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,