtor also conduct business based out of home office
locations.

                                     - 17 -
<PAGE>

                               SECURITY AGREEMENT

                                   SCHEDULE II

                   List of Other Liens and Encumbrances, etc.

                           UCC-1 Financing Statements

Debtor: SkillSoft Corporation
Delaware Secretary of State

<TABLE>
<CAPTION>
FILE NUMBER         FILE DATE            SECURED PARTY                   COLLATERAL DESCRIPTION
-------------------------------------------------------------------------------------------------
<S>                 <C>              <C>                                 <C>
11165716            09/17/2001       Fidelity Leasing, Inc.                Equipment Lease
-------------------------------------------------------------------------------------------------
21918071            07/11/2002       IBM Credit Corporation                Equipment Lease
-------------------------------------------------------------------------------------------------
22119208            08/16/2002       IBM Credit Corporation                Equipment Lease
-------------------------------------------------------------------------------------------------
22816449            10/28/2002       IBM Credit Corporation                Equipment Lease
-------------------------------------------------------------------------------------------------
30122047            12/26/2002       IBM Credit Corporation                Equipment Lease
-------------------------------------------------------------------------------------------------
30400476            01/24/2003       IBM Credit LLC                        Equipment Lease
-------------------------------------------------------------------------------------------------
31010696            04/17/2003       IBM Credit LLC                        Equipment Lease
-------------------------------------------------------------------------------------------------
</TABLE>

New Hampshire Secretary of State

<TABLE>
<CAPTION>
FILE NUMBER          FILE DATE               SECURED PARTY                 COLLATERAL DESCRIPTION
-------------------------------------------------------------------------------------------------
<S>                 <C>             <C>                                    <C>
537634              05/27/1999      NationsCredit Commercial Corporation      Blanket Lien**
-------------------------------------------------------------------------------------------------
578829              04/18/2001      IBM Credit Corporation                    Equipment Lease
-------------------------------------------------------------------------------------------------
</TABLE>

** to be terminated post-closing, on or before August 15, 2003

                                     - 18 -
<PAGE>

                               SECURITY AGREEMENT

                                  SCHEDULE III

                            Other Collateral Location

None.

                                     - 19 -