WAIVER AND SIXTH AMENDMENT TO CREDIT AGREEMENT

Exhibit 10.3

WAIVER AND SIXTH AMENDMENT TO CREDIT AGREEMENT

THIS WAIVER AND SIXTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of August 26, 2008, is entered into by and among the Lenders signatory hereto, WELLS FARGO FOOTHILL, INC., a California corporation, in its capacity as Agent for the Lenders and Bank Product Providers (in such capacity, “Agent”), and SUMTOTAL SYSTEMS, INC., a Delaware corporation (“Borrower”). Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement defined below.

RECITALS

A. The Lenders, Agent and Borrower have previously entered into that certain Credit Agreement dated as of October 4, 2005, as amended as of October 21, 2005, August 11, 2006, November 13, 2006, June 19, 2007 and August 17, 2007 (as so amended, and as further amended, modified and supplemented from time to time, the “Credit Agreement”), pursuant to which the Lenders have made certain loans and financial accommodations available to Borrower.

B. The Borrower has informed Agent that it desires to transfer up to US$7 million in cash to SumTotal Systems Netherlands B.V., a besloten vennootschap organized under the laws of the Netherlands (“SumTotal Netherlands”) and a Subsidiary of the Borrower, which cash (the “Netherlands Investment”) shall be contributed by SumTotal Netherlands to its wholly-owned subsidiary, SumTotal Systems U.K. Ltd., a private limited company organized under the laws of the United Kingdom (“SumTotal UK”) (such cash contribution to SumTotal UK being the “UK Investment”), in order (i) to recapitalize SumTotal UK and (ii) permit the repayment by SumTotal UK of certain of its obligations to the Borrower of up to US$7 million (the “SumTotal UK Loan”). Section 6.7 of the Credit Agreement prohibits the prepayment of certain Indebtedness of Subsidiaries of the Borrower; Section 6.12 restricts Borrower’s ability to make Investments in certain Subsidiaries; Section 6.12(b) prohibits SumTotal UK from holding more than US$1 million of cash in a deposit account that is not subject to a Control Agreement; and Section 6.13 of the Credit Agreement restricts Borrower’s and its Affiliates’ ability to enter into certain transactions with one another.

C. The Borrower has requested that the Lenders and the Agent agree to certain additional amendments to the Credit Agreement, and the Lenders and the Agent have agreed to such request, subject to the terms and conditions hereof.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Amendments to Credit Agreement. Subject to and upon the conditions hereof, the Credit Agreement is hereby amended, effective as of the date of satisfaction of the conditions set forth in Section 3, as follows:

(a) Section 2.6(a) of the Credit Agreement is hereby amended by deleting in their entirety the second and third sentences thereof (which state in their entirety: “The foregoing notwithstanding, at no time shall any portion of the Obligations (other than Bank Product Obligations) bear interest on the Daily Balance thereof at a per annum rate less than 6.00%. To the extent that interest accrued hereunder at the rate set forth herein would be less than the foregoing minimum daily rate, the interest rate chargeable hereunder for such day automatically shall be deemed increased to the minimum rate.”).

(b) Section 5.5 of the Credit Agreement is hereby amended by amending and restating the first sentence thereof as follows:

“At any time when (i) the amount of Revolver Usage is positive or (ii) any Default or Event of Default is continuing, permit Agent, each Lender, and each of their duly authorized representatives or agents to visit any of its properties and inspect any of its assets or books and records, to examine and make copies of its books and records, and to discuss its affairs, finances, and accounts with, and to be advised as to the same by, its officers and employees at such reasonable times and intervals as Agent or any such Lender may designate and, so long as no Default or Event of Default exists, with reasonable prior notice to Borrower and during normal business hours.”

(c) Section 5.26 of the Credit Agreement is hereby amended and restated in its entirety as follows:

5.26 Certain Control Accounts. No later than twenty (20) days from the date of satisfaction of all conditions precedent to effectiveness of that certain Waiver and Sixth Amendment to Credit Agreement among the Lender parties thereto, Agent, and Borrower, Borrower shall transfer Investments in an amount not less than US$25,000,000 into Deposit Accounts or Securities Accounts at Wells Fargo Bank, N.A. or its affiliates and, at all times thereafter (tested on a monthly basis), shall maintain in such Deposit Accounts or Securities Accounts Investments in an amount equal to, at such time, at least 50% of the total aggregate amount of Borrower’s invested cash and Cash Equivalents (excluding operating cash) held in the United States at such time.

(d) Section 6.10 of the Credit Agreement is hereby amended by deleting the phrase “August 19, 2008” where it appears in the last sentence thereof and replacing it with the phrase “the Maturity Date”.

2. Consent and Waiver.

(a) Subject to and upon the conditions hereof, the Agent and the Lenders hereby consent to (i) Borrower’s Investment in SumTotal Netherlands in the form of a single contribution of the Netherlands Investment (and waive the application of Section 6.12 of the Credit Agreement thereto), (ii) SumTotal UK’s holding of cash in an amount equal to the Netherlands Investment, in a deposit account not subject to a Control Agreement (and waive the application of Section 6.12(b) of the Credit Agreement thereto) and (iii) SumTotal UK’s prepayment in full in cash to Borrower of all outstanding obligations under the SumTotal UK Loan (and waive the application of Section 6.7 of the Credit Agreement thereto) (items (i) through (iii), collectively, the “Investments and Prepayment”), so long as the Investments and Prepayment shall be completed in no more than 14 days from the date of the Netherlands Investment.

(b) The Agent and Lenders hereby waive the application of Section 6.13 of the Credit Agreement, and any other applicable provision of the Credit Agreement, to the Investments and Prepayment as described in subsection (a) above.

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3. Effectiveness of this Amendment. Agent must have received the following items, in form and content acceptable to Agent, before this Amendment is effective:

(a) Amendment; Acknowledgments and Releases. This Amendment and the attached Acknowledgment and Release by Subordinating Creditors, each duly executed in a sufficient number of counterparts for distribution to all parties.

(b) Representations and Warranties; No Default. (i) The representations and warranties set forth herein and in the Credit Agreement must be true and correct in all material respects on and as of the date hereof (after giving effect to any updated information supplied to the Agent), as though made on and as of the date hereof (except to the extent that such representations and warranties relate solely to the Closing Date or another earlier date); and (ii) no event shall have occurred and be continuing that constitutes a Default or an Event of Default.

(c) Other. All other documents and legal matters in connection with the transactions contemplated by this Amendment or requested by Agent shall have been delivered, executed or recorded and shall be in form and substance satisfactory to Agent in its sole discretion.

4. Representations and Warranties. Borrower represents and warrants as follows:

(a) Authority. Each of the Borrower and each Subsidiary has the requisite corporate power and authority to execute and deliver this Amendment, and to perform its obligations hereunder and under the Loan Documents (as amended or modified hereby) to which it is a party.

(b) Enforceability. This Amendment has been duly executed and delivered by Borrower. This Amendment is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms (except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally), and is in full force and effect.

(c) Representations and Warranties. After giving effect to any updated information supplied by Borrower, the representations and warranties of Borrower and its Subsidiaries contained in each Loan Document (other than any such representations or warranties that, by their terms, are specifically made as of the Closing Date or another date other than the date hereof) that are qualified by materiality are true, accurate and complete as though made on and as of the date hereof, and that are not qualified by materiality are true, accurate and complete in all material respects as though made on and as of the date hereof.

(d) Due Execution. The execution, delivery and performance of this Amendment are within the power of Borrower, have been duly authorized by all necessary corporate action and no other corporate proceedings are necessary to consummate such transactions, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on Borrower.

(e) Disclosure. All factual information (taken as a whole) furnished by or on behalf of Borrower or its Subsidiaries in writing to Agent or any Lender for purposes of or in connection with this Amendment, the other Loan Documents or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of Borrower or its Subsidiaries in writing to Agent or any Lender will be, true and accurate, in all material respects, on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided.

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(f) No Default. No event has occurred and is continuing that constitutes a Default or an Event of Default.

5. Choice of Law. The validity of this Amendment, its construction, interpretation and enforcement, the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the laws of the State of New York.

6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties and separate counterparts, each of which when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by telefacsimile or other similar method of electronic transmission shall be effective as delivery of a manually executed counterpart of this Amendment.

7. Reference to and Effect on the Loan Documents.

(a) Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to “the Credit Agreement”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby.

(b) Except as specifically amended or modified above, the Credit Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrower.

(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Lender Group under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents.

(d) To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby.

8. Integration. This Amendment, together with the other Loan Documents, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter hereof.

9. Severability. In case any provision in this Amendment shall be invalid, illegal or unenforceable, such provision shall be severable from the remainder of this Amendment and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

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4.

IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.

[Sixth Amendment to Credit Agreement]

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[Sixth Amendment to Credit Agreement]

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ACKNOWLEDGMENT BY SUBORDINATING CREDITORS

Dated as of August 26, 2008

In connection with the foregoing Sixth Amendment to Credit Agreement (the “Amendment”), each of the undersigned, being a Creditor (each a “Subordinating Creditor” and collectively, the “Subordinating Creditors”) under the Intercompany Subordination Agreement (as defined in the Credit Agreement referenced in the Amendment) hereby confirms and agrees that the Intercompany Subordination Agreement is and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects except that, upon the effectiveness of, and on and after the date of the foregoing Amendment, each reference in the Intercompany Subordination Agreement to the Credit Agreement (as defined in the Intercompany Subordination Agreement), “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended or modified by the Amendment. Although Agent and the Lenders have informed Subordinating Creditors of the matters set forth in the Amendment, and Subordinating Creditors have acknowledged the same, each Subordinating Creditor understands and agrees that neither the Lender Group nor the Bank Product Providers have any duty under the Credit Agreement, the Intercompany Subordination Agreements or any other agreement with any Subordinating Creditor to so notify any Subordinating Creditor or to seek such an acknowledgment, and nothing contained herein is intended to or shall create such a duty as to any advances or transaction hereafter.

[Acknowledgment by Subordinating Creditors to Sixth Amendment]

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[Acknowledgment by Subordinating Creditors to Sixth Amendment]

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