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.”).

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(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.

 

2.

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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.

 

3.

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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.

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

 

SUMTOTAL SYSTEMS, INC., a Delaware corporation By:   /s/ Neil J. Laird Name:  
Neil J. Laird Title:   Chief Financial Officer

[Sixth Amendment to Credit Agreement]

 

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WELLS FARGO FOOTHILL, INC., a California corporation, as Agent and a Lender By:
  /s/ Thomas Fortbath Name:   Thomas Forbath Title:   Vice President

[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.

 

CREDITORS:    

SUMTOTAL SYSTEMS, INC.,

a Delaware corporation

      By:   /s/ Neil J. Laird       Name:   Neil J. Laird       Its:   Chief
Financial Officer    

SUMTOTAL SYSTEMS NETHERLANDS BV,

a besloten vennootschap organized under the laws of the Netherlands

      By:   /s/ Neil J. Laird       Name:   Neil J. Laird       Title:  
Director    

SUMTOTAL SYSTEMS U.K. LTD.,

a private limited company organized under the laws of the United Kingdom

      By:   /s/ Neil J. Laird       Name:   Neil J. Laird       Title:  
Director

[Acknowledgment by Subordinating Creditors to Sixth Amendment]

 

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PATHLORE SOFTWARE LIMITED,

a private limited company organized under the laws of the United Kingdom

By:   /s/ Neil J. Laird Name:   Neil J. Laird Title:   Director

[Acknowledgment by Subordinating Creditors to Sixth Amendment]

 

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