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Agreement And Plan of Merger And Reorganization

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EXHIBIT 10.17


===============================================================================


AGREEMENT AND PLAN OF MERGER AND REORGANIZATION


among:


DNA SCIENCES, INC.,
a Delaware corporation;


PIPO ACQUISITION CORP.,
a Delaware corporation;


AND


PPGX, INC.,
a Delaware corporation;


---------------------------


Dated as of December 17, 2000


---------------------------


================================================================================


TABLE OF CONTENTS


PAGE


SECTION 1. DESCRIPTION OF TRANSACTION.............................................................................1


1.1 Merger of Merger Sub into the Company...........................................................1


1.2 Effect of the Merger............................................................................1


1.3 Closing; Effective Time.........................................................................1


1.4 Certificate of Incorporation and Bylaws; Directors and Officers.................................2


1.5 Conversion of Shares............................................................................2


1.6 Stock Options...................................................................................6


1.7 Closing of the Company's Transfer Books.........................................................7


1.8 Exchange of Certificates; Escrow Shares.........................................................7


1.9 Appraisal Rights...............................................................................10


1.10 Tax Consequences...............................................................................10


1.11 Accounting Treatment...........................................................................10


1.12 Further Action.................................................................................10


SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................10


2.1 Due Organization; Subsidiaries; Etc............................................................11


2.2 Certificate of Incorporation and Bylaws; Records...............................................11


2.3 Capitalization, Etc............................................................................12


2.4 Financial Statements...........................................................................13


2.5 Absence of Changes.............................................................................14


2.6 Title to Assets................................................................................16


2.7 Bank Accounts; Receivables.....................................................................16


2.8 Equipment; Leasehold...........................................................................17


2.9 Proprietary Assets.............................................................................17


2.10 Contracts......................................................................................20


2.11 Liabilities....................................................................................23


2.12 Compliance with Legal Requirements.............................................................23


2.13 Governmental Authorizations and Facility Certifications........................................23


2.14 Tax Matters....................................................................................24


2.15 Employee and Labor Matters; Benefit Plans......................................................25


2.16 Environmental Matters..........................................................................28


i.


TABLE OF CONTENTS
(CONTINUED)


PAGE


2.17 Insurance......................................................................................29


2.18 Related Party Transactions.....................................................................29


2.19 Legal Proceedings; Orders......................................................................29


2.20 Authority; Binding Nature of Agreement.........................................................30


2.21 Non-Contravention; Consents....................................................................30


2.22 Inapplicability of Section 2115 of California Corporations Code................................31


2.23 Vote Required..................................................................................31


2.24 Brokers or Finders.............................................................................31


2.25 Full Disclosure................................................................................31


SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...............................................32


3.1 Organization and Standing; Articles and Bylaws.................................................32


3.2 Capitalization.................................................................................32


3.3 Financial Statements...........................................................................33


3.4 Actions........................................................................................33


3.5 Title to Properties and Assets; Liens, etc.....................................................34


3.6 Patents, Trademarks, etc.......................................................................34


3.7 Proprietary Information and Inventions Agreements..............................................34


3.8 Material Contracts and Commitments.............................................................34


3.9 Compliance with Other Instruments..............................................................35


3.10 Validity of Parent Capital Stock...............................................................35


3.11 Governmental Authorizations....................................................................35


3.12 Tax Returns and Payments.......................................................................36


3.13 Tax Elections..................................................................................36


3.14 Employees......................................................................................36


3.15 Employee Benefit Plans.........................................................................36


3.16 Environmental Matters..........................................................................36


3.17 Insurance......................................................................................36


3.18 No Conflict of Interest........................................................................37


3.19 Litigation, etc................................................................................37


3.20 Authority; Binding Nature of Agreement.........................................................37


ii.


TABLE OF CONTENTS
(CONTINUED)


PAGE


3.21 Non-Contravention; Consents....................................................................37


3.22 Financial Condition............................................................................38


3.24 U.S. Real Property Holding Corporation.........................................................38


3.25 Investment Company Act.........................................................................38


3.26 No Brokers or Finders..........................................................................38


3.27 Full Disclosure................................................................................38


SECTION 4. CERTAIN COVENANTS OF THE PARTIES......................................................................38


4.1 Access and Investigation.......................................................................38


4.2 Operation of the Company's Business............................................................39


4.3 Notification; Updates to Company Disclosure Schedule...........................................41


4.4 Notification; Updates to Parent Disclosure Schedule............................................42


4.5 Operation of Parent's Business. During the Pre-Closing Period:................................43


4.6 No Negotiation.................................................................................44


SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES...................................................................44


5.1 Filings and Consents...........................................................................44


5.2 Company Stockholders' Meeting..................................................................44


5.3 Public Announcements...........................................................................45


5.4 Reasonable Efforts.............................................................................45


5.5 Tax Matters....................................................................................45


5.6 Noncompetition Agreements......................................................................46


5.7 Employment Agreements..........................................................................46


5.8 Releases.......................................................................................46


5.9 Underwriter Lockup Agreements..................................................................46


5.10 Amendment/Clarification of Existing Agreements; Payoff of Company Line of Credit...............46


5.11 Termination of Certain Agreements..............................................................47


5.12 FIRPTA Matters.................................................................................47


5.13 Employee and Related Matters...................................................................47


SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB..........................................48


6.1 Accuracy of Representations....................................................................48


iii.


TABLE OF CONTENTS
(CONTINUED)


PAGE


6.2 Performance of Covenants.......................................................................48


6.3 Stockholder Approval...........................................................................48


6.4 Consents.......................................................................................48


6.5 Agreements and Documents.......................................................................48


6.6 Absence of Material Adverse Effect.............................................................49


6.7 HSR Act........................................................................................49


6.8 FIRPTA Compliance..............................................................................50


6.9 No Restraints..................................................................................50


6.10 No Legal Proceedings...........................................................................50


6.11 Employees......................................................................................50


6.12 Termination of Certain Agreements..............................................................50


6.13 Closing of Series C Investment.................................................................50


6.15 Company Amended and Restated Certificate.......................................................50


SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY....................................................50


7.1 Accuracy of Representations....................................................................51


7.2 Performance of Covenants.......................................................................51


7.3 Documents......................................................................................51


7.4 No Restraints..................................................................................51


7.5 Absence of Material Adverse Effect.............................................................51


7.6 HSR Act........................................................................................51


7.7 Amended and Restated Certificate...............................................................52


7.8 Director Appointment...........................................................................52


7.9 Company Amended and Restated Certificate.......................................................52


SECTION 8. TERMINATION...........................................................................................52


8.1 Termination Events.............................................................................52


8.2 Termination Procedures.........................................................................53


8.3 Effect of Termination..........................................................................53


SECTION 9. INDEMNIFICATION, ETC..................................................................................53


9.1 Survival of Representations, Etc...............................................................53


9.2 Indemnification................................................................................54


iv.


TABLE OF CONTENTS
(CONTINUED)


PAGE


9.3 Deductible.....................................................................................55


9.4 Exclusive Remedy for Monetary Damages..........................................................55


9.5 No Contribution................................................................................56


9.6 Interest.......................................................................................56


9.7 Defense of Third Party Claims..................................................................56


9.8 Exercise of Remedies by Parent Indemnitees Other Than Parent...................................57


SECTION 10. MISCELLANEOUS PROVISIONS.............................................................................57


10.1 Stockholders' Agents...........................................................................57


10.2 Further Assurances.............................................................................57


10.3 Fees and Expenses..............................................................................57


10.4 Attorneys' Fees................................................................................57


10.5 Notices........................................................................................57


10.6 Confidentiality................................................................................59


10.7 Time of the Essence............................................................................59


10.8 Headings.......................................................................................59


10.9 Counterparts...................................................................................59


10.10 Governing Law..................................................................................59


10.11 Successors and Assigns.........................................................................59


10.12 Remedies Cumulative; Specific Performance......................................................59


10.13 Waiver.........................................................................................60


10.14 Amendments.....................................................................................60


10.15 Severability...................................................................................60


10.16 Parties in Interest............................................................................60


10.17 Entire Agreement...............................................................................60


10.18 Construction...................................................................................60


v.


AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION


THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is made and entered into as of December 17, 2000, by and among: DNA SCIENCES, INC., a Delaware corporation ("Parent"), PIPO ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and PPGX, INC., a Delaware corporation (the "Company"). Certain capitalized terms used in this Agreement are defined in EXHIBIT A.


RECITALS


A. Parent, Merger Sub and the Company intend to effect a merger of Merger Sub into the Company in accordance with this Agreement and the Delaware General Corporation Law (the "Merger"). Upon consummation of the Merger, Merger Sub will cease to exist, and the Company will become a wholly owned subsidiary of Parent.


B. It is intended that the Merger qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). For accounting purposes, it is intended that the Merger be treated as a "purchase."


C. This Agreement has been approved by the respective boards of directors of Parent, Merger Sub and the Company.


D. Contemporaneously with the execution and delivery of this Agreement, each of Axys Pharmaceuticals, Inc. ("Axys") and Pharmaceutical Product Development, Inc. ("PPD," and collectively with Axys, the "Major Stockholders") is executing and delivering to Parent a voting agreement (a "Voting Agreement") of even date herewith substantially in the form of EXHIBIT B.


AGREEMENT


The parties to this Agreement agree as follows:


SECTION 1. DESCRIPTION OF TRANSACTION


1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with and into the Company, and the separate existence of Merger Sub shall cease. The Company will continue as the surviving corporation in the Merger (the "Surviving Corporation").


1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in this Agreement and in the applicable provisions of the Delaware General Corporation Law.


1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Cooley Godward LLP, 3000 El Camino Real, Five Palo Alto Square, Palo Alto, California 94306 at 10:00 a.m. on a date to be


1.


mutually agreed upon by Parent and the Company no later than three days after the satisfaction (or, to the extent permitted, the waiver) of the conditions set forth in Sections 6 and 7. Contemporaneously with or as promptly as practicable after the Closing, a properly executed certificate of merger conforming to the requirements of the Delaware General Corporation Law shall be filed with the Secretary of State of the State of Delaware. The Merger shall become effective at the time such certificate of merger is filed with the Secretary of State of the State of Delaware (the "Effective Time").


1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Unless otherwise determined by Parent and the Company prior to the Effective Time:


(a) the certificate of incorporation of the Surviving
Corporation shall be amended and restated as of the Effective Time in a
form acceptable to Parent;


(b) the bylaws of the Surviving Corporation shall be amended
and restated as of the Effective Time to conform to the bylaws of Merger
Sub as in effect immediately prior to the Effective Time; and


(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals selected by
Parent prior to the Closing.


1.5 CONVERSION OF SHARES.


(a) Subject to Sections 1.8(c) and 1.9, at the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, the Company or any stockholder of the Company:


(i) each share of common stock of the Company (par value
$0.001 per share) ("Company Common Stock") outstanding immediately prior
to the Effective Time shall be converted into the right to receive a
fraction of a share of the common stock (par value $0.001 per share) of
Parent ("Parent Common Stock") equal to the Remainder Exchange Ratio;


(ii) each share of Series A preferred stock of the
Company (par value $0.001 per share) ("Company Series A Preferred Stock")
outstanding immediately prior to the Effective Time shall be converted
into the right to receive a fraction of a share of the Series D preferred
stock (par value $0.001 per share) of Parent ("Parent Series D Preferred
Stock," and together with Parent Common Stock, "Parent Capital Stock")
equal to the Series A Exchange Ratio; and


(iii) each share of the common stock (par value $0.001 per
share) of Merger Sub outstanding immediately prior to the Effective Time
shall be converted into one share of common stock of the Surviving
Corporation.


(b) For purposes of this Agreement:


2.


(i) The "Series A Exchange Ratio" shall be equal to (A) the
Liquidation Portion Exchange Ratio PLUS (B) the Remainder Exchange Ratio,
rounded to five decimal places.


(ii) The "Liquidation Consideration" shall be equal to (A) the
Debt Repayment DIVIDED BY (B) a fraction, the numerator of which is
$47,000,000, and the denominator of which is the Merger Consideration,
rounded to five decimal places.


(iii) The "Liquidation Portion Exchange Ratio" is equal to (A)
the Liquidation Consideration DIVIDED BY (B) 10,000,000, rounded to five
decimal places.


(iv) The "Remainder Exchange Ratio" shall be equal to (A) the
Merger Consideration MINUS the Liquidation Consideration DIVIDED BY (B)
the Aggregate Company Common Number, rounded to five decimal places.


(v) The "Debt Repayment" shall mean (A) the actual outstanding
indebtedness due and payable to the Bank (as defined in Section 4.2(k))
that is actually repaid by the Company on or prior to the Closing Date in
accordance with Section 5.10(c) and (B) the value of the indebtedness due
and payable to the Major Stockholders under the Loan Agreement (as
defined in Section 4.2(n)) that is actually contributed to capital of the
Company by the Major Stockholders on or prior to the Closing Date in
accordance with Section 5.10(c).


(vi) "Merger Consideration" shall be equal to (A) 0.1175 TIMES
(B) the Aggregate Parent Common Number.


(vii) The "Aggregate Parent Common Number" shall mean the sum of
(1) the total number of shares of Parent Common Stock that are issued and
outstanding on the date hereof; (2) the total number of shares of Parent
Common Stock that are issuable upon the conversion of any shares of
Parent Preferred Stock issued and outstanding on the date hereof; (3) the
total number of shares of Parent Common Stock that are issuable upon the
conversion of any shares of Parent Series C Preferred Stock issued to PPD
in connection with the closing of the Series C Investment (as defined in
Section 6.14) and issued or to be issued to Alliance Capital Partners;
(4) the total number of shares of Parent Common Stock that are issuable
upon the exercise in full of all warrants to acquire shares of Parent
Common Stock that are out
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