Press release

SumTotal Systems completes acquisition of Pathlore

Mountain View, California and Columbus, Ohio, USATraining Press ReleasesSumTotal Systems

SumTotal Systems, Inc. (NASDAQ: SUMT), the largest provider of learning and business performance technologies and services, today announced that it has completed its acquisition of privately-held Pathlore Software Corporation, also a leading enterprise software company in the learning and business performance management market, for approximately $48 million.

Merger reinforces SumTotal's market leadership and vertical industry strength with more than 1500 customers and 17 million users worldwide

MOUNTAIN VIEW, CA and COLUMBUS, OH -- (October 4, 2005) - SumTotal Systems, Inc. (NASDAQ: SUMT), the largest provider of learning and business performance technologies and services, today announced that it has completed its acquisition of privately-held Pathlore Software Corporation, also a leading enterprise software company in the learning and business performance management market, for approximately $48 million.

The acquisition of Pathlore helps SumTotal significantly increase its market share and reinforce its market leadership, with more than $100 million in expected annualized revenue and approximately $10 million in expected annual cash flow. With 17 million licensed users in over 1500 customer organizations - including over 60 of the Fortune 100 - spread across five continents, SumTotal has increased its scale to drive innovation and customer satisfaction.

The acquisition offers Pathlore customers access to SumTotal's broader enterprise suite of product capabilities and expanded global support. Additionally, SumTotal expects the acquisition to expand research and development capacity, helping set the stage for bringing product and services innovations to the market more rapidly and economically.

"SumTotal's acquisition of Pathlore results in a company with critical mass in the industry, increasing the potential for the development of more innovative learning environments and increasing the company's resilience in the market," said Jim Bauman, director of NCR University operations at NCR.

"For us, SumTotal's acquisition of Pathlore means the support we've gotten in the past will be even better; this acquisition has the potential to be quite powerful for Pathlore customers," said Christina Parr, director of training and organizational development at La Quinta Inns, Inc., a Pathlore customer. "We're taking a scientific approach to training; that means aligning learning and performance metrics. And with SumTotal's resources and industry know-how behind us, our goals may be easier to reach."

The merger also is expected to extend SumTotal's reach into key industry segments, including state government, health care and the rapidly growing middle-market. The Pathlore customer base includes more than 100 healthcare organizations -- including four of the 10 top hospitals in the U.S. -- as well as more than 200 government agencies in 38 of the 50 United States and abroad.

"We believe the combination of resources, market reach and expertise brought together by this merger represents tremendous new opportunities for our company, our customers and our partners," said R. Andrew Eckert, SumTotal CEO. "As never before, SumTotal is in a position to provide customers with the most comprehensive, effective solutions on the market to meet their critical needs and to innovate new solutions that anticipate the future demands of evolving industries, business environments and international markets."

Eckert will continue to lead SumTotal as CEO. Steve Thomas, president and CEO of Pathlore prior to the acquisition, has joined the SumTotal Board of Directors and will remain actively involved with the combined company.

Terms of the Agreement and Financials
Pathlore shareholders received approximately $29 million in cash and 4 million shares of SumTotal common stock. SumTotal has also entered into a $22.5 million Senior Secured Credit Facility with Wells Fargo Foothill, Inc. to finance, in part, the acquisition, provide for ongoing working capital needs and to provide for other general corporate purposes. This facility includes a term loan of $17.5 million repayable over four years and a revolver of $5 million.