8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) December 16, 2004

VIROLOGIC, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-30369	94-3234479
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

345 Oyster Point Blvd. South San Francisco, California	94080
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code

(650) 635-1100

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

Effective upon the closing of its merger with ACLARA BioSciences, Inc. on December 10, 2004, the Board of Directors of ViroLogic, Inc. (the “Company”) appointed John Mendlein and Thomas Baruch, who previously served as ACLARA directors, to the ViroLogic Board of Directors. In connection with that appointment, on December 16, 2004, the Board of Directors of the Company granted to each of Mr. Mendlein and Mr. Baruch stock options to purchase 30,000 shares of the Company’s Common Stock. These stock options were granted under the Company’s 2004 Equity Incentive Plan (the “Incentive Plan”), a copy of which is included as Exhibit 99.1 and incorporated herein by reference. The options, which are nonstatutory options, have a term of eight (8) years and vest monthly over a period of thirty-six (36) months. They also include a provision pursuant to which their vesting and exercisability will be accelerated upon a change in control (as defined in the Incentive Plan) of the Company. The form of option agreement used by the Company for option grants to directors and executive officers under the Incentive Plan is included as Exhibit 99.2 and incorporated herein by reference.

On December 21, 2004, the Company entered into a letter agreement with Karen J. Wilson, who had served as the Company’s Chief Financial Officer until the closing of its merger with ACLARA. A copy of the letter agreement is included as Exhibit 99.3 and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits.

Exhibit Number	Description
99.1 (1)	ViroLogic, Inc. 2004 Equity Incentive Plan
99.2	Form of Option Agreement Under ViroLogic, Inc. 2004 Equity Incentive Plan
99.3	Letter Agreement with Karen J. Wilson

(1) Filed as an exhibit to Registrant’s Registration Statement on Form S-8 (No. 333-121437) and incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ViroLogic, Inc.
Date: December 22, 2004	/s/ Kathy L. Hibbs
	Kathy L. Hibbs Vice President, General Counsel

Exhibit Index

Exhibit Number	Description
99.1 (1)	ViroLogic, Inc. 2004 Equity Incentive Plan
99.2	Form of Option Agreement Under ViroLogic, Inc. 2004 Equity Incentive Plan
99.3	Letter Agreement with Karen J. Wilson

(1) Filed as an exhibit to Registrant’s Registration Statement on Form S-8 (No. 333-121437) and incorporated herein by reference.

EX-99.2

Exhibit 99.2

VIROLOGIC, INC.

STOCK OPTION GRANT NOTICE

(2004 EQUITY INCENTIVE PLAN)

ViroLogic, Inc. (the “Company”), pursuant to its 2004 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below. This option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement, the Plan and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.

Optionholder:	_____________________________________________________________
Date of Grant:	_____________________________________________________________
Vesting Commencement Date:	_____________________________________________________________
Number of Shares Subject to Option:	_____________________________________________________________
Exercise Price (Per Share):	_____________________________________________________________
Total Exercise Price:	_____________________________________________________________
Expiration Date:	_____________________________________________________________

Type of Grant:	Incentive Stock Option1	Nonstatutory Stock Option
Exercise Schedule:	Same as Vesting Schedule	Early Exercise Permitted
Vesting Schedule:	_____________________________________________________________
Payment:	By one or a combination of the following items (described in the Stock Option Agreement):
	¨     By cash or check
	¨     Pursuant to a Regulation T Program if the Shares are publicly traded
	¨     By delivery of already-owned shares if the Shares are publicly traded
	¨     By deferred payment

Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Stock Option Grant Notice, the Stock Option Agreement and the Plan. Optionholder further acknowledges that as of the Date of Grant, this Stock Option Grant Notice, the Stock Option Agreement and the Plan set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject with the exception of (i) options previously granted and delivered to Optionholder under the Plan, and (ii) the following agreements only:

OTHER AGREEMENTS:	________________________________________________________________
	________________________________________________________________

VIROLOGIC, INC.		OPTIONHOLDER:
By:
	Signature		Signature
Title:		Date:
Date:

ATTACHMENTS: Stock Option Agreement, 2004 Equity Incentive Plan and Notice of Exercise

¹ If this is an Incentive Stock Option, it (plus other outstanding Incentive Stock Options) cannot be first exercisable for more than $100,000 in value (measured by exercise price) in any calendar year. Any excess over $100,000 is a Nonstatutory Stock Option.

ATTACHMENT I

STOCK OPTION AGREEMENT

VIROLOGIC, INC.

2004 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

(INCENTIVE STOCK OPTIONOR NONSTATUTORY STOCK OPTION)

Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Stock Option Agreement, ViroLogic, Inc. (the “Company”) has granted you an option under its 2004 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan.

The details of your option are as follows:

1. VESTING. Subject to the limitations contained herein, your option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.

2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common Stock subject to your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments.

3. EXERCISE PRIOR TO VESTING (“EARLY EXERCISE”). If permitted in your Grant Notice (i.e., the “Exercise Schedule” indicates that “Early Exercise” of your option is permitted) and subject to the provisions of your option, you may elect at any time that is both (i) during the period of your Continuous Service and (ii) during the term of your option, to exercise all or part of your option, including the nonvested portion of your option; provided, however, that:

(a) a partial exercise of your option shall be deemed to cover first vested shares of Common Stock and then the earliest vesting installment of unvested shares of Common Stock;

(b) any shares of Common Stock so purchased from installments that have not vested as of the date of exercise shall be subject to the purchase option in favor of the Company as described in the Company’s form of Early Exercise Stock Purchase Agreement; and

(c) you shall enter into the Company’s form of Early Exercise Stock Purchase Agreement with a vesting schedule that will result in the same vesting as if no early exercise had occurred.

4. ISO EXERCISE LIMITATION.

(a) The aggregate Fair Market Value of the shares of Common Stock with respect to which you may exercise your option for the first time during any calendar year, when added to the aggregate Fair Market Value of the shares of Common Stock subject to any other

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options designated as Incentive Stock Options and granted to you under any stock option plan of the Company or an Affiliate prior to the Date of Grant with respect to which such options are exercisable for the first time during the same calendar year, shall not exceed $100,000 (the “ISO Exercise Limitation”) unless applicable law requires that your option be exercisable sooner. For purposes of this Section 4, your options designated as Incentive Stock Options shall be taken into account in the order in which they were granted to you, and the Fair Market Value of shares of Common Stock shall be determined as of the time the option with respect to such shares of Common Stock is granted. If Section 422 of the Code is amended to provide for a different limitation from that set forth in this provision, the ISO Exercise Limitation shall be deemed amended effective as of the date required or permitted by such amendment to the Code.

(b) [Notwithstanding the provisions of Section 4(a), if the ISO Exercise Limitation would prevent you from exercising your option as to vested shares, then the ISO Exercise Limitation shall terminate as to such vested shares [as such shares vest] [thirty (30) days after such shares vest], and you may exercise your option as to such vested shares. Upon such termination of the ISO Exercise Limitation, your option shall be deemed a Nonstatutory Stock Option to the extent of the number of vested shares of Common Stock subject to your option that exceed the ISO Exercise Limitation.]

(c) The ISO Exercise Limitation shall terminate, and you may fully exercise your option, as to all vested shares of Common Stock subject to your option, upon the earlier of the following events:

(i) the date of termination of your Continuous Service;

(ii) the day immediately prior to the effective date of a Corporate Transaction; or

(iii) the day that is ten (10) days prior to the Expiration Date of your option.

(d) Upon such termination of the ISO Exercise Limitation, your option shall be deemed a Nonstatutory Stock Option to the extent of the number of shares of Common Stock subject to your option that exceed the ISO Exercise Limitation.

5. METHOD OF PAYMENT. Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice, which may include one or more of the following:

(a) In the Company’s sole discretion at the time your option is exercised and provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.

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(b) Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by delivery of already-owned shares of Common Stock either that you have held for the period required to avoid a charge to the Company’s reported earnings (generally six (6) months) or that you did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.

(c) Pursuant to the following deferred payment alternative:

(i) Not less than one hundred percent (100%) of the aggregate exercise price, plus accrued interest, shall be due four (4) years from date of exercise or, at the Company’s election, upon termination of your Continuous Service.

(ii) Interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid (1) the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement and (2) the treatment of the Option as a variable award for financial accounting purposes.

(iii) At any time that the Company is incorporated in Delaware, payment of the Common Stock’s “par value,” as defined in the Delaware General Corporation Law, shall be made in cash and not by deferred payment.

(iv) In order to elect the deferred payment alternative, you must, as a part of your written notice of exercise, give notice of the election of this payment alternative and, in order to secure the payment of the deferred exercise price to the Company hereunder, if the Company so requests, you must tender to the Company a promissory note and a pledge agreement covering the purchased shares of Common Stock, both in form and substance satisfactory to the Company, or such other or additional documentation as the Company may request.

6. WHOLE SHARES. You may exercise your option only for whole shares of Common Stock.

7. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option also must comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.

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8. TERM. You may not exercise your option before the commencement of its term or after its term expires. The term of your option commences on the Date of Grant and expires upon the earliest of the following:

(a) immediately upon the termination of your Continuous Service for Cause;

(b) three (3) months after the termination of your Continuous Service for any reason other than Cause, Disability or death, provided that if during any part of such three- (3-) month period you may not exercise your option solely because of the condition set forth in the preceding paragraph relating to “Securities Law Compliance,” your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service;

(c) twelve (12) months after the termination of your Continuous Service due to your Disability;

(d) eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates for any reason other than Cause;

(e) the Expiration Date indicated in your Grant Notice; or

(f) the day before the eighth (8th) anniversary of the Date of Grant.

If your option is an Incentive Stock Option, note that, to obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times beginning on the date of grant of your option and ending on the day three (3) months before the date of your option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability. The Company has provided for extended exercisability of your option under certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an Incentive Stock Option if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your option more than three (3) months after the date your employment terminates..

9. EXERCISE.

(a) You may exercise the vested portion of your option (and the unvested portion of your option if your Grant Notice so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.

(b) By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the

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payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such exercise.

(c) If your option is an Incentive Stock Option, by exercising your option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your option that occurs within two (2) years after the date of your option grant or within one (1) year after such shares of Common Stock are transferred upon exercise of your option.

10. [CHANGE IN CONTROL.

(a) If a Change in Control occurs and your Continuous Service with the Company has not terminated as of, or immediately prior to, the effective time of the Change in Control, then, as of the effective time of such Change in Control, the vesting and exercisability of your option shall be accelerated in full.]

OR

10. [CHANGE IN CONTROL.

(a) If a Change in Control occurs and as of, or within thirteen (13) months after, the effective time of such Change in Control your Continuous Service terminates due to an involuntary termination (not including death or Disability) without Cause or due to a voluntary termination with Good Reason, then, as of the date of termination of Continuous Service, the vesting and exercisability of your option shall be accelerated in full.

(b) “Good Reason” means that one or more of the following are undertaken by the Company without your express written consent: (i) the assignment to you of any duties or responsibilities that results in a [material] diminution in your function as in effect immediately prior to the effective date of the Change in Control; provided, however, that a change in your title or reporting relationships shall not provide the basis for a voluntary termination with Good Reason; (ii) a [material] reduction by the Company in your annual base salary, as in effect on the effective date of the Change in Control or as increased thereafter; provided, however, that Good Reason shall not be deemed to have occurred in the event of a reduction in your annual base salary that is pursuant to a salary reduction program affecting substantially all of the employees of the Company and that does not adversely affect you to a greater extent than other similarly situated employees; (iii) any failure by the Company to continue in effect any benefit plan or program, including incentive plans or plans with respect to the receipt of securities of the Company, in which you were participating immediately prior to the effective date of the Change in Control (hereinafter referred to as “Benefit Plans”), or the taking of any action by the Company that would adversely affect your participation in or reduce your benefits under the Benefit Plans or deprive you of any fringe benefit that you enjoyed immediately prior to the effective date of the Change in Control; provided, however, that Good Reason shall not be deemed to have occurred if the Company provides for your participation in benefit plans and programs that, taken as a whole, are comparable to the Benefit Plans; (iv) a relocation of your

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business office to a location more than thirty-five (35) miles from the location at which you performed your duties as of the effective date of the Change in Control, except for required travel by you on the Company’s business to an extent substantially consistent with your business travel obligations prior to the effective date of the Change in Control; or (v) a material breach by the Company of any provision of the Plan or the Option Agreement or any other material agreement between you and the Company concerning the terms and conditions of your employment.]

[(b)/(c)] If any payment or benefit you would receive pursuant to a Change in Control from the Company or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in your receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order unless you elect in writing a different order (provided, however, that such election shall be subject to Company approval if made on or after the effective date of the event that triggers the Payment): reduction of cash payments; cancellation of accelerated vesting of Stock Awards; reduction of employee benefits. In the event that acceleration of vesting of Stock Award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of your Stock Awards (i.e., earliest granted Stock Award cancelled last) unless you elect in writing a different order for cancellation.

The accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder.

The accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to you and the Company within fifteen (15) calendar days after the date on which your right to a Payment is triggered (if requested at that time by you or the Company) or such other time as requested by you or the Company. If the accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish you and the Company with an opinion reasonably acceptable to you that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon you and the Company, except as set forth below.

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If, notwithstanding any reduction described in this Section 10, the IRS determines that you are liable for the Excise Tax as a result of the receipt of the payment of benefits as described above, then you shall be obligated to pay back to the Company, within thirty (30) days after a final IRS determination or in the event that you challenge the final IRS determination, a final judicial determination, a portion of the payment equal to the “Repayment Amount.” The Repayment Amount with respect to the payment of benefits shall be the smallest such amount, if any, as shall be required to be paid to the Company so that your net after-tax proceeds with respect to any payment of benefits (after taking into account the payment of the Excise Tax and all other applicable taxes imposed on such payment) shall be maximized. The Repayment Amount with respect to the payment of benefits shall be zero if a Repayment Amount of more than zero would not result in your net after-tax proceeds with respect to the payment of such benefits being maximized. If the Excise Tax is not eliminated pursuant to this paragraph, you shall pay the Excise Tax.

Notwithstanding any other provision of this Section 10, if (i) there is a reduction in the payment of benefits as described in this section, (ii) the IRS later determines that you are liable for the Excise Tax, the payment of which would result in the maximization of your net after-tax proceeds (calculated as if your benefits had not previously been reduced), and (iii) you pay the Excise Tax, then the Company shall pay to you those benefits which were reduced pursuant to this section contemporaneously or as soon as administratively possible after you pay the Excise Tax so that your net after-tax proceeds with respect to the payment of benefits is maximized..

11. TRANSFERABILITY. Your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option.

12. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.

13. WITHHOLDING OBLIGATIONS.

(a) At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your option.

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(b) Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid variable award accounting). If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your option. Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.

(c) You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.

14. NOTICES. Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.

15. GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.

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EX-99.3

Exhibit 99.3

Karen Wilson

2263 Mimosa Court

Los Altos, CA 94024

Dear Karen:

As you know, following the Company’s recent merger with Aclara Biosciences, Inc. you resigned as Chief Financial Officer. In recognition of your service and contributions to the Company the Board of Directors has approved the following terms concerning your separation of employment (the “Agreement”), provided that you sign this Agreement.

1. Separation. Your last day of work and employment with the Company will be December 31, 2004 (the “Separation Date”). You have agreed to assist the Company for one year following the Separation Date (the Consulting Period). The consulting agreement between you and the Company is attached hereto as Exhibit A.

2. Accrued Salary Time Off and Employee Stock Purchase Plan. On the Separation Date, the Company will pay you:

• all accrued salary

• all accrued and unused vacation earned through the Separation Date

• unused floating holidays

• all excess monies withheld to make an Employee Stock Purchase Plan (“ESPP”) purchase

Except for the ESPP refund, these payments are all subject to standard payroll deductions and required withholdings.

3. Severance Benefits. As part of this Agreement, the Company will pay you a severance payment equal to twelve (12) months of your final base salary, less standard payroll deductions and required withholdings, payable in bi-weekly installments over the twelve (12) month period following the Separation Date.

4. Health Insurance. You will receive a separate notice regarding your COBRA benefits.

5. Stock Options. During the course of your employment you were granted options to purchase shares of the Company’s common stock pursuant to the Company’s 2000 and 2002 Equity Incentive Plans (the “Plan”) as represented by the Company’s corresponding grants to you (“Option Grants”). The vesting for any unvested shares as of the Separation Date under the Option Grants shall be accelerated and any unvested shares shall be vested as of the Effective Date (defined below). Your right to exercise your option as any vested shares shall expire ninety (90) days after the end of the Consulting Period.

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6. 401(k) Plan. Contributions to your 401(k) plan will cease as of the Separation Date. Information regarding distribution or rollover options with respect to your account will be provided as part of your Exit Package.

7. Life and AD&D Insurance. Your Group Life and Accidental Death and Dismemberment insurance coverage will cease as of the Separation Date.

8. Flexible Spending Plan. If you enrolled in the Company’s Flexible Spending Plan, you may be eligible for reimbursement for health or dependent care expenses incurred before the Separation Date. You will have ninety (90) days following the Separation Date to submit expenses to ProBusiness. Information will be included in your Exit Package.

9. Other Compensation or Benefits. You acknowledge that, except as expressly provided in this Agreement, you will not receive any additional compensation, severance or benefits from the Company after the Separation Date.

10. Expense Reimbursements. You must submit any expense reimbursement requests within thirty (30) days of your Separation Date.

11. Return of Company Property. You agree to return to the Company, no later than the end of the Consulting Period, all Company documents (and all copies thereof) and other Company property that you had in your possession at any time, including, but not limited to, Company issued cellular telephones, laptop computers, monitors, Palm Pilots, and projectors; Company files, notes, notebooks, correspondence, memoranda, drawings, records, Company plans, business plans, proposals, reports, analyses, studies, investment documents, agreements, forecasts, financial information, specifications and computer-recorded information; tangible property, credit cards, entry cards, identification badges and keys; and, any materials of any kind that contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part). During the Consulting Period you may maintain, Company issued cellular telephones, laptop computers, and monitors. The timely return of such property is a condition precedent to the Company providing you severance benefits under this Agreement.

12. Proprietary Information Obligations. You acknowledge your continuing obligations under your ViroLogic, Inc. Employee Proprietary Information Agreement, a copy of which will be included in your Exit Package.

13. Nondisparagement. Both you and the Company agree not to disparage the other party, and the other party’s officers, directors, employees, shareholders and agents, in any manner likely to be harmful to them or their business, business reputation or personal reputation; provided that both you and the Company will respond accurately and fully to any question, inquiry or request for information when required by legal process.

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14. General Release. In exchange for the severance payment and other consideration you will receive under this Agreement, you hereby generally and completely release the Company and its officers, directors, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, agreements, acts, conduct or omissions occurring at any time prior to and including the date you sign this Agreement. This general release includes but is not limited to: (a) all claims arising out of or in any way related to your employment with the Company or the termination of that employment; (b) all claims or demands related to your compensation or benefits, salary, bonuses, commissions, vacation pay, expense reimbursement, severance pay, fringe benefits, stock, stock options, or any other equity or ownership interests in the Company; (c) all claims for breach of contract, wrongful termination and breach of the implied covenant of good faith and fair dealing; (d) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (e) all federal, state and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964, as amended; the federal Americans with Disabilities Act of 1990; the federal Age Discrimination in Employment Act of 1967, as amended (“ADEA”); and the California Fair Employment and Housing Act, as amended; and the California Labor Code. Nothing contained herein is intended to waive your rights with respect to any obligation by the Company to indemnify you in the event of any claims relating to or arising from your employment.

15. Waiver of ADEA Claims. You acknowledge that you are knowingly and voluntarily waiving and releasing any rights you may have under the ADEA and that the consideration given for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which you were already entitled. You further acknowledge that you have been advised by this writing, as required by the ADEA, that: (a) your waiver and release does not apply to any rights or claims that may arise after you sign this Agreement; (b) you have been advised hereby that you have the right to consult with an attorney prior to signing this Agreement; (c) you have forty-five (45) days to consider this Agreement (although you may choose to voluntarily sign this Agreement earlier); (d) you have seven (7) days after you sign this Agreement to revoke it, and (e) this Agreement will not be effective until the date upon which the revocation period has expired (which will be the eighth day after you sign this Agreement), or the date that the fully executed Agreement is returned to the Human Resources Department, whichever is later (the “Effective Date”).

16. Waiver of Unknown Claims. In granting the general release herein, you acknowledge that you have read and understand California Civil Code section 1542:

A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.

You expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to the release of any unknown or unsuspected claims contained in this Agreement.

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17. Miscellaneous. This Agreement, including its exhibits, constitutes the complete, final and exclusive embodiment of the entire agreement between you and the Company with regard to the subject matter hereof. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such oral or written promises, warranties or representations. You specifically acknowledge that you have consulted with your own counsel in entering into the Agreement. This Agreement may not be modified or amended except in a writing signed by both you and a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination will not affect any other provision of this Agreement and the provision in question will be modified by the court so as to be rendered enforceable. This Agreement will be deemed to have been entered into and will be construed and enforced in accordance with the laws of the State of California.

If this Agreement is acceptable to you, please sign below and return the original to me.

On behalf of the Company, I want to thank you for your dedication to the Company and wish you good luck in your future endeavors.

Sincerely,

VIROLOGIC, INC.
By:	/s/ William D. Young
	William D. Young, Chairman and CEO

AGREED:
/s/ Karen J. Wilson
Karen J. Wilson
Date:	12/21/04

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Exhibit A

CONTRACT SERVICES AGREEMENT

This Agreement is made and effective this 31st day of December, 2004 by and between Karen Wilson, an independent contractor with a principal place of business at 2263 Mimosa Court, Los Altos, Ca 94204 (hereinafter “CONSULTANT”) and ViroLogic, Inc., having a principal place of business at 345 Oyster Point Blvd., South San Francisco, CA 94080 (hereinafter “ViroLogic”)

RECITALS

WHEREAS, ViroLogic is engaged in the business of developing and commercializing drug resistance testing for viral diseases and cancer assays which are made available in ViroLogic’s clinical reference laboratory;

WHEREAS, CONSULTANT is in the business of providing contract services and expertise in the areas of finance, audit and accounting.

WHEREAS, ViroLogic wishes to engage CONSULTANT’s professional services in managing to completion for the Company’s fiscal 2004 Sarbanes Oxley compliance, assistance in transitioning accounting responsibilities and such other tasks as from time to time requested by ViroLogic at the direction of Alfred Merriweather, Chief Financial Officer of ViroLogic (collectively, the “Services”).

THEREFORE, in consideration of the premises and of the mutual promises and covenants contained herein, the parties agree as follows:

1. CONSULTANT shall use her best efforts to apply her expertise in assisting ViroLogic to transition the above-mentioned projects in a thorough and timely manner

2. Any confidential information provided to CONSULTANT by ViroLogic concerning existing or contemplated research and development, technology, trade secrets or other proprietary information, business or marketing plans, test results, machines, devices, products, proposed products, processes, techniques or know-how, financial data, or any information or data developed shall not be disclosed by CONSULTANT to others or used for CONSULTANT’s own benefit without the prior written consent of ViroLogic. Confidential Information as defined shall not include any information which (i) at the time of disclosure is in the public domain, (ii) comes into the public domain by publication or otherwise other than by an unauthorized act or omission by CONSULTANT (iii) was known to CONSULTANT without an obligation of confidentiality prior to its disclosure under this Agreement as evidenced by its written records, (iv) is disclosed to CONSULTANT by a third party having lawful right to make such disclosure, or (v) is required by law to be disclosed.

3. Confidential information will neither be transferred to any third party nor used other than as provided by this Agreement without prior written approval of ViroLogic.

4. ViroLogic hereby offers to engage CONSULTANT and CONSULTANT accepts the engagement by ViroLogic on a fee for service basis.

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5. In consideration of the Services provided by CONSULTANT ViroLogic shall pay $115 per hour for the services of CONSULTANT when required to be on site or otherwise fully engaged in the Services. Services to be provided by CONSULTANT will be approved in advance by ViroLogic. CONSULTANT will not be entitled to any employee benefits, including but not limited to accrual of vacation pay, medical benefits of further vesting of stock options, except as set forth in the Separation Agreement entered into by and between CONSULTANT and ViroLogic. ViroLogic will reimburse usual and customary direct expenses, including travel costs, related to each project and approved in advance by ViroLogic.

6. Should ViroLogic desire to retain CONSULTANT for additional projects outside the scope of the Services then the parties shall negotiate in good faith the fee therefor. The parties may amend this Agreement to include such additional services and fees by written amendment signed by both parties and appended to this Agreement.

7. CONSULTANT shall neither comment on, respond to, nor originate any publicity, news release or other public announcement, written or oral, whether to the public press or otherwise, relating to ViroLogic, this Service Agreement, to any amendment hereto, or to performance hereunder without the prior written consent of ViroLogic.

8. ViroLogic will indemnify and hold CONSULTANT harmless from and against any damage, liability, claim, or suit, including reasonable attorney’s fees and court costs in connection with any liability claim asserted against CONSULTANT in connection with CONSULTANT’s use of information provided by ViroLogic hereunder provided such injury, damage or loss is not caused by CONSULTANT’s negligence or willful acts. ViroLogic understands and agrees that this indemnification will survive termination of this Agreement.

9. CONSULTANT will indemnify and hold ViroLogic harmless from and against any damage, liability, claim, or suit, including reasonable attorney’s fees and court costs in connection with any liability claim asserted against ViroLogic in connection with ViroLogic’s use of information provided by CONSULTANT provided such injury, damage or loss is due to CONSULTANT’s negligence or willful acts or omission and is not caused by ViroLogic’s negligence or willful acts. CONSULTANT understands and agrees that this Information will survive termination of this Agreement.

10. CONSULTANT and ViroLogic understand and agree that the obligations set forth in paragraphs 2,, 3, 8 and 9 hereinabove and all other rights of CONSULTANT and ViroLogic shall survive termination of this Agreement, by completion of the services to be rendered or for any other reason, for a period of three (3) years.

11. The term of this Agreement shall be for twelve (12) months from the date stated on the first page; provided, however, that ViroLogic may terminate this Agreement in its entirety by giving CONSULTANT prior written notice. The parties may by written amendment extend this Agreement for an additional period to be agreed upon.

12. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed as of the day and year first written above.

Consultant		ViroLogic, Inc.
By:	/s/ Karen Wilson	By:	/s/ William D. Young
	Karen Wilson		William Young
		Title:	CEO
Date:	12/21/04	Date:	12/21/04

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