Exhibit 10.6
 
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS (COLLECTIVELY, THE
“ACTS”). NO INTEREST IN SUCH SECURITIES MAY BE SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACTS COVERING THE TRANSACTION, (II) ONYX RECEIVES AN OPINION OF COUNSEL
SATISFACTORY TO ONYX THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACTS, OR
(III) ONYX OTHERWISE SATISFIES ITSELF THAT REGISTRATION IS NOT REQUIRED UNDER
THE ACTS.
 
THE SECURITIES REPRESENTED BY THIS WARRANT ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A REGISTRATION RIGHTS AGREEMENT DATED JANUARY     , 2003, A COPY
OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION, AND MAY NOT BE
SOLD, TRANSFERRED OR ENCUMBERED EXCEPT IN ACCORDANCE WITH THE TERMS AND
PROVISIONS OF SAID AGREEMENT AS SAID AGREEMENT MAY FROM TIME TO TIME BE AMENDED
OR SUPPLEMENTED.
 
Warrant No. LT-3
 
                                         Number of Shares: 265,000
Date of Issuance: January __, 2003
 
                                         (subject to adjustment)

 
FORM OF WARRANT TO PURCHASE SHARES
OF COMMON STOCK OF
 
ONYX SOFTWARE CORPORATION
 
This Warrant is issued to Bellevue Hines Development, LLC, a Delaware limited
liability company, or its registered assigns (“Purchaser”), pursuant to that
certain Third Amendment to Lease dated as of December 20, 2002 between Onyx
Software Corporation, a Washington corporation (“Onyx”), and Purchaser (the
“Lease Amendment”), and is subject to the terms and conditions of the Lease
Amendment.
 

 
1.
 
Exercise of Warrant.

 
(a)    Method of Exercise.  Subject to the terms and conditions herein set
forth, upon surrender of this Warrant at Onyx’s principal office and upon
payment of the Warrant Price (as defined below) by wire transfer to Onyx, or
cashiers check drawn on a United States bank made to the order of Onyx, or
exercise of the right to credit the Warrant Price against the fair market value
of the Warrant Stock (as defined below) at the time of exercise (the “Net
Exercise Right”) pursuant to Section 1(b), Purchaser is entitled to purchase
from Onyx, at any time after the date hereof and on or before January     ,
2008, all or any portion of up to 265,000 shares (as adjusted from time to time
pursuant to the provisions of this Warrant) of common stock of Onyx (the
“Warrant Stock”), at a purchase price of $3.46 per share (the “Warrant Price”).

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(b)    Net Exercise Right.  If Onyx shall receive written notice from the holder
of this Warrant at the time of exercise of this Warrant that the holder elects
to exercise the Net Exercise Right, Onyx shall deliver to such holder (without
payment by Purchaser of any exercise price in cash) that number of fully paid
and nonassessable shares of common stock, par value $0.01 per share, of Onyx
(“Common Stock”) equal to the quotient obtained by dividing (y) the value of
this Warrant (or the specified portion thereof) on the date of exercise, which
value shall be determined by subtracting (1) the aggregate Warrant Price of the
Warrant Stock immediately prior to the exercise of this Warrant from (2) the
Aggregate Fair Market Value (as defined below) of the Warrant Stock (or the
specified portion thereof) issuable upon exercise of this Warrant (or specified
portion thereof) on the date of exercise by (z) the Fair Market Value (as
defined below) of one share of Common Stock on the date of exercise. The “Fair
Market Value” of a share of Common Stock shall mean the last reported sale price
and, if there are no sales, the last reported bid price, of the Common Stock on
the business day prior to the date of exercise as reported by the Nasdaq
National Market or such other principal exchange or quotation system on which
the Common Stock is then traded or, if the Common Stock is not publicly traded,
the price determined in good faith by Onyx’s Board of Directors. The “Aggregate
Fair Market Value” of the Warrant Stock shall be determined by multiplying the
number of shares of Warrant Stock by the Fair Market Value of one share of
Common Stock.
 

 
2.
 
Certain Adjustments and Payments.

 
(a)    Mergers or Consolidations.  If at any time after the date hereof there
shall be a capital reorganization (other than a combination or subdivision of
Warrant Stock otherwise provided for herein) (a “Reorganization”), or a merger
or consolidation of Onyx with another corporation (other than a merger with
another corporation in which Onyx is the continuing corporation and which does
not result in any reclassification or change of outstanding securities issuable
upon exercise of this Warrant or a merger effected exclusively for the purpose
of changing the domicile of Onyx) (a “Merger”), then, subject to Section 2(e),
as a part of such Reorganization or Merger, lawful provision shall be made so
that Purchaser shall thereafter be entitled to receive upon exercise of this
Warrant, during the period specified in this Warrant and upon payment of the
Warrant Price, that number of shares of stock or other securities or property of
Onyx or the successor corporation resulting from such Reorganization or Merger
to which a holder of the Warrant Stock deliverable upon exercise of this Warrant
would have been entitled under the provisions of the agreement relating such
Reorganization or Merger if this Warrant had been exercised immediately before
such Reorganization or Merger. In any such case, appropriate adjustment (as
determined in good faith by Onyx’s Board of Directors) shall be made in the
application of the provisions of this Warrant with respect to the rights and
interests of Purchaser after the Reorganization or Merger to the end that the
provisions of this Warrant (including adjustment of the Warrant Price then in
effect and the number of shares of Warrant Stock) shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
 
(b)    Splits and Subdivisions; Dividends.  In the event Onyx should at any time
or from time to time fix a record date for effecting a split or subdivision of
the outstanding shares of Common Stock or determining the holders of Common
Stock entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares

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of Common Stock (hereinafter referred to as the “Common Stock Equivalents”)
without payment of any consideration by such holder for the additional shares of
Common Stock or Common Stock Equivalents (including the additional shares of
Common Stock issuable upon conversion or exercise thereof), then, as of such
record date (or the date of such distribution, split or subdivision if no record
date is fixed), the per share Warrant Price shall be appropriately decreased and
the number of shares of Warrant Stock shall be appropriately increased in
proportion to such increase (or potential increase) of outstanding shares.
 
(c)    Combination of Shares.  If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, the per share Warrant Price shall be
appropriately increased and the number of shares of Warrant Stock shall be
appropriately decreased in proportion to such decrease in outstanding shares.
 
(d)    Adjustments for Other Distributions.  In the event Onyx shall declare a
distribution payable in securities of other persons, evidences of indebtedness
issued by Onyx or other persons, assets (excluding cash dividends paid out of
net profits) or options or rights not referred to in Section 2(b), then, in each
such case for the purpose of this Section 2(d), upon exercise of this Warrant
the holder hereof shall be entitled to a proportionate share of any such
distribution as though such holder was the holder of the number of shares of
Common Stock into which this Warrant may be exercised as of the record date
fixed for determining the holders of Common Stock entitled to receive such
distribution.
 
(e)    Change of Control Cancellation Payment.  In the event that on or before
January     , 2005 (the “Second Anniversary Date”), Onyx completes (i) a Merger
in which the shareholders of Onyx immediately prior to such Merger own less than
50% of the voting power of the surviving entity immediately following such
Merger or (ii) a sale of all or substantially all of Onyx’s stock or assets to
an entity in which the shareholders of Onyx own less than 50% of the voting
power of such entity (a “Change of Control”), the holder hereof shall be
entitled to elect to cancel any unexercised portion of this Warrant, in whole or
in part, and to receive, in lieu of and not in addition to receiving the
securities or other property provided in Section 2(a), in exchange for such
cancellation, a cash payment (the “Change of Control Payment”) in the amount of
$3.476 per share of Warrant Stock as to which this Warrant is so cancelled. Such
election shall be made by delivering notice to Onyx no later than ten (10)
business days after receipt by the holder of notice of such Change of Control
pursuant to Section 10. The Change of Control Payment shall be made by Onyx or
the entity surviving such Change of Control prior to the consummation of such
Change of Control by wire transfer of immediately available funds to such
account as the holder hereof shall direct.
 
(f)    Preferential Securities Cancellation Payment.  In the event that on or
before the Second Anniversary Date, Onyx issues any new equity securities having
a liquidation preference, right to dividends, redemption right or other economic
right or preference superior to the Common Stock (a “Senior Security”), or any
securities convertible into or exchangeable for any such Senior Security (other
than any Series A Participating Cumulative Preferred Stock issued pursuant to
that certain Rights Agreement, dated as of October 25, 1999, between Onyx and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent, or any securities
issued as a dividend or distribution on the Common Stock as described in Section
2(b)) (a “Preferential

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Issuance”), the holder hereof shall be entitled to elect to cancel any
unexercised portion of this Warrant, in whole or in part, and to receive, in
lieu of and not in addition to any other payment or issuance hereunder, in
exchange for such cancellation, a cash payment (the “Preferential Issuance
Payment”) in the amount of $3.476 per share of Warrant Stock as to which this
Warrant is so cancelled. Such election shall be made by delivering notice (the
“Cashout Election Notice”) to Onyx no later than thirty (30) calendar days after
receipt by the holder of notice of such Preferential Issuance pursuant to
Section 10. The Preferential Issuance Payment shall be made by Onyx no later
than five (5) business days after the date on which Onyx receives the Cashout
Election Notice by wire transfer of immediately available funds to such account
as the holder hereof shall direct in the Preferential Election Notice.
 
3.    No Fractional Shares.  No fractional shares of Warrant Stock will be
issued in connection with any exercise of this Warrant. In lieu of any
fractional shares that would otherwise be issuable, Onyx shall pay cash equal to
the product of such fraction multiplied by the Fair Market Value of one share of
Warrant Stock.
 
4.    No Shareholder Rights.  Until the exercise of this Warrant or any portion
of this Warrant, Purchaser shall not have nor exercise any rights by virtue
hereof as a shareholder of Onyx (including, without limitation, the right to
notification of shareholder meetings or the right to receive any notice or other
communication concerning the business and affairs of Onyx).
 
5.    Reservation of Stock.  Onyx covenants that during the period this Warrant
is exercisable, Onyx will reserve from its authorized and unissued Common Stock
a sufficient number of shares of Common Stock (or other securities, if
applicable) to provide for the issuance of Warrant Stock (or other securities)
upon the exercise of this Warrant. Onyx agrees that its issuance of this Warrant
shall constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
the Warrant Stock upon the exercise of this Warrant.
 
6.    Mechanics of Exercise.  This Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant and the Notice of
Intent to Exercise attached hereto as Exhibit A duly completed and executed on
behalf of the holder hereof, at the principal office of Onyx, together with
payment in full of the Warrant Price then in effect with respect to the number
of shares of Warrant Stock as to which this Warrant is being exercised. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Warrant Stock issuable upon such exercise shall
be treated for all purposes as the holder of such shares of record as of the
close of business on such date. As promptly as practicable on or after such
date, Onyx at its expense shall cause to be issued and delivered to the person
or persons entitled to receive the same a certificate or certificates for the
number of full shares of Warrant Stock issuable upon such exercise, together
with cash in lieu of any fractional share as provided above. The shares of
Warrant Stock issuable upon exercise hereof shall, upon their issuance, be
validly issued, fully paid and nonassessable, and free from all preemptive
rights, taxes, liens and charges with respect to the issue thereof. In the event
that this Warrant is exercised in part, Onyx at its expense will execute and
deliver a new Warrant of like tenor exercisable for the number of shares of
Common Stock for which this Warrant may then be exercised.

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7.      Certificate of Adjustment.  Whenever the Warrant Price or number or type
of securities issuable upon exercise of this Warrant is adjusted as herein
provided, Onyx shall, at its expense, promptly deliver to the record holder of
this Warrant a certificate of an officer of Onyx setting forth the nature of
such adjustment and showing in detail the facts upon which such adjustment is
based.
 
8.      Representations of Onyx and Purchaser.  As of the date hereof, Purchaser
hereby confirms the representations and warranties made by Purchaser in Section
2 of the Lease Amendment and Onyx hereby confirms the representations and
warranties made by Onyx in Section 3 of the Lease Amendment.
 
9.      Transfer Restrictions.
 
(a)    Unregistered Security.  The holder of this Warrant acknowledges that this
Warrant and the Warrant Stock have not been registered under the Securities Act
of 1933, as amended (the “Securities Act”), or applicable state securities laws
(collectively, the “Acts”), and agrees not to sell, encumber or otherwise
transfer this Warrant or any Warrant Stock issued upon its exercise unless (i)
there is an effective registration statement under the Acts covering the
transaction, (ii) Onyx receives an opinion of counsel satisfactory to Onyx that
such registration is not required under the Acts or (iii) Onyx otherwise
satisfies itself that registration is not required under the Acts. Each
certificate or other instrument for Warrant Stock issued upon the exercise of
this Warrant shall bear a legend substantially to the foregoing effect.
 
(b)    No Transfer.  This Warrant is not transferable without Onyx’s prior
written consent; provided, however, such consent shall not be required in
connection with the transfer by Purchaser of this Warrant (but only with all
related obligations) without consideration to one or more Qualifying Holders (as
such term is defined in Section 3 of the Registration Rights Agreement between
Onyx and Purchaser entered into in connection with the Lease Amendment dated as
of even date herewith), provided that (i) written notice (in the form of Exhibit
B attached hereto) is provided to Onyx at least five (5) business days prior to
any such transfer, (ii) each transferee is an “accredited investor” as defined
in Rule 501(a) of Regulation D promulgated under the Securities Act and (iii)
each transferee agrees in writing to be bound by all of the provisions of this
Warrant.
 
(c)    Warrant Certificates and Fractional Shares.  As promptly as practicable
on or after the date on which Onyx receives notice of a permitted Transfer
pursuant to Section 9(b), Onyx at its expense shall cause to be issued and
delivered to each transferee entitled to receive the same a certificate or
certificates for the number of full shares of Warrant Stock subject to such
Warrant, together with cash in lieu of any fractional shares as provided in
Section 3; provided, however, that in no event shall Onyx be obligated to pay
cash in lieu of fractional shares to the extent this Warrant is transferred to
more than ten (10) transferees.
 
10.    Notices of Record Date and Other Events. In the event of:
 
(a)    any taking by Onyx of a record of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to receive
any dividend (other than a cash dividend payable out of earned surplus of Onyx)
or other distribution, or any right to

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subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right;
 
(b)    any Reorganization or Merger, and/or any Change of Control;
 
(c)    any voluntary or involuntary dissolution, liquidation or winding-up of
Onyx; or
 
(d)    any Preferential Issuance,
 
then and in each such event Onyx will mail or cause to be mailed to the holder
of this Warrant a notice specifying (i) the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, (ii) the date
on which any such Reorganization, Merger, Change of Control, dissolution,
liquidation or winding-up is to take place, and the time, if any, as of which
the holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such Reorganization, Merger, Change of Control,
dissolution, liquidation or winding-up or (iii) the date of such Preferential
Issuance. In the case of any notice of the events specified in subsection (a),
(b) or (c) above, such notice shall be mailed at least twenty (20) business days
prior to the date therein specified. In the case of a notice of the event
specified in subsection (d), such notice shall be mailed no later than ten (10)
business days after the date therein specified.
 
11.    Replacement of Warrants.  On receipt of evidence reasonably satisfactory
to Onyx of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft, destruction or mutilation of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to Onyx or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, Onyx at its expense will execute and deliver, in
lieu thereof, a new Warrant of like tenor.
 
12.    No Impairment.  Except to the extent as may be waived by the holder of
this Warrant, Onyx will not, by amendment of its charter or through a
Reorganization, Merger, dissolution or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in carrying out all such terms and taking
all such action as may be necessary or appropriate in order to protect the
rights of the holder of this Warrant against impairment.
 
13.    Saturdays, Sundays, Holidays, Etc.  If the last or appointed day for
taking any action or the expiration of any right required or granted herein
shall be a Saturday or Sunday or a legal holiday, then such action may be taken
or such right may be exercised on the next succeeding day not a Saturday, Sunday
or legal holiday.
 
14.    Notice and Cure of Breach.  If any holder of this Warrant believes Onyx
to be in default of any term of this Warrant, such holder shall first notify
Onyx in writing of the existence and the exact nature of the alleged default
and, if such default is capable of cure, Onyx shall have ten (10) days after
receipt of such notice to cure the alleged default. For purposes of this
Warrant, the Lease Amendment and the other documents related thereto, Onyx shall
not be deemed to be in default of any term or covenant contained in this
Warrant, unless Onyx is

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provided notice of such default in accordance with this Section 14 and fails to
cure any alleged default within the cure period provided in this Section 14.
 
15.    Miscellaneous.  This Warrant shall be governed by the laws of the state
of Washington. The headings in this Warrant are for purposes of convenience of
reference only, and shall not be deemed to constitute a part hereof. Neither
this Warrant nor any term hereof may be changed, waived, discharged or
terminated orally but only by an instrument in writing signed by Onyx and
Purchaser. Any notice required or permitted by this Warrant shall be in writing
and shall be given by personal delivery, confirmed facsimile transmission,
overnight courier service or certified or registered mail (airmail if sent
internationally) with postage prepaid), to any holder at its address as shown on
the books of Onyx or to Onyx, as applicable, at the address of its principal
office, and if to Onyx, with a copy to Alan C. Smith, Orrick, Herrington &
Sutcliffe LLP, 719 Second Avenue, Suite 900, Seattle, Washington 98104. The
effective date of any notice shall be the date of personal delivery, the date on
which successful facsimile transmission is confirmed, the date actually
delivered by a reputable overnight courier service or forty-eight hours after
mail deposit, as the case may be, in each case properly addressed and with all
charges prepaid. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provisions.

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IN WITNESS WHEREOF, this Common Stock Purchase Warrant is issued effective as of
this          day of January, 2003.
 
ONYX SOFTWARE CORPORATION
By:
       

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Brian C. Henry
Executive Vice President and Chief Financial Officer

 
SIGNATURE PAGE TO THE WARRANT
TO PURCHASE SHARES OF COMMON STOCK

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EXHIBIT A
 
NOTICE OF INTENT TO EXERCISE
(To be signed only upon exercise of Warrant)
 
To:    ONYX SOFTWARE CORPORATION
 
The undersigned, Purchaser of the attached Warrant, hereby irrevocably elects to
exercise the purchase right represented by such Warrant for, and to purchase
thereunder,                      (            ) shares of Common Stock of Onyx
Software Corporation and (choose one)
 
                herewith makes payment of                              Dollars
($                    ) thereof
 
or
 
                exercises the Net Exercise Right pursuant to Section 1(b)
thereof;
 
and requests that the certificates for such shares be issued in the name of, and
delivered to                                     , whose address is
 
                                                                              
                                        
                                        
                                        
                                                             
 
DATED:                     
 

   

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(Signature must conform in all respects to name
of Purchaser as specified on the face of the
Warrant)
   
 

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(Address)

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EXHIBIT B
 
NOTICE OF ASSIGNMENT FORM
 
FOR VALUE RECEIVED,                                               (the
“Assignor”) hereby sells, assigns and transfers all of the rights of the
undersigned Assignor under the attached Warrant with respect to the number of
shares of common stock of Onyx Software Corporation (the “Company”) covered
thereby set forth below, to the following “Assignee” and, in connection with
such transfer, represents and warrants to the Company that (i) such Assignee is
a Qualifying Holder (as such term is defined in Section 3 of the Registration
Rights Agreement, dated as of January         , 2003, between Onyx and Purchaser
entered into in connection with the Lease Amendment dated as of December 20,
2002) of the Assignor and (ii) the transfer is otherwise in compliance with
Section 9(b) of the Warrant:
 
Name of Assignee

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Address/Fax Number

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No. of Shares

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Dated:
 

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Signature:
 

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Witness:
 

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ASSIGNEE ACKNOWLEDGEMENT
 
The undersigned Assignee acknowledges that it has reviewed the attached Warrant
and by its signature below it hereby represents and warrants that it is a
Qualifying Holder and an “accredited investor” as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act of 1933, as amended, and
agrees to be bound by the terms and conditions of the attached Warrant as of the
date hereof.
 
Signature:
 

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By:
 

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Its:
 

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Address:
 

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